the resolve of Liberals to prefer the interests of Liberalism to those of Free Trade, a resolve which finds its most strident and repellent expression in the levity with which the destruction of the ancient Constitution has been urged.

Such are the difficulties in the path of secession to Liberalism. The next question is: why is it impossible for all Unionist Free Traders to do what many of them have done, that is, assimilate their opinions to those of the Leader of the party? To answer this fully would be to enter upon all the merits of the fiscal controversy, which would be beyond the scope of the present article; but it may be convenient to set out, so far as may be, the character and extent of the difference of opinion that separates us from Mr. Balfour. For that purpose let me recall the main features of Mr. Balfour's policy.

Mr. Balfour, in his famous Birmingham speech, gave an outline of his plan :

On this question of fiscal reform I do not think there is a better text to be taken than that which is given me by the resolution moved by my friend Mr. Chaplin, and passed, not merely unanimously, but with enthusiastic acclamation, by the whole body of representatives. That resolution divides the question into four heads-broadening the basis of taxation, safeguarding our great productive industries from unfair competition, strengthening your position for the purpose of negotiation in foreign markets, and establishing preferential commercial arrangements with the colonies and securing for British producers and workmen a further advantage over foreign competitors in the colonial markets. . . . .I think you may approach those four propositions-broadening the basis of taxation, safeguarding productive industries, strengthening our position in foreign markets, and colonial preference-you might, I say, approach the whole policy from any one of these four propositions, and I believe you would arrive at the same practical result. The policy which is good for one is good for the other, the policy by which one can be promoted the other can be advanced, and we can confidently say that any fiscal changes we carry out would not be merely independent efforts to deal first with this proposition and then with that, but a comprehensive scheme by which all four of those great causes might be equally advanced. Well, if it be a matter of indifference, and I think it is, from which of these propositions you approach the whole policy, let us for the sake of brevity approach it from the revenue side, from the point of view which is represented by the resolution which deals with the basis of taxation. . . . Looking at it from that point of view alone, how are you going to broaden the basis of taxation? Surely there are four principles which may be laid down as practically incontrovertible, or, at all events, which I am prepared to support by arguments if necessary. The first is that your duties should be widespread ; the second is that they should be small; the third is that they should not touch raw material; the fourth is that they should not alter the proportion in which the working classes are asked to contribute to the cost of government. They should be small, because it is small duties which do not interfere with the natural course either of production or consumption; they should be numerous because, if you require revenue and your duties are small, you must have many articles of consumption subject to those duties. Need I argue the other two questions— the question whether they should be applied to raw material, or whether they should be used to alter the balance of material burdens on the working classes ? Those require no argument.

Mr. Balfour's policy will be seen to amount to this:-he desires to have customs duties for four purposes: (1) to get revenue; (2) that they may be reduced for the benefit of the colonies in return for reciprocal concessions; (3) that they may be varied after negotiation against foreign countries in order to obtain similar concessions; (4) that they may afford some safeguard against what he calls unfair competition.' For these purposes he designs a tariff of numerous but small duties which are not to be on raw material, which are not to alter the balance of material burdens on the working classes, and, most remarkable of all, which are not to alter the natural course either of production or consumption. This last condition appears to differentiate his policy sharply from that adopted by France, Germany or America, and recommended by the majority of Tariff Reformers. Certainly a principal object of the tariffs of America, Germany and France is to change the natural course of production and consumption; and if the arguments that are used in favour of Tariff Reform in every corner of the country have any meaning, it is the purpose of Tariff Reform in like manner to change that natural course. When, for instance, Mr. George Bowles is attacked in Norwood for refusing to promise to support a duty which would restrict the importation of doors and window-frames into this country, it would seem that he might reply that he was only insisting on Mr. Balfour's principle that duties should not interfere with the natural course of production and consumption. But it might perhaps be rejoined that Mr. Balfour, in the fourth branch of his policy, contemplates customs duties as a safeguard against unfair competition. And this is precisely the most doubtful and obscure part of Mr. Balfour's policy. What competition, in his meaning, is unfair? The classical Birmingham speech appears to throw no light on this problem. But in other utterances, including his last speech in the House of Commons delivered on the 19th of February, the competition which he appears to desire to prevent is the competition of goods during a period of depression, which are sold in our market at a price not determined by the ordinary cost of production. Such importation of goods is ordinarily called dumping,' and, since the phrase is convenient, I will use it, quoting a passage from Mr. Balfour's speech as describing what dumping He supposes the tariff-protected manufacturers to speak as follows:

6

is.

We will build our mills upon a scale that will supply our country adequately in good times, and in bad times we shall no doubt suffer, but we shall be able to put our surplus produce in the neighbouring Free Trade market at a price, it may be, that will not pay interest on our capital, but that will enable us to keep our hands and not dissipate the staff, and to keep our machinery running on the whole, and to pour out our surplus produce in bad times upon this open market.

The same process is described in Mr. Balfour's pamphlet, 'Insular

Free Trade' at greater length. I can only quote a part of what is there set forth :

Such is the ordinary position of the manufacturer under Free Trade. Compare with it the position of his protected rival, who controls his home markets. To him the dangers of over-production appear in their most benignant form. If the home demand slackens, compelling him, if he desires to maintain prices, to limit home supply, he has a way of escape not open to his less favoured brother. Instead of closing works, dismissing hands, and running machinery on half time, he may hope that the markets benevolently opened to him by Free Trade countries may enable him to dispose of his surplus abroad, at prices no doubt lower, often very much lower, than the prices which his quasi-monopoly enables him to obtain at home, but at prices which nevertheless make the double transaction, domestic and foreign, remunerative as a whole.

Why, it may be asked, is no similar policy open to the manufacturer in a Free Country? Because Free Trade makes it difficult for him to obtain control of his home markets; and because, unless he has this control, it is difficult for him to fix two prices, a low foreign and a high domestic one. If he attempts it he will be undersold in the home market by his rivals, or even, if the divergence of price exceed the double cost of carriage, by himself! His own goods will be reimported. He will become his own most dangerous competitor!

It is worthy of note that in theory it is not only possible that the foreign prices charged by the quasi-monopolist should be less than the home price, but even that they should be less than the cost of production. And it has often been so in practice. Foreign steel, for instance, has been sold in this country at a price for which no English manufacturer could produce it-or foreign manufacturer either, without the double aid of combination and protection.'

It seems that the sort of importation which is here contemplated must be of a limited amount. Not every industry is of a character to make continuous production on a large scale a very important matter, nor in the case of any industry can production be artificially kept up in times of depression unless, in addition to a tariff, there is a combination to control the home market. Accordingly, while we hear a good deal about dumping in some branches of commerce, notably in the iron trade, there is no reason to think that dumped goods are at all a large proportion of the total imports. If, then, unfair competition only means dumping, the fourth object of Mr. Balfour's Birmingham policy would only interfere with no extensive part of the import trade of the country. All the rest would only pay the duty which Mr. Balfour has expressly stated is to be small because it is small duties which do not interfere with the natural course either of production or consumption.'

If this be a correct account of Mr. Balfour's fiscal policy, it must be said that it cannot satisfy either a convinced Free Trader or a convinced Protectionist. Even those parts of his policy like retaliation, restraint of dumping, and the levying of revenue, which are not inconsistent with the theoretical principles of Free Trade, must excite apprehensions in the minds of Free Traders on account of the mechanism which Mr. Balfour apparently intends to use. A general 'Insular Free Trade, Paragraphs 52 and 53.

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tariff against all countries for the purpose of retaliation, of excluding dumped goods, and of collecting revenue, would be complicated and ambiguous. In its practical working it could hardly escape protectionist developments at the instance of the numerous body of Protectionists by whose support it would be enacted. On the other hand, the convinced Protectionist desires something more. He wishes to see the scientific control of foreign trade by means of import duties with a view to the encouragement of British industries. He wants, in fact, precisely what Mr. Balfour appears to deprecate, the changing of the natural course of production and consumption. It is a whimsical idea, but perhaps a correct one, that this Birmingham policy, a verbal adherence to which is being imposed on every Unionist candidate, is in its true character such as would secure the support of neither of the principal divisions of economic opinion. Perhaps if everyone fully understood Mr. Balfour's meaning, the more ardent Tariff Reformers would find themselves as little able to assent without reservation to the Birmingham policy as any member of the Unionist Free Trade Club.

It is possible, however, that the above is not the true interpretation of Mr. Balfour's doctrine of unfair competition.' In his recent speech in the House of Commons he certainly appears to regard the Continental tariffs as beneficial to the countries that adopt them. He praised, in particular, the stability which he believed a tariff to secure, but a tariff does not, by itself, secure what Mr. Balfour calls stability. It does not, on the one hand, prevent dumping, as Canadian experience shows; it does not, on the other hand, control the home market unless it is supplemented by some kind of trust or syndicate. I can hardly suppose that Mr. Balfour desires to see trusts and syndicates established in this country. But it is not easy to understand the relevance of his arguments about stability, if he shrinks from enabling combinations to control home competition. In short, on this part of his policy we still require more light. If Mr. Balfour would tell us what he regards as fair competition, his meaning would be made clear. Hitherto the obscurity in his utterances which has so often been complained of, has always arisen from one cause his reluctance, namely, to limit his policy on what may be called its protectionist side. He has often explained the distinctions between his policy and the existing system; but how his policy would differ, for example, from the German system, if it differed at all, he has never explained. Similarly, while he has described the sort of importation which he regards as mischievous, he has never stated what kind of imports he approves and would leave unrestricted. We hear of unfair competition from him, but we are not told what competition is not unfair, and we cannot certainly judge whether he means to limit his restrictions to dumping, or whether all foreign competition would fall under the same condemnation. My own opinion is that he means no more

than the restriction of dumping, and that he no more wishes to restrict normal importation (e.g. of doors and window-frames) than does Mr. George Bowles; but until the doubt is cleared up, it would by itself prevent any Unionist Free Trader from assenting without reservation to the Birmingham policy.

So far, then, as three out of the four points of the Birmingham programme go, the difficulty with which Free Traders are encountered arises, as it seems to me, from doubt as to the precise purport of the policy. In regard to unfair competition' Mr. Balfour might do something to make matters clear by explaining what competition he includes, and what competition he excludes from that description. In respect to the revenue tariff and to the policy of retaliation the doubt relates only to the machinery by which the policy will be carried out, and is therefore unavoidable. It can only be cleared up when proposals are definitely made to Parliament. I make no criticism upon Mr. Balfour in noting the impossibility of giving an unreserved assent to what is not yet defined. But how strange it is that numerous speakers and writers seem to regard it as natural, proper and requisite that candidates for the House of Commons should pledge themselves beforehand to support they know not what. It is evident that such pledges, if they are to become usual in public life, will destroy all rational ground for having a House of Commons at all. It would be no more use in our Constitution than the College of Electors is in that of America. Manifestly, if the deliberations of Parliament are to be of value at all they must be entered upon with a certain amount of freedom in respect to the conclusions at which its members are to arrive. A pre-arranged decision makes deliberation a sham.

The part of the Birmingham policy to which it seems necessary to take an objection in principle is that which relates to Colonial Preference. I do not say that there is no kind of preferential policy which could ever be adopted without grave political or economic mischiefs. I do say that if by Colonial Preference is meant a policy of bargaining with the colonies and adjusting a number of commercial treaties between the different parts of the Empire, such a policy is far more likely to end in discord than in harmony. No one can watch the periodic renewals of commercial treaties between the great protectionist countries of Europe without observing how fruitful such negotiations are in ill-humour and friction. It is not too much to say that the doctrine that agreements for promoting mutual trade by means of differential duties lead to unity or even to friendship is contradicted by experience as well as by a priori reasoning. We once had preferential duties in favour of the Colonies, and the Colonies were certainly not more devoted to the Mother Country than they are now. On the contrary, their separation from the Empire seemed in those days far more probable than it does at present. Mr. Lyttelton, indeed, points out that Cobden anticipated that Free Trade would dissolve the con