Sacrificing His Core Supporters in a Race Against Defeat
IN November 1930 an Imperial Conference was held in London. The discussion was mainly on economic relations within the Empire, and Mr. Bennett, who had just become Prime Minister of Canada, urged strongly on the Labor Government, which was fully pledged to free trade, the advisability of inter-Empire preferences. "I offer to the Mother Country," he said, "and to all other parts of the Empire, a preference in the Canadian market in exchange for a like preference in theirs based upon the addition of a ten per centum increase in prevailing general tariffs or upon tariffs yet to be created. In the universal acceptance of this offer and in like proposals and acceptances by all other parts of the Empire we attain to the ideal of Empire preference."
For the Prime Minister of a Dominion to suggest to the British Government a policy which directly contravened their well-known principles was a daring thing to do, and it brought down on Mr. Bennett's head much criticism from august quarters. The London Economist's comment was: "Mr. Bennett says in effect -- 'Revolutionize your fiscal policy, put duties on primary foodstuffs imported from foreign countries in order to admit under preferential rates larger quantities of Canadian wheat, and we will give your manufactured goods -- not lower duties but a preference conditioned by the further raising of our own tariff barriers against the world.'" This leading journal went on to chide Mr. Bennett for the lack of practical work at the Conference, which they thought was due to his ill-considered attempt to stampede the British Government.
At that time many people were inclined to agree with the Economist. Yet within two years an Imperial Economic Conference has done what then seemed to most thoughtful people impossible.
In the event, it has all come about naturally enough. The British Labor Government found themselves overwhelmed by the economic and financial blizzard of the summer of 1931, and being unable to carry on under storm conditions gave way to a government predominantly Conservative, supported in the main by members pledged to protection. It was not long before a beginning was made in the setting up of protective duties in the United Kingdom, and this opened the way for the Conference at Ottawa, originally planned for the summer of 1931 but postponed because at that date it obviously could accomplish nothing.
American readers will no doubt be chiefly interested in the Conference so far as it affects Canada and the United Kingdom, because these are the two parts of the British Empire with which American trade is of greatest importance. In this article I shall therefore confine myself to those aspects of it.
I heard a distinguished Canadian public man say in January last to a group of Americans, in referring to Canadian-American trade, "You have made us feel that we must go elsewhere." A glance at the facts will show how true this is. Canadian economic history since 1855 is strewn with the wreckage of trade from time to time built up and then as regularly destroyed, so far at least as tariffs could destroy it, by American tariff laws. A Reciprocity Pact was made by Lord Elgin in 1854. Between 1850 and 1866, when the Reciprocity Pact was denounced, the total trade between the two countries had increased in value from $10,000,000 to $54,000,000. In 1866 the trade dropped promptly to $45,000,000. It is not necessary to do more than mention briefly the succeeding American tariff measures, the general tendency of which was to carry the tariff walls against Canadian natural products higher and higher. The McKinley tariff of 1890, designed to protect the farmers in the northern states, dealt a body blow to the farmers of Ontario. The Dingley tariff of 1897 carried the duties again higher, and it was perhaps no mere accident that in the same year the Canadian Government, under a French-Canadian Premier, gave the first preference in the Canadian market to the British manufacturer. From that time until the World War there was a happy interlude from tariff increases, and indeed the Payne and Underwood tariffs reduced barriers and allowed trade to flow more freely.
I must not, of course, forget Canada's refusal in 1911 of reciprocity proposals from the United States. A lot of foolish imperialistic arguments were made against a reciprocity pact at that time, and great use was made of certain unguarded utterances of the late Champ Clark, the late President Taft and other Americans suggesting that the proposed treaty was the first step toward annexation. But apart from these influences there undoubtedly also existed in Canada the feeling that to make a treaty with the United States was again to give hostages to fortune -- in other words, that if we built up trade under such a treaty we might again find it seriously affected in an adverse manner whenever the United States felt it convenient to do so.
In the post-war confusion the distress of American farmers has again caused increases in the American tariff against Canadian natural products which have been devastating to Canadian growers. The Fordney-McCumber Act in 1922 added new duties which, had it not been for the prosperous years that followed, would have immediately worked grievous injury in Canada. As it was, trade increased in the prosperous years up to 1930; but the Smoot-Hawley tariff of that year, synchronizing with the depression, brought about a catastrophic drop in Canadian exports to the United States. In 1931 they fell about 33 percent below 1930 and have since gone substantially lower.
Let us now turn to the history of trade relations between England and the United States. The story is comparatively simple. With the exception of a few duties on luxuries, particularly on motor cars, most of which were repealed by the Labor Government, England has until the last few months supplied a great free market to the United States, taking far more than the United States took from her. The balance of exports was made up in two ways -- first of all through the amount (now, as Mr. Keynes would say, so astronomically reduced) spent by American tourists abroad; and, of course, in later years, by the huge amounts lent by Americans to Europe which enabled England, like the rest of Europe, to buy heavily from the United States.
It should be pointed out that while Great Britain has pursued an almost entirely free trade policy until a few months ago, there has for many years existed an element anxious for a tariff. At the beginning of the present century, the late Joseph Chamberlain, whose son Neville was one of the British representatives at the Ottawa Conference, initiated a tariff reform movement which rapidly gathered impetus and which from the year 1900 until the landslide to the Liberals at the end of 1905 appeared to be an important political factor. Under the Liberals in the prosperous pre-war years the influence of this movement waned, not to rise again till the collapse of the post-war prosperity. In the years of growing unemployment after 1921 the movement again became important and captured a strong element in the Conservative Party. Indeed, in the 1923 election Mr. Baldwin half committed his party to tariff reform. The disaster suffered by the Conservative Party in that election again thrust tariff reform into the background, and in the 1929 election, when the Conservative Party was returned to power, it was not a serious issue -- the memory of 1923 was still fresh.
Such was the situation when the new (depression) era commenced and everyone began to feel the pinch and to take steps for self-preservation. And what steps have been taken! The United States, having given the lead in raising tariffs to all the rest of the world, was quick to move forward again. In Canada during 1930 we elected a government pledged to cure unemployment by the use of tariffs. Immediately after his election Mr. Bennett called a special session of Parliament and raised tariffs substantially, particularly in the textile industry. I have already referred to the proposals he subsequently made to the Imperial Conference in London, and to the events leading up to the Ottawa Conference in August last.
The months prior to the Conference were busy with preparations. These were chiefly of two kinds. In the first place there was naturally an intensive preparation by civil servants on both sides, particularly by the admirably trained British civil servants. And there were also meetings in England and Canada of representatives of different industries in the hope that agreements might be made to divide up the business to the satisfaction of both. Certain of these meetings of business men were successful, notably the meetings between representatives of the steel and leather industries. On the other hand, an attempt of textile manufacturers on both sides of the water to get together was an entire failure.
As the date for the Conference approached hopes and fears alternated in curiously opposite ways, and the training, temperament and outlook of the decisive and courageous Prime Minister of Canada were carefully and anxiously assessed. Notwithstanding that unlike his predecessors in the Conservative Party he had implemented his election promises by putting into effect the high tariffs which he had promised, there was great fear in the manufacturers' ranks, and corresponding hope among low tariff people, that having summoned the Conference Mr. Bennett would become convinced there was only one way for it to succeed, namely, by Canada's making real concessions, and that he might be prepared to make such concessions even in the face of violent opposition in his own party.
His speech at the opening of the Conference gave encouragement to both sides. He said in part:
For a great many years Colonial and Imperial Conferences have discussed the question of closer Empire association and have searched for a formula by which it might be brought about. Throughout these Conferences is to be found the evident desire for an improvement in Empire trade relationships through the general application of tariff preferences.
At the Imperial Conference held in London two years ago Canada submitted what she conceived to be the basis of a plan for closer economic association.
That plan was predicated upon the general adoption of preferential tariffs, and we maintained that such a plan could best provide reciprocal benefits to those participating in it. At that time a most profitable enquiry, in my opinion, was held into the merits of our proposal, and all competing plans and projects were fairly and fully canvassed. The Empire as a whole was not then ready to adopt our plan. By common consent the Conference was adjourned. This Conference follows upon that adjournment.
In the interval, as I have said, the United Kingdom has adopted the principle of tariffs as an instrument of economic advancement. As a consequence, the difficulty in adopting our plan has been removed. Our policies are now uniform. Our desire for achievement is even greater now than then. Our common need is now more urgent. No one, therefore, can now deny that the time for action has arrived and that the British Empire at last is able to fulfil its longtime hope of real and helpful closer Empire economic association. And that the son of the greatest protagonist of Empire trade is today one of the delegates to this Conference seems to me prophetic.
I will re-submit in principle my earlier proposal with such modifications as the present circumstances make advisable. . . .
We therefore will propose that the United Kingdom shall extend the principle of her present tariff preferences to natural products, and on our own part we are prepared to make the necessary adjustments in our tariffs to secure the advantages which we believe will come from this arrangement.
Mr. Baldwin, in his opening speech to the Conference, revealed what he and his colleagues hoped to obtain when he used these words:
Reverting now to Empire trade, we hope that as a result of this Conference we may be able not only to maintain existing preferences, but in addition to find ways of increasing them. There are two ways in which increased preferences can be given -- either by lowering barriers among ourselves or by raising them against others. The choice between these must be governed largely by local considerations, but subject to that it seems to us we should endeavor to follow the first rather than the second course. For however great our resources, we cannot isolate ourselves from the world.
The Conference encountered stormy and difficult weather. Many pious hopes had been expressed that there would be no bargaining, but of course it was a plain and obvious fact that the whole point of the Conference was for the various parts of the Empire to bargain with each other. As one writer, referring to the Conference, has said: "Most prudent people hesitate to do business with their relatives. When the necessity arises, the results are seldom a stimulant of family affection. Each kinsman expects the other by reason of his kin to make kindly concessions and is outraged to find the others expect the same of him." There was some criticism of Mr. Bennett for being somewhat harsh and overbearing in his dealings. But as against this it may fairly be said that without his firmness, force and resolution it is doubtful whether the Conference could have achieved what it did.
Though details were not available until the Parliaments of the Empire met in October, it was at once evident when the Conference ended that a situation not without considerable irony had arisen. Mr. Bennett, the convinced protectionist, had by his forcefulness imposed on the British representatives (who may fairly be described as most unwilling protectionists, and some of whom were at heart free traders) the food taxes which have been anathema in England for over eighty years, thereby raising a storm in English politics the end of which is not yet. On the other hand, there was reason to believe that the British delegates had forced on Mr. Bennett certain tariff concessions quite out of line with his previous course of action.
In analyzing the results of the Conference I shall begin by quoting the general statement of principle contained in the resolution which it passed:
The nations of the British Commonwealth having entered into certain agreements with one another for the extension of mutual trade by means of reciprocal preferential tariffs, this Conference takes note of these agreements and records its conviction;
That by the lowering or removal of barriers among themselves provided for in those agreements the flow of trade between the various countries of the Empire will be facilitated, and that by the consequent increase of purchasing power of their peoples the trade of the world will also be stimulated and increased;
Further, that this Conference regards the conclusion of these agreements as a step forward which should in the future lead to further progress in the same direction and which will utilize protective duties to ensure that the resources and industries of the Empire are developed on sound economic lines.
A special Supplement to the London Economist, dated October 22, 1932, contains an admirable detailed summary of the results of the Conference, and in what immediately follows I shall quote from this freely.
The concessions in each case can be divided into pre-Ottawa concessions and undertakings made at Ottawa. Dealing first with the concessions made by Great Britain to Canada, the Economist points out: "The concession of free entry for Empire produce under the Import Duties Act and Horticultural Products Act gave the Dominions a preference varying from 10 percent to 33 percent over a range of commodities covering one-half of British trade." In the case of Canada, these preferences included more than half of her sales to the Mother Country. Undoubtedly this had prior to the Conference produced a considerably better market for Canadian goods in Great Britain.
The undertakings made by the British Government at Ottawa fall under five heads: 1. Continuance of free entry for all Imperial products now admitted free of British duties. 2. Imposition of fresh duties on certain imports from foreign countries. 3. Maintenance of certain existing preferences, i.e., by not reducing the existing duties on foreign imports. 4. Quantitative regulation of certain meat imports. 5. Certain other undertakings, including notably an agreement with Canada to deal with imports of goods whose price is affected by foreign State action. (This last clause was designed to deal with what was regarded in Canada as Russian dumping.) The agreements are to run for five years.
Coming to details, we find that Canada expected to realize most benefit from the duties on wheat, copper, lead, zinc and lumber, the meat import regulations, the removal of certain limitations on the export of live cattle from Canada, and also from a preference for Canadian tobacco. The two most important duties were those on wheat and meat, particularly the latter. The undertaking given by the United Kingdom makes clear that what is intended is, by the use of quotas, to raise the price of meat in England to the point where the English farmer can make a profit, and to give to Canadian bacon and ham free entry to a maximum of 2½ million cwts., an amount larger than Canada has exported to England even at the height of the export trade.
The best informed men in the Canadian packing industry regard this part of the agreement as of enormous potential importance to Canada. At present the low prices in England, coupled with the depreciation in the pound and the inadequacy of the hog supply in Canada, make it impossible for Canada to take advantage of the arrangement. But there is a feeling that Great Britain's declared policy of raising and stabilizing the price, while at the same time regulating foreign importation and allowing the Canadian product free entry, offers Canada a concession which should prove most valuable. A beginning has already been made toward the carrying out of this part of the agreement. A cabled report from London, dated November 10, states: "A reduction of foreign imports of bacon to the United Kingdom by 20 percent was practically agreed upon at a conference today attended by members of the Department of Agriculture and commercial attachés of countries concerned. A representative of the United States Embassy was present at the conference. Nations concerned with the bacon trade are Canada, Denmark, Sweden, Norway, Poland, Latvia, United States and the South American meat producers."
The effect of the six-cent preference on Dominion wheat should undoubtedly result in a larger movement of Canadian wheat to the United Kingdom market. The potential benefits here, however, are not so clear as in the case of meats. The trade and the Canadian farmer are still puzzled as to the exact outcome. More cannot usefully be said at the moment.
In addition to making certain concessions, the agreement between the British Government and Canada contained an article providing that "if either Government is satisfied that any preferences hereby granted . . . are likely to be frustrated in whole or in part by reason of the creation or maintenance directly or indirectly of prices for such class of commodities through state action on the part of any foreign country, that Government declares that it will exercise the powers which it now has or will hereafter take to prohibit the entry from such foreign country directly or indirectly of such commodities into its country for such time as may be necessary to make effective and to maintain the preferences hereby granted by it." This was directed at Russia and particularly intended to aid Canadian lumbering interests. How far it will do so the future will show. Canadian lumber manufacturers are at present in England seeking to make satisfactory arrangements there, and for the most part are full of hope that great benefit to the industry will come from the denunciation of the Russian agreement which has already been carried out by Great Britain and from the prevention of Russian dumping. It should be pointed out that the British Columbia manufacturers do not think that under existing conditions the preference presently offered will be sufficient to enable them to compete.
Summing up the result, the Economist says: "After the imposition of the new duties provided for in the Ottawa agreements Great Britain will have a tariff of far-reaching scope and considerable height. . It will be seen that of our foreign imports in 1930 no less than 83 percent were admitted free of duty. As a result of the various duties imposed under the 1932 Import Duties Act the free list before the application of the new Ottawa duties had shrunk to 30 percent. After Ottawa the free list will amount to only 25 percent. Not only so, but the effect of the Ottawa agreements will be substantially to increase the incidence of the rates levied on imports subject to the new protective duties." It should be pointed out that these alterations in duties seriously affect the position of such important customers of Britain as Denmark, Holland, Belgium, Sweden, Italy, Finland, Poland, Chile and the Argentine.
Before I set out the concessions made by Canada, it is necessary to say a word about the Canadian tariff. There are three rates of duty: 1, the British preferential tariff, the lowest scale, which applies to goods imported from the United Kingdom and most parts of the Empire, provided that not less than half the value of the goods (or one-third in the case of cotton manufacturers) is of British origin; 2, the intermediate tariff, which applies to imports from a few British countries and from 22 foreign countries; 3, the general tariff, which applies to imports from other countries, including the United States.
At the Ottawa Conference the Canadian Government gave certain general undertakings, namely:
1. To protect by tariffs against United Kingdom products only those industries which are reasonably assured of sound opportunities for success.
2. During the currency of the agreement (1932-37) to base the Canadian tariff on "the principle that protective duties shall not exceed such a level as will give the United Kingdom producers full opportunity of reasonable competition on the basis of the relative cost of economical and efficient production," provided that special consideration shall be given to industries "not fully developed."
3. To constitute forthwith the Tariff Board provided for in the Act of 1931, and to alter the tariff in accordance with its report, to give effect to principles of paragraph 2.
4. Not to increase existing duties without inquiry by the Tariff Board and to give United Kingdom producers a hearing at such inquiry.
5. To ensure a minimum of uncertainty, delay and friction in connection with the tariff and provide machinery for prompt and impartial settlement of disputes.
6. To abolish surcharges on United Kingdom imports as soon as possible and to consider the ultimate abolition of exchange dumping duty on United Kingdom products.
"In addition to these general undertakings," says the Economist, "whose implementation is a matter for the future, and depends on the recommendations of a Tariff Board instructed to act on the vicious principle of 'compensatory tariffs,' the Canadian Government promised specifically to carry out forthwith a revision of a portion of the existing tariff. The results of this revision are now available; and, as they constitute the most important immediate fruits of Ottawa they merit examination in some detail."
Views on an agreement covering matters so highly controversial were bound to vary widely and to be discussed vehemently. Leaving aside the orthodox party press, the views of which are known in advance, we find in Canada a strong difference of opinion among newspapers which may be regarded as having a considerable degree of detachment and impartiality. The leading journalist in Canada in many ways is Mr. Dafoe of the Winnipeg Free Press. While on the whole strongly Liberal, he was, I am satisfied, prepared to estimate the Conference quite impartially. While criticizing with some asperity some of the objections of opposition (Liberal) critics who attacked the reality of the concessions ("Liberal members stultify themselves by putting them forward," he remarked), he goes on to say:
It cannot be too frequently pointed out that Great Britain, though it now has tariffs against the world covering about two-thirds of its imports, has kept its ports open to Canadian imports, whether they are manufactured goods or primary products of the forest and farm. This attitude towards Dominions which have shown a virulent resourcefulness in keeping out goods from Great Britain is singularly magnanimous. It reflects the mood in which the British Ministers entered the Conference. They hoped to establish over the Commonwealth an area of mutual low tariffs tending towards at least free trade within the Empire; and to this end they set the example by exempting Dominions' goods from the operation of their tariff. Undoubtedly they hoped for tariff concessions in the like spirit from the Dominions.
The agreements which are the outcome of the Conference are now under review in all parts of the Empire. Here in Canada the agreement has been subjected to intensive examination in Parliament, and in so far as the Canadian concessions to Great Britain are concerned, with the most disappointing results. The reductions in the tariff are so trivial as to be almost meaningless; the tariff upon the British goods is still in most cases prohibitive. Where the preference is increased it is, in most cases, at the expense of the Canadian consumer, and the purpose of the change, as it is revealed under examination, is to give the lion's share of the benefit not to the British but the Canadian manufacturer.
The Toronto Globe, for many years a leading Liberal paper, though of late independent in tone, and which had hoped for great things from the Conference (it was perhaps the first Canadian newspaper to support it), regards the results of the Conference with hope, though mainly as making a beginning and providing an impetus to the growth of inter-Empire trade. One is inclined to suspect that, like the Free Press, it finds the actual tariff concessions made by Canada disappointing.
Mr. Mackenzie King, opposition leader at Ottawa, has criticized Canada's action at the Conference on two scores -- first, because of the increase of duties against countries outside the Empire; secondly, because of the inadequacy of the British preference. He promised, if returned to power, to lower the general tariff and increase the British preference.
The Economist feels:
1. That the bulk of the new British Free List "concessions" represent classes of goods in which previously high protection for domestic manufacture was judged to be unnecessary.
2. That in many instances the increased preferential margin is unlikely to bring much benefit to Britain.
3. That even in the small part of the vast complete Canadian tariff now revised, half the imports will be subject to almost prohibitive duties. Making a rough estimate where only a specific duty is listed, we arrive at the conclusion from our analysis that out of the $90 millions of imports covered by our sample inquiry, $43½ millions (British $9½ millions, foreign $34 millions) will still be charged with duties of more than 20 percent, in addition to primage and exchange dumping duties and sales tax.
Those who find cold comfort in the actual reductions conceded by Canada try to cheer themselves with the belief that the Tariff Board provided for by the agreement will set things right. A well-informed Englishman resident in Canada said to me, in commenting on the agreement: "Of course the crucial thing is the Tariff Board."
I have quoted above the undertaking of Canada to constitute the Tariff Board and not to increase existing duties without inquiry by it. On this point the Economist says:
This statement of principle, which is, of course, by no means new, looks at first sight to be very fair and just. But, on further examination, it will be found to be not only misleading but vicious; for while it appears to be a limiting principle, it is not a limitation either in theory or in practice; for if carried out strictly it would put an end to all foreign trade. Clearly, if a duty is put on equal to this difference, there will be no benefit from foreign trade, which is only advantageous because you can buy abroad cheaper than you can produce at home, and vice versa as regards exports.
This criticism, which suggests that the duty of the Tariff Board will merely be to find out what tariff will enable any industry, however unsuitable to Canada, to compete with the United Kingdom on equal terms, entirely overlooks the word "efficient" in the agreement. If this is interpreted as one hopes, consideration will be given to the suitability of the industry in question to Canada, as well as to the efficiency of its operation. A proper consideration of these two points will, I believe, answer the Economist's point, which smacks more of the lecture-room than of practical affairs.
That the general sense of people in Canada and England regards the Tariff Board as an instrument of great potential value is shown by the amount of interest which has been taken in its personnel. Notwithstanding the hostile and captious assumption that the Board would be a mere tool of Mr. Bennett, the report in the press that he has attempted to secure as Chairman one of the outstanding Supreme Court Judges of Ontario is regarded by fair-minded people as clear evidence of his intention to make the Board an impartial body to be kept on the highest plane. Perhaps the best comment that I can make is to quote the opinion of a low-tariff Liberal resident in Western Canada, who said that he would be quite satisfied as to our tariff future if that part of the agreement which relates to the Tariff Board were carried out in the letter and in the spirit.
The political consequences of a system of Empire trade agreements have been a matter of great concern to thoughtful minds on both sides of the water ever since they began to be definitely advocated as a part of Empire policy. Twenty years ago a Canadian who has since become a well-known political figure said to me: "Preferences freely given between one part of the Empire and another which can be withdrawn at the will of the giver--yes! But binding trade agreements are an entirely different thing. There will be great danger that under them situations will arise whereby certain elements in one part of the Empire will feel that a certain agreement with another part of the Empire is injurious to them and that it has been fastened on them for the benefit not of themselves but of the other partner. That will be fraught with great danger."
These fears came to be widely held previous to the Conference, and certainly the event has shown that they were well founded. The reception of the agreement in the British House of Commons has demonstrated clearly that the food taxes are strongly repugnant to the Liberals and to the Labor opposition. Great stress is laid on the fact that the Ottawa agreements are to be effective for five years and that during this period the component parts of the Empire apparently will have great difficulty in making trade bargains with the rest of the world. Mr. Baldwin and the other British representatives who attended the Ottawa Conference stoutly deny this.
Another criticism which has found vehement expression in the British Parliament is that by the Ottawa agreements the British Government has tied its hands in tariff matters for five years, and, further, that it has really acted unconstitutionally by abrogating for five years its ability to deal with its own tariff policy. Speaking in the House of Lords, Lord Snowden said: "The Dominions are to dictate to us where we shall buy and where we shall not buy. The agreements have surrendered our fiscal autonomy and handed over to the Dominions the control of British trade policy, reducing this country below the status of a Dominion." Sir Herbert Samuel has used language in the Commons similar to that used by Lord Snowden in the Lords. In Canada, the opposition leader, Mr. Mackenzie King, also objected on constitutional grounds to the making of a five-year agreement.
From a strict constitutional view the objectors are no doubt right. Such at any rate is the view expressed by Sir John Simon, an eminent lawyer, now Foreign Secretary of Great Britain. But he added that in the circumstances the constitutional objection should be overlooked. This is almost certainly what the man on the street thinks -- he will not worry unduly about the letter of the constitution if the agreement brings better business. Like Mr. Montagu Norman, he will take short views.
It should also be pointed out that both at Ottawa and Westminster statements have been made by the opposition that if returned to power they will not feel bound by the five-year period. It would certainly be a serious matter if a British or Canadian Government repudiated agreements made by their predecessors. But I believe the common view is that when the time came this would not be done.
While it has not been given prominence in Parliament or in the press, the really serious question for the future is to determine whether the emphasis should be laid on economic ties rather than spiritual ties as the true link of Empire. Lord Hailsham, one of the delegates, speaking in Calgary immediately after the Conference, pointed out that as the result of previous Imperial conferences the only link of Empire remaining was the allegiance to the Crown, and he went on to express the view that to replace the previous ties now severed we must look to the creation of new economic ties. But it may seriously be questioned whether if economic ties come to be regarded as the only or even the most important ones they will prove to have the durability of those less tangible but more enduring things which have carried us in the Empire, through many shocks, thus far on our course.
Mr. Ramsay MacDonald, speaking to his constituents at Lossiemouth in May last, stated that the aim of the Imperial Conference was to create freer trade conditions over a large part of the world. Mr. Baldwin, at the opening of the Conference, expressed the same idea in different language.
There is no doubt that in Canada even the convinced supporters of a high tariff were puzzled and disturbed at finding themselves in a world where international trade was rapidly shrinking. For many years it had seemed possible, notwithstanding frequent warnings from the free traders that it could not last, to have quite high protection for home manufactures and a large export trade. The years 1930 to 1932 had seen a drastic shrinkage of the export trade; and the obvious necessity for a freer exchange of goods started doubts in unexpected quarters regarding the effectiveness of protection. Thus one of the leading Canadian Boards of Trade, composed almost exclusively of convinced protectionists, passed a resolution which, after referring with approval to Mr. Mac-Donald's words above mentioned and declaring its belief that "permanent improvement in manufacturing conditions in Canada can only arise through an improvement in the position of the producers of the natural products arising from agriculture, mining, fishing and the forest," went on to say:
That while it is recognized that there may be cases where tariffs may still have to be adjusted for special reasons such as particularly low labor costs, the objective of the Conference, in order to assist producers of natural products, should be, as far as possible, to lower existing trade restrictions within the Empire.
That the return of prosperity to Canadian grain growers depends on the preservation of the maximum freedom of exchange of products with countries which import or may import Canadian wheat. The same is true with regard to our other natural products.
The fact that such a resolution could be passed by such a body shows how far men's minds have been captured by the belief that only through freer international trade can our present economic ills be overcome. Even the plain man on the street is beginning to sense the fact that the economic organism, like the human organism, cannot live if its circulation is stopped.
Judged by Mr. MacDonald's test, what can be said of the Conference? A prominent Canadian journal says:
Whatever may be the financial effect of the tariff changes now announced by Canada as a result of the Imperial Conference, they effectually dissipate the hope that the Conference would constitute the first step toward a general reduction of tariffs. For out of 223 items in which changes other than those of wording are made, the tariff is actually increased against non-British nations in 125. There are only 84 in which it is lowered to Britain without being increased to other countries. . . . It cannot be said that Canada has taken the path toward the lower tariffs which the world so sadly needs.
It would be equally difficult to argue that the steps being taken by Great Britain are in the nature of reductions. Further, the fact that the tariff arrangements are embodied in five-year agreements means that, to use Mr. Hoover's word, they are apparently being "imbedded" still further in our economic life.
And yet this is only a partial view. In the first place, as has been suggested earlier, it is quite arguable that the best way to bring about a lowering of tariffs in the long run is for the British Empire in general, and the United Kingdom in particular, to have something with which to bargain. The people in England have for the most part come to the conclusion that their hope of seeing the rest of the world follow their free trade example was futile so long as they had nothing in the way of tariff concessions to offer. Those who hold this view hope that the raising of tariffs in England may be the beginning of a downward revision throughout the world -- in other words, they are trying homeopathic treatment, having perhaps particular regard to the forthcoming World Economic Conference.
In the second place, if as time goes on the tariff reductions within the Empire itself prove to be real, it is quite possible that, notwithstanding tariff increases against the rest of the world, and notably in the case of Canada against the United States, there might be, through increased trade in the Empire, the achievement of Mr. MacDonald's desire for freer trade conditions over a large part of the world. Many people think that if our Canadian Tariff Board functions as it should function we shall have very much freer trade between Canada and the United Kingdom. Also, it should not be overlooked that compared with the tariff of countries who have been "thorough," the tariffs imposed by England, and in many cases even by Canada, are moderate and will operate in the main as tariffs for revenue and not for protection.
Broadly speaking, I think it may be said that the common opinion in Canada and Great Britain, apart from the interested views of those directly affected for good or ill by the agreements, is that while the immediate results are disappointing (it may be noted that the disturbed exchanges are making it difficult for the agreements to function naturally at present), a beginning at least has been made, and that we should not abandon hope of substantial achievement until we have had time to give the plan a fair trial. As I have already said, people in Canada at any rate are not disposed to despair of the Canadian Tariff Board's achieving a great deal if Canada (as Mr. Bennett's own actions promise) carries out the spirit of the agreement which provided for its appointment.
Naturally much will depend on what happens to the American tariff. If it should be substantially reduced, so that the United Kingdom and Canada can resume anything like their former trade with the United States, the effects will be profound on the future course of inter-Empire agreements. If, on the other hand, the United States pursues the exclusionist policy of the last couple of years, then there is really no course left open to the Empire but to endeavor in every way, first, to increase inter-Empire trade and, secondly, to increase trade with the rest of the world outside the United States. In this, as in so many other departments of world affairs, the action of the new administration in the United States may well be decisive.