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stood all the actual facts of world industry, would secure. In fact, the whole intelligence of the mercantile and financial classes which operate foreign commerce is constantly engaged in seeking to achieve and maintain this economically right balance of trade between the several nations. What quantities of what kinds of goods each nation buys, and what quantities of what kinds of goods it pays with, are directly determined by the delicate mechanism of international finance, which, registering the productive capacities of the several nations in the various industries, directs the flow of free capital and labour into the most productive channels, and so elicits those surpluses of various kinds of wealth, over and above the needs of home consumption, which form the substance of international commerce.

CHAPTER IX

CAN PROTECTIVE COUNTRIES "SUCK"

A FREE-TRADE COUNTRY?

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in most industries, and the defective intelligence of the business world at large, prevent the machinery of international finance from achieving more than a fraction of the full economy of division of labour and interchange of wealth which it is designed to secure. The chief harm of protective tariffs, bounties, or preferences consists in impeding further the operation of these beneficent forces aiming to secure for each nation the particular volume and make-up of import and export trade which is at once most profitable for her and for the commonwealth of nations. To the wastes occasioned by immobility and ignorance it adds a new artificial waste, setting nations to do work they cannot do so well as other nations, and thereby preventing them from doing better work. It makes a nation buy abroad a smaller quantity and different qualities of goods than it would be good for her

to buy, and it makes her pay for them in larger quantities and different qualities of goods than is good for her to pay. To a less extent and in various degrees the tariff of each nation inflicts similar injuries on each other nation of the commercial world.

Although it will be manifest that the main injury of a protective system falls on the country that adopts it, and only a smaller injury upon another country thus restrained in commerce with her, it may be useful to examine the suggestion that a number of protective countries, each exercising this restraint, may inflict blows upon a free-trade country whose cumulative force will virtually destroy her trade and suck out her available capital. It has been suggested that Great Britain is or may be in such a case.

The danger commonly indicated assumes a twofold character. A ring of protective nations may, by putting up high tariff walls, exclude our goods from their shores, while at the same time their producers, enjoying the security of a protected and high-priced home market, "dump" their artificially cheapened goods upon our shores, underselling our producers, and taking their trade.

Now it is evident to anyone who grasps the first principle of foreign trade, viz. that it consists in exchange of commodities, that the two alleged dangers are mutually destructive. If protective nations are refusing to receive our goods, they cannot continue to dump their goods at any price upon our shores.

They must take payment either in current imports from us (directly or through intermediate nations), or in liens upon our capital which they are engaged in depreciating by the very process in question, and which would be absolutely valueless by the time they had carried their policy to its logical conclusion. If nations "dump" cheap goods on us and try to evade payment by putting up tariffs, this policy does not mean that they are not paid, but that they are paid in a smaller quantity of dearer British goods (or their foreign equivalents) instead of the larger quantity of cheaper goods they would have received in free exchange. What their joint protective and dumping policy does is to alter the division of employments in Great Britain, the make-up of our export trade, and the proportion of the exports which go to various foreign countries. What they dump is likely to be raw material for some of our trades, for most commodities, though they be finished manufactures or foodstuffs, are raw materials for some trades; these trades, directly subsidised by the foreigner, will send in their products over the tariff wall which the same foreigner sets up to counteract his own bounty on exports. A widespread system of "dumping" would also mean cheap commodities to British consumers, would help to keep money wages low and thus again would keep down expenses of production for British producers in all trades.

When we remember that the exact converse

of these forces are operating in the protective and dumping countries to raise the expenses of production in general, and particularly in trades where goods sold high at home in order to sell low abroad are raw materials, we perceive the mutually destructive nature of dumping and protection. Even if the protective tariff of each country were so arranged as to prevent us from sending exports into those countries from trades fed by the dumped articles, we should send them into neutral countries with which they also trade, and underselling them, as they themselves would have assisted us to do, we should force our payment on them through the indirect methods of roundabout trade. Seeing that the costs, alike of dumping and protection, fall in the main on expenses of production in the protective country, it is easy to understand how the bounty-fed industries in free-import Great Britain can force markets, either directly in these protective countries wherever the tariff wall is lower than usual, or in countries where tariffs are lower or non-existent.

§ 2. If we suppose that there are no other free import or low-tariff nations, and that the ring of protectionist nations is so infatuated as to put up protective tariffs on all our export trade, they have not only stopped our trade, but their own as well, even the dumping which is part of it; for no "tariff reformer" is likely to suggest that "dumping" can go on in vacuo, foreigners taking nothing in return. Moreover, the least reflection will make it manifest

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