CHAPTER XVII. RETALIATION ON DUMPING.

We cannot very well ask a foreign government to stop its individual citizens doing in foreign trade what it cannot stop them doing in home trade. We know how underselling is met in home trade—by similar underselling. But the only retaliation yet proposed against underselling nations is the imposing of Import Duties here, and this, surely, is merely a defensive measure. Will this, however, cure dumping in our case when it has not cured it elsewhere? But, once admitted that dumping constitutes a claim on government protection, where are we to stop? And who or what is to define what “selling at or under cost” means?

GRANTING, however, all the compensations of Dumping; granting that it is more harmful to the nations that dump than it is to us; and granting that the extent of the dumping is small: let us assume that the actualities are so annoying, and the possibilities so great, that we must seek a remedy. In the present chapter, then, we shall consider Retaliation as the proposed remedy. We premise, as before, that we have no thought or intention of protecting home industries; that we are Free Traders in theory, and mean to return to Free Trade in practice whenever we have attained the end aimed at.

Is it duly realised that Dumping is not a government policy like a protective tariff, but a thing done by the individuals of a nation as one of their business methods—“unfair” competition, perhaps, but still individual competition? It is not even a bounty; it is only an indirect result of two things, the government policy of Protection and the private Trust.

In other words, protective duties by themselves are part of a specific government policy. We can fight them either by free imports, as Cobden advised us to do, or by another government policy, namely, counter protection. But this dumping is not an organised attack of the American or German nation on the English; it is not, indeed, a thing recognised by the American or German nation at all: it is an act done by individuals, by Trusts or Kartells, in their own self-interest. What happens is that some individual foreign exporter, for one reason or other, offers goods for sale in this country to some individual firm of importers at a low price. All the nonsense one hears about dumping as a “national conspiracy,” is derived from that fallacious idea which thinks of another nation as an industrial unit.

When, then, we find our trade interfered with by foreign Trusts and their policy of dumping, are we to go to the Government of these countries and say, “You must stop this or we shall—do something”? Why, the American government is as convinced as we are of the evils of Trusts, but it can do nothing; it cannot even prevent one State dumping in another State. Is it reasonable to ask it to muzzle its Trusts when they affect us—to stop this international dumping—to prevent underselling in other countries, when it cannot stop underselling at home?

In what way, then, isthe proposed remedy to be worked? What the merely academic person, who assumes that words have a meaning, understands by Retaliation, is “hitting back,” and, from long experience of a trade where cutting of prices was one of the commonest incidents, I venture to say that this is what the business man means by it. The “negotiation” to which I was accustomed usually took this form: “You are underselling us in X, where you have a small trade and we have a large one. It doesn’t hurt you much, but it is serious to us. If you don’t stop it, we shall go to Y, where you have nearly all the trade and we have very little, and cut prices 30 per cent. or so. This won’t hurt us, but it will be very serious to you.” This was Retaliation; and, as between a large firm and a small, it was very effective. There was simply no answer to it—on the part of the small one. As between two large firms, however, it usually involved a bitter war of cutting prices, much bad feeling, and great loss to both parties and to the whole trade.

But, being curious to find out if the advocates of international retaliation meant this or anything like this—if, perhaps, they contemplated some method of government subsidy by which we could attack some large, and therefore vulnerable and sensitive trade of other nations, without much hurting ourselves—I put this question in a letter to several of the leading newspapers last autumn: How is our Government to take effective measures against the actions of individuals not recognised by their Government?

The answer I got was the answer I expected—that the way to stop dumping was to put a tax on the dumped articles.

Precisely. But why is this called Retaliation? It is not “reprisals”; it is not a counter attack. It is simple defence. America and Germany dump steel on us; we are to answer by putting a duty on American and German steel. May one ask in what this differs from what we used to call Protection of the steel industry? If it differs in nothing, then I submit that the retaliation has overshot its mark. It stops the “unfair” competition, but it does a great deal more. It presumably aims at securing our manufacturers against loss,—against being obliged to meet dumping, and bring down the home prices to, or under, cost. What it does, is to secure them in a quasi-monopoly profit, by giving them the power to raise the price of home steel by something under the amount of the retaliatory duty. What I think we must ask, then, is: Is Mr. Balfour’s Retaliation, after all, anything different from Mr. Chamberlain’s undisguised Protection of home manufactures?

The next question is fairly obvious: Will this stop dumping?

Why should it? Suppose we put a 10 per cent. tax on foreign steel, it is pretty certain that our price in England—the price of home steel as well as the price of imported steel generally—will go up, either 10 per cent. or a little less. Say it goes up 10 per cent. Then we shall be precisely as we were. The foreigner will dump his steel at 10 per cent, higher price than he did before, but he will be as much under our price as before. In other words: If our home price for steel is 100, and America has been dumping at 90; then, if our price goes up to 110, the American will dump at 100, will still be 10 per cent. below our price, and will not make a farthing more sacrifice.

It would be different if, when the 10 per cent. duty was put on, our steel makers kept their prices unchanged. Then the foreigner who meant to undersell as before would have to pay the 10 per cent. duty, and would be 10 per cent. worse off than he was. But it is more than human nature to suppose that the price of home steel would not go up. Suppose it went up only 5 per cent. Then the foreigner would have to sacrifice 5 per cent. in addition to what he sacrificed before in dumping. This would make dumping a little more expensive, but I am by no means convinced that it would stop it. Whether it would stop it or not, depends on the proportion of his home trade to his dumping trade. If the home trade is 96 per cent. of the whole output in the United States, as Mr. Carnegie says it is, then it might pay to send away the other 4 per cent. to be sunk in the sea.¹ It paid the Dutch East India Company in past times to destroy some of its produce, and even some of its plantations, rather than sell the produce too cheap. It used to pay Billingsgate to destroy its fish rather than let the surplus spoil the market and bring down prices. Similarly, it might pay America to get nothing for her surplus if the surplus is a small proportion of the total output.

But, as it happens, we have an instance of what a 10 per cent. import duty cannot do. Belgium has a tariff, not of 10 per cent., but of some 13 per cent. ad valorem. The imports of wrought iron and steel into Belgium were 6,885,000 kilos in 1891; 13,223,000 kilos in 1900; 21,423,000 kilos in 1901.² These imports were, I believe, dumped from Germany. How did Belgium save herself? In the Consular Report, No. 3104, on the state of Belgium in 1902, Mr. Hertslet says: “The iron and steel industries suffered, not only from local over-production, but from that in the neighbouring countries. A market, however, was found for a large quantity in the United States. The crisis was thus averted, and the end of the year saw a general improvement.”

Here, then, is a much needed correction of an ordinary assumption; that we, as the great Free-Trade country, are “the one dumping ground of the world.”¹ In the above case, we have first Germany dumping wrought iron and steel into Belgium—a protected country—and then Belgium saving herself by dumping her iron and steel into a much more heavily protected country. Similarly, we find from the Board of Trade Blue Book, that Germany dumps coke into Austria and France, and coal into Holland and Belgium; and that Bohemia in turn dumps lignite into Germany “at any price obtainable.” Finally, we hear that German manufacturers are in a panic at the promised invasion of the United States Steel Trust.²

What it all comes to is;—that this Retaliation, which was to prevent dumping, and may or may not do so, is to end in Protection of the iron and steel industries, and, as a probable sequence, the formation of Trusts on the American model. Our steel makers are to have the privilege of making steel dear at home, and the second privilege of selling it at or under cost to other countries, our rivals. And the Times, in its issue of 5th December, 1903, confirms this by telling us that “an average 10 per cent. duty may be reached by charging 100 per cent. upon some, 50 per cent. upon others, 15 per cent. upon another category, and nothing at all upon the remainder,” and that the principle upon which Mr. Chamberlain would act is, that, “when the Germans charge 30 per cent. upon steel bars, he would put the business on a free-trade footing (sic) by putting the same duty on German bars.” It reminds one of the simple-minded proposal of some people, that we should “let other countries make our tariff for us,” by putting on their goods precisely the duty they put upon ours!

If, however, Protection is the only remedy for Dumping, we may well hesitate. A man may be suffering from a slight cold, but may object to take a medicine that will throw him into fits.

The moment we admit that Dumping is a claim for counter duties, we seem to have taken a long step and a perilous one. At what stage in the dumping is the aid of the State to be invoked? Is it when a thousand tons have been dumped, or a hundred thousand, or a million? Surely, a smaller trade may be ruined by dumping before any large figure is reached. Or are we to stop the danger before it emerges, by putting an “average duty of 10 per cent.” on all manufactures?

And who is to decide what is Dumping, as distinguished from “fair competition”? Is it selling at cost?—or under cost?—or far under cost? What is “cost”? When students in a Political Economy class have got the length of answering that question, they have very little more to learn. Even economists are not agreed as to what elements should be regarded as entering into “cost” and what should not. The wonderful ideas of some Municipalities, as to the place, function, and extent of Depreciation Funds and Sinking Funds, emphasise this.

Or may one take the rough and ready way of saying that a country dumps when she sells at a higher price at home than she does abroad? This, however, as I have hinted, would be to admit the contention of other countries that we are the “champion dumpers,” and justify them in retaliation. I cut this out of an interview with a Canadian woollen manufacturer last autumn: “The outlook is gloomy. Canadian manufacturers are menaced by conditions that make it profitable for British woollen manufacturers to dump their goods in Canada at prices which the home industry simply cannot meet. Canada is being used as a slaughter market.”

Finally, when dumping is so glibly spoken of, has it been considered that low prices are a concomitant of large orders, as well as of dumping? A million tons of coal will not be sold to Germany at the price per cwt. here. Who is to determine that a low price in a foreign country is not due to the economies of having a large order, or to a long contract taken at a time when prices were low?

It is not too much to say that every claim for counter duties against dumping would require a Royal Commission to itself. And one can see the probable corruption and bribery that would be let loose to secure this government aid.¹

¹ The Census statisticians say 93 per cent. Giving the figures for 1900 as follows:—Agricultural products, £950 millions; manufactured products, £2600 millions; mining products, £210 millions—total, £3760 millions; they add:—“This was all consumed at home, except the sum of £275 millions, or about 7 per cent., representing the value of all articles of domestic merchandise exported in the year 1900.” Twelfth Census of U.S., 1900, vol. vii., p. Iviii.

²Foreign Statistical Abstract, p. 98.

¹ The words are Mr. Chamberlain’s.

² This possibility of dumping into other countries may remind us that, if the dumping is diverted from us to neutral markets in which we compete, any success we may have in excluding dumped goods from our own country will not necessarily protect our exporting industries at any rate.

¹ In the present chapter, I have assumed that Retaliation is directed against foreign nations. But our own Colonies dump. In 1901-2, Germany, Holland, and Belgium together landed 78,615 tons of pig iron on our shores. The United States landed 45,973 tons. Canada, under a direct bounty, landed no less than 103,262 tons. Dumping by kinsfolk is very much the same as dumping by strangers.