TRADE AND PATRIOTISM.

Auckland Star, Volume LVII, Issue 142, 17 June 1926, Page 9

TRADE AND PATRIOTISM.

THE FREE TRADE ARGUMENT. LOWERING CUSTOMS BARRIERS. (By HARTLEY WITHERS.) Most people will admit that the system of putting up trade barriers between the nations is bad for International trade as a whole, however strongly they may feel that the barriers which their own country puts up are justifiable and necessary. It is generally easy to mate out a case for any particular Customs duty or restriction, or even prohibition, but the broad fact remains that the world would certainly be more prosperous and better fed, clothed and housed if goods were grown and manufactured in the places that are best suited for their production, and were exchanged freely between one nation and another, without any check imposed by Government or by patriotic sentiment. If such a system were possible the high cost of living, which at present presses so severely on the greater part of the population of most countries, would certainly be reduced, : and a higher standard of comfort would be possible for the general consumer— that unfortunate person who fully bears the brunt of all the present difficulties.

And yet in spite of the obvious disadvantages of the system, it stands entrenched behind formidable defences, and a campaign that is now being organised by the International Chamber-of Commerce for the reduction of trade barriers has a difficult task before it. To all nations a reduction of trade barriers is from some point of view desirable. Even the United States, so solid in the strength given her by the great rich area at home that is free from all trade barriers, sees that her economic relation with the rest of the world would be easier and simpler if Customs barriers—her own and other people's—could be lowered. She has developed a great export trade in manufactured goods, which is hampered by foreign duties and restrictions as she has lent millions of dollars abroad, and ■would be able to collect the interest on them all the more easily if she allowed foreign goods to cross her frontier more readily and if the policy of restriction practised abroad did not hamper the power of her debtors to grow rich by active production. Other countries all have goods to sell and goods to buy and would evidently do both these things more easily and on better terms if the barriers set up were less stiff and obstructive. And yet in spite of these obvious advantages on the side of freer exchange of goods between the nations we .find them—including what used to be free trade England—busy in making it more, difficult. If any man were told that it is to his advantage to buy all that he wants in the street in which he is standing, and that he must not go round the corner to see if he can find something better and cheaper, he would laugh at the suggestion as absurd. But this is just what the nations tell their citizens when they set up trade barriers, and the citizens accept the suggestion not only with patience, but very often with approval.

This curious fact seems to be based on two misapprehensions. The first makes every nation think that it is better to be independent of all others, as far as possible, for the supply of its economic needs, and especially that it ought to be able to do its own manufacturing for itself, as if there ' were something undignified about buying goods, and especially manufactures, from other countries. The second is the fear that if trade barriers did not exist, the less highly developed nations would lie swamped with goods from abroad, would have no work for their populations to do, and woulfi be ruined by an excess of imports. The idea of self-sufficiency, as the economic ideal to be aimed at, is in effect a denial of the advantages to be secured by the division of labour, which have not only been demonstrated by Adam Smith and all economists who have come ' after him, but are endorsed by the practical action every day by every one of us. Our whole economic civilisation and progress in the last two centuries have been based on the advantages of letting each man concentrate on the work that he can do best and exchanging his product, or the wnge and salary that he gets for it, for the work of thousands of other people, each of whom is specialising in some other line of activity. We do not think it undignified to buy boots from our neighbour—why should a nation think it undignified to buy railway material from another?

The fear of being swamped by other people's goods is based on the delusion which imagines that foreign goods are given to us, whereas in fact we have to work just as hard in order to buy them as if they had been made at home. A nation can only buy abroad if it has goods or services to sell, and every time that it buys abroad it is, in effect, giving an order to its own export trades to produce goods to meet the cost of its foreign purchases. Let us imagine what would happen if a country suddenly ceased to produce. How could it buy abroad? The gold in its central bank might be taken in payment, and any foreign investments that it held could go; but these forms of payment would very soon be exhausted, and then its imports would have to stop because the means of payment have to be furnished by exports. When the general consumer begins to see that by cherishing these delusions he is himself responsible for much of the high cost of living, he will be eager to reduce the trade barriers which he at present tolerates.