at an adequate level. I do not think we bankers ought to be called upon alone to assume that responsibility, but we should co-operate with the Bank of England towards that end. But even the Bank of England has, at present, no such specific duty imposed upon it, although it is the Bank of the Government, endowed with special privileges. But, as I said nearly three years ago, "the time cannot be far distant when a revision of Peel's Act will become necessary," and it implies no disrespect to the framers of that Act which, on the whole, has worked so well, or to those who have administered it so efficiently and conscientiously, to maintain that new conditions have arisen, to which our system should be adapted.

PREFERENTIAL TREATMENT: PROTECTION.

From the many attacks which, somewhat unexpectedly, have been directed against our whole commercial system during the last few months, three distinct policies have emerged, viz.: (1) Preferential treatment; (2) Retaliation; (3) Protection. To go into these fully in this paper is not my intention, and I am anxious to avoid anything like political controversy; yet there are various points which have material bearing on the subject-matter of this paper. It appears to me that in considering the question we must keep certain recognised facts, facts admitted by all sides, constantly before us. No matter what our opinions may be of the results of the policy decided upon sixty years ago, we have to deal with present conditions; we have a large and growing population which is, and must be, dependent on a large proportion of its foodsupplies and the raw materials for its manufactures, having to be imported from abroad. A comparison with a country like, say, the United States, which produces both its food and raw materials at home, must be therefore entirely misleading; the problems to be solved are of a different nature altogether. We are compelled to import in order to find for our population both subsistence and employment; to pay for such

imports we have to render services to foreign countries, either by sending them our own goods, or by finding them capital or means of transport, or in such other ways as our position as the central clearing house may induce them to require work done for them here.

As countries advance in civilisation, they advance gradually from the purely agricultural to the manufacturing and commercial stage of development; we cannot expect countries like Germany or the United States to allow their own natural resources to remain undeveloped. Competition was therefore bound to arise when, after the Civil War in the United States and the Franco-German War, these countries had consolidated their national existence. That competition we have to meet, not only in the countries mentioned, but in all countries where we meet them on equal terms; to meet such competition we must be able to produce more cheaply and a better article than others do, and we must safeguard our position as the world's bankers and carriers, as well as the position of our manufacturers. These seem the aims towards which we must work if we wish to keep our population fully employed and raise their standard of living. Whether any of the above-mentioned policies, the three new policies, or a system of trade with the fewest possible restrictions, is best calculated to bring about that end is the great problem that has to be solved.

The three policies are often mentioned together as if they could be carried on simultaneously; in reality they appear to be inconsistent with, in fact antagonistic to, one another. The duties to be imposed which are best adapted to a preferential tariff are not suitable to retaliation; and Preferential Treatment and Protection cannot, in the end, work together. Our imports from the Colonies being mainly either raw materials which it is not suggested should be subject to duties, or foodstuffs, preferential treatment must mean a tax on food, and food must become dearer, for this is the very essence of the scheme; if it did not, the Colonies could not derive any possible advantage from it. On the first introduction of such

a scheme, the home producer would unquestionably benefit by the rise in price, until the Colonies are enabled to increase their production through the acquired stimulus, when they would begin to gain, and if the scheme is successful in bringing about what is claimed for it, viz., the diversion of trade now carried on with foreign countries to our Colonies, then the home producer must again lose what the latter gain; in fact, in the end he will be worse off, because all the incidental expenditure, and the plant and machinery acquired under the temporary stimulus of higher prices, will be wasted when colonial imports attain such proportions as will secure the Colonies a benefit. Another consideration is suggested, viz., that the foreign producer will pay the duty that may be imposed: this is a consideration which, at this late stage of the controversy, I need only mention in order to dismiss. Men of business know only too well how much any charge, however slight, must ultimately raise the cost of the article to the consumer.

But what would follow from the carrying out of such a scheme is, that whereas we have now competition between a number of various sources of supply which keeps prices down, the inevitable consequence of a preferential tariff on foodstuffs would be the absence of all competition, our being restricted to one market only, and it is to be expected that prices would consequently rise to an extent greater than the duty to be imposed. What the dangers would be if our foodsupplies were to be derived from one source only must be apparent to all business men. It is manifest how such a market would lend itself to manipulation, and, worse still, what would happen if bad seasons should occur. We have an object-lesson before us now in the shortage of the cotton crop in the United States, which may have a most serious influence on our cotton industries. What then would happen if a shortage in the crops were to occur in Canada? We could not then rapidly fall back on the various foreign markets which now supply us, for all the machinery of trade, shipping,

and other matters, are easily destroyed, but are not quickly regained. What would happen in time of war if we had only one colonial source of supply? These are matters on which our naval experts will also have a word to say, quite apart from the question of price.

The more you restrict your markets, the more rapid must be the fluctuation in price, but, in any case, it is an essential part of the scheme that the price of food must rise; if our working population is to be enabled to maintain their standard of living, wages must rise; although I am more than doubtful whether eventually this will happen. If wages rise the cost of all our productions must rise, especially if, as is suggested, part of the scheme is taxation of foreign manufactures, which will further raise their price and increase the cost of living to our wage-earners and to the whole of our population. If then the cost of our manufactures is increased, our exports to neutral markets must decrease, and our Colonies would derive no benefit from the scheme because they would have to pay more for our manufactures than at present; their own protectionist system would only be further stimulated to the further exclusion of our goods; thus our exports to colonial markets would also not be likely to increase; I cannot therefore perceive any advantage from the scheme, either for the Colonies or for ourselves, but only greater cost of living and fewer chances of employment. Is not the best we can do for the Colonies, the maintenance of our pre-eminent position as the centre of the world's commerce, and, as the clearing house of the world, of our ability to supply them with cheap capital, cheap manufactures, rapid and economical means of communication? To be of benefit to them it is essential we should retain our own strength; which consists in carrying on a world-wide trade with the fewest possible restrictions, and our efforts must be mainly directed, while maintaining our ports open, to do our utmost to increase our exports. Can we afford to risk our trade with foreign countries, which still amounts to 75 per cent. of the whole? Can we afford to restrict our trade within

narrower channels, having regard to our great shipping industry, which carries so much of the trade of the world? Our shipping would indeed be doubly hit; through taxes which would raise the cost of living the cost of shipbuilding would be materially increased, and, owing to protective tariffs, there would be fewer goods to carry. It must be remembered that foreign countries are still our best customers, and I found it to be a surprise to many that, according to the figures of the Blue Book, our exports of manufactures to Germany last year still exceeded our imports from that country by £1,000,000.

Are the Colonies willing, are they in a position to give us as wide a market as we have now, and as we can hope to attain, if only a proper effort be made, in the many markets that are open to us on equal terms with other nations? I can only refer incidentally to the difficulties of putting the preferential scheme into operation-American corn is shipped vid Canada during certain seasons of the year, and Canadian corn is shipped through the United States when Canadian ports are closed-and also to the loss of freedom it would cause in making commercial treaties, both to the Colonies themselves and to the United Kingdom, as well as to the difficulty in differentiating between the various Colonies and treating them all fairly. Is it not possible that the Imperial tie would be loosened rather than strengthened through a constant bargaining over duties and tariffs? Then the effect on the British exchequer will also have to be considered, for the effect on the British taxpayer must be greater than the gain to the exchequer, and the more effective the scheme becomes, the smaller the gain to the exchequer.

Our own agricultural interest at home is one with which we must all feel the deepest sympathy, both from the point of view of the economic loss caused by land being absolutely unproductive, and of the population being driven from the land into the towns; but the latter is a symptom which occurs under modern conditions, even in the most protected countries