war, or which are disorganized while passing from war work to peace work, or which have been created or encouraged owing to circumstances arising out of the war-the restrictions in such cases will continue for a period not extending beyond September 1 next without a further review of the whole situation.

The policy of the time limit is quite clear. These are war restrictions; this policy is to deal with the transitional stage. * * * The Board of Trade is to take steps to consider what shall be done to maintain in this country industries which it is the policy of the Government to foster, to consider definitely in detail the steps which are to be taken, and to report to the Government. That policy need not be limited to any existing restriction. * * * The President of the Board of Trade has now decided that the Advisory Council under Lord Emmott, which was set up some time ago to advise him on import and export restrictions, should be formed into a sort of commission and be reinforced by the addition of representatives of all the general interests that require to be consulted-manufacturers, retailers, workmen, and the inevitable consumer. * * * The duties of this commission will be to settle the machinery and procedure. It is to go over all the imports now restricted, and the other imports as well, and recommend a percentage of the normal which is to be admitted. We hope in that way very shortly to be able to produce a list of all the restrictions that are to remain upon imports into this country. The Board of Trade will receive the report of the commission, which will, we hope, sit continuously, and the Government will then decide upon the matter.

The original consultative council on import and export restrictions consisted of 12 members, under the chairmanship of Lord Emmott. It was now proposed to increase the number by at least a score, and the chairman resigned in protest when it appeared to him that the work of the council was to be largely done through subcommittees dominated by representatives of the affected industries. Five subcommittees were created to deal with (1) textiles and apparel, (2) glass and leather, (3) motor cars and manufactures of wood, (4) machinery and hardware, and (5) fancy goods and miscellaneous manufactures. The reorganized council, under a new chairman, held its first meeting on March 25, 1919,1 and the results of its deliberations as finally approved were currently announced in the Board of Trade Journal. It was discontinued after it had completed the revision of the list of prohibited imports.

A further announcement of the Government's attitude in the matter of import restrictions was made in the House of Commons on June 24, 1919, by Sir Auckland Geddes, President of the Board of Trade (the following account of Sir Auckland's address is in the form of an indirect quotation):

It was necessary to realize, he said, that the country stood, as it were, between two worlds-the almost bankrupt world of Europe and the very prosperous and wealthy world of America. It was really no good imagining that a tariff system was the best way to deal with our difficulty. It was absolutely impossible to think that the trade policy of this country was going to be solved along any of the old lines, which were so much discussed, without some change. There was no question whatever that this whole question of British trade policy was urgent. * But until the Government was in a position really to say what the post-war position was, it would be the height of folly to announce a policy which would be labeled permanent. It was much better for the country to realize that we were working on the traditional lines because we were passing through a transitional period.

* **

* *

*

The Government had adopted, the speaker said, a permanent definite line of policy during the transitional period-a policy known to every member of the

1 Emmott, Import restrictions, Ways and Means, Aug. 9, 1919: II, 129-130. Bureau of Foreign and Domestic Commerce, Supplement to British control of imports and exports, Tariff Séries No. 39A (May, 1919).

House and to every trader in the country; a policy avowedly rather crude, because there was no time to define and recreate the machine. Let them think for a moment what our position would have been if we had not had a policy which included import restrictions. By this time there would have been sent across the Atlantic from America to these shores a great flow of articles which we did not really need. In the present state of public opinion in this country, when nearly everyone was spending as if there were no bottom to his purse, we should have had motor cars and every sort of thing America could have sent (and was only too anxious to send), pouring into our markets at a time when our manufacturers could not produce similar articles. The movement of these unessential articles to this country would have pushed the American exchange to some level which it was difficult to imagine, and with that the price of our food would have risen to a level which it was difficult to imagine. The price of our cotton, the raw cotton for Lancashire, would have been he knew not what.

The policy, therefore, was designed to meet the transitional period. It was definitely announced in the House of Commons on the 10th of March that that policy would be reconsidered and reviewed before the 1st of September. It had never ceased to be under reconsideration and review. It was most anxiously watched, and the speaker said, without hesitation, that the trade policy followed by the Government, in spite of these defects, had been successful. There was no possibility (yet he hoped there would be soon) of announcing the definite trade policy of the country or the date when that policy would come into operation. It would have been extraordinarily unwise for the Government to have announced a permanent policy, because obviously the permanent policy would not be the same as the transitional policy, and greater disturbance on the part of manufacturers would be caused than by having only one system of control by the Government to work upon. To announce a permanent policy without announcing the date on which that policy would come into operation would be the height of folly. It was only on this day that they had learned definitely that peace was to be signed by Germany. Until the peace was signed we might be faced at any moment by a completely different situation in Germany, owing to which there might have to be a wholesale reimposition of control which had been removed. Would not that, as happened during the war owing to sudden change forced upon the Government by the military situation, have hampered them, and caused unnecessary loss?

The Government had worked out in full detail the permanent policy which it was believed would best meet the situation that might be expected when peace was finally concluded. There was no delay. The whole thing, covering every line of trade, was in type ready as a plan against the situation which would arise; and he believed that the best thing the Government could do was to keep the lock very tight upon that box until such time as it would be right and proper in the interests of the country to bring out its contents, and that time would come just so soon as they could see with reasonable clearness the approach of conditions which they might regard as fairly approximating to the new post-war normal.

Authority for the imposition of import restrictions by proclamation is based upon a legal foundation which has been questioned, but thus far without resort to the courts. This is clause 43 of the customs consolidation act of 1876, which declares that "the importation of arms, ammunition, gunpowder, or any other goods, may be prohibited by proclamation or order in council." Thus the Government claims to extend a provision, relating to a particular class of dangerous imports, to other classes which it may wish to limit or exclude.

This is not the place for a discussion of the ejusdem generis rule of legal construction, which has been cited in opposition to the Government's interpretation, but the question is of great importance, when considered in connection with the attitude of certain branches of industry which fear a resumption of open competition.1

1 On December 17, 1919, a decision against the Government was handed down by Justice Sankey, of the King's Bench Division of the High Court of Justice, and on the following day Sir Auckland Geddes announced in the House of Commons that, pending an appeal, the Government had suspended its policy of import restriction.

66

KEY INDUSTRIES.

The restrictions above considered have been imposed upon the theory that we are still at war, and our industries are still disturbed by war," to quote from the President of the Board of Trade. But many industries are concerned with the production of goods which are essential to the military strength of the State. Much has been heard of these "key or pivotal industries" during the war, and it is considered of great importance that hereafter Great Britain should be independent of sources outside the Empire for commodities of this essential character. One difficulty, of course, lies in the matter of definition; another in the inadequate information available as to the sources from which British importers (who have been in the habit of maintaining their own counsel) have derived such commodities.

The situation is further complicated by the fact that there is no means of knowing what industries will be essential in any future war. Already the articles considered essential to military use comprise the majority of articles known to commerce, as is evident from the contraband lists in force at the end of the war. The number is likely to increase rather than diminish, so the idea seems incapable of realization, except with respect to certain selected commodities. The list of such commodities, as presented by the committee on commercial and industrial policy, was as follows: (1) Synthetic dyes, (2) spelter, (3) tungsten, (4) magnetos, (5) optical and chemical glass, (6) hosiery needles, (7) thorium nitrate, (8) limit and screw gauges, and (9) certain drugs.

Three alternative methods were suggested by the committeenamely, subsidies, import restrictions or prohibitions, or tariff protection-and Government production or manufacture was proposed in case of the failure of the policy of encouragement.

In the case of the dye industry the Government is disposed to further it both by direct subsidy and by restricting importations. This plan was announced in a memorandum by the Board or Trade in November, 1918. Here it was proposed to set up a Trade and Licensing Committee to determine what colors and intermediates should be licensed for importation and in what quantities, and such a committee was appointed in January, 1919.

On June 19, 1919, the Board of Trade announced the establishment of a central importing agency, through which alone it is to be possible to import dyestuffs, at a commission of 1 per cent. This agency is under the direct control of the Trade and Licensing Com

mittee.

By a proclamation dated June 25, 1919, the importation of the following commodities was prohibited, except as licensed by the Board of Trade: (1) Chemicals of all descriptions; (2) electrical goods and apparatus, including electrical plant and machinery of all kinds and insulating materials of all descriptions; (3) scientific, mathematical, and optical instruments; and (4) tungsten powder and ferrotungsten.

In his speech of August 18, 1919, outlining the Government's trade policy to be inaugurated after September 1, the Prime Minister declared that "unstable key industries" were to be shielded by the Board of Trade, which would have power to prohibit the importation of competing goods except under license, and that to prevent

excessive imports a fee would be charged for the license. As to the matter of definition he suggested four tests:

Whether the industry was revealed to be essential for war or the maintenance of the country during the war;

Whether, during the war, it was discovered that that industry had been so neglected that there was an inadequate supply of goods produced in the industry for the purpose of equipping the country for the essential task of war;

Whether it was found necesary for the Government to take special steps to promote and foster that industry during the war; and

Whether, if that special Government support were withdrawn, that industry could maintain itself at the level of production which war has shown to be essential to the national life.

These tests, however, are so inclusive in their terms as to defeat their ostensible purpose, for they fail to provide a definition that can be applied with certainty. Nor is the matter clarified by the illustrations submitted, namely, synthetic dyes and optical glasses and lenses, for in those cases there has been no uncertainty. The difficulty lies in the marginal cases, and in the discretion which must be exercised in such cases by the Board of Trade in administering the licensing system.

In conformity with the plan thus announced the Board of Trade, on August 22, issued a long list of articles which are the product of "unstable key industries."

"IMPORTANT" INDUSTRIES.

*

The demand for protection is not limited to key industries; it extends to industries which are "important for the maintenance of the industrial position of the United Kingdom," to quote the terms used by the committee on commercial and industrial policy. In the case of such industries this committee advised: "Some Government assistance should be given * * where such assistance is proved to be necessary because of the inability of the industries to maintain or develop themselves by reason of undue foreign competition, inadequate supplies of raw materials, or any other causes." The industries to be thus favored are admitted to be numerous, “including for example, the heavy iron and steel trades, and numerous branches of the manufacture of iron and steel goods; the engineering trades, including electrical and motor engineering; the production of a considerable number of nonferrous metals and ferroalloys; shipbuilding; many branches of the chemical trades; the textile trades almost as a whole; the manufacture of various classes of rubber goods, especially tires; and the leather industries."

* * *

For industries of this character the committee recommended that protection through customs duties should be granted, but only after a searching investigation in each case; but as has been already shown, the Government has not seen fit to adopt the proposal, preferring to foster essential and important industries by means of a proclamation or order restricting importation. This first became apparent in connection with the paper industry.

In anticipation of the removal of control on May 1, the Board of Trade, on April 5, 1919, appointed a committee on the paper-making industry, which presented a restrictive program on April 28. This

was put in force through an order of the Board of Trade under date of April 30, 1919.

It would appear from the suggested definition of "key industries " made by Mr. Lloyd George in his speech of August 18, 1919, and discussed in the preceding section, that such industries as are considered under this head may be officially recognized as of a pivotal character. At all events they have not been singled out for separate

treatment.

A general reference was made to the unfavorable state of American exchange, but it was declared that the rate then in force gave to home industry a protection that was equivalent to a tariff of 15 per cent on American manufactured goods, and that this protection was increased by high shipping rates. But as it was said in another part of the speech that American imports were almost exclusively food and raw materials, the apparent advantage is negatived by the higher cost of raw material, the demand for higher wages to meet increased cost of food, and the reduction in the margin available for the purchase of home manufactures in a country where the cost of living is at an abnormally high level.

ANTIDUMPING MOVEMENT.

66

In the course of the recent discussion of British trade policy much has been said of that variety of unfair competition known as dumping;" but here again there is a need for an adequate definition, and this was not supplied in the policy declaration speech of the Premier on August 18, 1919. Instead, we have this statement: "I am giving now, not a legal definition, but only my view of what would be a dumping operation. Dumping is the exporting to this country of goods from a foreign land under the cost-beneath the price at which they are sold in their own country." And we are told that "the Government has decided to submit to Parliament proposals which will effectively deal with dumping in the sense in which I have defined it." That the framing of such a measure will be attended with difficulties is apparent. These difficulties have been well presented in Ways and Means, a British economic review of good repute:

Dumping is a term capable of various interpretations. It has often been defined to mean the sale in one country of goods below the cost-of-production price in the country of origin. This definition, however, errs in regarding the cost-of-production price as a fixed quantity irrespective of the amount produced. Every competent economist knows that very few commodities are produced under conditions in which the cost of each unit is absolutely identical. Most goods which enter largely into the trade of the modern world are produced under conditions of decreasing cost—that is to say, the cost of production of successive units progressively declines as additional supplies are put on the market. Now, apply this to the definition of dumping quoted above. In the dumping country the average cost of production will vary according to the amount of the commodity to be produced. If it is assured of a large and secure foreign market it will produce in large quantities. If, either because conditions are more favorable for the manufacture of the commodity in foreign countries or because they refuse to accept the products of the dumping country, that country's manufacturers are restricted to their home market, then their output will be smaller and the cost of production higher-how much higher will depend on the rigor with which other countries shut out the commodity in question. Now, supposing that the Government decides to exclude all foreign goods sold here at less than their cost of production in their country of origin, which cost of production are they going to take? Is it the cost of production before or after the antidumping law comes into operation? The two costs may well be very different.