About the same time the French and English began mutually to oppress each others industry, and the hostility continued until, under the influence of Adam Smith's teaching, Pitt made the celebrated commercial treaty with France in 1784.

This is no doubt ancient history, but it is important to notice that the appeal to experience is of the last importance in dealing with the policy of retalia

tion.

§ 15. When Justified.

"There may be good policy in retaliations of this kind when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. The recovery of a great foreign market will generally more than compensate the transitory inconveniency of paying dearer for a short time for some sorts of goods."

There can be no question of the justification by Adam Smith of the principle of retaliation, and the reason assigned is quite in harmony with his general position. The retaliation is only expedient if thereby it is likely that the great foreign market may be restored. Retaliation that fails is worse than useless.

§ 16. Difficulties of.

"When there is no probability that any such repeal can be procured, it seems a bad method of compensating the injury done to certain classes of our people, to do another injury ourselves, not only to those classes but to almost all the other classes of them. When our neighbours prohibit some manufac

ture of ours we generally prohibit not only the same, for that alone would seldom affect them considerably, but some other manufacture of theirs. This may, no doubt, give encouragement to some particular class of workmen among ourselves, and by excluding some of their rivals may enable them to raise their price in the home market. Those workmen, however, who suffered by our neighbours' prohibition will not be benefited by ours. On the contrary they, and almost all the other classes of our citizens, will thereby be obliged to pay dearer than before for certain goods. Every such law, therefore, imposes a real tax upon the whole country not in favour of that particular class of workmen who were injured by our neighbours' prohibitions, but of some other class."

Attention has already been called to the danger of the retaliation being initiated by "that insidious and crafty animal vulgarly called a statesman or politician," and the recent history of tariff wars shows that it is very difficult to put the plan of retaliation into effective operation.

§ 17. Retaliation on other Grounds-examined.

In our own times those who advocate retaliation seem to rely less on the idea of the recovery of a foreign market than on the idea of excluding the foreigner by way of natural revenge from our markets. This, however, is to reduce retaliation to the ordinary case of protection to native industries. It is not the kind of retaliation of which Adam Smith approves, but of the kind which he explicitly

condemns. By retaliation Adam Smith means fiscal war-war with the ultimate idea of obtaining some advantage to the nation; the advantage being the recovery of a great foreign market for our exports. Being war it must be carried on for success by the methods of war. A policy of pin-pricks is not war, and may not even lead to war.

If, under present conditions, England resolves to adopt the method of retaliation, it should be prepared to suffer some temporary loss, and strike hard at the most vulnerable part of the enemy's trade. A small ad valorem duty on all imports might possibly be a good source of revenue, and, more probably, a good beginning for a reversion to ordinary protection, but it certainly would not be retaliation in the sense understood by Adam Smith; for the simple reason that it would have no influence whatever in inducing other nations to take off their duties; on the contrary it would probably lead most of them to make an increase. Real retaliation would consist in inviting some particular country (say Germany) to take off or reduce objectionable duties, with the indication that if the invitation were declined this country would impose duties which would be intended to be injurious to German trade. We might, for example, threaten to renew the old Navigation Act so far as Germany was concerned. Such retaliation, to judge by the history of the past, would be more likely to end in heavier duties being imposed against us, and might eventually end in real war. Retaliation, how

ever, to be effective, must run risks.

§ 18. List on Retaliation.

It is rather remarkable that List should have brought forward one of the strongest objections to retaliation as advocated by Adam Smith. In commenting on Adam Smith's position, List says: "The principle of retaliation is reasonable and applicable only if it coincides with the principle of the industrial development of the nation, if it serves, as it were, as an assistance to this object." His reason is that otherwise the retaliating nation would run the risk of establishing industries unsuited to the country, industries which could only be disestablished at a loss if the retaliation was successful in the way supposed by Adam Smith.

This consideration naturally leads to the second exception which Adam Smith thinks may be worthy of deliberation; this may be briefly described as the case of vested interests.

§ 19. Fourth Exception: Case of Vested Interests.

"The case in which it may sometimes be a matter of deliberation how far or in what manner it is proper to restore the free importation of foreign goods after it has been for some time interrupted, is when particular manufactures, by means of high duties or prohibitions upon all foreign goods which

come into competition with them, have been so far extended as to employ a multitude of hands. Humanity may in this case require that the freedom of trade should be restored only by slow

gradations and with a good deal of reserve and circumspection."

As already observed, it is in the interests of labour that Adam Smith advocates this cautious restoration of free trade. He gives reasons, however, why it may be supposed that the disorder caused by the abolition of protection would not be so considerable as is commonly imagined. These reasons amount to the assertion that there is always a certain degree of mobility of labour and that other employments will be available. This guarded statement of Adam Smith has been too often converted by popular writers into an axiom, and it has been taken for granted that in all cases there will be available other employment in other things. It is at this point that the famous prophecy occurs on the improbability of the establishment of perfect free trade in Britain. If by free trade is meant the absence of differential duties this prophecy has been completely upset.

"To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the premuch more uncon

judices of the public, but what is querable, the private interests of many individuals irresistibly oppose it."

§ 20. Extension of the Principle of Vested Interests.

The principle at the basis of this exception may also be extended to other cases. In the first place it may be argued that if an old-established industry