§2. So far I have been considering what should be done by a particular State for the maintenance of the system of restraints imposed on civilised States generally by the rules of international duty; I now pass to consider the relations that any State should aim at establishing with alien communities and territories, within the limits fixed by strict international obligations. Here the most important questions are (I.) how far the government of a State should allow (a) free trade---that is, trade only hampered by taxes imposed for the purpose of raising revenue---between its subjects and foreigners; and (b) free immigration of aliens into its territory: and (II.) how far it should aim at expansion of territory, and absorption of the foreign communities inhabiting the territories annexed.
I. A full discussion of the burning question of Free Trade I consider more suitable to a treatise on political economy. Here I will only say that the economic argument for Free Trade---which is a simple application of the general argument for laisser faire, given in a previous chapter (X.) is now generally admitted as decisive, when the matter is considered from what I may call a cosmopolitan point of view, i.e. in relation to the interests of the aggregate of the States trading. This admission is most strikingly manifest in the countries in which the faith in the benefits of protection to native industry is most strongly held; since we do not find that in any of these countries protection to local industries from the competition of fellow-countrymen is seriously advocated as a measure conducive to the economic interests of the whole nation. For instance, in the United States, which imposes high protective duties on foreign imports, no political party---so far as I know---has ever proposed to interfere with the present unrestricted freedom of internal trade.
The question, however, is altered if we restrict our regard to the sectional interest of the group of persons inhabiting a particular portion of the whole region over which trade is carried on, supposing them to constitute an independent community. In the first place---as J. S. Mill has argued---it may in certain cases be economically gainful to a country to impose protective duties ``temporarily, in hopes of neutralising a foreign industry, in itself perfectly suitable to the circumstances of the country''. Doubtless such a duty---if it is both needed and effective---imposes a tax on the consumers of the native product protected; but it is possible that the cost thus incurred may be compensated to the community through the ultimate economic advantage of producing at home a commodity previously imported; although the initial outlay that would be required to establish the industry without protection could not be expected to be ultimately remunerative to any private capitalist who undertook it. For the difficulties of introducing an industry may be such that, when once overcome by the original introducers, they would no longer exist for others in at all an equal degree; so that, as soon as the new industry begins to be profitable, competition is likely to bring down prices so much, that though remunerative to the later competitors, they would not compensate the introducers of the industry for their initial outlay.
Secondly, for somewhat different reasons, it may possibly be sometimes expedient on the whole to resist by import duties an industrial change which unrestricted free trade would cause; because it is a matter of common experience---no less than a conclusion of general economic reasoning---that industrial improvements within a country may involve, as their natural consequence, a transfer of population and wealth from one part of the country to another. Suppose, for instance, that an improvement takes place in a certain manufacture in a district (A)---favoured by the special physical conditions of the district---which enables the manufacturers to cheapen their products so far that the manufacturers of similar wares in another district (B) cannot carry on their industry remuneratively. The natural result will be that the manufacture in question will gradually be abandoned in B; and probably some of the persons who would otherwise have been employed in it will migrate out of B, either to supply the growing demand for labour in A, or to seek some other employment which the improvement in question will indirectly provide; the remaining inhabitants of A will get the products in question cheaper, and thus the improvement will benefit all concerned. Let us now suppose that districts A and B are in different States, when the manufacturers of the former obtain this decisive victory in industrial competition. Then, if the products of A are freely admitted into B, either the transfer of population will still take place as above described, in which case the State containing A will gain in population and wealth at the expense of the State containing B; or, if it does not take place, owing to the dislike of the inhabitants of B to expatriation, it is conceivable that the disturbance to industry caused by the change, and the difficulty of finding profitable employment for the persons engaged in the extinguished industry, may be evils outweighing the gain to B from the change.
This last result, however, is very unlikely to occur in a large country, with a variety of employments and labour tolerably mobile: it is far more likely that the persons thrown out of employment can be, without much difficulty, employed somehow within the community in a manner more useful socially than if they were artificially protected in their old manufacture. And, as regards the case first mentioned---of temporary protection of naturally suitable industries---it would seem that the task of confining such protection within the limits within which it would be really advantageous to the community is too difficult and delicate to be successfully performed by actual governments. Such protection as actually applied is likely both to be too prolonged, and also to be used to foster weak industries that have no chance of living without artificial support; in short, any gain that may be derived from it in particular instances is likely to be outweighed by the indirect bad consequences of deviating from the broad and simple rule of free trade, and encouraging employers and labourers to look to State help instead of self-help in any difficulty caused by changes in industry and trade.
On the whole, therefore, I hold that---apart from the military considerations of which I shall presently speak---the commercial policy of modern States should keep aloof from all attempts to protect native industry, even if each State has regard exclusively to its own economic interests; not because it is impossible that such protection, if judiciously introduced and limited, might not be occasionally advantageous to the protecting country, but because a really judicious protection of native industry implies a wisdom and strength on the part of government which we cannot practically expect to obtain.
It does not follow that a rigid adhesion to the rule of imposing import duties for revenue only is always expedient in the case of a country surrounded---as England is now---by neighbours more or less protectionist. Retaliatory import duties are essentially different from protective duties in their primary aim and justification: although they may often have protective effects,---as, indeed, may be the case with duties imposed for revenue only. Such retaliatory duties, indeed, are not generally justifiable---as is often confusedly thought---on the ground that the ``one-sided free trade'' which will take place if they are not imposed will be in itself disadvantageous. The mere fact that one country (A) endeavours to exclude the imports of another country (B) by protective duties does not make it directly the interest of B to prevent its members from importing the products of A; since it gives us no reason for thinking that such importation will be carried on unless it is, under existing circumstances, the most economic mode of supplying the needs of the inhabitants of B, and unless the products imported can be paid directly or indirectly by the products of the importing country. The only valid argument for meeting the foreigner's protective duties by retaliatory duties on his products is that such retaliation may put the free trade country in a more favourable position for getting rid of the foreign protective duties by means of commercial treaties. How far this is a sufficient reason for imposing import duties for other than revenue purposes is not, I think, a question to which a general theoretical answer is possible.
So far I have taken only economic considerations into account, but these alone cannot be absolutely decisive in a political discussion of the question. We have to ask further whether the mutual dependence of nations, which tends to result from unrestricted free trade, is advantageous or the reverse. From a cosmopolitan point of view, the answer to this question seems to me altogether favourable to free trade. What has been contemptuously called the ``bagman's millennium'' of Cobden---the ideal of universal peace brought about by universal free trade---rests, I conceive, on a thoroughly rational basis. We may distinguish two ways in which free trade conduces to peace: (1) by interweaving the interests of industrial classes in different societies in so intimate and complex a way as to cause a strong aversion to the widespread disorganisation of industry that must result from war; and (2) by removing one special motive for war, which must be expected to influence the nations of Western Europe, even more strongly in the future than in the past, if they cling to their protective systems---the desire of obtaining access to new markets for their products and new supplies of the materials of manufacturing industry. Supposing general freedom of trade and immigration, there seems to be no reason why the process of national expansion---of which I shall presently speak---should not go on peacefully, without exciting national rivalries so keen and bitter as to cause war; since the colonies and conquests of any one nation would afford open markets---and partially open fields of employment---to all other nations.
On the other hand, assuming that war is to come, it must be admitted to be a disadvantage to a State to be dependent on other States for the necessaries of existence or warfare; and that unrestricted free trade may conceivably place it in this state of dependence. Whether it would be wise to interfere with the natural course of trade in order to prevent this dependence must depend partly on the danger of war, partly on the probability that even in case of war a sufficient amount of trade might be kept open to supply the most imperative needs of the people or the army.
Hitherto I have spoken only of import duties, which are practically the most important restrictions on international trade that a modern State is likely to be urged to impose. Turning to export duties, it is easy to show that it may be economically advantageous to a particular country to impose them, if this country controls the whole, or the chief, supply of a particular commodity for which there is a keen foreign demand. But monopolies of this kind are rare and precarious: and an export duty has a dangerous tendency to stimulate efforts to find substitutes for the wares artificially raised in price by it; and consequently to end by inflicting commercial loss on the country imposing it. If, however, the commodity thus monopolised is useful for warlike purposes, the export duty may have a special expediency as tending to increase the relative military strength of the State.[Back to:]