The restrictive and prohibitory policy was originally grounded on what is called the Mercantile System, which, representing the advantage of foreign trade to consist solely in bringing money into the country, gave artificial encouragement to exportation of goods, and discountenanced their importation. The only exceptions to the system were those required by the system itself. The materials and instruments of production were the subject of a contrary policy, directed, however, to the same end; they were freely imported, and not permitted to be exported, in order that manufacturers, being more cheaply supplied with the requisites of manufacture, might be able to sell cheaper, and therefore to export more largely. For a similar reason importation was allowed and even favored, when confined to the productions of countries which were supposed to take from the country still more than it took from them, thus enriching it by a favorable balance of trade. As part of the same system colonies were founded, for the supposed advantage of compelling them to buy our commodities, or at all events not to buy those of any other country: in return for which restriction we were generally willing to come under an equivalent obligation with respect to the staple productions of the colonists. The consequences of the theory were pushed so far that it was not unusual even to give bounties on exportation, and induce foreigners to buy from [England] rather than from other countries by a cheapness which [England] artificially produced, by paying part of the price for them out of [their] own taxes. This is a stretch beyond the point yet reached by any private tradesman in his competition [pg 608] for business. No shopkeeper, I should think, ever made a practice of bribing customers by selling goods to them at a permanent loss, making it up to himself from other funds in his possession.
The principle of the Mercantile Theory is now given up even by writers and governments who still cling to the restrictive system. Whatever hold that system has over men's minds, independently of the private interests exposed to real or apprehended loss by its abandonment, is derived from fallacies other than the old notion of the benefits of heaping up money in the country. The most effective of these is the specious plea of employing our own countrymen and our national industry, instead of feeding and supporting the industry of foreigners. The answer to this, from the principles laid down in former chapters, is evident. Without reverting to the fundamental theorem discussed in an early part of the present treatise,[358] respecting the nature and sources of employment for labor, it is sufficient to say, what has usually been said by the advocates of free trade, that the alternative is not between employing our own people and foreigners, but between employing one class and another of our own people. The imported commodity is always paid for, directly or indirectly, with the produce of our own industry: that industry being, at the same time, rendered more productive, since, with the same labor and outlay, we are enabled to possess ourselves of a greater quantity of the article. Those who have not well considered the subject are apt to suppose that our exporting an equivalent in our own produce, for the foreign articles we consume, depends on contingencies—on the consent of foreign countries to make some corresponding relaxation of their own restrictions, or on the question whether those from whom we buy are induced by that circumstance to buy more from us; and that, if these things, or things equivalent to them, do not happen, the payment must be made in money. Now, in the first place, there [pg 609] is nothing more objectionable in a money payment than in payment by any other medium, if the state of the market makes it the most advantageous remittance; and the money itself was first acquired, and would again be replenished, by the export of an equivalent value of our own products. But, in the next place, a very short interval of paying in money would so lower prices as either to stop a part of the importation, or raise up a foreign demand for our produce, sufficient to pay for the imports. I grant that this disturbance of the equation of international demand would be in some degree to our disadvantage, in the purchase of other imported articles; and that a country which prohibits some foreign commodities, does, cæteris paribus, obtain those which it does not prohibit at a less price than it would otherwise have to pay. To express the same thing in other words: a country which destroys or prevents altogether certain branches of foreign trade, thereby annihilating a general gain to the world, which would be shared in some proportion between itself and other countries, does, in some circumstances, draw to itself, at the expense of foreigners, a larger share than would else belong to it of the gain arising from that portion of its foreign trade which it suffers to subsist. But even this it can only be enabled to do, if foreigners do not maintain equivalent prohibitions or restrictions against its commodities. In any case, the justice or expediency of destroying one of two gains, in order to engross a rather larger share of the other, does not require much discussion; the gain, too, which is destroyed, being, in proportion to the magnitude of the transactions, the larger of the two, since it is the one which capital, left to itself, is supposed to seek by preference.
§ 3. —supported by pleas of national subsistence and national defense.
Defeated as a general theory, the Protectionist doctrine finds support in some particular cases from considerations which, when really in point, involve greater interests than mere saving of labor—the interests of national subsistence and of national defense.[359] The discussions on the Corn [pg 610] Laws have familiarized everybody with the plea that we ought to be independent of foreigners for the food of the people; and the Navigation Laws were grounded, in theory and profession, on the necessity of keeping up a “nursery of seamen” for the navy. On this last subject I at once admit that the object is worth the sacrifice; and that a country exposed to invasion by sea, if it can not otherwise have sufficient ships and sailors of its own to secure the means of manning on an emergency an adequate fleet, is quite right in obtaining those means, even at an economical sacrifice in point of cheapness of transport. When the English navigation laws were enacted, the Dutch, from their maritime skill and their low rate of profit at home, were able to carry for other nations, England included, at cheaper rates than those nations could carry for themselves: which placed all other countries at a great comparative disadvantage in obtaining experienced seamen for their ships of war. The navigation laws, by which this deficiency was remedied, and at the same time a blow struck against the maritime power of a nation with which England was then frequently engaged in hostilities, were probably, though economically disadvantageous, politically expedient. But English ships and sailors can now navigate as cheaply as those of any other country, maintaining at least an equal competition with the other maritime nations even in their own trade. The ends which may once have justified navigation laws require them no longer, and afford no reason for maintaining this invidious exception to the general rule of free trade.
Since the introduction of steamships and the advance of invention in naval contrivances, the plea for navigation laws on the ground that they keep up a “nursery of seamen” for the navy is practically obsolete. The “seaman” employed on the modern naval ships more nearly resembles the artisan in a manufacturing establishment; he need have but comparatively little knowledge of the sea, since the days of sailing-vessels have passed by, so far as naval warfare is concerned. Steam and mechanical appliances now do what was before done by wind and sail.
While Mr. Mill thinks navigation laws were economically—that [pg 611] is, so far as increase of wealth is concerned—disadvantageous, yet he believes that they may have been “politically expedient.” It is possible, for example, that retaliation by the United States and other countries against England early in this century brought about the remission of the English restrictions on foreign shipping. But it is quite another thing to say that such laws produced an ability to sail ships more cheaply. That the English navigation acts of 1651 built up English shipping is not supported by many proofs; whereas it is very distinctly shown that English shipping languished and suffered under them.[360] Moreover, under the régime of steam and iron (which drew out England's peculiar advantages in iron and coal), in all its history English shipping never prospered more than it has since the abolition in 1849 of the navigation laws—events which have taken place since Mr. Mill wrote.
The United States is still weighed down by navigation laws adapted to mediæval conditions, and the relics of a time when retaliation was the cause of their enactment. So long as wooden vessels did the carrying-trade, the natural advantages of the United States gave us a proud position on the ocean. Now, however, when it is a question of cheaper iron, steel, and coal for vessels of iron and steel, we are at a possible disadvantage, and the bulk of navigation laws proposed in these days are intended to draw capital either by raising prices through duties on ships and materials, or by outright bounties and subsidies from industries in which we have advantages, to building ships. And until of late no distinction has been made between ship-building and ship-owning (or ship-sailing). Within the last year (1884) many burdens on ship-sailing have been removed; but even when we are permitted to sail ships on equal terms with foreigners, we can not yet build them with as small a cost as England (which is proved by the very demand of the builders of iron vessels for the retention of protective duties), and our laws do not as yet allow us to buy ships abroad and sail them under our own flag.[361]
With regard to subsistence, the plea of the Protectionists has been so often and so triumphantly met, that it requires little notice here. That country is the most steadily as well as the most abundantly supplied with food which draws its supplies from the largest surface. It is ridiculous to found a general system of policy on so improbable a danger as that of being at war with all the nations of the world at once; or to [pg 612] suppose that, even if inferior at sea, a whole country could be blockaded like a town, or that the growers of food in other countries would not be as anxious not to lose an advantageous market as we should be not to be deprived of their corn.
In countries in which the system of Protection is declining, but not yet wholly given up, such as the United States, a doctrine has come into notice which is a sort of compromise between free trade and restriction, namely, that protection for protection's sake is improper, but that there is nothing objectionable in having as much protection as may incidentally result from a tariff framed solely for revenue. Even in England regret is sometimes expressed that a “moderate fixed duty” was not preserved on corn, on account of the revenue it would yield. Independently, however, of the general impolicy of taxes on the necessaries of life, this doctrine overlooks the fact that revenue is received only on the quantity imported, but that the tax is paid on the entire quantity consumed. To make the public pay much, that the treasury may receive a little, is no eligible mode of obtaining a revenue. In the case of manufactured articles the doctrine involves a palpable inconsistency. The object of the duty as a means of revenue is inconsistent with its affording, even incidentally, any protection. It can only operate as protection in so far as it prevents importation, and to whatever degree it prevents importation it affords no revenue.