It has been shown that the colonies are incomparably our best customers for that division of our export trade to which prudence bids us assign the higher value. If, then, we admit the two assumptions of Mr. Chamberlain's critics (1) that the proposed encouragement of our colonial trade will entail a diminution of our foreign trade, and (2) that the decrease will be proportionate to the volume of trade, it by no means follows that the decrease-assumed but unproven-in the total volume of trade over seas will impair its true value to the nation. On the contrary, we find in the statistics a very strong reason in support of the policy of fostering and enlarging our trade with the colonies.

MARSHAL HALSTEAD,

Consul.

BIRMINGHAM, ENGLAND, July 20, 1903.

CHANGE IN CHARACTER OF BRITISH EXPORTS. In my report of July 20 I inclosed a copy of one of the series of articles on "Trade preference and reciprocity"* which the Birmingham Post is printing as an "authoritative exposition of the views held by Mr. Chamberlain" on this subject. In the article the claim was made that the export trade of Great Britain to its colonies was proportionately more valuable than that with foreign countries because of its character, the colonies purchasing more largely of manufactured goods and buying a smaller proportionate quantity of raw materials, such as coal and other irreplaceable materials. Supplementary to that report, I forward another article to which the caption is given "Change in character of our export trade," and containing statistics intended to demonstrate that British foreign trade has been subject to a change in character which is unsatisfactory, because in export percentages raw materials had increased and manufactured goods decreased, the one "highly significant exception" being machinery-"the equipment of foreign manufactories"-while in import returns "the changes. have proceeded in exactly the reverse direction."

The article printed to-day reads as follows:

CHANGE IN CHARACTER OF OUR EXPORT TRADE,

[From the Birmingham Post of July 22, 1903.]

It has been shown that our trade with the colonies is of a more satisfactory character than our trade with foreign countries, because it includes a far larger proportionate exportation of manufactured goods and a far smaller proportionate exportation of coal and other irreplaceable materials.

The following statistics are intended to demonstrate that our trade, regarded as a whole, has recently been subject to a gradual change which is in the same sense and for the same reason unsatisfactory. If this be so, a change in our commercial policy is indicated by the symptoms.

The following calculations of the percentage of different classes of exports and imports to the total value of exports and imports, respectively, are derived from

* See preceding report, “Foreign and colonial trade of the United Kingdom."

Board of Trade returns. For brevity's sake, the returns of four years out of five will be omitted; those of every fifth year-not selected years, but years taken at regular intervals-will suffice to justify the argument.

CLASSIFICATION OF TRADE.

Exports and imports are roughly classified as (1) food, (2) raw materials, (3) manufactured or partly manufactured goods. In the Board of Trade summaries, tobacco is counted with food. In the following statement living animals-i. e., mostly cattle, sheep, and pigs exported or imported for food—are counted in the food class, although separately classified by the Board of Trade, in order that the tables may be uniform with the German returns that will be given for comparison below. The error so introduced-inasmuch as the class also includes horses and stock cattle-will not affect the conclusions, which depend wholly on the comparison of the classes of raw material and manufactures. It is in any case a slighter error than that of omitting live meat from the count of food stuffs.

Here observe (1) the steady decrease of manufactured exports and (2) the steady increase of raw materials (coal, clay, etc.) exported. Observe, further (3), that both the increase and the decrease are most rapid in the two periods 1887-1892 and 18971902. This completes the proof that the phenomena are correlated. The law is, the more of our raw materials we sell to foreigners the less of our manufactures they buy from us.

KINDS OF MANUFACTURED GOODS.

The classification of manufactured goods in use is:

(a) Yarns and textiles.

(6) Metals and articles manufactured therefrom, except machinery.

The great falling off has been in the exports of textiles, but it is also considerable in metal manufactures. On the other hand, machinery-that is, the equipment of foreign manufactories-supplies a highly significant exception, showing an increase instead of a decrease.

THE IMPORT RETURNS.

Now let us bring into comparison the corresponding statistics of importation. It will be noticed that the rows in the following table, if cast up horizontally, come to less than 100. The difference represents a small miscellaneous class, varying from 3.4 to 3.8.

Here we find that the changes have proceeded in exactly the reverse direction. The importation of manufactured goods is on the up grade; that of raw materials is declining.

THE TRADE OF GERMANY.

A most significant contrast is afforded by the similar statistics of the German Empire. These will also be given at intervals of five years. The years do not exactly correspond, as the statistics for 1901 and 1902 are not yet to hand.

It would surely be the most willful sort of blindness to refuse to connect this unsatisfactory development of English trade, coinciding with a satisfactory development of German trade, with the strongly contrasted commercial policies of the two Empires.

A SIGNIFICANT COMPARISON.

Here are some more statistics that tell the same tale and point the same moral: Exports of manufactured goods.

Country.

United King

dom

United States...
Germany

£215,000,000 $1,046,297,000 £230,000,000 $1,119,295,000 £222,000,000 $1,080, 363,000

Thus, in eleven years British manufactured exports decreased by 3.5 per cent; American manufactured exports increased by 174 per cent; and German manufactured exports increased by 35.5 per cent.

The imports of manufactured goods into the United Kingdom in the three years in question were as follows:

1883............

1890.......

1900..........

As imports rise, exports are falling.

THE FAILURE OF A THEORY.

£53, 000, 000=$25, 924, 500

63, 000, 000=306, 589, 500 93, 000, 000=452, 584, 500

These statistics also illustrate once more the failure of the predictions of the extreme school of laisser-faire economists. Undeterred by failure, they still go on prophesying-just as a sporting prophet, whose selection for the Derby was nowhere on Wednesday, is as confident as ever Thursday that he knows what will win the Oaks on Friday.

In 1878 the late Professor Fawcett published a very lucid and powerful defense of free trade against reciprocity. His arguments are for the most part a priori, or deductive, but occasionally he condescends to statistics. The result is, to a wellinformed reader of to-day, quite ludicrous. If we substitute the most recent returns (those of 1902) for the returns cited by Mr. Fawcett (those of 1877), it will be found in nearly every case that the inference drawn is exactly reversed.

For example, Mr. Fawcett wrote: "In the year 1877, when the iron trade was most inactive, the entire quantity of iron and steel, manufactured and unmanufactured, imported into England amounted to only £2,515,034" ($12,239,412). This importation, even excluding iron ore, amounted last year to £7,988,519 ($38,876,127); and the inference fails. "With regard to Belgian iron competing successfully against English iron in our own market, so little reason is there to suppose our trade can be so injured that the value of the iron exported from Belgium to England in 1877 exceeded by only £210,724 ($1,024,488) the value of the iron exported from England to Belgium. It therefore appears that the Belgian ironmasters have nearly as much to fear from the competition of England as the English ironmasters have from the competition of Belgium." To-day this excess is nearly £2,500,000 ($12,166,250), and the importation from Belgium is more than six times the exportation to Belgium.

Then follows the generalization: "No single case can be brought forward in which English trade suffers to any appreciable extent by foreign products underselling in our own markets the same articles of English manufacture." We may safely accept Mr. Fawcett's word that this was true twenty-six years ago. But who is bold enough to repeat the assertion to-day? Any reader of this paper could adduce not a single case merely, but many examples of trades ruined in the way that Mr. Fawcett thought impossible. Or again, he remarked that the value of all the exports from the United States to England, excepting articles of food and raw produce, amounted to the "comparatively trifling" sum of £2,578,000 ($12,545,837). Last year they amounted to about £13,000,000 ($63,264,500).

Let not the purpose of these citations and corrections be misunderstood. It is certainly not to make a point against an economist and politician whose name must always be held in high esteem by Englishmen. It would be absurd to blame Mr. Fawcett, who dealt honestly with the conditions of his own time, for not foreseeing the conditions of our time. If he wrongly conceived that those conditions were immutable, when in fact they were changing, that is the commonest error of fallible human judgment. He had a theory. He tested the theory by the facts to

which he had access and found it justified. We in our turn test the theory by a new set of facts and find it wanting. What the citations do prove is this, at least: That Mr. Balfour is absolutely right when he declares that the conditions of trade have so altered during the past twenty years that a reconsideration of commercial policy is imperative. Indeed, that opinion must seem the merest common sense to anyone but a theoretical economist fighting for an ancient creed with the zeal of defiant orthodoxy.

In further illustration of the argument, a few examples are appended of British manufactures injured by foreign competition. The test applied is that suggested and employed by Mr. Fawcett, viz, a large excess of importation over exportation of the same class of manufactured goods. It can not, however, be admitted that this test discloses every case. It does not reveal the worst cases-those in which exportation is either entirely destroyed, or has become so small that it is not separately recorded by the Board of Trade, but included in a mixed class. For example, last year we imported £1,145,000 ($5,572,142) worth of house frames and other joinery. There is no similar entry in the export returns. If there was any exportation it is included under "Wood manufactures, unenumerated," of which the total value was only £376,901 ($1,834,184). The statistics are in every case taken from the Board of Trade returns for 1902. Where possible quantities, in other cases values, are given;

To avoid misapprehension, it may be well to define the purposes for which these returns are cited. They prove in the first place that the conditions of our manufacturing industries have vastly changed since Mr. Fawcett made the observation quoted above. In the second place, they disprove a favorite position of the school of economists that refuses to be taught by experience-the position that protected countries can not compete in foreign markets with free-trade countries because protection raises the cost of living and therefore the rate of wages.

MARSHAL HALSTEAD,

BIRMINGHAM, ENGLAND, July 22, 1903.

Consul.

CANADIAN IMPORTS AND EXPORTS FOR 1903.

I transmit herewith an article showing the exports and imports of Canada compiled from a report just issued from the department of customs at Ottawa, which should be of interest to the Department of Commerce and Labor.

ST. JOHN'S, QUEBEC, July 23, 1903.

CHARLES DEAL,

Consul.