A history of commerce

by Clive Day

459. (2) Alleged weakness of the English mercantile organization.—In the preceding paragraph we have suggested various elements of weakness in English manufactures, which in greater or less degree were bound to affect the power lying behind the English export trade. We have now to consider another set of conditions, which are easily confused with the foregoing, but which are better kept separate. English manufacturers might be strong, and still they would have but a small export trade if they were not informed as to the wants of their customers, and did not study their customers’ tastes in supplying goods. This set of conditions, which may be termed mercantile, the business of the merchant rather than of the manufacturer, we may study under two heads: (a) finding out what is wanted; (b) selling a suitable ware when it has been made.

460. Insufficient knowledge of the needs of foreigners.—(a) The complaint was general that the scouts of British commerce, the commercial travelers, were too few in number and that they were ill prepared, especially in their knowledge of foreign languages. The English exporter shipped goods which he thought were suitable, without knowledge or regard of the desires of his customers. A business man who had had seven years’ experience with trade in the Empire said, “There is a universal complaint: ‘You English will not make your goods to suit our markets. You send your samples and tell us to take them or leave them—you don’t care which. If we ask you to alter things you either refuse to do it or else you demand prohibitive prices.’” In countries where English is not spoken (Persia, Sumatra, South America, etc.) the conditions were still worse. The Merchandise Marks Act, the origin of the familiar “Made in Germany,” was designed to protect the British colonist from having foreign-made goods palmed off on him as English, and thus help the English manufacturer; but it served only to advertise foreign manufactures, and led the colonists to import goods directly from foreign countries, instead of taking them through English hands.

461. Unwillingness to adopt foreign trade customs.—(b) Finally, when wares suited to sale in any market have been manufactured, they need to be sold, to maintain trade. English exporters were criticised for allowing their wares to be driven out of foreign markets by other wares, no better in themselves but for some reason more attractive to the customer. Here again the commercial traveler was at fault, but part of the blame lay on the exporter. Sales must be made in small lots and on long credit in some countries, if they are to be made at all; and the English had shown a disinclination to adapt themselves to such conditions which had enabled others (especially Germans) to take trade from them. When other things are nearly equal slight differences in packing and shipping may turn the scale. The English lost trade in Australia because they sent tacks in paper packages instead of in cardboard boxes, because they sent cartridges in lots of one hundred instead of lots of twenty-five. An interesting example of an opportunity well met occurs in the career of an Englishman who left the field of manufacture to become a leading statesman—Joseph Chamberlain. He found that the trade with France in his product, wood-screws, was small; he introduced the metric system of measurement, put up the screws in packages of the size usual in France and wrapped in blue paper familiar to the French customer, and developed a large export trade. If there had been more men like Chamberlain in manufactures in England there would have been less need of the protective policy which he advocated as a remedy for the troubles of English business.

462. Tendency to remedy these faults.—There is no doubt that there was a good basis for these charges against the British manufacturer and merchant, though some of them doubtless were exaggerated, and it is impossible to apportion exactly the weight that should be allowed to any one of them. The crisis of the World War was needed to sweep away the customs and traditions of a long past. The stimulus of a struggle for national existence, with the insistent demand for the highest attainable efficiency, effected reforms reaching deeper and further than those of a whole previous generation. Even before 1914, however, many men in responsible positions in English politics and business recognized the need of mending the pace if England was to keep abreast of competitors in industry and commerce. Interest in elementary and technical education quickened; inquiry was directed to the means by which foreign rivals were getting ahead; the government, associations and individuals worked together or independently to further efficiency.

A parliamentary committee which in the course of the World War made a careful study of the prospects of British industry and trade reached the following conclusions as regards conditions in the previous decade. England had taken but a small part in the development of some modern industries, particularly the chemical and electrical; the country had made comparatively little progress in the iron and steel industry, in which it was entirely overshadowed by Germany and the United States; but it had shown wholesome vigor and capacity for growth in some great manufactures, such as the textiles, ship-building and some branches of machine-making. British trade abroad was found to suffer from the competition of foreigners who were found, in some cases at least, to be following methods of organization and marketing that were distinctly more efficient than those which the British pursued.

463. (3) Adverse influence of foreign tariffs; proposals to revise the English policy of free trade.—Under conditions of adversity there is always an inclination to lay the blame, rightly or wrongly, on others. A considerable party in England asserted that the reasons for the recent decline were political rather than economic, resulting from the protective tariffs of other states; and this party asserted that a change in the tariff policy of England and of the colonies was needed to rescue British commerce.

There can be no question of the main fact, that protective tariffs had increased considerably during the last quarter of the century. It is estimated that the principal English exports were burdened with duties equivalent to 10 to 30 per cent ad valorem in most states, but amounting to far more than that in some cases (72 per cent in United States, 130 per cent in Russia). There can be no question that England suffered from these restrictions; every commercial state suffers from them. It is, however, open to grave doubt whether England could help herself by a change in policy; and the question of what change, if any, ought to be made, remained unsettled.

464. Demand for customs duties as a means of defense and retaliation.—One group of “tariff reformers” clung to the ideal of free trade, and favored its maintenance as the policy of the country in general. It would, however, permit deviations from it in particular cases. The adherents of this view asserted that England stripped herself of the armor and the weapons of commercial war when she adopted complete free trade. She could make no effective protest when other nations raised tariffs against her, marked perhaps by offensive discriminations; she must suffer everything because she was forbidden to retaliate. The adherents of this view laid particular stress on the practice of “dumping,” as it is called. The manufacturers of protected nations, themselves, secure from England’s competition, market their surplus output in England at prices which may not cover the costs, much less the profits, of production. It is cheaper to do this than to break prices in the protected market at home; it kills the English industries and enables foreign manufacturers in the long run to raise prices to a profitable level in the English market. For retaliation against protective countries, and for defense against “dumping,” this school demanded that the English government be armed with the power to impose heavy duties, to be temporary in character and to be removed as soon as their immediate object has been accomplished. Such a policy has been adopted in Canada.

465. Proposal of an imperial customs union.—Another school of tariff reformers, led by Joseph Chamberlain, accepted in general the views just indicated, but laid particular stress on another possibility in shaping English commercial policy. It would make the whole great group of English dependencies not only a political unit but a commercial unit as well, bound together in an imperial customs union (Zollverein), so that trade would flow from place to place within the Empire instead of crossing its frontier. It is not possible here to discuss the various aspects of this proposal, of which some of the most important are political rather than commercial in character. The attractiveness of the plan is at once apparent; it promises to assure to England a market for her manufactures in the colonies, and to the colonies a protected market for their raw materials in England. The practical weakness of the plan is, however, equally apparent; no law would be necessary to secure this result if the various parts of the Empire found it advantageous to trade with each other, and the mere suggestion that a law is necessary shows that trade would be cramped and the interests of individuals hurt by such an arrangement.

466. Obstacles to a customs union.—The course of trade has, in fact, taken lines more and more opposed to the scheme of a customs union. During the first part of the century, when England was still protectionist, and when the mother country made the laws for its dependencies, the plan could be carried out with comparatively little friction; the colonies were engaged chiefly in the production of raw materials, and were glad to exchange these for English manufactures. Since about 1850, however, both the political and the economic organization of the Empire have changed. The self-governing colonies have received the right to make their own laws, and have used it to raise protective tariffs, against England as well as against other countries. Behind the barriers of the tariff they have developed a considerable manufacturing industry. They were now unwilling, therefore, to open wide their markets to English manufacturers; and showed an increasing tendency to buy what manufactures they did import from other countries than England. They were unable, on the other hand, to supply in full the English demand for raw materials; and any measure designed to restrict supplies of raw materials to some source inside the British Empire threatened injury to producer and consumer at home. The self-governing colonies gave evidence of the strength of their political affection by enacting differential tariffs favoring the British producer. Canada began the practice in 1894, and later enlarged the concession until it amounted to a remission of one-third of the regular customs duty. New Zealand, South Africa and Australia adopted after 1900 the same principle, making their concessions less extensive. The differential advantage thus offered the English exporter must evidently have had an effect on the course of trade. The new policy was keenly resented in Germany, where it was pictured as an abuse by England of her political ascendancy to deprive other countries of the benefit that should go to superior economic efficiency. On the other hand the policy seems to have been less important than ordinary economic factors in determining the flow of goods, and certainly had no decisive influence in changing the customary channels of trade.