# The Empire and the century/Free Trade and the Empire

FREE TRADE AND THE EMPIRE
By J. St. LOE STRACHEY
I.
The subject of the following chapter can be summed up in a sentence. Free Trade is the only secure foundation for the British Empire. My object is to show not only that Free Trade is a better foundation for Empire than Protection, but that no lasting Empire can be built upon a policy of commercial exclusiveness—that is, I meet Mr. Chamberlain's declaration 'No Preference no Empire' with the contra declaration 'No Free Trade no Empire.'
The maxim 'No Free Trade no Empire' is no mere assertion of a personal opinion, but a statement which can be made good by an appeal to the teachings of history. It is a fact, not a theory. While we possessed a system of preference the Empire flourished neither commercially nor politically. Trade was not helped, but hindered, and at the same time the political relations between the Colonies and the United Kingdom were far from satisfactory. When, however, we abandoned the attempt to establish special trade privileges within the Empire, and instead allowed trade to follow its own ​interests, the Colonies became a source of pride and strength to the Mother Country.
But this is no isolated example. History shows that the States of former days which tried to maintain oversea Empires based on exclusive trading perished, largely owing to such exclusiveness. They withered away because they insisted on acting on the belief that an Empire cannot be kept together on sentiment and on the ties of race, language, and common institutions, but must have the material bond of preferential trading.
The evil effects of a preferential system, as exhibited in the case of the British Empire, are patent to all who will examine the facts. That system led not only to bad trading, but to political relations which were full of friction and of danger. As a nation we are apt to forget our failures, whether in battle, in diplomacy, or in business. Hence it happened that very few people were aware till the fiscal controversy overtook us that only sixty years ago we had a complete system of Colonial Preference. We greatly favoured colonial products in our markets, while they gave us a position of privilege in theirs. The results were as deplorable from the commercial as from the political standpoint. So completely forgotten, however, was this fact that when the new Preferential policy was first launched it was held to be a completely new and original Imperial device. We can hardly wonder, however, that the nation chose to forget its original Imperial fiscal policy. An incident so eminently unsatisfactory, and so full of friction and confusion, was naturally ignored. In endeavouring to trace the evil effects of the preferential system which once ruled the trade relations of the Empire, I shall not go so far back as the period when that system was in full force, and when we enjoyed 'the monopoly of colonial buying and selling,' and maintained the principle of 'the prohibition and discouragement of colonial manufactures.' Mr. Chamberlain no doubt hinted to the Colonies that it would be a friendly act if they would be content with such ​manufactures as they have already created, and would leave what remains to the Mother Country in exchange for a preference from her. Still, I do not suppose that anyone now seriously desires to go back to the old plan—the plan under which the Colonies were veritable 'tied houses' in all particulars. Our Tariff Reformers only wish to make them 'tied houses' in certain trades. I shall, therefore, not examine the Navigation Acts and other Acts in restraint of colonial trade at the time of their full severity. I shall deal rather with the later period, and when the Navigation Laws had been greatly relaxed, and something closely resembling Mr. Chamberlain's system of Preference was established throughout the Empire. During that period—i.e., from the close of the French war up till 1845—the absolute prohibition of many articles from entry into the Colonies had been abandoned and ad valorem duties were imposed instead, but at the same time Colonial Preference in the English market remained intact. Let us look at the actual working of this system of Colonial Preference.
II.
I will take first the timber trade. Till the beginning of the nineteenth century we drew all our supplies of timber from the North of Europe. After our quarrel with the Northern Powers, and our seizure of the Danish fleet in 1807, our policy was altered. Mr. Vansittart, the then Chancellor of the Exchequer, devised a plan similar in intention to that of the Preferentialists of to-day. He argued that as there was plenty of timber to be found in the British Empire it would be wise to use the Tariff to render the Empire self-supporting in the matter of timber and free from the danger of relying upon foreign sources of supply. Accordingly, he almost entirely repealed the duties on timber coming from our American possessions, and placed an enormous duty on North European timbers. The immediate result of the policy was that we were flooded for years with inferior ​timber from Canada, the good, cheap timber from the North of Europe was shut out, and we were compelled to use for building purposes wood particularly subject to dry-rot But there was still a demand for Baltic timber, and thus there followed one of those absurdities which always track the course of Preference. It actually paid to ship wood from Northern Europe to Canada in order that it might come in here as colonial timber. In consequence of this artificial stimulus, large vested interests grew up in Canada in connection with the trade. When, then, preference was withdrawn, first partially and then entirely, as it became absolutely necessary in the interests of British trade, these interests not unnaturally held themselves to be deeply aggrieved. They were, they declared, certain to be ruined. The sufferers threatened secession and an agitation in favour of annexation to the United States. But, though the timber merchants suffered, the small farmers rejoiced, for they had resented the preference. Agriculture had been neglected in the Colony for the benefit of a few great capitalists. Canadian millers also suffered when we ceased to give a preference to Canadian flour. The discriminating duty on colonial flour had allowed Americans to import their wheat into Canada, where it was ground up, and then exported to England as Canadian flour.
The results of preferential treatment in the case of sugar were even more preposterous than those in that of timber. The duties on sugar in 1836 were 36s. a hundredweight on colonial and 63s. on foreign sugar. They were regulated anew in 1842, owing to the depression produced in the West India Islands by the abolition of slavery, and stood then at 14s. for colonial brown sugar, 63s. for foreign sugar produced by slave-labour, and 23s. 4d. when produced by non-slave labour. This distinction was really an absurdity, for we allowed other slave-made commodities to enter without any differential duty. In consequence, the average loss to the British public was enormous, and the Revenue lost ​also. The talk, too, about slave-grown sugar was absurd, for we did not hesitate to trade largely in it with the Continent On the other hand, we had prevented the legitimate development of our West India Colonies by forbidding them to set up sugar refineries to compete with our own refining trade. Thus we managed, by our double system of preference, to confer a double injury on the nation and on the West Indies, in the hope of benefiting two selected industries.
But, bad as were the results of attempting to make the Empire self-sufficing in the matter of timber and sugar by preferring colonial products, they pale before those achieved in the case of coffee. The argument for preference looked at first sight as good, and proved in the long-run even more fallacious. We consume a great deal of coffee. Coffee can be grown in the Empire, and coffee is a very profitable crop. Therefore, let us encourage coffee-growing in the Empire by giving it a preference in our markets. In this way we can secure the profits of a very lucrative trade for ourselves. So ran the very plausible argument in favour of preference. Let us look at the facts. Before 1842 the duty on foreign coffee was as much as Is. 8d. per pound. On coffee imported from any British possessions within the East India Company's charter the duty was only 9d. The result of this was that the coffee-producing foreigner shipped his coffee to the Cape (which was within the charter), and it came in here at a 9d. duty. The importation of coffee from the Cape rose, therefore, from 189 pounds in 1880 to 6,149,189 pounds in 1842. At that date the duty on foreign coffee was placed at 6d. per pound, and on colonial at 4d. per pound, and ultimately the difference disappeared altogether. We had done very little good to the colonial grower, though we had placed a heavy tax on our own consumers without raising any large amount of revenue. The only persons who really benefited were the fraudulent importers of foreign coffee.
The astonishing position produced by Colonial ​Preference in the case of coffee is so well summed up in the evidence given before the Select Committee in 1840 that I cannot resist quoting a portion of it. The witness under examination was Mr. McGregor, one of the joint-secretaries of the Board of Trade. The chairman was Mr. Hume.
'887. Chairman. Will you state what has been the effect of the high differential duty on coffee?—The effect of the high differential duty on coffee has been the legal evasion of the law, in principle, as to the way of bringing coffee to this country.
'888. Is there any coffee produced at the Cape of Good Hope?—No, I believe not; 57 out of every 100 pounds which were imported to England by way of the Cape of Good Hope was carried in the first instance to that colony from Brazil; 8 from Cuba; 12, I think, were sent from England of foreign coffee to the Cape, to be reimported to England; 6, I think, from Java; and 6 or 8 sent from Holland to the Cape of Good Hope, and the remainder from other countries.
'889. Mr. Thornely. From your evidence it appears that cargoes of coffee have been sent from the United Kingdom and from ports on the Continent of Europe, to be landed on the Cape of Good Hope, and to be brought back to the United Kingdom for the purpose of supplying the necessary consumption here?—Yes; from the 26th of April, 1838, to the 24th of March, 1840, it appears by the returns that eighty-one cargoes, importing more than 21,000,000 pounds of foreign coffee, had arrived in the United Kingdom from the Cape of Good Hope, the duty being on that mode of carrying coffee 9d. a pound; that is, 6d. less than if imported direct from foreign countries; the duty, if imported from the country of the growth of the principal part of the coffee, would amount to £1,750,000; the duty saved by the indirect importation would be £750,000, supposing all to he entered for consumption.
'890. Chairman. Then, is it to be understood that merchants, in order to evade the discriminating duty, have been to the expense of sending coffee from those different ports, and even from England, in order to obtain admission at the reduced rate?—Yes, and also upon other articles which pay differential duties, such as spices and nutmegs.
'891. In fact, does the Cape of Good Hope reduce the duty upon all those prohibitive articles?—Yes, from its being retained as within the limits of the East India Company's charter.
'892. Mr. Thornely. Has it not been absolutely necessary, for ​the supply of the consumption of coffee to this country, that we should resort to this mode of indirect importation?—There is no doubt of the fact of it being imported to England in that way to supply consumption; the consumption is evidence of the fact.
'893. Chairman. Do not those greatly increased expenses keep up the price of coffee in this country?—They have two effects. The expense of sending coffee to the Cape of Good Hope is about 1d., and consequently it arrives in this country at about 5d. less duty than if it came direct from the countries of its growth; but if the duties were reduced to an equitable fiscal principle, the article would be cheaper and the consumption of coffee in this country would no doubt increase enormously.'
Another striking example of the absurdity of preference is to be found in the preferential treatment accorded to Cape wines. Here is a lesson which I hope will be borne in mind by those who are inclined to lend a favourable hearing to any scheme for giving Australian wines a preference over foreign wines. During and after the Napoleonic war we thought it better to make the Empire 'self-sustaining' in wine as in other things. By an Act passed in 1818 Cape wine was admitted here at one-third the duty on Spanish and Portuguese wines. The result was, of course, a great stimulus to the Cape wine trade; and even in 1846, when the duty on Cape wines was only half that on foreign wines, the importation of Cape wines almost equalled that of wines from France. But the trade was a purely artificial one. When differential duties were abolished and the importation of Cape wine fell to its natural level, the trade almost disappeared. This was in fact the most ridiculous preference of all. It chiefly benefited the fraudulent wine merchant in Britain, for it supplied him with cheap and inferior grape-juice wherewith to adulterate good foreign wine. It did not really benefit the Cape winegrower. It did not encourage him to improve his methods of manufacture. It only gave him a safe market for a bad product.
Before leaving this part of the subject, it may be worth while to give the actual figures of the Colonial Preference as they stood in the year 1840. Here is the list quoted verbatim from the Blue Book of 1841:
| | £ | s. | d. |
| Sugar—colonial duty: |
| On muscovado | 1 | 4 | 0 |
| On foreign | 3 | 0 | 0 |
| On molasses | 0 | 9 | 0 |
| On foreign | 1 | 18 | 9 |
| Coffee — British possessions per lb. | 0 | | 6 |
| Foreign growth, except from British ports, within limits of East India Company's possessions, where it pays 9d. |
| Distilled spirits, colonial | 0 | 9 | 0 |
| Foreign | 1 | 2 | 6 |
| Wines, colonial | 0 | 2 | 9 |
| Foreign | 0 | 5 | 6 |
| Timber, colonial: |
| Hard wood, per load | 0 | 5 | 0 |
| Pine and fir of all kinds | 0 | 10 | 0 |
| Foreign | 2 | 15 | 0 |
| Cotton-wool per cwt. | 0 | 0 | 4 |
| Foreign | 0 | 2 | 11 |
| Wool, sheep's, colonial | free | free | free |
| Foreign | 0 | 9 | 4 |
| Fish, free ; foreign nearly all prohibited. |
| Tallow per cwt | 0 | 1 | 0 |
| Foreign | 0 | 3 | 2 |
| Rice, colonial per cwt. | 0 | 1 | 0 |
| Foreign | 0 | 15 | 0 |
| Rough rice per qr. | 0 | 1 | 0 |
| Foreign | 1 | 0 | 0 |
Spices and all tropical colonial productions have high differential duties. :
| | £ | s. | d. |
| Fish oil. Colonial per tun | 0 | 1 | 0 |
| Of foreign taking | 26 | 12 | 0 |
| Hides and skins about 100 percent, protective duty. On some the duties are equal. Furs are protected if from North America, chiefly from Hudson's Bay. |
| Bark from British possessions per cwt. | 0 | 0 | 1 |
| Foreign | 0 | 0 | 8 |
| Honey per cwt. | 0 | 5 | 0 |
| Foreign | 0 | 15 | 0 |
| Soap per cwt. | 0 | 1 | 8 |
| Foreign | 0 | 4 | 10 |
| Wax per cwt. | 0 | 10 | 0 |
| Foreign | 1 | 10 | 0 |
| All seed oils per tun £39 18s. | 0 | 1 | 0 |
| Ashes | free | free | free |
| Foreign | 0 | 6 | 0 |
| Copper and metals of all kinds, high protective duties. |
| Bark per cwt. | 0 | 0 | 1 |
| Foreign | 0 | 3 | 0 |
III.
No doubt the colonists throughout the Empire were at first annoyed by the abolition of Preference, but soon they began to suit themselves to the new and healthier conditions, and it is not too much to say that they owe their commercial prosperity to the abolition of Preference. The effects are so well summed up by Professor Davidson in his admirable little book, 'Commercial Federation and Trade Policy,' that I cannot do better than quote his words:
'The repeal was probably what the Colonies needed most. It threw them on their own resources, and made them realize the duties as well as the privileges of responsible government. The ruin that was imminent did not come, because they set to work to avert it; and the threat of ruin was ultimately the industrial salvation of the Colonies. When they (the colonists) found that their appeals and protests were disregarded, and that the English market was no longer to be their preserve, they began to set their house in order and to accommodate their business methods to the new conditions. The possession of Preference had encouraged unbusinesslike ways and a spirit of dependence on Government. Henceforth they talked less politics and devoted themselves to trade.'
All this is still true. The readoption of Preference would bring back unbusinesslike ways, and recall a spirit of dependence on Governments. Indeed, as Professor Davidson says, 'the whole history of the preferential duties is one long warning against an attempt to give an artificial direction to industry.'
But bad as were the commercial results of Preference, the political results were even worse. The colonists, instead of trying to develop their industries by improving them, were always trying to get better, preferential treatment, and when they could not get it, naturally grumbled, and thought they were not sufficiently considered. Also, strange as it may seem, though they apparently benefited by having Britain as a kind of tied house, the Colonies were not nearly so loyal under ​Preference as they are to-day. The best men did not, as now, look forward to an Imperial union in which the British communities oversea would some day claim an equal share with the Mother Country, but to complete independence like that of the United States.
IV.
Still greater political harm was done in the Mother Country by the system of Colonial Preference. All true Imperialists must have deplored the harsh and pessimistic things said about the Empire by our public men in the past—^by Conservatives as much as by Radicals. During the period of Colonial Preference there was no public sympathy with the Colonies, and though the bulk of the people may have been, and I believe were, determined to maintain the Empire, almost all the audible voices were raised against its continuance. The Colonies, that is, were profoundly unpopular. Sir Spencer Walpole, in the last two volumes of his admirably fair and lucid work, has brought together a number of expressions of opinion hostile to the Empire, which I will quote to show how deep was the feeling. For example. Lord Beaconsfield, writing in 1852, told Lord Malmesbury: 'These wretched Colonies will all be independent in a few years, and are a millstone round our necks.' The Duke of Newcastle declared that he should see a dissolution of the bond between the Mother Country and Canada with the greatest pleasure. Sir Henry Taylor wrote: 'As to the American Provinces, I have long held and have often expressed the opinion that they are a sort of damnosa hereditas.' Even Lord Salisbury, when Lord Robert Cecil, said in the House of Commons that 'it might be fairly questioned whether it had been wise originally to colonize the Cape and New Zealand, and whether, looking back on all the results, we have been repaid for the great cost and anxiety which they had entailed.' Sir George Come wall Lewis was even more pessimistic:
This view lingered on even into the sixties, and in 1867, when it was proposed to guarantee the Canadian Pacific Railway, Mr. Cave, the member for Barnstaple, remarked that 'instead of giving £8,000,000 sterling with a view to separating Canada and the United States, we ought to give £10,000,000 to unite them.' As Sir Spencer Walpole comments, such a remark would now be regarded as treachery. When said it did not elicit a single protest. Such was the feeling in regard to the Colonies that possessed statesmen who had been reared in the period of Preference. To them the Colonies were an incubus.
Contrast this feeling with that which prevails to-date. Not only would no statesman who wished to remain in public life dare to express such sentiments, but the great majority, whether Tory or Radical, would never dream of entertaining them. They have been banished from the mind of the nation by the epoch of Free Trade. That, and not Protection, has proved the soil in which the Imperial sentiment can best grow.
A very little reflection will show whence arose this unfavourable feeling towards the Colonies, which, remember, was specifically strong in the commercial class, and was reflected from it into the minds of our statesmen. 1 believe it came from the system of Preference which oppressed our trading and commercial classes at every turn. The merchant who was forced by it to buy bad, dear, and unsuitable colonial timber or sugar, coffee or wine, naturally resented the necessity, and vented his resentment on the Colonies. They were a stumbling-block in his path, and people never love stumbling-blocks. The Colonies were unpopular, and with those persons ​who declared that they would soon be independent, the wish was father to the thought. They longed to get rid of the burden of preferential trade, and believed that it would only disappear with independence. Hence the men who belonged to, or who were brought up in, the preferential period tended to become Little Englanders. As soon, however, as Colonial Preference was abolished, and instead of relying on the dangerous bonds of so-called commercial interests, we relied on the nobler nexus of a common race, a common language, common institutions, and a common loyalty to the Empire, our relations with the Colonies at once began to improve. The statesman who grew up under these conditions, and who did not find the supposed interests of the Colonies impeding commerce at every turn, became Imperialist in the true sense.
Perhaps the most striking example is that offered by Lord Beaconsfield himself. With his usual quickness and agility of mind, he was able to throw off the effects of the epoch in which he grew up. While England and he were Protectionists, he believed, as I have shown, that the Colonies were nothing but a burden. After the nation had adopted Free Trade and he had acquiesced in the change, he became an Imperialist who did not wish that the 'wretched Colonies' should become independent
V.
I cannot, I regret to say, find space to deal except very slightly with my contention that the colonial Empires of the past, such as Spain, Holland, and Portugal, withered away because they persisted in treating their Colonies as tied houses, and could not realize that the only true foundation of Empire is liberty, commercial and political. I must be content to record the opinion that the attempt to establish a system of commercial exclusiveness within those Empires greatly helped to produce the decay from which they suffered. Other causes, no doubt, contributed, but this ​was among the most effective in the work of destruction. Another very important point in regard to the influence of the policy of Free Trade on Empire deserves to be noticed. That is the attitude of the rest of the world towards the British Empire. No doubt continental statesmen are jealous of our success, but the British Empire as a whole does not anywhere excite that sense of widespread jealousy and hatred which is so dangerous to the State which inspires it. Recall for a moment the intense feeling of hatred which existed in regard to Holland and to Spain during the time of their greatest wealth and prosperity as Imperial Powers. This hatred was due to the policy of exclusion and of privilege enforced by either Power. Every individual trader not a Spaniard or a Dutchman was bound to be the enemy of Spain or Holland, for every trade-door was closed against him. It was indeed a double hatred. The colonists, whose very blood was sucked by the Imperial Power, felt almost as aggrieved as the excluded foreigner. Their colonies were the tied houses of those Empires. How different is the case with the British Empire! The foreigner may hate us in the abstract, but when it comes to business he cannot feel very angry with a nation which not only allows him to come freely and sell what he has got to sell here, but does not claim extra privileges over him in any of the colonial markets that are controlled directly by the Imperial Government. Thus our Free Trade policy has given us a world-wide Empire that excites the minimum of popular hatred and jealousy. Each Power might like to get our Indian or our African possessions for itself, but if that is not possible it would prefer the status quo. No other Power would be so good to trade with as England. It was very different in the case of Spain and Holland. Any change seemed then a change for the better.
The policy of unrestricted Free Trade has helped us even more inside our Colonies and dependencies. Turgot's saying that colonies always dropped off the parent tree like fruit when it was ripe was true under ​a system of extorting special privileges for the Mother Country. By allowing the Colonies to manage their own fiscal affairs without restriction, and by giving them just as good treatment in the home market when they tax our products as when they do not, we have given the colonists a confidence in the Mother Country that no other scheme of action would have been able to give. Every colonist instinctively fears being exploited by the Mother Country. How is it possible for Australia to say we are making use of her when she taxes our goods and we do not tax hers? The Free Trade policy of a free market—i.e., the policy of allowing all men to come here and sell freely whatever they have to sell without question asked or hindrance given—has alone, I believe, enabled the Empire to develop without any sense of injury or injustice growing up among the Colonies. Think for a moment what would almost certainly have been the result if we had tried to develop our Empire on Protectionist lines—had tried, that is, to make every colony and dependency give us a 'privileged position.' In that case every fresh acquisition of territory would have been met with a cry of alarm from the rest of the world. 'Here,' the nations would have said, 'is another piece of territory passing into the sphere of British exclusiveness. How long is this to be borne?'
Next, is it possible that a protective policy applied to the Colonies, even though intended to do them no harm, would not have ended in constant squabbles and disputes? Some Colonies would have wanted more Protection and some less, and none would have been really satisfied. Lastly, our own trade, debilitated by close markets, would never have taken the place it now has. As it is, our vast, free, and expanding trade helps to maintain the Empire, for all people like to be connected with a flourishing firm. Can it be contended that this feeling would be as strong with a narrower and more jealously conducted business? Depend upon it, the British Empire as we know it could not have ​been built up and could not now be kept together under any system but a system of Free Trade.
VI.
I shall be told, no doubt, that the old Free Traders certainly never thought that Empire and Free Trade had any connection. Instead, it will be argued, they admitted that they were antagonistic. I grant the truth of this assertion in respect of many of them. The old Free Traders were not as a rule aware that Free Trade would prove the best possible foundation-stone for the Empire. They builded, that is, better than they knew. And herein we see an example of the good results that may incidentally arise from laying hold of and following out a really sound principle. Probably Mr. Cobden would have rejoiced in an Empire such as we have to-day, but, if not, and if it could be proved that he would have been annoyed at its persistence, it troubles me very little. Free Trade is far too great and vital a matter to be pinned to any one man's coat-tails. We should always refuse to allow the policy of Free Trade to be tested by what Mr. Cobden or Mr. Bright would have thought of its most recent developments. They did not discover the doctrine of Free Trade, and it is not subject to any limitations that may be found in their writings. Hence I feel perfectly entitled to proclaim myself both an Imperialist and a Free Trader, or, indeed, an Imperialist because I am a Free Trader.
VII.
There is not only no antagonism, but an essential connection, between a sound and reasonable Imperial policy and the policy of Free Trade. The one thing that can and would ruin the Empire would be the abandonment of Free Trade in any shape or form. Once give up the principle that, subject only to the needs of the revenue, all men may resort to our markets ​and sell what they have to sell, and substitute the principle of restriction and exclusion, of trade jealousy and special privilege, and the ruin of the Empire will have begun. The policy of the open market is a policy from which we cannot afford to budge a single hair's-breadth. I hold, then, that it is the duty of every true Imperialist to combat with all his heart and all his strength the proposal to revolutionize our policy of Free Trade and to adopt the policy of Preference and Protection. He must insist on falsifying the prophecy of Robert Lowe, who in 1867 said: 'In the time of the American Revolution the Colonies separated from England because she insisted on taxing them. What I apprehend as likely to happen now is that England will separate from her Colonies because they insist on taxing her.' God forbid! We will neither tax our Colonies for our benefit nor tax ourselves in the vain hope of benefiting them thereby. What we will do is to insist that the tie which unites us in one mighty State shall be the tie of freedom—freedom political and commercial. That is the motto which we must blazon on the banner of Empire. In that sign we shall conquer.
* ↑ Though portions have been rewritten and some omissions made, the bulk of this article appeared in the Monthly Review in 1904. I have also made use of a letter on Colonial Preference contributed to the Spectator in February, 1904, and have resumed portions of an article by me in the Spectator of January 28, 1899.— J. St. L. S.
* ↑ Being a differential protection of 450 per cent., taking the various rates of duty on colonial and on foreign deals, staves, spars, masts, battens, hoops, and all kinds of timber, there is much about the same differential duties to protect the colonial.