History of. Conflict ing deductions. would admittedly increase the price of food to the English consumer. If it failed to produce this effect, the protective duty would afford no encouragement to English agriculture. If it did produce this effect, it would necessarily enhance the cost of living, and recent experience has conclusively demonstrated that a rise in the cost of living involves a rise in the rate of wages. But of all the elements in the production-cost of commodities, as in the cost of their distribution and transport, wages are by far the most important. Consequently, every rise in the rate of wages diminishes the power of Great Britain to sell her products abroad, and conversely the willingness of the overseas producer of food to supply the necessities of the British population. Yet the statistics of our foreign trade appear, at first sight, to throw some doubt upon the accuracy of these deductions. For a long time past, the value of English imports has greatly exceeded the value of exports. It was not always thus. In the year 1355, the value of exports was £294,000 or 28. 6d. per head of the inhabitants as compared with £120,000 of imports or 18. per head. Under James I exports were valued at £2,091,000 or 8s. 3d. per head; imports at £2,140,000 or 88. per head. By the close of the seventeenth century exports led by only one penny, 15s. 1d. to 158.; and though the volume of trade largely increased in the course of the eighteenth century this precision of balance was not seriously impaired. During the nineteenth century the balance tilted increasingly in favour of imports. Since the full effect of the industrial revolution, combined with the Free Trade policy, has been reflected in the statistics of foreign trade, there has been an evergrowing disparity. Thus, forty years ago (1882), British exports amounted to £214,060,000, or £6 178. per inhabitant; imports to £348,000,000 or £9 168. per head. By 1905 the total of exports reached £329,816,614; of imports £565,019,917. For 1913, exports were £525,245,289 and imports £768,734,739. The facts are indisputable; the disparity is evident, but very different are the interpretations suggested respectively by Protectionists and Free Traders. The Protectionist is apt to argue that such a disparity indicates extreme debility and proves that Great Britain must be living on her capital; plunging like a reckless spendthrift down the slippery slope of extravagance towards the yawning abyss of bankruptcy. The Free Trader is more optimistic. If the foreigner is willing to supply us with so large an amount of his products for a quantity of ours so comparatively small, we should be only too grateful and rejoice that the industrial activities of England command so generous a remuneration. Neither interpretation, as we shall see, discloses the real facts of the situation. In passing, however, it may be observed that the phenomenon is not peculiar to England, nor indeed to Free Trade countries. For the half decade between 1908 and 1912 the imports of France, excluding goods in transit, amounted to 35,077,000,000 francs, her exports 29,716,000,000-an average disparity of over 1,000,000,000 francs. Yet France is reckoned to be substantially self-sufficing. The explanation of the apparent paradox is simple. The Invisible excess of imports is far from indicating an easy descent Exports. to Avernus, partly because the phenomenon is more apparent than real. The analogy of the individual spendthrift is wholly irrelevant. We are not living beyond our income nor encroaching upon capital. On the contrary we were, prior to the war, steadily adding to the volume of our foreign investments, to the amount perhaps of £100,000,000 a year, and thus strengthening our position as a creditor country. Nor does the analogy of the individual trader serve any better. We were not buying more than we sold. The simple truth is that all we bought was visible; that much that we sold was invisible. The earnings of shipping and other mercantile services Freights. are alone reckoned to amount to about £100,000,000 a year in excess of the corresponding payments due from this country to foreigners. A simple illustration will elucidate this point. 1,000 tons of coal are shipped from Cardiff to Foreign investments. Other items. Montreal at 108. a ton (f.o.b.). The declared value of the export, is, therefore, £500. By the time the coal is landed at Montreal it is worth, say, £1,000. To pay for it Canada exports £1,000 worth of wheat. On its arrival at Cardiff the wheat is worth £1,500. On that single transaction the disparity between exports and imports is, therefore, £1,000. The difference has gone into the pockets (mostly English) of the shipowners and the mercantile marine. Plainly, in such a case (purposely exaggerated), the disparity has not spelt a loss to England. A second source of invisible payment for imports is or was to be found in the interest due on English capital invested in overseas countries. The amount of the capital was commonly reckoned, before the war, at about £4,000,000,000, and the interest at from £170,000,000 to £190,000,000. Not the whole of that interest was remitted to England in the shape of commodities, but a large proportion of it was, the balance being reinvested overseas, and thus further strengthening our credit.1 A third explanation was supplied by Mr. Joseph Chamberlain in one of the most famous of his early speeches (1881). A Birmingham manufacturer exports to Nigeria brass deities, each valued at 108.; he sells them to African chiefs at £8 apiece, and with the proceeds he purchases rubber which on reaching England is valued at £4. Export 108.; import £4; but the disparity implies no disadvantage to English traders. Other, but less important items, which contribute to the volume of invisible exports, are supplied by the commissions earned by the overseas operations of bankers and brokers; and by the profits on tourists, estimated in the case of France at £16,000,000; of Italy at £14,000,000, and of Switzerland—perhaps too modestly-at £8,000,000. Under this head, the balance would probably be against England, and certainly against the United States of America.2 1 Gide (op. cit., p. 333) estimates the pre-war revenue of France from foreign investments at from £60,000,000 to £80,000,000. 1 Ibid., p. 334. The explanation offered in the preceding paragraph is not exhaustive, but it may suffice to dispel the alarm manifested by protectionists when confronted with the figures of foreign trade. One final and conclusive argument may, nevertheless, be added; not free-trade England only, nor protectionist France exhibits this phenomenon; the aggregate value of the world's imports was, in 1904, estimated to be 4 milliards of francs in excess of the world's exports. There is, needless to say, more than one important country which shows a balance the other way. The United States, for example, exported in 1921, £389 millions more than she imported, or if bullion be added no less than £530 millions. Argentina was £154 millions in excess. But these facts make more remarkable the aggregate excess of world's imports. Yet the phenomenon, though superficially unintelligible, is really susceptible, in the light of the explanations furnished in the preceding paragraphs, of a simple explanation. Quantities must exactly balance, except for losses in transit: but it is not quantities but values with which we have been concerned, and as Gide pertinently points out it is not surprising that the goods imported-that is to say goods at their destination-represent a greater value than the goods exportedthat is to say goods at their starting-point.1 It remains to ask, in conformity with the plan of this Ethical book, whether there are any ethical issues involved in the Issues. general problem of international trade? We may at once exclude discussion as to the morality of particular trades, such as the traffic in human beings; in opium; in noxious drugs; the sale of alcoholic liquors or firearms to 'backward' peoples, and the like. If, on ethical grounds, it be decided that such trade is wrong, it must, however great the economic advantage which may accrue from it, be 1 Ibid., p. 333. Fiscal ethical denounced and abandoned. There is no commingling of the It is otherwise with the problem of Free Trade and policy and Protection. Here it is often necessary for the practical problems. statesman to weigh the political argument against the economic, and for the moralist to equate ethical and economic values. For instance, adherence to a policy of Free Trade might conceivably lead to the extinction of the agricultural industry; the country side might then be left completely derelict save as a pleasure ground, and the whole working population be swept into the towns. The politician might therefore intervene with the plea that a sturdy agricultural population was essential to the security of the State; the student of eugenics or hygienics might insist that a teeming countryside was important on grounds of public health; while the moralist might condemn the concentration of the people in cities. It might be that none of these pleas would prove of sufficient weight to counterbalance the economic advantages derivable from an international division of industries which condemned England to supply the world with coal and cotton. It might be otherwise. But such considerations are at least capable of equation; and the statesman is, as a fact, consciously or unconsciously, perpetually equating them. Commerce An even wider issue was raised in the earlier campaigns and Peace. of the Manchester School. Bright and Cobden believed that in preaching the faith of Free Trade they were also making straight the path for peace between the peoples. The free-traders were not 'cotton spinners all'; Cobdenism had its idealism as well as its commercialism; the breaking down of fiscal barriers was only to be a prelude to the proclamation of a universal peace. Those who Dipt into the future, far as human eye could see, Saw the heavens fill with commerce, argosies of magic |