But that is not all. The case of Russia alone has brought home to all capable of realising an economic truth the fact that the economic collapse of any large mass of population which had in the past entered into the totality of international trade is a condition of proportional impoverishment to all the others concerned. He who sees this as to Russia cannot conceivably miss seeing it as to Germany; even tariffist hallucinations about a “losing trade” under German tariffs cannot shut out the fact that our trade with Russia and the United States was carried on under still higher hostile tariffs. The unalterable fact remains that industrial prosperity rises and falls in the measure of the total mass of goods handled; and men who realise the responsibility of all Governments for the material wellbeing of their populations can come to only one conclusion. Trade must be facilitated all round for our own sake.
Once more we come in sight of the truth that the industrial health of every trading country depends on the industrial health of the rest—a Free Trade truth that is perceptibly of more vital importance now than ever before. It is in the exchange of commodities, and the extension of consumption where that is required on a large scale, that the prosperity of the industrial nations consists. And to say that, is to say that until the trade exchanges of the world in general return to something like the old footing, there cannot be a return of the old degree of industrial wellbeing. Not that industrial wellbeing is to be secured by the sole means of industrial re-expansion: the question of the need of restriction of rate of increase of population is now being more and more widely recognised as vital. But the present argument is limited to the fiscal issue; and it must suffice merely to indicate the other as being of the highest concurrent importance.
Adhering, then, to the fiscal issue, we reach the position that, just as foreign trade has been a main source of British wealth in the past, and particularly in the Free Trade era, the wealth consumed in the war is recoverable only on the same lines. It is not merely that British shipping—at present so lamentably paralysed and denuded of earning power—cannot be restored to prosperity without a large resumption of international exchanges: a large proportion of industrial employment unalterably depends upon that resumption. And it is wholly impossible to return to pre-war levels of employment by any plan of penalising imports.
The Dyestuffs Act
How then does the persistent Free Trader relate to the special case of the “key industry,” of which we heard so much during the war, and hear so little to-day? I have said that the question of maintaining any given industry on the score that it is essential for the production of war material is a matter of military administration, and not properly a matter of fiscal policy at all. But the plea, we know, has been made the ground of a fiscal proceeding by the present Government, inasmuch as the special measure known as the Dyestuffs (Import Regulation) Act of 1920 forbids for ten years the importation of dyestuffs into this country except under licence of the Board of Trade. Dyestuffs include, by definition, all the coal-tar dyes, colours, and colouring matter, and all organic intermediate products used in the manufacture of these—the last category including a large number of chemicals such as formaldehyde, formic acid, acetic acid, and methyl alcohol. The argument is, in sum, that all this protective control is necessary to keep on foot, on a large scale, an industry which in time of war has been proved essential for the production of highly important munitions.
What has actually happened under this Act I confess I am unable to tell. Weeks ago I wrote to the President of the Board of Trade asking if, without inconvenience, he could favour me with a general account of what had been done in the matter of issuing licences, and my letter was promised attention, but up to the moment of delivering this address I have had no further reply. I can only, then, discuss the proposed policy on its theoretic merits.[1] The theoretic issues are fairly clear. Either the licensing power of the Board of Trade has been used to exclude competitive imports or it has not. If it has been so used, it is obvious that we have no security whatever for the maintenance of the industry in question in a state of efficiency. In the terms of the case, it is enabled to persist in the use of plant and of methods which may be inferior to those used in the countries whose competition has been excluded. Then the very object posited as the justification for the Act, the securing of a thoroughly efficient key industry necessary to the production of munitions, is not attained by the fiscal device under notice. If, on the other hand, there has been no barring of imports under the licence system, the abstention from use of it is an admission that it was either unnecessary or injurious or was felt to be useless for its purpose.
And the common-sense verdict on the whole matter is that if continuous and vigilant research and experiment in the chemistry of dye-making is held to be essential to the national safety, the proper course is for the Government to establish and maintain a department or arsenal for such research and experiment, unhampered by commercial exigencies. Such an institution may or may not be well managed. But a dividend-earning company, necessarily concerned first and last with dividend earning, and at the same time protected against foreign competition in the sale of its products, cannot be for the purpose in question well managed, being expressly enabled and encouraged to persist in out-of-date practices.
This being so, the whole argument for protection of key industries goes by the board. It has been abandoned as to agriculture, surely the most typical key industry of all; and it has never even been put forward in regard to shipbuilding, the next in order of importance. For the building of ships of war the Government has its own dockyards: let it have its own chemical works, if that be proved to be necessary. Protection cannot avail. If the Dyestuffs Act is put in operation so as to exclude the competition of foreign chemicals, it not only keeps our chemists in ignorance of the developments of the industry abroad: it raises the prices of dyestuffs against the dye-using industries at home, and thereby handicaps them dangerously in their never-ending competition with the foreign industries, German and other, which offer the same goods in foreign markets.
The really fatal competition is never that of goods produced at low wages-cost. It is that of superior goods; and if foreign textiles have the aid of better dyes than are available to our manufacturers our industry will be wounded incurably. It appears in fact to be the superior quality of German fabric gloves, and not their cheapness, that has hitherto defeated the competition of the native product. To protect inferior production is simply the road to ruin for a British industry. Delicacy in dyes, in the pre-war days, gave certain French woollen goods an advantage over ours in our own markets; yet we maintained our vast superiority in exports by the free use of all the dyes available. Let protection operate all round, and our foreign markets will be closed to us by our own political folly. Textiles which are neither well-dyed nor cheap will be unsaleable against better goods.
[1] The promised statistics were soon afterwards sent to Mr. Robertson by the Board of Trade. They will be found in the Liberal Magazine for September, 1922, p. 348.—Ed.