there are circumstances which qualify this norm. Some businesses competing in the export trade may be far better equipped, more economically handled, and more advantageously placed than their competitors, and in consequence may be earning higher profits.

In so far as this is true, the effects of a duty upon the imported goods will approximate to the effects of a duty on agricultural produce; the rise of price may not cover the entire duty, the poorer competitors will go under, unable to produce for the market, and the abnormal profits of the favourably situated manufacturers may be cut down by the duty. In a word, if in a manufacture there are differential profits which correspond to the differential rents of more fertile or better situated lands, a duty levied on the produce may fall on the former as we saw it fall upon the latter. There is, however, one not unimportant qualification to this power to put taxes on the foreign manufacturer. As its first effect is to crush weaker competitors, it will operate to promote combination among the smaller residue of strong competitors, who will be driven by a keen stimulus of self-defence to organise price-lists or combinations and maintain them.

Of course, it comes to this, that a duty upon manufactured imports can only be put upon producers in as far as competition has not already reduced their prices to a minimum profit, and weeding out the

weaker competitors, left a number of equals. Where foreign countries send manufactured goods into another well-developed industrial country, it will seldom happen that the profits of such import trade can bear any considerable tax, unless the importer be a trust or "combine," a case with which we have already dealt.

The countries which could place a duty upon manufactured imports that might largely lie on producers are savage or backward countries, especially in the early days of their exploitation by more advanced industrial nations, whose traders often exchange cheap textile, metal, and other goods upon terms which are very profitable. A tax on beads, rum, and calico, by a fiscal statesman of Fiji or West Africa, when first brought into contact with civilised trading nations, would lie largely on producers. A nation such as Great Britain sending out exports in the shape of highly manufactured articles, shipping and financial services, largely restricted in the terms of their competition, and receiving in return from many sources foods, raw materials, and partly manufactured or wholly manufactured goods which represent surplus products, is probably getting a much larger aggregate of wealth, as measured by costs, than she pays in return. It is improbable that she could find many imports upon which she could safely and profitably impose duties, whereas it is quite probable that coun

tries which receive her imports may find many articles that will bear a tax.1

1 The interesting investigation by which Dr. Cannan shows that Great Britain has in recent years been obtaining increased quantities of imports for a given quantity of exports supports this suggestion. 66 "Since 1885 the price of imports measured in exports has fallen II per cent. for the United Kingdom and only 4 per cent. for Germany, while the fall since 1881 has been 19 per cent. and II per cent. respectively. This is a marked difference in both periods in our favour. . . . So far as these tests show, both countries are carrying on their foreign trade at an increasing advantage, but the advantage on the part of the United Kingdom is greater. Of course the advantage in this greater fall of prices of the goods we import than of those we export is doubtless due in part to the cheapening of transport, which counts as a 'cost' in the former but not in the latter set of prices. But it is also probably attributable in part to the larger quantities of 'rents,' ‘surplus profits,' ‘high salaries,' contained in the prices of the goods and services we export, than in the prices of the goods we import."

IT

T is proposed to tax agricultural produce and manufactured goods entering Great Britain from foreign countries. Who will bear the tax? British merchants will in the first instance pay the duties at the port of entry. No one, however, suggests that their profits, kept down by keen competition, are such as will enable or oblige them to bear any appreciable part of this new expense. They must recover it, either from the foreign producer in the lower prices they pay him for the goods they import, or from the home consumer in the higher prices they make him pay, or they must recover part of it from each.

In any case, the real incidence of the tax will take the shape of a change of price-a fall in prices paid to foreigners, a rise in prices paid by consumers, or both. In trying to trace the effect of a tax on prices, one principle must be kept constantly in mind, viz. that the immediate cause of every rise or

fall of prices is a shift in the quantity of supply in relation to demand; a rise of price can only come from a reduced supply or an increased demand, a fall of price from an increased supply or a reduced demand. Now it can be clearly seen that there are very few cases where the producer or the consumer will bear the entire tax, plus the cost of collection, in a direct rise or fall of prices. The only case where the consumer would bear this full expense is where an import duty was imposed upon a necessary of life, none of which could be produced at home.

If in Great Britain we could raise no wheat, and a duty were placed upon external supplies from all sources, a duty of 2s., 5s., or 10s. per quarter would tend to raise the prices to an equivalent extent. Even this statement, however, is only true on the assumption that all our present consumption of wheat were strictly necessary, and that a rise in its price would cause neither a reduction in the consumption of food nor a substitution of some other food, capable of being produced at home, for wheat. On such an assumption, the price paid by the consumer must rise to the full extent of the duty for the following reason. The first act of the merchant who paid the duty would be to reduce his importation of wheat, for he could not afford to buy so much at current prices; this reduction of demand for foreign wheat in relation to the same supply will tend to bring down the price of wheat paid to the