The Progress of Imperial Preference

General Mitchell and Gentlemen--I would like in the first place to express my very great appreciation of the honour you have done me in inviting me here as your guest today. I feel very great diffidence in speaking to a Canadian audience on the subject of Progress of Imperial Preference, and especially to a gathering under the aegis of the Empire Club, because preference is a principle that you have espoused for many years, and you know, more or less, its ramifications all through the Empire.

Before I proceed to detail my views of the Progress of Preference I would like to give expression to a few thoughts that occur to me on the present political and economic organization of the British Empire. We are all aiming at the same thing-the development and consolidation of the Empire, and the closer union of the peoples comprising it. But there are two streams of thought and action. One is in the direction of Imperial Federation-and don't forget that that movement is a very highly organized movement in many parts of the Empire, having its own journals, and very ably conducted they are. The other school of thought is in the direction of autonomous government. In my opinion we cannot promote Empire unity by legislation; kinship, common ideals, common interests, mutual defence, a common economic policy-these, in my opinion, are the true bonds of unity. (Applause) I believe it will be found that the lines on which the Empire is developing at the present time are the right lines,- and this might be expressed in the words-the ever-increasing freedom of each part in the management of its own affairs.

The great war through which we have passed, however, has disclosed both the strength and the weaknesses of autonomous government. It was one of the most inspiring episodes of the war that in the moment of danger men from the Yukon, the back-woods of Australia, the heart of Africa, dropped their tools and rallied to the flag. That spirit, in my opinion, would never have existed under Imperial Federation. On the other hand, the autonomous system of government has its weaknesses, as the war has painfully disclosed to us. These weaknesses were apparent from the very start. We had no common or understood policy of defence, with the result that our strength was dissipated in covering up disclosed weaknesses of defence all over the Empire. What proved our greatest weakness, however, was the lack of an economic policy, with the result that many of the principal key industries were, even in the hour of danger, found to be controlled by enemy countries and enemy organizations, and even the raw materials essential for the conduct of the war and for the daily life of the people were in the hands of foreign corporations. I need not refer in detail; you will all remember the position of Canadian nickel, Australian zinc, Malay copper, Indian tungsten. I had the question of tungsten in my own hands, and I knew the difficulty of getting it at a very critical time. Raw materials from East and West Africa were controlled by enemy countries. It will be seen, therefore, that if we are to continue along autonomous lines of government we must have a thoroughly understood and accepted foreign policy, a defence policy, and in particular an economic Empire policy.

It is particularly with regard to the latter that I wish to speak. I venture to say that the principle underlying any Empire policy must be one of Imperial Preference. By Imperial Preference I do not mean tariff preference; that would be a very limited view of such a policy. Preference is, as I understand it, an expression of the family tie, and covers everything pertaining to the economic and social welfare of the people of the Empire. The people of Canada are familiar with the principle in respect to tariffs, as are other parts of the Dominions; and the Mother-country has specialized in every form of preference to which I shall presently refer.

I would like to refer for a moment to the position of the Mother-country just before the war. So international in our ideas had we become that, amongst the first of the people's orders in foreign countries, was the British Empire. It is remarkable to the people of this country, and it is a difficult thing to understand, how our Foreign Office, our own War Office, could invite German and Austrian firms to supply them, in competition with British firms, with the means of defence of Great Britain. But that was actually the position that we were in just before the war. The Crown Agents for the Colonies, the great purchasing department in England, purchasing the supplies for some forty-five Crown Colonies, kept whole industrial districts in Germany busy with orders for rails, machinery and supplies for those forty-five British territories. At the out-break of the war the London County Council had orders in Germany for rails and tramway material to the extent of over half a million pounds. The Port of London authorities had orders for dock gates and machinery to the value of over half a million pounds. I want you to understand these things because these are your affairs as well as ours; if you are going to participate in the government of the Empire as you should, and to take your proper place in foreign policy and in evolving an economic policy-these are your questions as well as ours. The placing of such orders was justified on a difference in price in favour of the foreigner of from two to ten percent; and the great consideration, the Empire consideration, was entirely lost sight of-the fact that from thirty to sixty per-cent of the value of those contracts was lost in the servicebill of the workmen of the United Kingdom and the Dominions.

What is the position today? I am afraid the outlook of the Mother country in regard to these matters has not altered to the extent that it should have. The British market today is being flooded with Austrian, German, Swiss, Belgian and other goods. As you know, the value of the mark in Germany itself still retains its purchasing power, although its value outside of Germany is practically down to zero. There is no longer a question of industrial competition in the ordinary sense; and still these goods come in, and many of them come in labelled "London Make" "Sheffield Make", etc. They find their way into every Dominion on preferential terms through our having no legislation compelling a marking, under heavy penalties, of the country of origin.

I am talking a great deal about the unwisdom of the Mother Country, and I am doing it advisedly, because personally I want to see the Dominions taking a larger share in dealing with these problems, and representing their views on these problems, which really affect them almost as directly as the people of the United Kingdom.

I have referred to the unfortunate limitation that has been set in the popular mind to the term, "Imperial Preference" and its consequent associations with party politics in connection with tariff construction. In my opinion tariffs are very effective means of giving a preference, and I think it is very unfortunate that Great Britain has not made more use of this expedient to encourage Empire trade; but there are other means which can be used to develop reciprocity in inter-Empire relations, namely, finance, shipping, cables and wireless, emigration, and last but not least, in domestic and social preference, to which I will refer later.

I am afraid I am trespassing on your time in my introductory remarks, but if you will permit me I will refer, in turn, to each of these factors operating in regard to the Principle of Preference.

First of all, tariffs. Preferential tariffs, have made a considerable development in the Empire since the war, and during the latter years of the war. You Canadians think you are the pioneers of Preference, and I am sorry to have to disillusionize you. , The preference was first introduced into the tariff shortly after South Africa was founded, after the pioneer work had been done by Vasco de Gaina. The first scale of duties in South Africa, the first scale of import duties, provided for a preference to the Mother-Country, and that preference was in respect to alcohol. (Laughter) It is a very extraordinary coincidence that the last preference that has been placed in a tariff in the Empire is one that has been incorporated in our finance, and only a few weeks ago, and that gives a preference of two shillings and six-pence per gallon to Empire alcohol-for power purposes. (Laughter) But it is really to Canada that the credit must be given for the development of tariff preference as we now understand it; and I think the Empire owes a great deal to the late Sir Wilfrid Laurier for his insisting on that principle in the first Imperial Conference.

You put your preference arrangements on very broad lines, and their advantages are open to any other part of the Empire that will reciprocate. The tariff arrangements between Canada and the West Indies, will, in my opinion, promote a connection with those tropical countries that will be absolutely invaluable. It will make Canada a self-supporting unit; you will have the products of the tropics that you can exchange with the West Indies for your manufactured and agricultural products. You have a preference in South Africa, but it is a small one; but that can be considerably developed, and I think you could get a larger preference in South Africa if you would buy in that country some of those goods that you now buy from foreign countries, but which South Africa produces pre-eminently. You could get return cargoes.

The British Empire Producers' Organization, of which I have the honour to be Chairman, has been instrumental in promoting Preferential Tariffs, inter-Empire tariffs, in many parts, and particularly between the Crown Colonies and the Dominions and the Crown Colonies and the Mother Country. I have recently taken part in discussions involving preferential tariffs between Canada and Australia, and I hope that they will come to fruition in a very short time. It will open up a new vista for Canadian trade in many avenues. But then, you know that both Australia and New Zealand have preferential arrangements with the Mother Country; they have them with South Africa, with Mauritius, with Ceylon; and so this whole principle of preference is gradually pervading the economic life of the Empire. The great weakness is the Mother Country, which should be, in my opinion, the great co-ordinator of this economic system.

A word about India. There is a commission now sitting in India to consider the advisability of incorporating preference in the Indian tariff, and the feeling in India, I know, is rather against preference. The position has been prejudiced very much by the people of Lancashire, who, when India started to enquire into this question, to take practical steps, protested very strongly against any system of preference in India, on the argument that preference implied a protective tariff. Well, I am not a bit sorry for Lancashire, now that India has turned around and imposed an additional ten per-cent duty in her tariff without any preference at all. I consider that the Lancashire people did very ill service to the Empire in opposing preference in India.

Negotiations are also on foot to bring about preferential arrangements between Newfoundland and the West Indies, and I think that is very likely to come about in the very near future.

Now, let me say something about the United Kingdom. We have made great strides since the war towards the adoption of this principle, and if we have not embraced it as a policy we are using it seriously as an expedient. Previous to the war the sugar industry of the Empire, as you know, was languishing under German and Austrian competition. The British Empire Producers' Organization put a deputation to the government and impressed upon it the serious position of the British sugar industry, with the result that British-grown sugar was given a very substantial preference in the British tariff. They have, in individual cases, made a special representation in regard to a number of other items, such as Dominion wines and various products.

Just before I left the Old Country, on July 21st, there was passed through the British House of Commons a bill called the "Safeguarding of Industries Bill". You are doubtless familiar with its provisions. It is a very great installment of the principle of preference. The first portion of the bill empowers the government to impose duties up to 33 1/3 percent on any imports likely to affect key or essential industries in Great Britain. The second part authorizes the imposition of duties to compensate for adverse exchanges--and there again the Board of Trade can impose duties up to an additional 33 1/3 percent. Now, under both provisions of the bill the British Empire is entirely excluded, that is to say, those duties may not be imposed upon any goods coming from any part of the British Empire. (Applause) That, in my opinion, embodies a principle of the very highest value in British legislation. (Hear, hear) Another advance in political thought extending towards Imperial Preference was recorded in the proceedings of the Empire Agricultural Conference which was organized by my Organization and concluded just before I left England. For the first time the British farmer joined with Dominion and Colonial farmers in passing a resolution in favour of Imperial Preference. That is an extraordinary political development in the United Kingdom, and I mention this to show you the trend that I hope we are permanently embarked upon in the Old Country. As a result of that Conference I am at present in Canada. The Conference felt that the time had come for Canada and the Mother Country to get into direct trading relations. The United States has been the principal broker for your products; your wheat, your meat and other products have been sold to us through the United States, and I am over here discussing with agricultural and other organizations what means we can take to promote the direct marketing of Canadian goods in the United Kingdom. (Applause) It is an operation that will not only promote Empire unity and consolidation but will give actually a higher price to the Canadian producer and a lower price to the Canadian consumer (hear, hear) because the passage, the mere handling of your goods by a third party, entails something like five distinct commissions, every one of which, or most of which, could be entirely cut out in the handling of your products. So much for tariff.

May I refer to the second point-Empire finance? I have always held the view that British finance should never be divorced from British policy; that the credit of this Empire has been built up by the stability of character, the progressiveness, the deeds of heroism and sacrifice, of all the peoples composing the Empire. The seat of finance is in London, but the credit at the back of all finance belongs to you as much as it does to us. Now, how is this great instrument of finance being used? And how was it used before the war? The bulk of the capital issued in the first six months on the London market in the present year was for foreign enterprises-and this at a time when we need all our means for re-construction work and for developing our industries to enable us to bear the burden of the war.

Three weeks before the war broke out there was an Austrian loan issued in London, and it was subscribed two or three times over. At the same time there were several Dominion loans issued, particularly a New Zealand loan, about twenty or thirty per-cent of which was subscribed. That happened about three weeks before the outbreak of war. Now, just before I left London the Government of the Province of San Paolo, Brazil, issued a loan on the London market for two million pounds, the object of which was to stimulate the coffee industry there, and at that time our own coffee industry was absolutely a dead-letter. They have enormous stocks but no market; East Africa and Uganda and West Africa, and all those producers languish and die because of the need of capital to carry the industry over this period, yet they issue a loan of two million pounds on the London market to tide over the San Paolo coffee industry! Well, I contend, Gentlemen, that there is something radically wrong when that sort of thing can happen in the Empire today. (Hear, hear) I need not point out to you how desirable it is that that capital which is going into foreign enterprises might be directed towards the development of Canada and Canadian industries in competition with the United States. That is a subject that I am enquiring into here.

Then we come to another form of Preference, and that is in connection with shipping on railways. I would like to see the old navigation laws re-imposed on the Empire-that British goods should be carried to British ports in British bottoms. (Applause) Let a British shipper try to do some business on the American coast and see what kind of treatment he gets. Before the war we were so lacking in a shipping policy that one of our largest shipping companies in Great Britain had a secret agreement--I happen to have seen a copy of it myself--with a German shipping firm to push your Canadian Pacific Ocean Service off one of its trade routes. There was a conspiracy with the leading British shipping houses, and the foreign house, to push out another English concern, or British concern. There is no guiding principle at the back of all this; and if we had an Empire policy that was thoroughly understood and that was at the back of all our legislation and all our doings, these things could not occur.

In connection with shipping and railways there is one form of preference which we all could develop, and in my opinion it would be one of the most effective forms; that is, to establish systems of through rates and through bookings. It should be possible to get a through rate from Winnipeg to Birmingham. Before the war Germany had this tbrough system of bookings in operation, and an exporter in the interior of Germany could send a parcel of goods to Johannesburg for one booking and at one rate, and need not employ any intermediaries. That facility could be utilized by you. You have a national system of railways; you have a merchant marine which wants something to do; you could tie them all up and you could establish very effective through bookings which would stimulate Canadian industry enormously. (Applause) The next preference is in connection with cable and wireless. I do not know what you can have thought of the Old Country for the way it has handled the question of wireless. I consider that our government has stood in the way of the development of those means of inter-communication in the most criminal manner. At the last Imperial Conference some progress was made, I believe; but we have to remove the obstruction, the influence of the old cable concern, before wireless is going to make very much headway.

Then I will just refer shortly, for I am afraid my time is entirely gone, to domestic and social preference. By social preference I mean such preference as has been entered into by Australia and New Zealand in regard to social legislation. The old-age pensioner in Australia can emigrate to New Zealand without forfeiting his old age pension, and the countries on both sides honor these obligations. I merely point to this as a new development in the way of Preference in legislation. If we could have similar legislation over all parts of the Empire we should then obliterate boundaries to a much greater extent.

Then, with regard to domestic preference let me say a word. By that I mean that all of us should in our personal lives seek to purchase only British goods-Empire goods. (Applause) In the present condition of the Empire it ought to be a religion with everyone of us, and I very heartily approve of your Made-in-Canada movement which is being pushed so well by the Canadian Manufacturers' Association. (Applause) Charity begins at home. You are only strong to the Empire if you are strong in yourselves; and the first preference must always be given to local products, and after that comes the preference to Empire products.

With regard to this question of preference let me say one more word. We cannot do better than follow the example of the United States. In Cuba and the Philippines and Porto Rico, and wherever the United States has a political control, the first thing she does is to establish a preferential tariff that will effectively prevent any other country engaging in competitive trade with her own manufacturers. We had a very big business in sugar machinery with Cuba. That was killed by the forty per-cent preference in favour of United States manufacturing. The difference in tariff in favour of their manufacturers in the Philippines is still greater.

Now, you are all men of affairs, and I make no appeal to you on the grounds of sentiment alone, but on those of common-sense and patriotism. It is good to trade together; it is sound economics to devote our energies and capital to the development of our own family estate. The achievements of the British race in literature, in industry, in science, in civilizing influence throughout the world will last through all time; it needs no perpetuation. But if we as a race are still to go forward in the paths of progress, and play our proper part, we must be guided by a great common principle which will keep us free from outside domination and dependence on the goodwill of other nations. (Loud applause)

PRESIDENT MITCHELL: Gentlemen, I am sure we have listened to Mr. Morgan with very great interest and very great profit. The constructive suggestions which he has made will appeal to all the members present. I have great pleasure, Mr. Morgan, in extending to you our very great thanks for your very excellent address today. (Applause)