CHAPTER XXIII. THE CANADIAN PREFERENCE.

Its results are disappointing. It changed a decline into an increase, but the increase is not proportional to that of other countries which have no preference. As differentiated, the tariff still presses most heavily on us, and favours the foreigner.

THERE is at least one part of the scheme to which we are not likely to object. It was not our wish that the Colonies ever adopted Protection, but, since they have done so, it seems as if the least thing they could do is to give us a Preference. Perhaps, then, we may begin by considering what has been the result of the Canadian Preference.

For some years after the Federation of the separate provinces into the Dominion, in 1868, Canada enjoyed a comparatively low tariff. In 1874, there was a period of depression, and the Conservative party, under Sir John Macdonald, began an agitation for Protection. This “national policy,” as it was called, triumphed in 1879, and, for the next ten years, Protection ran riot. Still, our imports into Canada steadily increased, till, in 1885, a very severe tariff, directed, to all appearance, against our manufactures, was imposed, and the imports declined rapidly. In 1890, began a reaction against Protection, and, in 1896, Sir Wilfred Laurier came in on a programme of tariff reform. Protection, however, had now established the vested interest. In 1897, the Reciprocal Tariff came into force. Rates were reduced, but not greatly reduced. The standard for the highest duties became 35 per cent. ad valorem. It was on this tariff that the first Preference of 12½ per cent, on British goods was given.

No reciprocal obligation on our part was expected. Sir Wilfred Laurier stated, in so many words, that the Preference was not a quid pro quo; that Canada did not ask anything in return; it was a recognition, he said, that the Canadians got in the home market of the Mother Country better treatment than in any of the foreign markets of the world.¹

In 1898, the Preference was increased to 25 per cent. But, under our treaties with certain foreign powers, it was found that the same preference was claimed by Belgium, France, Germany, Spain, and many other countries. To remedy this, in July, 1898, we denounced these treaties as regards Belgium and Germany, and, in August of the same year, the Reciprocal Tariff was superseded by the British Preferential Tariff, which gave 25 per cent, of reduction from the general tariff to Great Britain, Bermuda, West Indies, India, Ceylon, New South Wales, and the Straits Settlements.¹

The Preference, however, was not extended to all goods. Exception was made of Wines, Malt liquors, Spirits and Spirituous liquors, Medicines, articles containing Alcohol, Tobacco, Cigars, and Cigarettes. The average rate of duty on these is about 170 per cent, ad valorem.

On 1st July, 1900, the Preference was raised to 33⅓ per cent., at which it still stands. Sir Charles Tupper, the Opposition leader, then took the definite position that a quid pro quo should be asked if the Preference were to be continued; but Sir Wilfred Laurier held his ground that the Preference was a free gift, and won with an undiminished majority.

The general results were summed up by Mr. Chamberlain at the Conference with the Colonial Premiers in 1902. In the five years, our imports into Canada which came under the preference clause increased 55 per cent. But the general trade, that is the imports from foreign countries enjoying no preference, increased by 62 per cent. And the imports which came in free—that is, subject to no tariff and no preference—increased by 67 per cent. Or, taking it another way, the total increase of the trade of Canada with foreigners was 69 per cent., while the total increase of British trade was only 48 per cent. This unlooked-for result calls for closer investigation.

Canada has been passing through a time of extraordinary prosperity. In the last ten years, the country has been filling up. Foreign immigration has doubled. The great railways and the Hudson’s Bay Company have been selling their lands rapidly. The Homestead entries have increased 150 per cent., owing to the enormous influx of British settlers. Thousands of American farmers have crossed the border and become Canadians. And, among other phenomena, the foreign trade has doubled in seven years.

It was to be expected, then, that British imports into Canada should have increased. But up till 1897 they were steadily falling. In 1882 and 1883, they were above £10½ millions. In 1890, they were £8,915,000; in 1896, £6,776,000; in 1897, £6,043,000. Succeeding years, however, show as follows:

1898,	-	-	6,678,000
1899,	-	-	7,615,000
1900,	-	-	9,203,000
1901,	-	-	8,839,000
1902,	-	-	10,114,000

On the face of it, this seems very satisfactory. But a glance at the imports from other countries lessens the satisfaction. In the same period France has increased her sendings from £534,000 in 1897 to £1,371,000 in 1902. Germany has increased hers from £1,334,000 to £2,224,000. But the most suggestive figures are those of the United States. In 1890, their imports into Canada were £10,744,000, and, in 1896, £12,035,000. The succeeding years show as follows:

1897,	-	-	£12,667,000
1898,	-	-	16,172,000
1899,	-	-	19,111,000
1900,	-	-	22,570,000
1901,	-	-	22,702,000
1902,	-	-	24,834,0001

The net result is that France’s increase is 156 per cent.; Germany’s, 66 per cent.; America’s, 96 per cent.; while ours is only 67 per cent. And although France and Germany started from a low figure, and a percentage comparison between their increase and ours is therefore not sound argument,² this is not the case with America, which started from a higher level. It would be difficult to draw an argument for the success of a Preference from figures like these.

The explanation of our failure, however, is not far to seek. What determines imports into a country is not cheapness alone, but demand. Canada wants our whisky because Canada likes it, so our exports of whisky increase although we get no preference, and although all whisky is subject to a duty of $2.40 per gallon. Canada finds the agricultural implements of America more suitable for her soil, so she imports them, although the duty on our implements is one-third less.

Again, in judging of the effects of a tariff in keeping out the goods of a particular country, it is not the average rates of duty that have to be considered, but the rates on the goods which that country sends. There are certain things admitted free into Canada, such as anthracite, coal and coke, raw cotton, crude rubber, rough sawn timber, undressed hemp, fur skins, hides, steel rails. 70 per cent, of these free imports come from the United States—for obvious reasons—and this free entry does not do us much good. Raw materials, again, of iron, steel, leather, and wood, and many agricultural products, are admitted at comparatively low rates. Here, again, the advantage America has over us is obvious.

The heaviest duties are on textiles—woollens, cottons, silks, and linens. These are the goods we wish to send into Canada, and these are the goods which the Canadian consumer would very gladly take from us. But they are also the goods which Canada is bent on manufacturing for herself, and here, allowing for the preference, we have to pass our textiles through an actual rate of 23⅓ per cent.

The rivalry, in fact, which concerns us is not that between foreign countries—particularly the United States—and ourselves for the Canadian trade, but the rivalry between the Canadian manufacturer and the British manufacturer. There is little wonder, then, that the result of the Preference was pronounced “altogether disappointing.” “The tariff still presses with the greatest severity on Canada’s best customer, and has favoured the foreigner.” As Mr. Chamberlain put it to the Colonial Premiers at the Conference: “So long as a preferential tariff is still sufficiently protective to exclude us altogether, or nearly so, from your markets, it is no satisfaction to us that you have imposed even greater disability upon the same goods if they come from foreign markets, especially if the articles in which the foreigners are interested come in under more favourable conditions.” If England cannot get in at the front door, it is small consolation that America is kept at the garden gate.

It would not be reasonable to say that, in this comparative failure, we have an argument against Preference. It might have been the case that, but for it, our exports to Canada would have gone on declining, while those of the countries which had no Preference increased. All that can be said is that it is impossible to see in it any great argument for a Preference where the circumstances are similar.

It must be remembered, however, that the Canadian Preference, such as it is, is a free gift. We gave no quid pro quo: we made no sacrifice. But how, in face of this failure, can any British statesman ask his fellow-countrymen to make a sacrifice? Suppose we shut out the foreigner from our market, in order to admit Canada free, how will this help us to get into her market? She admits us at a third less than our rivals now, and we cannot make headway. How shall we be any more able to enter by giving her a Preference on our imports? The expectation seems to be that, by doing so, we shall induce her to increase the amount of her Preference to us. But she has declared, in unequivocal terms, that this is what she will, on no consideration, do.¹ Whether it be from want of humour on her part, or from under-estimation of our common sense, all she does is to hint that she might raise her tariff higher against the rest of the world. Neither we nor our rivals can climb the thirty foot wall; to favour us, however, she will raise it to forty feet against them!

¹According to Professor Flux, of Montreal, the Preference was given frankly for the benefit of the Canadian consumer, with no idea whatever of it being a sacrifice.—Economic Journal, December, 1903.

¹At the same time, the bounty on pig iron made from Canadian ores was raised from $2 to $3 per ton, remaining at $2 on that made from imported ores. As consequence, the production of pig iron rose from 58,000 tons in 1897 to 274,000 tons in 1901.

¹Colonial Statistical Abstract, 1903, p. 210. The figures include bullion and specie.

²A more detailed comparison with other countries brings out much more startling results when stated in percentages. For instance., in the same six years, Holland increased her sendings to Canada by 133 per cent.; Switzerland, 148 per cent.; Portugal, 184 per cent.; South America, other than British Guiana, 194 per cent.; Italy, 223 per cent. But, as starting from comparatively small amounts, these are not adequate, but only suggestive comparisons. How, in face of these figures, it could be said that “the increase in our trade with Canada has been very great, but it has not increased largely out of proportion to the increase of the trade between Canada and other countries,” passes my comprehension.

¹In his Budget speech of April, 1903, Mr. Fielden said that any change they made might favour Great Britain against the foreign competitor—“not over the Canadian manufacturer.”