XV. MAY HAVE UNPLEASANT EFFECTS 145

For a time, they have been sunning themselves in the warmth of Protection-a Protection they did not ask. Unaccountably, so far as they were concerned, the British government gave them Protection. As unaccountably, from their point of view, the government withdraws it. The favouring breeze dies down, and the free import of German toys begins again. The British toy maker finds himself with extended premises and increased plant, and possibly with long contracts for supply of material. And a large part of his demand has suddenly fallen away. Will it not be a little difficult to convince him that his trade should have been trifled with and upset, for the benefit of the trades which export to Germany?

The question is not, Are we injured by foreign protective tariffs? Of course we are. We are not injured so much as we appear to be when we look at our small direct exports to such countries; for, happily, other countries are always anxious to export, and the door that opens outward opens inward. They must be paid for their exports; and, though they may not take the payment from us direct, they must take it from other nations to which we export. But, all the same, we are injured. And we are injured in another way that does not so readily meet the eye. Protection, in itself, as I have tried to show, does not increase the wealth of a nation; so far as it is indirect taxation, it fetters its growth by redistributing its wealth in the wrong way, giving to the rich and taking from the poor. But this hurts us, for these nations are our customers,

K

146

BLUFF

CH. XV.

and our exports depend on their purchasing power. It is not only, then, that we are not allowed to send them so much as we would, but that they, not being so rich as they might be, · have not so much to send us. We are doubly injured by protective tariffs.

But this Protection is the settled and believed

in policy of other nations. It is a pity, perhaps, that they were not content to let us remain the "workshop of the world." But they were not content. They determined to be manufacturing nations. At great cost, as we believe, they have made themselves so by Protection, and, rightly or wrongly, they consider that their manufacturing still needs the protection of high tariffs. And before we try to break down these tariffs by Retaliation, one would like to be sure that we are not going to make things dear in this country, and so inflict a third injury on ourselves, all to no purpose. Certainly we shall expose ourselves to the ridicule of the protected world as well, if we have no thought-out policy of how to retaliate beyond the expedient of Bluff.

But, so far as I can see, the only part of Retaliation for which we are prepared is the threat of it. So great is the power of the British Lion's roar that it seems enough that he is opening his mouth ominously. Suppose the other beasts of the forest do not fall down and creep to his feet, what then? Would it not be better to change his mind? It will scarcely be dignified to pretend that he was only going to yawn.

CHAPTER XVI.

DUMPING.

We cannot object to the import of “naturally cheap" goods. But the double monopoly of Trusts, dumping their surplus, presents new features, the most serious being that the dumping is intermittent. But (1) it has compensations, not so much in cheap goods as in cheap material for many of our industries-a Nemesis which the dumping countries are beginning to notice. And (2) its extent as yet seems exaggerated; dumping" is often blamed for inability to compete when "inefficiency" would be a better word.

We do not and cannot object to the importation of cheap goods as cheap goods. Our fruit growers may find it hard when the weather is more friendly to France than to us, and the imports of French fruit prevent them raising their prices to compensate for a short crop at home; but this is an incident in Free Trade. We have not refused cheap wheat, although it meant ruin for many agricultural interests. Nor shall we object to Belgian iron or American steel if the reason of their coming in is that they are more cheaply produced in Belgium and America than they are here. Show us, in short, that cheap goods mean naturally cheap goods," whether the cause of cheapness lies in better natural resources, in better

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NATURALLY CHEAP GOODS

CHAP.

labour, or in better organisation, and we shall accept them-just as we should never have signed a Sugar Convention if it had been the case that beet was, by nature and not by subsidy, a cheaper sugar than cane.

It would, indeed, be rather unreasonable if, after having for years pinned our faith to a policy based on the international division of labour, and deluged foreign markets with cheaper goods than they could make for themselves, we should now object to the import of their naturally cheap goods. As a fact, England went far beyond "natural cheapness." We very often sent our goods to other countries at a loss-either a loss of profit or an absolute loss. I have known articles sent to India year after year at half the home price, in order to accustom the natives to the goods, with the view of ultimately raising the price to a paying level. In this we did nothing more internationally than we do nationally. If any home manufacturer wants to introduce his goods, the "natural way," and the first thing he does, is to sell them cheaper than other people. If a man wants to "get in” to the London market, he will sell his goods there under the price at which he sells them in Glasgow, so long as he is not afraid of their being brought back and underselling himself. And it was generally safer to undersell abroad, for goods would not usually pay the carriage back. We could not, then, in reason, complain if foreign producers treated us in the same way.

But, a few years ago, there appeared, in several countries, the phenomenon known as the Trust or

XVI.

TRUSTS AND KARTELLS

149

Kartell. This phenomenon altered things very considerably, and made a good many of the old arguments against Protection not quite up-todate.1

Twenty years ago, Fawcett could say: "The amount of manufactured goods which is sent from America to England is so extremely small that it could make scarcely any difference if this particular part of the trade between the two countries were to cease altogether." And again: And again: "No single case can be brought forward in which English trade suffers, to any appreciable extent, by foreign products underselling in our own markets the same articles of English manufacture." 2 This could scarcely be said now.

It

A Trust, in itself, is quite unexceptionable. is simply the amalgamation of a great number

1 The Continental Kartells are looser forms of combination than the Trust. The constituent firms, retaining their separate organisations, sell to a central agency, the output and the price being both fixed. The methods in which Kartells are formed and worked are not always similar, but the principle is generally the same-the regulation of prices, by curtailment of home production and so of home competition. The way in which this system affects other countries is most clearly seen in the Austrian Iron Kartell. Here each constituent member is limited in the amount which it is allowed to produce, but "in the contract of limitation are not reckoned products which are exported, either by being sold directly into the foreign country, or through being sold to manufacturing establishments (e.g. manufacturers of wagons or locomotives), and by them used for export." Thus large production and cheap production are secured; and, even if the maker makes nothing on what he exports, he gains an extra profit on what he sells to or through his Kartell. See the exhaustive memorandum in the Board of Trade Blue Book, p. 297.

2 Free Trade and Protection, pp. 75, 83.