(3) The supply of the Allies for the restoration of their industries as laid down in Resolution B. III of the Transitory Measures of the Paris Conference.

As regards (1) the Committee is unanimously desirous of doing everything practicable during the transitional period to prevent the enemy countries from obtaining an unfair advantage over the British Empire and over our Allies, whose industries have been seriously damaged. . . . It is obvious that effective control can only be exercised over products in which Great Britain and the British Empire have a virtual monopoly. Any attempt to restrict the exportation of products in which this is not the case would merely tend to develop the supplies from other sources, and might have far-reaching effects detrimental to British trade after the conclusion of the transitional period.

As regards (2) the first and most obvious course would be to continue the present régime so far as enemy countries are concerned, that is, a general prohibition of exports from the United Kingdom to enemy countries, exceptions being permitted only under license. This policy, although superficially attractive, presents the difficulty that, if exports to neutral countries are permitted without restriction, enemy traders will be able to provide themselves through such sources at little, if any, additional expense. Unless it be proposed to continue a system of rationing neutral countries, such a policy would merely have the effect of appearing to do something, while in reality achieving no useful result.

(3) The resolutions adopted at the Economic Conference held at Paris bearing upon the matter are Numbers B. I and III of the Transitory Measures.

It appears to us that effect cannot be given to these (Paris) Resolutions unless export restrictions are placed during the transitory period upon a certain number of important articles. We consider that any measures undertaken for the purpose should aim at assuring the British Empire and the Allies priority for their requirements and at preventing the present enemy countries from gaining by the use of such materials an initial advantage

in the competition to recover markets which will follow the

war.

Policy Recommended

After considering the subject in all its bearings, we have come to the conclusion that a policy of controlling exports during the transitory period immediately following the war can and should be applied to carefully selected materials, the imports of which into the enemy countries before the war were mainly derived from the British Empire and Allied countries, and the available supply of which will be wholly or mainly required by the British Empire and the Allies immediately after the war.

We do not consider that it would be either practicable or expedient to attempt to prevent the enemy countries from obtaining materials, as regards which the British Empire and the Allies will not be in a position to absorb the greater part of their production. To do so would involve the continuance after the war on an elaborate scale of the system of rationing neutral countries, and of exacting stringent guarantees of the ultimate destination of exports which has been partially applied during the war. Under the exceptional conditions prevailing in war it is possible by means of the sea power of Great Britain, and the consequent restriction of shipping, to induce some of the neutral states to accept such a limitation of their trading rights; but we are of opinion that an attempt to continue such a general arrangement after the war would raise questions of great international difficulty, and we have the gravest doubt whether it could, under any circumstances, be made practically effective when the ordinary channels of commerce among the other nations of the world are freely open.

It is also very desirable that interference with the export trade of this country after the war should be limited to cases in which it is clearly required by the public interest.

Suggested System of Export Licenses

We recommend that the Government should seek powers from Parliament to prohibit during the period of reconstruction imme

diately following the war the export to all or any destinations, except under license, of such articles as may be deemed expedient. The control thus obtained should be exercised so as to secure that the requirements of the British Empire and Allied countries are first satisfied, and the export of the surplus to neutral countries should be permitted.

An Allied Organization

In Part II of the report it is recommended that in order to secure common action among the Allies the Government should consider, in consultation with the Allies, the expediency of establishing after the war a joint organization on the lines of the Commission Internationale de Ravitaillement for dealing with the orders of the Allied Governments for reconstruction purposes and with such private orders as they may find it expedient to centralize. In exceptional cases it may be found necessary to adopt a policy of Government purchase of certain important raw materials, the supply of which cannot otherwise be safeguarded.

To carry into effect the recommendations of the Balfour Committee, Parliament passed "A Bill to continue, with modifications, for a limited period after the termination of the present war, certain powers in relation to imports and exports.

"The Lords of the Council on the recommendation of the Board of Trade may by order prohibit the importation or exportation of goods of any class, description, or origin, or produced or manufactured in whole or in part in any country or place specified in the order, either generally or from or to any country or place named in the order, subject in either case to such exceptions as may be specified in the order, and to any licenses the grant of which may be authorized in the order.

"This Act may be cited as The Imports and Exports (Temporary Control) Act, 1917.

"This Act shall continue in operation until the expiration of a period of three years after the termination of the war."

(b) Opposition to the Boycott

The advocates of the boycott did not find themselves in undisputed possession of the field. There were divers elements which were not in accord with their views, in spite of loosely flung accusations of pro-Germanism. Business men who had sold goods to Germany, and who in times of peace are greatly in need of the German market, historians who studied the effects of previous wars on the trade of the countries involved, economists whose views were grounded in the principles of science, and statesmen who were anxious to avoid future wars, were to be found in the opposition to the boycott movement which rode on the waves of popular passion.

(1) General

Historically, it is interesting to note that in the case of previous wars commerce between the belligerents increased both absolutely and relatively after the signing of the treaty of peace. This was notably the case after the Franco-Prussian War, the Spanish-American War, and the Russo-Japanese War.

"The imports of France from German territory in the year prior to the Franco-Prussian War were $50,000,000. In 1872, the year following the war, they were practically $70,000,000, and averaged $66,000,000 per annum in the five years after the war. German imports from France in the same period showed a larger gain. They were $60,000,000 the year before the war, and averaged annually $83,000,000 in the five years following the war. The trade between France and Germany showed an increase of 40 per cent in the years immediately following the war.

"Another example is to be found in the trade relations between the United States and Spain. Our imports from Spain in 1897 were less than $4,000,000. In the five years following the war they averaged $6,000,000 per annum, an increase of 50 per cent. Our exports to that country, whicch were $11,000,000 in the year before the war, averaged $14,000,000 per annum in the five years following the war, or an increase of 25 per cent.

"The Russo-Japanese War showed the same facts. Japan's exports to Russia which were about $1,500,000 in the year prior

to the war, averaged more than $3,000,000 per annum in the five years after the war, showing an increase of over 100 per cent."

There is nothing in the present circumstances to indicate that this phenomenon will not again be evident.

From the economic point of view, the principle of the boycott is fallacious. It is a discarded doctrine that in every trade one party gains to the extent that the other loses. The impoverishment of one nation will not lead to the enriching of another. The amazing development of industrial Germany benefited Great Britain and France. The current of trade set up by 70,000,000 people can not be shunted without diminishing the volume of trade in which they are not directly involved. In 1912 the combined imports and exports between the four powers, Great Britain, France, Russia, and Italy, on the one hand, and Germany, Austria-Hungary, Turkey, and Bulgaria on the other, that is, the trade between the two groups amounted to over $2,000,000,000. In 1913 the imports of the four Central Powers totaled about $3,500,000,000, and their exports about $3,000,000,000. Their total trade constituted about 17 per cent of the world's trade for the year. Will it be possible to short-circuit their markets without wrecking the trade organization of the nonTeutonic powers?

The four Central Powers bought in the year 1913 from Great Britain $400,000,000 worth of merchandise, from France $150,000,000, and from the United States $375,000,000. How many of the merchants in these three countries are anxious to continue the boycott against their best customers?

The boycott scheme fails to take into account the fact that the pre-war commerce of the world was based upon the free interplay of forces, the unimpeded exchange of commodities among all countries. Will it be possible to strike an international trade equilibrium within the larger group of the world's powers which will be as satisfactory as a world-wide understanding? Will not the world be the poorer for rejecting trade with 70,000,000 people with high standards of living and with great capacity for

"O. P. Austin, International Commerce, chapter in "American Problems of Reconstruction."