XIII. AGAINST CHEAP GOODS 125 II. The second argument for Retaliation takes entirely different ground. Up till lately, as was said, we congratulated ourselves that, under free trade, we got all goods cheap, and we used to point out that other countries, by taxing imports, were making goods dear, and so preventing themselves from competing with us in neutral markets. But now we have an outcry against the admission of certain goods on the ground that they are too cheap. And the proposal is, that we should take measures against other countries to prevent this evil. The essential difference of these two grievances should be realised before we assume that one remedy will cure both ;-will lower other countries' tariffs to admit our cheap goods, and will prevent them sending us their cheap goods. CHAPTER XIV. RETALIATION ON PROTECTIVE TARIFFS: PROSPECTS OF SUCCESS. The only justification of Retaliation is success. Did the retaliation before 1846 succeed? Have the tariff wars since succeeded? Granted, however, that other nations are anxious to keep our great Free Trade market, and are open to conviction through force; (1) we are quite unprepared for a retaliatory policy; (2) they believe in Protection, and, besides, could not give us better terms without giving the same to others. IN this and in the succeeding chapter, we shall consider Retaliation simply as a weapon employed to lower the protective tariffs of other nations in our favour. As those who advocate Retaliation generally call themselves Free Traders, we must assume that it is a temporary measure. If retaliatory duties are imposed, it must be on the understanding that they are to be taken off whenever they have served their purpose. Retaliation is a weapon used solely "for the purpose of increasing free trade.” 1 The first thing that strikes one as to this proposal is that, as putting on duties will evidently 1 The words are Mr. Balfour's. CH. XIV. ADAM SMITH ON RETALIATION 127 do some harm to our own people, in preventing them getting the cheap goods which other nations wish to sell, it must be shown that the advantage which certain of our producers are to gain at least warrants the sacrifice. If, then, Retaliation aims at anything worth doing, its justification must be its success; that it will give us what we want, and not merely inflict an injury; particularly when-as in the lovers' quarrel the Retaliation is likely to cause most hurt to the person who retaliates. Has Retaliation of this kind ever succeeded? Adam Smith, at least, did not think it had, and he lived in a time of bitter tariff wars. He said there “might be good policy in retaliations when there is a probability that they will secure the repeal of high duties and prohibition," and then he went on to show that the first result of Colbert's tariff was actual war between France and Holland, and "the rise of that spirit of hostility between France and this country which has subsisted ever since, and prevented either nation from moderating its duties against the other." Adam Smith, then, can scarcely be cited as a witness for the success of Retaliation. Coming down three-quarters of a century, what do we find? In 1843, J. L. Ricardo spoke of the commercial wars as now bringing us such calamities." In 1844, the tariffs of France, Austria, and Germany were "restrictive," that of Spain was "tyrannical," that of Portugal, "inconsistent and capricious"-I am quoting the words of a former Secretary of the Board of Trade. 128 RUSSO-GERMAN TARIFF WAR CHAP. In 1845, the Edinburgh Review said that a war of tariffs was being carried on between the civilised nations of the world. It was amid such circumstances of Retaliation and Counter-Retaliation that Peel said: "Wearied with our long and unavailing efforts to enter into satisfactory commercial treaties with other countries, we have resolved at length to consult our own interests, and not to punish other countries, for the wrong they do us in continuing their high tariffs upon the importation of our products and manufactures, by continuing high duties ourselves." now. But this is ancient history, and it may be reasonable to think that we can manage better Take, then, more recent experience. We have had tariff wars within the last few years. In 1893, Russia raised the duties on all German goods by 50 per cent. Germany replied by raising her own tariff—already higher for Russian exports than for those of any other countryagainst Russian goods. The war lasted only eight months-not long enough to dislocate permanently the conditions of trade, particularly as it took place during the winter, when, for most of the time, the Baltic ports were closed by ice. Nevertheless the suffering and loss caused by it were very considerable, as appears from the confessions made on both sides when the struggle was concluded. In the opinion of both governments, a continuation of the war would have led to very serious consequences-some of a political character-and there appears to have been great relief when peace was concluded. XIV. OTHER MODERN TARIFF WARS 129 There was another tariff war between France and Switzerland from 1893 to 1895. By the substitution of the general for the minimum tariff, Swiss goods entered France at an increase of duty of 41 per cent. French goods entered Switzerland at an increase of 190 per cent. The decline in the French exports to Switzerland, in three years, amounted to nearly 45 per cent., while the decline in Swiss exports to France was nearly 35 per cent. In the end, Switzerland obtained some small concessions from France. The trade relations between the two countries have not even yet recovered their prosperity of thirteen years ago. France and Italy played the same game from 1889 to 1898. Special duties were imposed by the two nations on each other's goods, and differential dues and surtaxes were imposed on each other's shipping. In ten years, the import of Italian goods for consumption into France fell off by 57 per cent., and the imports of French goods into Italy fell by fully 50 per cent. The whole loss of trade to the two countries during the continuance of the war has been estimated at £120,000,000. Italy now finds the French market practically closed to her exports of silks and wines, which formerly represented the most important part of her trade with France. In spite of the new Commercial Treaty, Franco-Italian trade has not shown any permanent indication of improvement since the total volume not exceeding the half of what it was before.1 1 The above details are taken from Reports on Tariff Wars between certain European States, Cd. 1938: Commercial No. I I |