TARIFF ISSUES

Dominion, Volume 22, Issue 233, 28 June 1929, Page 9

TARIFF ISSUES

A CONCERN OF FARMERS

ADDRESS BY PROFESSOR B. E. MURPHY

“The tariff issue is of a highly contentious nature, and eannot be resolved on a basis ol ‘devising a policy in the general interests of the people as a whole.’ Like most problems in democratic politics, it will be decided on the basis of a sectional struggle among the interests affected in different ways by the imposition of f tariff. In the tariff question the interests of farmers are opposed to those of industrial labour and manufacturers. It seems difficult to see on what basis a policy mutually acceptable could be founded,” said Professor B. E. Murphy, Professor of Economics at Victoria University College at the Royal Agricultural Society’s annual meeting. “We already ■ have a considerable tariff, which could not be abolished without doing great damage to those industries that have grown up under its shelter in the justifiable belief that at least the present measure of protection would continue,” he proceeded. “This protection could not suddenly be withdrawn. Apart from that, our tariff is still mainly a revenue tariff, and the taxation derived from Customs duties, which amounted to 51.75 per cent, of our total taxation in 1928. could not be dispensed with.

No. Further Protection.

“In my opinion the proper policy for the farmers is to demand that no further protection be granted to industries in New Zealand, whether primary or secondary, and that the existing protection, while allowed to stand, should be subject to close and continuous investigation, with a view to ascertaining periodically in the case of each protected industry: (a) that the protection is, still needed, (b) that a tariff is tie best way of giving protection; (c) that the protection granted is not excessive; (d) that the protection granted is not unreasonably injurious to other interests; (e) that the industry is suitable to New Zealand conditions; (f) that the industry is efficiently managed.’

“The burden of proof always rests on the advocate of more or continued tariff protection. , ~, . “I base this policy on. the following main grounds: The only argument for protection to manufacturing industry that can seriously be put forward in New Zealand, or that is in fact put forward, is the "amous ‘infant industry’ analogy. .... The infant industry argument . . . candidly admits that protection is a burden on the community. Indeed, that fact cannot be contested, but it is held to'be a temporary burden that will be wiped out bv industrial development. Applied in practice ... it is difficult ta point to any industries that come under this category, as fnr as New Zealand is concerned. It annlies only to such industries as can he unequivocally shown to be self-sup-porting within a period not too remote, otherwise it is merely a demand to subsidise any apparently feasible project. . . . Limitations of Manufactures. “There are few manufacturing industries in New Zealand that are suitable to the conditions of the country, which is adapted for primary but not secondary industries. There is no hope of an export trade in manufactured commodities. . . ■ The conditions for the applicability of . the infant industry argument do not exist.

“A tariff will not creat new industries. Industries can be created only by labour and capital, and a tariff can divert these from one channel to another, but cannot call them into being.

“The very fact of diversion implies loss, because we are artificially moving, by tariff legislation, labour and capital from where it would naturally settle if left alone to where the law, by giving a bounty at the expense of the non-protected interests in the community, causes capital artificially to go Making work’ is no valid argument. Our aim should be to concentrate our resources where they will produce most wealth and barter our surplus for the surplus of other ■ countries similarly engaged. Our main customer, Britain, does' this, and it would be mutually advantageous.

“Protection raises the cost of living, and while conferring a bounty on the protected interests does so at the expense of the general community. Manufacturers offer a guarantee that they will not raise prices as a result of the tariff- Such a guarantee is absurd. No man or body or men can predict or guarantee the future price level, which depends on factors they cannot control.

“We live by exporting our surplus primary products. If we don t buy, then in the long run we should not sell, because the economic struggle would cause our customers, if we made ourselves industrially independent of them, to buy their supplies from countries that will buy from them. This happens because our export markets, though large, are so restricted and likely to stay so. Cannot, be Self-supporting. “We cannot be self-supporting, nor can Britain. The present relations by which we interchange primary products for manufactured goods are the cheapest, satest and surest. Industrial independence is a dream, and a dangerous dream for a country situated as we are. It is open to question whether a policy of preference ot Britain and protection to home industry can be effectively pursued in conjunction. If we shut Britain out, or nearly so, in favour of local industry through a protective tariff, what is the value of the preference and what inducement do we give her to keep on taking our products? , . , “Farmers if they accept this general view should remember that it applies as much to themselves as to manufacturers. If they demand tariff on wheat and fruit, how can they resist the demand for tariffs on boots or flatirons? It would pay farmers to call a halt to protection of all kinds. In the main they are the principal non-protected section of the community and bear the weight of the tariff duties. They also have most to lose by any step that imperils the British market for our exports. Free trade within the Empire is. an unrealizable dream, because the Dominions need tariff duties for revenue, and have gone too far with protection to recede, but the process should not be allowed to go further and interests at present protected should be kept under review and made to justify the measure of protection granted, which should be withdrawn unless it can be shown to remain necessary, it is open to question whether such assistance should be given through the tariff or in the form of bounties such as guaranteed interest. This would prevent more protection than is necessary being granted to any firm. Some firms may need it. some do not. Indiscriminate protection by maintaining the weakest businesses in existence is simply giving an inducement for inefficiency. Bounties have objeetional features of their own, but applied in the form of a minimum guaranteed return, subject to inspection for efficiency, they are less costly and less objectionable than tariffs, and would also have the effect of letting the community see what protection costs.