452. Relative decline in value and quality of English exports.—The questions agitating the minds of English business men and statesmen at the opening of the twentieth century rose from a consideration of the immediate past and of the future of English commerce. While the country had enjoyed a full measure of prosperity in recent years, and had witnessed a considerable increase in the quantity of its foreign trade, the quality of this trade awakened forebodings. The increase had been almost entirely confined to imports. Since 1872 the exports, though they had increased in bulk, had remained almost stationary in value; they had kept pace neither with the growth of population in England, nor with the growth in value of the exports of other countries. In the twenty years, 1881-1900, foreign countries enlarged their purchases (imports) by 11 per cent, while England augmented her sales to them (exports) by only 4 per cent; the British possessions enlarged their purchases by 17 per cent, while English sales to these dependencies showed an actual decrease of 1 per cent. The exports of which England has been most proud, as indicating her superior industrial strength—the textiles, and iron and steel—had either increased slowly or shown an actual decline. On the other hand, the exports which had increased in value were of a kind which the English viewed with disfavor. Many of them (apparel and slops, preserves, soap, furniture, etc.) were the product of cheap and unskilled workers and seemed to show a degradation of English labor. Others of them, potter’s clay and especially coal, were raw materials which the English would have preferred to use in their own industry at home.

453. Growth in exports but decline in relative share of trade.—The table of trade of the United Kingdom in the preceding chapter shows that the period of stagnation in the English export trade ended about 1900, and that there was a marked recovery between that date and 1914, even after allowance is made, as it should be, for the rise in the general level of prices, which magnifies the actual growth. Studying the course of trade during the generation comprised between the dates 1880-1909, the United Kingdom maintained or increased the value of its sales in all but two of the more important markets of the world; and the two countries to which British exports have declined, Russia and Roumania, would not by themselves form very serious exceptions. If, however, we select for study not the bare figures of export values, but the figures showing the percentage which British sales to any country form of that country’s total imports, the result is very different; for we are then measuring British progress not by the home standard but by the standard set by commercial competitors.

454. Illustration by the recent commerce of Japan.—The distinction is so important that it deserves illustration by a particular example, and we may choose for the purpose a country which during the recent period has furnished a rapidly growing market to the merchants of the world, namely, Japan.

The Japanese monetary unit, the yen, has declined considerably in value in the course of the period, and therefore no exact equivalent for it can be given; but even allowing for this decline the growth of British export trade to Japan appears satisfactory if the student regards merely the figures in the first column. If we apply, however, the comparative standard, and measure the British exports to Japan alongside those from other countries, the result is not the same.

455. Relative decline of the United Kingdom in the world’s markets.—Pursuing the comparative method, illustrated by the last preceding table, we find that the United Kingdom during the generation 1880-1909 showed an increased share of sales in only three of the minor markets of the world: Spain, Argentine Republic, Sweden. It almost held its own in France, Switzerland and Norway; but in most of the important markets of the world it lost ground seriously.

Even in its trade with the British dependencies the United Kingdom did not hold its own. Comparing the percentage of British exports to a dependency with its total imports, we find that the United Kingdom kept its place in only one of its colonial markets, Mauritius, a purchaser of relative insignificance, while foreign countries gained ground from it in British India, Australia, Canada and all the other important colonial markets.

456. Significance of the decline, and three possible explanations of it.—The relative decline in English exports did not imply that the country was approaching industrial bankruptcy, but it did mean, if long continued, the loss of industrial leadership; and the causes of this decline and remedies proposed to meet it are worthy of careful attention. The decline in exports may be attributed to one of three factors: (1) weakness in manufacturing the wares which form the staple of the export trade; (2) weakness in marketing these wares, when they have been made; (3) the adverse influence of protective tariffs in other countries.

457. (1) Competition in manufactures by low-grade labor.—Considering the first of these factors, we find English manufactures menaced by competition from two different directions: from the East (countries like India and Japan), and from the West (countries like Germany and the United States). Eastern competition threatened especially England’s staple manufacture, cotton. The English laborer was superior in every point to his Asiatic competitor, but not enough better to earn his higher wages when employed in the manufacture of coarse goods. England had built up a serious and growing competition by exporting machinery and sending out skilled managers and foremen to superintend it. During the past generation there had been an immense development in the textile manufactures of India and Japan, and these countries were able now not only to supply a large proportion of their own demand, but also to reach out into neutral markets like China.

458. Competition in manufactures of high-grade labor.—More serious, because capable of far greater extension, was the competition which the Englishman had begun to experience from advanced western peoples. This confined itself to no one branch of production, but spread over the whole broad field of manufactures. Americans and Germans had begun to supply not only the British dependencies but England herself with manufactured wares, in increasing measure. Some of the reasons suggested to explain their superiority were as follows: (1) Elementary education had been developed only recently in England, and had been hampered by sectarian questions; the average laborer in Germany and the United States was better equipped for modern methods of manufacture than was the Englishman. (2) It was asserted that trade unions had seriously detracted from the productiveness of English manufactures, by preventing the introduction of improved machinery and by limiting output. (3) Technical education was even more backward than general education; improved processes were introduced earlier and developed further in other countries, for lack of a class of trained manufacturers in England. (4) Finally, and probably the most important point of all, English manufactures appeared to suffer from the very fact that they had been long established. An industry was divided among many independent firms, each clinging resolutely to the plant, the processes and the methods which had won for it success in the past. Foreign countries learned all that the English had to teach, and applied the lessons in a new field in which they could build up great manufacturing units, with fresh machinery adapted to production on a large scale, and with a more flexible and more efficient organization. It was charged that the directing class in England had lost its original energy, and did not realize its serious responsibilities. An English expert who investigated the American cotton industry reported that there was a great difference in the energy, intelligence, and adventurousness of the managing class in the two countries, all to the advantage of the United States.

459. (2) Alleged weakness of the English mercantile organization.—In the preceding paragraph we have suggested various elements of weakness in English manufactures, which in greater or less degree were bound to affect the power lying behind the English export trade. We have now to consider another set of conditions, which are easily confused with the foregoing, but which are better kept separate. English manufacturers might be strong, and still they would have but a small export trade if they were not informed as to the wants of their customers, and did not study their customers’ tastes in supplying goods. This set of conditions, which may be termed mercantile, the business of the merchant rather than of the manufacturer, we may study under two heads: (a) finding out what is wanted; (b) selling a suitable ware when it has been made.

460. Insufficient knowledge of the needs of foreigners.—(a) The complaint was general that the scouts of British commerce, the commercial travelers, were too few in number and that they were ill prepared, especially in their knowledge of foreign languages. The English exporter shipped goods which he thought were suitable, without knowledge or regard of the desires of his customers. A business man who had had seven years’ experience with trade in the Empire said, “There is a universal complaint: ‘You English will not make your goods to suit our markets. You send your samples and tell us to take them or leave them—you don’t care which. If we ask you to alter things you either refuse to do it or else you demand prohibitive prices.’” In countries where English is not spoken (Persia, Sumatra, South America, etc.) the conditions were still worse. The Merchandise Marks Act, the origin of the familiar “Made in Germany,” was designed to protect the British colonist from having foreign-made goods palmed off on him as English, and thus help the English manufacturer; but it served only to advertise foreign manufactures, and led the colonists to import goods directly from foreign countries, instead of taking them through English hands.

461. Unwillingness to adopt foreign trade customs.—(b) Finally, when wares suited to sale in any market have been manufactured, they need to be sold, to maintain trade. English exporters were criticised for allowing their wares to be driven out of foreign markets by other wares, no better in themselves but for some reason more attractive to the customer. Here again the commercial traveler was at fault, but part of the blame lay on the exporter. Sales must be made in small lots and on long credit in some countries, if they are to be made at all; and the English had shown a disinclination to adapt themselves to such conditions which had enabled others (especially Germans) to take trade from them. When other things are nearly equal slight differences in packing and shipping may turn the scale. The English lost trade in Australia because they sent tacks in paper packages instead of in cardboard boxes, because they sent cartridges in lots of one hundred instead of lots of twenty-five. An interesting example of an opportunity well met occurs in the career of an Englishman who left the field of manufacture to become a leading statesman—Joseph Chamberlain. He found that the trade with France in his product, wood-screws, was small; he introduced the metric system of measurement, put up the screws in packages of the size usual in France and wrapped in blue paper familiar to the French customer, and developed a large export trade. If there had been more men like Chamberlain in manufactures in England there would have been less need of the protective policy which he advocated as a remedy for the troubles of English business.

462. Tendency to remedy these faults.—There is no doubt that there was a good basis for these charges against the British manufacturer and merchant, though some of them doubtless were exaggerated, and it is impossible to apportion exactly the weight that should be allowed to any one of them. The crisis of the World War was needed to sweep away the customs and traditions of a long past. The stimulus of a struggle for national existence, with the insistent demand for the highest attainable efficiency, effected reforms reaching deeper and further than those of a whole previous generation. Even before 1914, however, many men in responsible positions in English politics and business recognized the need of mending the pace if England was to keep abreast of competitors in industry and commerce. Interest in elementary and technical education quickened; inquiry was directed to the means by which foreign rivals were getting ahead; the government, associations and individuals worked together or independently to further efficiency.

A parliamentary committee which in the course of the World War made a careful study of the prospects of British industry and trade reached the following conclusions as regards conditions in the previous decade. England had taken but a small part in the development of some modern industries, particularly the chemical and electrical; the country had made comparatively little progress in the iron and steel industry, in which it was entirely overshadowed by Germany and the United States; but it had shown wholesome vigor and capacity for growth in some great manufactures, such as the textiles, ship-building and some branches of machine-making. British trade abroad was found to suffer from the competition of foreigners who were found, in some cases at least, to be following methods of organization and marketing that were distinctly more efficient than those which the British pursued.

463. (3) Adverse influence of foreign tariffs; proposals to revise the English policy of free trade.—Under conditions of adversity there is always an inclination to lay the blame, rightly or wrongly, on others. A considerable party in England asserted that the reasons for the recent decline were political rather than economic, resulting from the protective tariffs of other states; and this party asserted that a change in the tariff policy of England and of the colonies was needed to rescue British commerce.

There can be no question of the main fact, that protective tariffs had increased considerably during the last quarter of the century. It is estimated that the principal English exports were burdened with duties equivalent to 10 to 30 per cent ad valorem in most states, but amounting to far more than that in some cases (72 per cent in United States, 130 per cent in Russia). There can be no question that England suffered from these restrictions; every commercial state suffers from them. It is, however, open to grave doubt whether England could help herself by a change in policy; and the question of what change, if any, ought to be made, remained unsettled.

464. Demand for customs duties as a means of defense and retaliation.—One group of “tariff reformers” clung to the ideal of free trade, and favored its maintenance as the policy of the country in general. It would, however, permit deviations from it in particular cases. The adherents of this view asserted that England stripped herself of the armor and the weapons of commercial war when she adopted complete free trade. She could make no effective protest when other nations raised tariffs against her, marked perhaps by offensive discriminations; she must suffer everything because she was forbidden to retaliate. The adherents of this view laid particular stress on the practice of “dumping,” as it is called. The manufacturers of protected nations, themselves, secure from England’s competition, market their surplus output in England at prices which may not cover the costs, much less the profits, of production. It is cheaper to do this than to break prices in the protected market at home; it kills the English industries and enables foreign manufacturers in the long run to raise prices to a profitable level in the English market. For retaliation against protective countries, and for defense against “dumping,” this school demanded that the English government be armed with the power to impose heavy duties, to be temporary in character and to be removed as soon as their immediate object has been accomplished. Such a policy has been adopted in Canada.

465. Proposal of an imperial customs union.—Another school of tariff reformers, led by Joseph Chamberlain, accepted in general the views just indicated, but laid particular stress on another possibility in shaping English commercial policy. It would make the whole great group of English dependencies not only a political unit but a commercial unit as well, bound together in an imperial customs union (Zollverein), so that trade would flow from place to place within the Empire instead of crossing its frontier. It is not possible here to discuss the various aspects of this proposal, of which some of the most important are political rather than commercial in character. The attractiveness of the plan is at once apparent; it promises to assure to England a market for her manufactures in the colonies, and to the colonies a protected market for their raw materials in England. The practical weakness of the plan is, however, equally apparent; no law would be necessary to secure this result if the various parts of the Empire found it advantageous to trade with each other, and the mere suggestion that a law is necessary shows that trade would be cramped and the interests of individuals hurt by such an arrangement.

466. Obstacles to a customs union.—The course of trade has, in fact, taken lines more and more opposed to the scheme of a customs union. During the first part of the century, when England was still protectionist, and when the mother country made the laws for its dependencies, the plan could be carried out with comparatively little friction; the colonies were engaged chiefly in the production of raw materials, and were glad to exchange these for English manufactures. Since about 1850, however, both the political and the economic organization of the Empire have changed. The self-governing colonies have received the right to make their own laws, and have used it to raise protective tariffs, against England as well as against other countries. Behind the barriers of the tariff they have developed a considerable manufacturing industry. They were now unwilling, therefore, to open wide their markets to English manufacturers; and showed an increasing tendency to buy what manufactures they did import from other countries than England. They were unable, on the other hand, to supply in full the English demand for raw materials; and any measure designed to restrict supplies of raw materials to some source inside the British Empire threatened injury to producer and consumer at home. The self-governing colonies gave evidence of the strength of their political affection by enacting differential tariffs favoring the British producer. Canada began the practice in 1894, and later enlarged the concession until it amounted to a remission of one-third of the regular customs duty. New Zealand, South Africa and Australia adopted after 1900 the same principle, making their concessions less extensive. The differential advantage thus offered the English exporter must evidently have had an effect on the course of trade. The new policy was keenly resented in Germany, where it was pictured as an abuse by England of her political ascendancy to deprive other countries of the benefit that should go to superior economic efficiency. On the other hand the policy seems to have been less important than ordinary economic factors in determining the flow of goods, and certainly had no decisive influence in changing the customary channels of trade.

467. Relative progress of England and other countries just before the World War.—Just before the outbreak of the World War England appeared to have made a new start in the efforts to keep her place among commercial countries. It is interesting to compare the advance that she had made with the progress of Germany and of the United States.

The figures, it should be noted, give not the total commerce of any country, but the gain which each country had made in the period in question. The figures do not take account of the difference in population in the three countries; they treat the three different countries as units. The reader in studying them cannot fail to be impressed by the closeness in the struggle for commercial leadership, and will be better prepared to understand how precarious was the situation if in one of the countries the view was dominant that commercial interests were group interests, to be furthered by any assistance which the state could render, if necessary by the sword.

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