FREE TRADE v. PROTECTION.

New Zealand Herald, Volume XIX, Issue 6424, 20 June 1882, Page 6

FREE TRADE v. PROTECTION.

A whiter, under the nom dax>lume. of " Free Trade," sends us the following letter, dated 7th inst.:—

J During last week two articles appeared in. your paper on trade. The. first was on Monday, giving a resume of a paper in the March number of. the Fortnightly Review, written by George Baden-Powell, proving conclusively that where free trade is adopted in" young communities," examined by the test points of (1) establishment of manufactures, (2) revenue, and (3) general prosperity and growth, these countries consolidate more firmly, advance more rapidly, and the condition of the mass of the people is considerably better than in the countries who adopt protection. You point the moral by saying "the future prosperity of New Zealand will largely depend on which policy she adopts," meaning, of course, that she ought to adopt the free trade policy. Your second article was published on Sabutday, and in it yoii speak of free trade versus protection as being "a debateable question," that "it will be admitted, by men of all shades of opinion, that it would be a wise statesmanlike step at the present juncture to lend a fostering hand to struggling colonial industries, already in existence, where such aid is needed, and in • creating others where local circumstances render their establishment feasible and prudent." You then proceed to.show your meaning by giving an account of the Kaiapoi Woollen Manufacturing Company, and to dilate on the folly of putting all the ," eggs in one basket," that our surplus population must be absorbed, and that our youth cannot be all agriculturists, &c. Your Saturday's paper contained also the report of the annual meeting of the Chamber of Commerce, irid the President's address. The discuasiou which followed indicated a strong i feeling against anything particularly outi spoken being allowed to go forth without ' something in the shape of an antidote I accompanying it. Mr. Firth's free trade speech of two years ago was alluded to, and a ( sort of pride taken that it was thus treated. Is it then come to this that in Auckland, which seeks to become the first commercial city of New Zealand, we may only speak of that great and living principle of free trade except " with bated breath and humbleness ?" I ask for a little space to allow me to examine some of the points referred to.

Ist. Free trade is no longer an open question, it is not even a matter of opinion, and hence it is not "a debateable question." There are many open questions, soine of which are occupying the attention of our Legislature at the present moment, such as the Native policy, the contemplated loan, Licensing Acta, and many others. You may argue any length of time about these, weighing proba"bilitiea in the balance, and anticipating good or evil results which, may or may not happen, andyou have to decide whether the adoption or rejection of these measures would tend most to the general welfare. Free trade is on. ,a, different footing. It is more like a question of arithmetic than of politics. Euclid, more than a thousand years ago, put a few reasons together, which made it quite clear that the three angles of a triangle are equal to ; two right angles.. People may go about and make long speeches on this question of the triangle marshalling a vast number of vague probabilities tending to throw doubt, on ,the proposition, and some who kaow nothing of Euclid's demonstration might believe them j but those who had studied the subject would know better, and would say this is ne case of probabilities, but of distinct and infallible proof. So is it with ■regard to free trade, you can demonstrate the truth of the principle without any balancing probabilities. Now, what I have further to say must not be interpreted to mean that I am an opponent of local industries, .which is not. the case; at the right time, and in proper manner, I should like to see a good many introduced. What I object to is, that these industries should be established and sustained only by abstracting money from the public revenue ; i.e., they are protected INDUSTRIES.

2nd. In studying this subject the first thing to be mastered and clearly understood, is imports and exports ; get a thorough idea of the principles regulating these, and fix them definitely in the mind, and other difficulties soon, vanish. The common notion is that the articles we send for from England, America, or any' other country, we pay for in speoie or money ; and that the wool, wheat, gold, gum, &c, we send away we get paid for in the same tray, and that money bring wealth, the more wools, &c, we export, and the fewer articles we import produces a highly flourishing condition of affairs. There could not be a greater fallacy. International trade is nothing more or les3 than an exchange of commodities, simply barter, in, which specie plays but a very insignificant part, and that chiefly as a standard o£ value. The trade of Europe and America amounts to thousands of millions sterling per annum, and, in proportion to the whole, a very small amount of specie passes. To go iuto all the reasoning as to how this is, would occupy too much space; it is only necessary to state the result which is, that the nation which exports must also import and vice versa; the exports must be paid for by the imports, and these will balance each other.

3rd. I must here anticipate an objection, and meet it. I shall be told that, on referring to the tables published by Government, it will be seen that, in no one year, nor even in a series of years, do the imports and exports balance each other. This is quite true that they do not, and for the reason that continually disturbing elements are at work. During the last dozen years our Government has borrowed about twenty millions sterling, and it is estimated that a similar sum has come into the country to be invested on private account; and, at the present moment, a sum of- nearly three millions sterling has to be paid in the way of interest. Now, when the Government effected its loans in London, it'did not immediately charter a vessel aud send over five millions of sovereigns at a time, nor did the money which was sent for privato investment come in coin. What England has lent is twenty millions worth o.f the products of her own labour—such as Railway material, rails, locomotives, carriages, agricultural implements, and goods of all kinds figuring as imports; the exports to balance them will appear when the loans are repaid, aud in the meantime, the interest which lias to be seut until repayment, all comes out of our exports of wool, wheat, gum, &c. 4th. There are two conflicting influences at work in New Zealand at the present moment. The first I will call agricultural, and comes of the settlement on the laud. That has gone on and prospered until now we are producing a vast quantity of wool, wheat, beef, mutton, ■fee, more than we we can cousume, and if it was not that we had an outside market, such as England, which is ready and eager to receive all we can send without let or hindrance, we should be in a sorry state, and . have prices so ruinously low that it would not pay to cultivate the land. Our farmers have shewn, by their industry, aud by the superior quality of the land, that they can raise more wheat per acre, grow a superior class of wool than the English farmer can, and, taking advantage of the discoveries of science, they are enabled to send off their beef and mutton and realize much higher prices for them than they would fetch her«>; this, as far as it goes, is free trade, and we are now clamouring for a direct steam service to crrry it on. There remains very much land still to be occupied, and so important is

it considered that it- should be settled that the Government are contemplating rendering ' assistance to people to oome out and cultivate it. The other influence may be styled manufacturing, whicn says, '' We not only require food, but also clothing and a great variety of other articles which we will make for ourselves, and thus find a diversity of employment." Now this is all very well and would be in accordance with Free Trade if it ended here, but it does not. It is soon found out that in making a piece of cloth, or a blanket, there are other matters which enter into the manufacture than wool which we have on the spot, or into the making of boots and shoes than leather, or of soap and candles than tallow and oil. England can make these articles better and cheaper than we can, and as she takes our surplus productions of jwheat, wool, &c, she can only pay us for these by sending us her manufactures, and if we don't take these she hau nothing else to offer us. But our manufacturers say, "No, we will insist on making ) our own goods, and, in order that we may as far as possible shut yours out, we will put on a duty of 16J per cent., and thus make all goods consumed in the country that much dearer for the sake of keeping our manufactories at work." This, in opposition to free trade, is called protection. sth. Your article mentions the Kaiapoi Woollen Mill, and adduces it as an example of tho sort of local industry which should be supported. I have once before in your columns exposed the fallacy of the position taken by the chairman of that company in his earnest demand for increased import duties. The company had originally a capital of £15,000 and claim to have made a profit of 16 per cent.- up to June, ISSO. Having all their profits locked up in stock, &.C, and only able to declare a dividend by borrowing money to pay it, they determined to enlarge the company and increase the capital to £100,000. In the process they make a further profit by watering tbe concern nearly £2,000. They have just issued a circular asking for more shares to be taken up and have published their last balance sheet, which shows on actual working of the mill a share capital employed of £45,569 and a profit of £4,300. The profits are swelled.to £4,780 by matters not connected with working of the mill. The accounts are very much jumbled together, and are not after the clear model of June, 1880; hence it is difficult to extract information. The wages which are lumped together with insurance and interest, perhaps I shall not be far wrong in estimating at £10,000. On goods manufactured they have intercepted duty on its way to the Colonial Treasurer, a sum of £7,760, which said sum has to be made up to the Government by extra taxation. They state they employ 425 persons. Now, I am going to make a statement which may appear bold, but I do so advisedly, and I hope those of our representatives who have gone to Wellington to encourage local industries by tariffregulations ■may see it, it is this— that the labour of 330 of those 425 employed at Kaiapoi is utterly lost to the country, it is of no more profit any way than if they had been engaged from January to December in digging holes in the sand on the sea shore and filling them up again. Mr. Wilson, the chairman, tells us plainly had these people been employed in agricultural pursuits they would have received higher wages than he has paid them, and had their £100,000 been employed as .Mr. Firth told the Chamber of Commerce he knew of an individual who had employed £60,000 on an estate of 60,000 acres, the same result would doubtless have followed and what is now desert ■would be made to "rejoice ,and blossom a3 the rosa," bringing great blessings in its train,- and conferring permanent benefit on the country in having the capital and energy directed to reproductive works.

6th. This subject has more than a passing interest for Auckland. So far we have very few protected industries in our midst, the chief being the boot and shoe manufacturing, which I am informed would easily live without this bolstering. These industries are chiefly in the South Island, trhich we in the North are taxed to sustain! A low estimate of the amounts thusabsirac Jed from the revenue of the country is, I am told, £50,000 a year; our share of that taxation for the Auckland province may be taken at £12,500, for which we do not get a particle of return. If it was possible to separate this province, or even the whole of the North Island, from the other part of the colony, and we _ here were to adopt free trade as against theirs of protection, we should see this portion forge ahead fast, and become like New South Wales is in comparison witn Victoria.