The International Aspects Of Free Trade

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Title:     The International Aspects Of Free Trade
Author: Evelyn Baring [More Titles by Baring]

PAPER READ AT THE INTERNATIONAL FREE TRADE CONGRESS AT ANTWERP, _August 9-21, 1910_[59]

I have been asked to state my opinion on the effect of Free Trade upon the political relations between States. The subject is a very wide one. I am fully aware that the brief remarks which I am about to make fail to do justice to it.

A taunt very frequently levelled at modern Free Traders is that the anticipations of their predecessors in respect to the influence which Free Trade would be likely to exercise on international relations have not been realised. A single extract from Mr. Cobden's writings will suffice to show the nature of those anticipations. In 1842, he described Free Trade "as the best human means for securing universal and permanent peace."[60] Inasmuch as numerous wars have occurred since this opinion was expressed, it is often held that events have falsified Mr. Cobden's prediction.

In dealing with this argument, I have, in the first place, to remark that modern Free Traders are under no sort of obligation to be "Cobdenite" to the extent of adopting or defending the whole of the teaching of the so-called Manchester School. It may readily be admitted that the programme of that school is, in many respects, inadequate to deal with modern problems.

In the second place, I wish to point out that Mr. Cobden and his associates, whilst rightly holding that trade was to some extent the natural foe to war, appear to me to have pushed the consequences to be derived from that argument much too far. They allowed too little for other causes which tend to subvert peace, such as racial and religious differences, dynastic considerations, the wish to acquire national unity, which tends to the agglomeration of small States, and the ambition which excites the desire of hegemony.

In the third place, I have to observe that the world has not as yet had any adequate opportunity for judging of the accuracy or inaccuracy of Mr. Cobden's prediction, for only one great commercial nation has, up to the present time, adopted a policy of Free Trade. It was, indeed, here more than in any other direction that some of the early British Free Traders erred on the side of excessive optimism.[61] They thought, and rightly thought, that Free Trade would confer enormous benefits on their own country; and they held that the object-lesson thus afforded might very probably induce other nations speedily to follow the example of England. They forgot that the special conditions which existed at the time their noble aspirations were conceived were liable to change; that the extraordinary advantages which Free Trade for a time secured were largely due to the fact that seventy years ago England possessed a far larger supply of mechanical aptitude than any other country; that her marked commercial supremacy, which was then practically undisputed, could not be fully maintained in the face of the advance likely to be made by other nations; that if those nations persisted in adhering to Protection, their progress--which has really been achieved, not by reason of, but in spite of Protection--would almost inevitably be mainly attributed to their fiscal policy to the exclusion of other contributory causes, such as education; and that thus a revived demand for protective measures would not improbably arise, even in England itself. These are, in fact, the results which have accrued. Without doubt, it was difficult to foresee them, but it is worthy of note that, in spite of all adverse and possibly ephemeral appearances, symptoms are not wanting which encourage the belief that the prescience of the early Free Traders may, in the end, be tardily vindicated. It is the irony of current politics that at a time when England is meditating a return to Protection--but is as yet, I am glad to say, very far from being persuaded that the adoption of such a policy would be wise--the most advanced thinkers in some Protectionist states are beginning to turn their eyes towards the possibility and desirability of casting aside those swaddling-clothes which were originally assumed in order to foster their budding industries. Many of the most competent German economists, whilst advocating Protection as a temporary measure, have for many years fully recognised that, when once a country has firmly established its industrial and commercial status in the markets of the world, it can best maintain and extend its acquired position by permitting the freest possible trade. Even Friedrich List, though an ardent Protectionist, "always had before him universal Free Trade as the goal of his endeavours."[62] Before long, Germany will have well-nigh completed the transition from agriculture to manufactures in which she has been engaged for the last thirty or forty years; and when that transition is fully accomplished, it may be predicted with some degree of confidence that a nation so highly educated, and endowed with so keen a perception of cause and effect, will begin to move in the direction of Free Trade. Similarly, in the United States of America, the campaign which has recently been waged against the huge Trusts, which are the offspring of Protection, as well as the rising complaints of the dearness of living, are so many indications that arguments, which must eventually lead to the consideration--and probably to the ultimate adoption--if not of Free Trade, at all events of Freer Trade than now prevails, are gradually gaining ground. Much the same may be said of Canada. A Canadian gentleman, who can speak with authority on the subject, recently wrote:

The feeling in favour of Free Trade is growing fast in Western Canada, and I believe I am right in adding the United States.

We have our strong and rapidly growing farmers' organisations, such as the United Farmers of Alberta, and of each Western province, so that farmers are now making themselves heard and felt in politics, and farmers realise that they are being exploited for the benefit of the manufacturer. Excellent articles appear almost weekly in the _Grain Growers' Guide_, published in Winnipeg, showing the curse of Protection.

A Canadian Free Trade Union, affiliated with the International Free Trade League, has just been formed in Winnipeg, and many prominent business and professional men are connected with it.

It ought to be better known among the electors of Great Britain how Free Trade is growing in Canada, that they may be less inclined to commit the fatal mistake of changing England's policy. Canada is often quoted in English politics now, and the real facts should be known.

No experience has, therefore, as yet been acquired which would enable a matured judgment to be formed as to the extent to which Free Trade may be regarded as a preventive to war. The question remains substantially much in the same condition as it was seventy years ago. In forming an opinion upon it, we have still to rely largely on conjecture and on academic considerations. All that has been proved is that numerous wars have taken place during a period of history when Protection was the rule, and Free Trade the exception; though the _post hoc ergo propter hoc_ fallacy would, of course, be involved, if on that account it were inferred that the protection of national industries has necessarily been the chief cause of war.

Without indulging in any utopian dreams as to the possibility of inaugurating an era of universal peace, it may, I think, be held that, in spite of the wars which have occurred during the last half century, not merely an ardent desire for peace, but also a dislike--I may almost say a genuine horror--of war has grown apace amongst the civilised nations of the world. The destructiveness of modern weapons of offence, the fearful personal responsibility devolving on the individuals who order the first shot to be fired, the complete uncertainty which prevails as to the naval, military, and political results which will ensue if the huge armaments of modern States are brought into collision, the growth of a benevolent, if at times somewhat eccentric humanitarianism, possibly also the advance of democracy--though it is at times somewhat too readily assumed that democracies must of necessity be peaceful--have all contributed to create a public opinion which holds that to engage in an avoidable war is the worst of political crimes. This feeling has found expression in the more ready recourse which, as compared to former times, is now made to arbitration in order to settle international disputes. Nevertheless, so long as human nature remains unchanged, and more especially so long as the huge armaments at present existing are maintained, it is the imperative duty of every self-respecting nation to provide adequately for its own defence. That duty is more especially imposed on those nations who, for one reason or another, have been driven into adopting that policy of expansion, which is now almost universal. Within the last few years, the United States of America have abandoned what has been aptly termed their former system of "industrial monasticism,"[63] whilst in the Far East a new world-power has suddenly sprung into existence. Speaking as one unit belonging to a country whose dominions are more extensive and more widely dispersed than those of any other nation, I entertain a strong opinion that if Great Britain continues to maintain her present policy of Free Trade--as I trust will be the case--her means of defence should, within the limits of human foresight, be such as to render her empire impregnable; and, further, that should that policy unfortunately be reversed, it will be a wise precaution that those means of defence should, if possible, be still further strengthened. But I also entertain an equally strong opinion that an imperial nation should seek to fortify its position and to provide guarantees for the durability of its empire, not merely by rendering itself, so far as is possible, impregnable, but also by using its vast world-power in such a manner as to secure in some degree the moral acquiescence of other nations in its _imperium_, and thus provide an antidote--albeit it may only be a partial antidote--against the jealousy and emulation which its extensive dominions are calculated to incite.

I am aware that an argument of this sort is singularly liable to misrepresentation. Militant patriotism rejects it with scorn. It is said to involve an ignoble degree of truckling to foreign nations. It involves nothing of the kind. I should certainly be the last to recommend anything approaching to pusillanimity in the conduct of the foreign affairs of my country. If I thought that the introduction of a policy of Protection was really demanded in the interests of the inhabitants of the United Kingdom, I should warmly advocate it, whatever might be the effect produced on the public opinion of other countries. British Free Traders do not advocate the cause which they have at heart in order to benefit the countries which send their goods to Great Britain, but because they think it advantageous to their own country to procure certain foreign products without any artificial enhancement of price.[64] If they are right in coming to this conclusion, it is surely an incidental advantage of much importance that a policy of Free Trade, besides being advantageous to the United Kingdom, tends to give an additional element of stability to the British Empire and to preserve the peace of the world.

From the dawn of history, uncontrolled commercialism has been one of the principal causes of misgovernment, and more especially of the misgovernment of subject races. The early history of the Spaniards in South and Central America, as well as the more recent history of other States, testify to the truth of this generalisation. Similarly, Trade--that is to say exclusive trade--far from tending to promote peace, has not infrequently been accompanied by aggression, and has rather tended to promote war. Tariff wars, which are the natural outcome of the protective system, have been of frequent occurrence, and, although I am not at all prepared to admit that under no circumstances is a policy of retaliation justifiable, it is certain that that policy, carried to excess, has at times endangered European peace. There is ample proof that the Tariff war between Russia and Germany in 1893, "was regarded by both responsible parties as likely to lead to a state of things dangerous to the peace of Europe."[65] Professor Dietzel, in his very remarkable and exhaustive work on _Retaliatory Duties_, shows very clearly that the example of Tariff wars is highly contagious. Speaking of the events which occurred in 1902 and subsequent years, he says: "Germany set the bad example.... Russia, Austria-Hungary, Roumania, Switzerland, Portugal, Holland, Servia, followed suit.... An international arming epidemic broke out. Everywhere, indeed, it was said: We are not at all desirous of a Tariff war. We are acting only on the maxim so often proclaimed among us, _Si vis pacem, para bellum_."

Can it be doubted that there is a distinct connection between these Tariff wars and the huge armaments which are now maintained by every European state? The connection is, in fact, very close. Tariff wars engender the belief that wars carried on by shot and shell may not improbably follow. They thus encourage, and even necessitate, the costly preparations for war which weigh so heavily, not only on the industries, but also on the moral and intellectual progress of the world.

Mr. Oliver, in his interesting biography of Alexander Hamilton, gives a very remarkable instance of the menace to peace arising, even amongst a wholly homogeneous community, from the creation of hostile tariffs. The first step which the thirteen States of America took after they had acquired their independence was "to indulge themselves in the costly luxury of an internecine tariff war.... Pennsylvania attacked Delaware. Connecticut was oppressed by Rhode Island and New York.... It was a dangerous game, ruinous in itself, and, behind the Custom-House officers, men were beginning to furbish up the locks of their muskets.... At one time war between Vermont, New Hampshire, and New York seemed all but inevitable."

To sum up all I have to say on this subject--I do not for a moment suppose that Universal Free Trade--even if the adoption of such a policy were conceivable--would inaugurate an era of universal and permanent peace. Whatever fiscal policy be adopted by the great commercial nations of the world, it is wholly illusory to suppose that the risk of war can be altogether avoided in the future, any more than has been the case in the past. But I am equally certain that, whereas exclusive trade tends to exacerbate international relations, Free Trade, by mutually enlisting a number of influential material interests in the cause of peace, tends to ameliorate those relations and thus, _pro tanto_, to diminish the probability of war. No nation has, of course, the least right to dictate the fiscal policy of its neighbours, neither has it any legitimate cause to complain when its neighbours exercise their unquestionable right to make whatever fiscal arrangements they consider conducive to their own interests. But the real and ostensible causes of war are not always identical. When once irritation begins to rankle, and rival interests clash to an excessive degree, the guns are apt to go off by themselves, and an adroit diplomacy may confidently be trusted to discover some plausible pretext for their explosion.

In a speech which I made in London some three years ago, I gave an example, gathered from facts with which I was intimately acquainted, of the pacifying influence exerted by adopting a policy of Free Trade in the execution of a policy of expansion. I may as well repeat it now. Some twelve years ago the British flag was hoisted in the Soudan side by side with the Egyptian. Europe tacitly acquiesced. Why did it do so? It was because a clause was introduced into the Anglo-Egyptian Convention of 1899, under which no trade preference was to be accorded to any nation. All were placed on a footing of perfect equality. Indeed, the whole fiscal policy adopted in Egypt since the British occupation in 1883 has been based on distinctly Free Trade principles. Indirect taxes have been, in some instances, reduced. Those that remain in force are imposed, not for protective, but for revenue purposes, whilst in one important instance--that of cotton goods--an excise duty has been imposed, in order to avoid the risk of customs duties acting protectively.

Free Trade mitigates, though it is powerless to remove, international animosities. Exclusive trade stimulates and aggravates those animosities. I do not by any means maintain that this argument is by itself conclusive against the adoption of a policy of Protection, if, on other grounds, the adoption of such a policy is deemed desirable; but it is one aspect of the question which, when the whole issue is under consideration, should not be left out of account.

[Footnote 59: Subsequently published in _The Nineteenth Century and After_ for September 1910.]

[Footnote 60: _Life of Cobden_, Morley, vol. i. p. 231.]

[Footnote 61: Sir Robert Peel, as is well known, did not fall into this error, and even Mr. Cobden appears to have recognised so early as 1849 that his original forecasts on this point were too optimistic. Speaking on January 10, 1849, he said: "At the last stage of the Anti-Corn Law Agitation, our opponents were driven to this position: 'Free Trade is a very good thing, but you cannot have it until other countries adopt it too.' And I used to say: 'If Free Trade be a good thing for us, we will have it; let others take it if it be a good thing for them; if not, let them do without it.'"]

[Footnote 62: Hirst, _Life of Friedrich List_, p. 134.]

[Footnote 63: Essay on the Influence of Commerce on International Conflicts; F. Greenwood, _Ency. Brit._ (Tenth Edition).]

[Footnote 64: In connection with this branch of the question, I wish to draw attention to the fact that Professor Shield Nicholson, in his recent brilliant work, _A Project of Empire_, has conclusively shown that it is a misapprehension to suppose that Adam Smith, in advocating Free Trade, looked merely to the interests of the consumer, and neglected altogether those of the producer. Mr. Gladstone's statement on this subject, made in 1860, is well known.]

[Footnote 65: Reports on the Tariff wars between certain European States, Parliamentary paper, Commercial, No. 1 (1904), p. 46.]

[The end]
Evelyn Baring's essay: The International Aspects Of Free Trade

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