materials. A duty of this kind is dangerous because it is apt to be used to transform a monopoly of a raw material into a monopoly of a finished product. It is perhaps likely, there

fore, that if it ever becomes necessary to revive in this country the old cry, "Millions for defense, but not one cent for tribute," it will be because of the imposition of a duty of this sort.

IN

N dealing with preferential tariffs upon a practical basis, it is necessary to consider in detail the circumstances relating to each tariff. In fundamental respects the tariffs of the British selfgoverning Dominions and perhaps especially that of Canada differ from those of the Colonial dependencies. A discussion of the preferential tariff of Canada must rest upon a knowledge of its origin and characteristics. I shall, therefore, review the tariff history of Canada in recent decades and conclude with certain observations upon the major features of Canada's trade.

THE ORIGIN OF CANADA'S

PREFERENTIAL TARIFF

The Liberal party during its period in opposition from 1878 to 1896 steadily opposed the principle of a high protective tariff. In the interests of the public at large, but without prejudice to the manufacturers, they advocated such freedom of trade as was consistent with a tariff for revenue only. They particularly favored the promotion of trade with Britain and the United States. They took comfort and encouragement from Mr. Cleveland's campaigns for a lower tariff. As the people of Canada were beginning to discover that the prosperity promised by the National Policy was rather slow in arriving, the Liberal policy was rapidly making converts. Even Conservative leaders talked tariff reform, though the majority still

adhered to the principle which had brought them into power and had for some time sustained them.

The principle of reciprocal trade, on the basis of treating other countries as they treated Canada, had been frequently discussed, but came more definitely into view during the last years of Conservative rule. The proposition was given special point under the influence of the Dingley tariff, which greatly cooled the ardor of Canadians for better trade relations with the United States, and turned attention towards the value of the British market for Canadian goods and the possibility of a more favorable treatment of British imports in return. At the same time the Liberal party, more particularly under the leadership of Mr. afterwards Sir WilfridLaurier, recognized the impossibility of altogether abandoning the principle of protection with reference to those industries which had been brought into existence through the National Policy, but which had never been able to outgrow their infancy. Still the party continued to advocate a considerable readjustment and modification of the protective principle, in the interests of consumers and of industries natural to the country.

Under such pledges, the Liberal party came into power in 1896. Once in office, their views on tariff reform were still further modified. This was in some measure due to the representations of the manufacturers before a

tariff commission which the new government appointed. Resentment at the anti-Canadian1 clauses in the Dingley tariff had been steadily growing, while the liberality with which Britain had treated Canadian imports was, by contrast, being more vividly realized. The Liberal Government, therefore, on succeeding to office, found itself between two fires. On the one hand it was expected to redeem its pledges to favor the consumer and lower the tariff, while on the other it was urged to respect the established system under which the industries of the country had been protected from hostile competition. The principle of reciprocal tariffs afforded a clue to a practical policy of ingenious compromise, which would enable the Government to claim the virtual redemption of its pledges, while at the same time avoiding the unpopular course of ap

1 To the suggestion that the Canadian tariff was anti-American in greater degree than the American tariff was anti-Canadian, Dr. Shortt replied in part as follows:

Most Canadians know very well that the American tariff, even more than their own, faces the whole world. In studying the nature and effects of the American tariff, however, Canadians observe that many of the articles which they might reasonably expect to export to the United States are such as, owing to the conditions of production or transportation, or both, are not likely to be sent to the United States in large quantities from other countries. Hence the duties which are imposed upon these articles, while stated in general terms, are in practical operation, and commonly in intention, directed mainly against Canadian exports. The agricultural sections of the tariff, for instance, are largely directed against Canada, and with such thoroughness as the customs returns demonstrate.

The fact that the greater part of all dutiable imports into Canada are derived from the United States is surely evidence, not of the antiAmerican character of the tariff, but of the opposite. The Canadian tariff, while protective in some of its features, is largely a revenue one, permitting very extensive dutiable imports and thus enabling a large revenue to be collected from the Canadian people. Even on this large dutiable import from the United States the average

parently turning the other cheek to the United States.

By the new tariff policy of 1897, after a well-considered readjustment of various specific articles, including the raising of duties in a few instances, a general reduction of the tariff by 12 per cent, except on a few articles such as spirits and tobacco, was granted upon imports from all countries which admitted Canadian goods at equally low rates of duty. This seemingly sweeping reduction of the tariff, which constituted the redemption of the party pledges given while in opposition, was found on examination to apply to no considerable traffic outside that with Britain. In virtue of special clauses in British commercial treaties with Germany and Belgium, goods from these countries were also included, pending a

rate is quite moderate, being lower than the average rate on British dutiable imports, although most of these enjoy the benefits of a preference. If one makes comparison with other countries which do not enjoy the British preference, the favorable treatment of American imports is still more obvious.

[The latter part of the first paragraph, if read with the substitution of "Canadian" for "American" and vice versa (which the facts more than justify) leads to the conclusion that the Canadian tariff is anti-American. The further argument that the American tariff is anti-Canadian because its rates are prohibitive, and that the Canadian tariff is not anti-American because its rates are moderate, might be the subject of a statistical inquiry, but in any case seems beside the point. Surely the terms anti-American and anti-Canadian should be used in reference to the animus of the legislation and not to the effects. If the development of Canadian industries does not warrant prohibitive duties, but the rates of the Canadian tariff whatever they may be are in practical operation directed mainly against American products, one seems warranted in applying the term anti-American-especially in view of the general application to competing British products of rates lower by 10 to 15 per cent ad valorem. B. B. W.]

2 [And by general most-favored-nation treaties, goods from Austria, Russia, Spain, Denmark, Switzerland, Sweden, Norway, received the same treatment as Germany and Belgium. B. B. W.]

denunciation of the treaties, which soon took place. As promised in 1897, a further reduction of the tariff took place the following year, increasing the preference to 25 per cent. As the device had proved a very popular one, and its limited application was now well recognized, the wording of the preference was changed from the general to the particular, and the reduction specifically limited to the British Empire, although important sections, such as Australia, have not yet availed themselves of it.

Thus the Canadian preference on British imports was the outcome of no bargain with the British Government, or of no theories as to the advantages of inter-imperial trade. It expressed no sacrifices on the part of Canada for the benefit of the mother country. It was undertaken entirely in the interests of Canada, and as, under the conditions of the time, the only advisable direction in which to carry out the oft repeated pledges of the Liberal party. Their political opponents strongly criticized the preference on the ground of its being an infringement of the National Policy, and as certain to affect most injuriously the industries of the country. This position has never been given up and is still employed in appeals to the manufacturing interests. But, as soon as it was perceived that the preference was by no means about to accomplish the promised ruin of Canadian industries, the Conservatives shifted their centre of attack, and made a vigorous assault upon the Government for having gratuitously Government for having gratuitously granted to the mother country a valuable concession without exacting any sacrifice in return.

This criticism, it will be observed, proceeded upon two assumptions:

First, that Canada did not undertake to lower the tariff upon British

goods for her own benefit, but had made a distinct sacrifice of her normal interests for the express benefit of Britain;

Second, that Britain would have been willing to alter her whole fiscal system and tax her world supply of food and other raw materials, as a return for the Canadian concession on less than 5 per cent of her trade. Neither of these assumptions was

true.

Nevertheless it soon came to suit the tactics of the Liberal party to accept the general interpretation of the preferential tariff, as a sacrifice made by Canada in favor of the mother country. It is represented, however, as a sacrifice prompted by pure generosity, and thus as contrasting with the harsh and ungenerous Conservative policy of an eye for an eye and a tooth for a tooth. Of course the Canadian favor might or might not be met by some equivalent concession on the part of Britain, but as far as Canada is concerned it has been noblesse oblige.

Tactically the Liberal position enjoyed an immense advantage over that of its opponents, for, on the one hand, it proved the Liberal party to be more loyal and at the same time magnanimous, than the Conservatives, towards the mother country. And this had a fine local flavor, since the Conservatives had always attempted to pose as the party of loyalty, par excellence, and had affected a more or less pharisaical attitude of suspicion towards the

implied republican tendencies of the Liberals. On the other hand, while exacting nothing from Britain, the Liberal Government might gracefully decline to concede further preferences until Britain had returned the compliment. Moreover, without the embarrassing necessity of breaking any bargain, or receding from any agree

ments, the Government may modify or withdraw any part of the preference, wherever it has a tendency to stimulate unduly the importation of British goods. This was actually accomplished in 1904 in the case of textiles.

THE RESULTS OF CANADA'S PREFERENTIAL TARIFF

And now as to the influence of the preferential tariff in stimulating imports from Britain or from the rest of the Empire. As the adoption of the preference happened to coincide with the beginning of a period of economic expansion throughout America, increasing prosperity accompanied its career and led to its being well received.

tion; and even when, in 1900, the preference was increased to 333 per cent, no appreciable difference was noted. Canadian imports all round have greatly increased during the preferential period and British imports among the rest. But the significant fact is that, in spite of the preference, British imports have failed to increase at anything like the same ratio as those from foreign countries, as the following table will show. Taking the values of goods entered for home consumption from the leading countries of the world, and also the total imports, and comparing the year 1896, which was the year before the introduction of the preference, with the years 1903 and 1914, we have the following results:

But it by no means had the effect anticipated by either friends or foes. Except in the textile trade and some sections of the metal industries, the preferential treatment of British goods did not specially stimulate importa

That the preference has not arrested the downward tendency of the share of Britain and the rest of the Empire in Canada's imports is further shown when we compare the percentages from 1883 to 1923:

From this we learn that whereas between 1896 and 1922 the percentage of British imports has declined from 30 to 16, the percentage of American imports has increased from 53 to 69. But on the 16 per cent of British imports in the fiscal year 1922, notwithstanding the preference, 20 per cent of the whole revenue was collected, while on the 69 per cent of American imports only 60 per cent of the total revenue was collected. The present relative positions of the United States and Great Britain in the total trade of Canada and the bearing of the duties collected are shown in the following statement, taken from the latest returns giving the information as to duties: (See page 226.)

of British manufactured goods, beyond what we have always taken because we needed them or because we could not produce them ourselves, would involve cutting in upon our own manufactures, as in the case of the textile and metal industries, where under the preference the chief increase in British imports has been secured. Now our Canadian manufacturers strenuously object to sacrificing any part of the home market to competitors in Britain, and that they are quite capable of making their objections felt is evident from the partial repeal of the preference in 1904. Once assure them adequate protection, however (and Americans will quite understand what that signifies), and they