FREE TRADE VERSUS PROTECTION

Nelson Evening Mail, Volume LXIV, 4 August 1931, Page 9

FREE TRADE VERSUS PROTECTION

INFANT INDUSTRIES CONCLUSION OF MR F. G. GIBB’S ADDRESS hollowing is the concluding portion of Mr F. G. Gibbs’s recent address on the subject of Free Trade as opposed to Protection : Some free tiade authorities have conceded that protection might be justified as a temporary measure in order to enable new industries for which the country is well adopted to surmount their initial difficulties and gain experience and strength before being called upon to face competition. But experience lias shown that such industries never admit that they have outgrown tlie need for protection. The stronger they become, and the less therefore tliev really need protection, the more political “puli’ they are able to exert to secure the retention of the duties which favour them. If, however, a policy of protection for infant industries should he decided on. it should take the form of special bounties and not o P customs duties. The people of tlie country then know exactly what the protection of the, industries is really costing them and moreover bounties can be withdrawn much more easily than tariffs can be removed.

POLITICAL CORRUPTION One of the greatest objections to a protectionist policy is that it is liable to promote much political corruption. Individual industries will organise themselves to bring political pressure to bear upon the Government in order to secure special tariff protection, and the pressure often takes the form'of widespread bribery. A country with a settled free trade policy is at any rate spared this corrupting influence. A VICIOUS CIRCLE It lias been noticed in several protectionist countries, particularly Australia, that protection has made the working man, even in the protected industries, no better off. The effect of imposing a tariff is to raise the prices of 'goods and increase the cost of living. When this has taken place, the wage earney demands an increase in his money wages. This in turn diminishes the manufacturers’ profits and causes them to demand yet higher duties to compensate for the higher wages. ■ The increased duties make prices go up still further; wages follow suit, a yet higher tariff is wanted and so on.

ANYTHING FOR A CHANGE In times of acute depression such as those through which we are now passing, there is always a strong tendency to blame the Government in power and the system in vogue for all the many troubles that beset humanity. Hence the many revolutions and changes of government all over the world; hence also the strange phenomenon that the protectionist countries of Europe with their suicidal tariff walls, heavens high, should be seriously considering Briand’s proposal for a general throwing down of the tariff walls within a United States of Europe, and further that there should be a powerful movement in the U.S.A. to reduce drastically their customs duties, while simultaneously free trade England should seein destined within the next few months to revert to protection. “When things are bad,, and change must bo for the better,” is a fallacy that dies hard. GOOD ONLY IN THEORY Finally we may consider the attitude taken up by the protectionist who says, “Free trade is very good in theory, hut does not work well in practice.” This retort is the last refuge of the man who is bankrupt of argument. So long your opponent can find the vestige ot an argument in favour of bis views, lie will produce it; but when be is completely at a loss, be falls back upon this hackneyed retort. After all protection is as much a theory as free trade is, and unfortunately we cannot absolutely settle the relative values of these two policies by an appeal to experience, the prosperity of a country depends upon a very large number of factors of which the fiscal policy is only one. Examples can be found of prosperous protectionist countries as well as of prosperous free trade countries. We cannot settle any social and political questions as we can chemical and physical questions bv a laboratory experiment. Therefore, as no decisive appeal from ‘ theory to “practice” can be made in favour oi either the one policy or the other, it will always remain possible for the protectionist whose arguments have been pulverised to fall back upon Ins favourite retort, “Very good in theory.

IMPERIAL FREE TRADE There was much that was attractive about the proposal that all parts of the Empire should have free trade among themselves with a tariff wall against all outsiders. Even iree traders would have preferred such a state of things to the present for it would have been a considerable extension of the free trade principle and might easily have been a stepping stone to worldwide free G’due. But it is now generally recognised that the scheme is quite impracticable. An the first place the external trade ol Great Britain with all her dominions and dependencies put together is smaller than that with foreign countries, and the possibilities of expansion with such countries as the Argentine and Brazil arc much greater than those which Canada and Australia can otter, tan Britain afford to jeopardise the greater part of her present trade on the oltchance of the lesser part expanding sufficiently to make it worth her while. But the attitude of the various 1 rune Ministers at the last Imperial Lonten encc gave the deathblow to any hope of achieving Empire free trade. \\ hi e demanding that Britain should put cluties on foreign foodstuffs and raw materials to favour the dominions, the Prime Ministers made it brutally clear that they intended to protect their own local industries at all hazards. the Canadian Prime Ministers paltry otter to extend preference to Great .Britain by reducing the 30 per cent, tariff walls to 27 per cent, was rightly termed a piece of humbug by Mr Thomas. As was wittily said bv an English manufacturer, '“You drown foreign traders m thirty feet of water and then expect via to be grateful because you drown us m only twenty feet, But as you drown us all the same, we sav thank you ioi nothing.” There is no doubt that a large proportion of the so-called preioiences are nothing less than farcical, i any rate until the various dominions aie prepared to admit goods from Britain and other parts of the Empire on much more favourable terms than they aio willing to do at present, all hope .of establishing a system of Empire free trade must be abandoned.