# The Empire and the century/Imperial Trade

II—MECHANISM OF EMPIRE

By HENRY BIRCHENOUGH

It is my wish in this article to present, not a commercial conception of Empire, but an Imperial conception of trade, by pointing out some of the facts which show the great part trade is playing in building up and binding together, through the steady growth of common commercial interests, the scattered States of the King's dominions.

There used to be, and perhaps still are, economists and politicians who maintain that trade does not follow the flag, but the price-list. It is possible that in a world of economic automata everyone would resign himself cheerfully to buy only in the cheapest and to sell only in the dearest markets. The British Empire is not, however, composed of economic automata, but of men and women who are influenced in all their business transactions by circumstances and conditions far more numerous and complicated than can be taken into account in any price-list. What strikes one most in studying Imperial trade is that all through its varied activities, its thousand changing forms, it reflects the mind and the character of our race. And if it mirrors Anglo-Saxon human nature, its movements are likely to be as sensitive to prejudice and to sentiment as they are to calculation. Experience confirms this supposition, for the vitality and progressiveness of our trade are most clearly indicated in those Colonies and possessions which are inhabited by people of our own race, whose habits and prejudices are very like ours, among whom fashions follow the same course, and popular demand is much the same as at home.

Why should commerce be regarded as an exceptional branch of human activity, standing, as it were, in a watertight compartment apart from the rest of life? It is affected, and to a large extent guided, by the same motives, considerations, and feelings as all other forms of human activity. It would, therefore, be a matter for surprise if, when we were dealing with Imperial questions, we did not find Imperial trade show signs of exactly the same movements of opinion and sentiment which we see at work in Imperial politics. There can be little doubt that the deep-lying causes which are bringing the Empire into closer political relations are also slowly driving it in the direction of closer commercial relations. And the reason is not difficult to find. The changes of the last twenty years in the commercial policy of our European neighbours and their new colonial activities have modified our position as Empire-builders and as traders in a closely parallel manner. In each case rivals have come into a field which was almost exclusively our own. In each case they have deprived us of our monopoly, but they have not, so far, succeeded in ousting us from our predominant position. It is probably the consciousness of these facts, the sense that we are face to face with competition, political and commercial, more severe, more far-reaching, more dangerous, than at any previous period, that is impelling us to take more careful stock of our own Empire, its commercial as well as its naval and military possibilities, its commercial as well as its naval and military future.

I am not particularly concerned to prove here how far trade follows or accompanies the flag, but I do wish to show what Imperial trade actually is, and what it is doing, or may be expected to do, for the Empire. In dealing with this question it is important to arrive at a larger conception of Imperial trade than can be conveyed by any statement of figures, however elaborate and varied such a statement may be. Statistics have their proper use. They should constitute the solid groundwork of our conceptions; they should control and set a definite limit to the play of our imagination. But what it is important to realize and to exhibit clearly, are not the figures which measure trade, but the living, life-giving thing itself, which with a thousand threads knits the Empire together in a solidarity of mutual interests and obligations that an alert and wise policy ought to make indestructible.

It is necessary at the outset to give a few figures in order to convey a definite notion of the magnitude of the external trade of the Empire. In the year 1908—the last for which complete figures are available—-the combined imports and exports of the British Empire were valued at £1,520,000,000. These figures, of course, include the trade of the different States of the Empire with each other as well as with foreign countries. The following table shows approximately the relative contributions to this enormous total:

 £ The United Kingdom 903,000,000 or 59 per cent ${\displaystyle \scriptstyle {\left.{\begin{matrix}\ \\\\\ \\\ \\\ \\\ \\\ \ \end{matrix}}\right\}\,}}$ Canada and Newfoundland 100,000,000 „  6½  „ The Commonwealth of Australia (excluding inter-state trade) 86,000,000 „  5½  „ 78½ New Zealand 28,000,000 „  2  „ South Africa 88,000,000 „  5  „ India, Straits Settlements, and Ceylon 293,000,000 „ 19½  „ ${\displaystyle \scriptstyle {\left.{\begin{matrix}\ \\\\\ \\\ \ \end{matrix}}\right\}\,}}$ West Indies 12,000,000 „  1  „ 21½ Miscellaneous Colonies 14,000,000 „  1  „

Let us examine first of all that portion of our Imperial trade which appeals particularly to us at home, the trade which Great Britain carries on with her Colonies and dependencies.

It is certain that this comparatively steady growth of business with markets within the Empire must have added enormously to the prosperity of the manufacturing population of Great Britain during the last half-century. Looking now at the same imports and exports from the colonial side—

Canada sends 56 per cent. of her total exports to the Mother Country, and receives 25 per cent. of her imports from the Mother Country; that is to say, she does fully 40 per cent. of her total external trade with Great Britain.

Australia sends 50 per cent. of her total exports home, and receives 50 per cent. of her total imports from home; she therefore does half her total external trade with Great Britain.

New Zealand sends 75 per cent. of her exports home, and takes 60 per cent. of her imports from home, so that just two-thirds of her external trade is done with the Mother Country.

South Africa sends 80 per cent, of her exports home, and takes more than 60 per cent, of her imports from home; 70 per cent, of her total trade, therefore, comes to Great Britain.

India and the Straits Settlements send 25 per cent, of their exports home, and receive about 50 per cent of their imports from home.

The Miscellaneous Colonies do about half their total external trade with the Mother Country.

Taking all the Colonies and possessions together, rather less than half of their total external trade falls directly to the share of Great Britain.

But the Mother Country's share is far from exhausting Imperial trade, for the various States and groups of the Empire carry on a great and increasing trade with each other, and this trade is bringing about an interdependence between different parts of the Empire, which is full of promise and hope for the future. In 1894 intercolonial trade only amounted to 15 per cent, of the total imports and exports of the Colonies and possessions; ten years later, in 1908, it had risen to 20 per cent. Instead of the Mother Country supplying the whole Empire with produce and manufactured goods, one part of the Empire is now directly supplying another. Colony after Colony, with the increase of its population and the development of its resources, is entering into the great industrial competition for the world's trade.

Canada exports largely to Newfoundland, to Australia, to South Africa, to the West Indies, and to British Guiana, and receives imports from British India, Newfoundland, the West Indies, and British Guiana.

Australia and New Zealand every year send more food-stuffs and raw materials to India, Ceylon, South Africa, and Fiji, and receive imports from India, Ceylon, and Hong Kong.

British India exports to the Straits Settlements, Hong Kong, Mauritius, Australia, South Africa, Canada, East Africa, Aden, and takes imports from most of them in return.

Already Australia and New Zealand supply the South African demand for frozen meat and butter, and in normal seasons Australia can secure the market for wheat and flour. At no distant date we may look forward to her providing the Eastern possessions of the Empire with most of the commodities they now buy from the foreigner.

There are, moreover, numerous cases where Colonies have wrested back from foreign countries trade that had been captured from Great Britain and temporarily lost to the Empire. In fact, we begin to see the natural and industrial resources of the Colonies contribute to the defence of the trade of the Empire exactly in the manner we all desire that their financial resources should, in course of time, contribute to its naval defence.

In order to add a touch of human interest to these lifeless figures and percentages, let us inquire for a moment of what Imperial exports and imports consist.

Great Britain circulates through the Empire everything which new countries require for their development and protection, and which people in new countries need for their maintenance and comfort—arms and ammunition, machinery and tools of all kinds, railway material telegraph and electrical appliances, steel-work for construction, bridges, water and gas pipes, ready-made clothing, cottons, woollens, soap and candles, carriages and saddlery, books and pictures, glass and china, household furniture, tinned and preserved provisions in infinite variety, patent medicines, stationery and musical instruments—in fact, all the thousand necessaries and luxuries of civilized life.

In return the Colonies send us all the 'wealth of Ormuz and of Ind,' as well as food-stuffs and raw material for our manufactures.

Canada and Newfoundland send us meat, com, flour, cheese, bacon and hams, salt-fish, eggs, apples, furs and skins, leather, and timber.

Australia and New Zealand send us wool, gold, corn, wine, butter, skins, mutton, timber, leather, silver, tallow, beef.

South Africa sends us gold, diamonds, feathers, wool, goat's hair, skins, and hides.

India and Ceylon send us wheat, cotton, silk, indigo, gums, hides, jute, rice, timber, seeds, tea, coffee, gold, and precious stones.

For the Miscellaneous Colonies one would need to offer some such list as the Old Testament gives of the treasures which were poured into the lap of Solomon during the brief period of Israel's prosperity. Imperial trade is, however, something far wider, far larger than all these movements of exports and imports, these operations of barter and exchange. The British Colonies and possessions not only depend upon the Mother Country for the supply of their industrial wants, they also lean upon her financially, and look to her for the provision of capital for all their great public and private undertakings; and capital is as vitally necessary for the development of new countries as are men and women.

Great Britain is the banker and financial agent of most of her Colonies and possessions. They are bound to her by financial obligations and the daily need of financial facilities. All their public loans are floated, and most of their large private enterprises are financed, in London. The whole fabric of colonial external trade rests upon London as its financial base. In an Empire such as ours London may be compared to the heart. She pumps the life-giving stream of capital through a thousand arteries to every limb of the Imperial body. Great Britain is not only a great trader but the greatest money-lender in the world. And, as is the case with smaller money-lenders, her clients generally take their loans partly in cash and partly in goods. For instance, if a colonial Government borrows in London for any great public works, or if a company raises capital for any large enterprise, a portion of the loan goes out to the Colony in the form of the materials and machinery which are necessary for the execution of such work; it may be in locomotives, railway plant, steel-work, mining machinery, water-pipes, or electrical equipment. This brings home to our minds the true Imperial meaning of many exports which seem dull and lifeless when grouped in lists and valued in pounds, shillings, and pence. Here we see they are the things which make life possible in new countries; they are the visible signs and accompaniments of Imperial expansion. In a thousand ways they are imparting new life to an Empire which covers one quarter of the earth's surface. We call them loans from England to Greater Britain, and are sometimes alarmed at the great debts the Colonies have piled up during the last fifty years. And yet this is the branch of Imperial trade of which we have, perhaps, the best right to be proud; for debts such as these are not like the old-world national debts—the outcome of destructive wars—they have left the Colonies something tangible and solid to show for them, thousands of miles of railway, deepened harbours, roads and bridges, waterworks. Government offices, courts of justice, schools, libraries, universities, museums, lighthouses, and innumerable other public, municipal, and private works. In the words of a colonial statesman, 'They are a solid investment of capital applied to eminently reproductive purposes, yielding not only in most cases a substantial monetary return in the shape of interest actually earned, but yielding also, in a measure that cannot be expressed by figures, benefits of incomparable value to the Empire at large.'

Enough has been said to show the power which Great Britain's possession of vast loanable capital has given her in the work of Empire-building. In the modem world, with its large affairs, its immense undertakings, finance often plays a decisive part. What is above all to be desired is that British finance should always go hand-in-hand with British industry, that the one should consciously support the other, and both should, as far as possible, be guided in the interests of a great Imperial trade policy. Probably no material ties are stronger to bind the scattered States of the Empire together than the close financial relations existing between the Colonies and the Metropolis. It was largely due to financial considerations that, until quite lately, all colonial produce came to England for distribution to the rest of the world; it is financial dependence in many cases which keeps the Colonies our customers in spite of temptations fix)m our foreign competitors; while on the side of the Mother Country widespread investments in colonial securities, public and private, associate the interests of thousands—and indirectly of millions—of people at home with Imperial stability, to whom it might otherwise be a phrase, or, at most, an aspiration. By all means let us value every tie of sentiment, and cherish to the utmost moral as distinct from material ideals of Empire; but if these can be fortified by common interests and mutual obligations, we shall not fail to strengthen, and perhaps make indestructible, the bond that unites us.

So far only the centripetal aspects of Imperial Trade have been dealt with. The picture would not be complete if some of the centrifugal tendencies, which undoubtedly exist, were not briefly indicated.

At one time the colonial markets were almost entirely supplied from home, even foreign goods finding their way to them through London, and in return practically the whole of the produce of the Colonies came to the ports of the Mother Country. In recent years a change has taken place. Our foreign competitors have made a resolute attack upon the markets of the Empire, and have succeeded not only in supplying a large share of their wants, but in obtaining directly an increased proportion of their produce. During the last ten years the imports into our Colonies and possessions from foreign countries have increased by 125 per cent., while British imports have only increased by 75 per cent. In the case of exports from the Colonies, those to foreign countries have increased by 85 per cent, against only 85 per cent, of an increase to the United Kingdom. All the figures are large, so that the usual criticism as to increase of mere percentages is not applicable.

What are the causes or reasons which explain the progress of our rivals, and in what manner can they be met?

In the first place, the scattered character of the Empire in itself exposes our trade peculiarly to foreign competition. The geographical proximity of highly industrial countries to parts of the Empire gives them great material advantages, and by this fact alone makes them most formidable rivals for the trade of the Colonies they are near. Thus the United States have quite naturally obtained a large share of the trade of Canada, Newfoundland, and the West Indies, while Japan will in the future play a rdle of increasing importance in the trade of our Eastern possessions. There is, indeed, a kind of law of gravitation which tends to cause distant Colonies to revolve in the industrial orbit of the nearest great commercial community rather than in that of the Mother Country. Obviously, we cannot hope to deprive our rivals of these geographical advantages; we can only endeavour to create counter-attractions in order to keep such Colonies within our own trade system.

There are, however, several foreign countries which, quite apart from any natural advantages, have shown themselves most dangerous competitors even in those Colonies where we meet them on equal terms, or where the advantage is all on our side.

So much publicity has been given to the alleged superiority of foreign methods of conducting and pushing trade that it is unnecessary to do more than refer to the indictment here. We have been told almost ad nauseum of the activity, alertness, and adaptiveness of the Americans and of the irrepressible enterprise of the ubiquitous German. I believe that all the public attention which has of late been directed to foreign competition, and even the somewhat exaggerated alarm which it has excited, are extremely salutary, and must have the effect of arousing us from any apathy into which we may have fallen. Traders are at last beginning to learn the lesson, even if politicians are not, that a system which is adequate when you have the field to yourself is entirely inadequate when you are face to face with rivals; that, in a word, the methods of monopoly are not the methods of competition.

To this end the study of German methods and German policy is perhaps more likely to prove immediately fruitful than the study of American methods, although of the two nations America is by far the more formidable rival in Imperial trade. It is impossible to withhold our admiration from Germany for the thoroughness with which she has prepared herself for her industrial career. She has neglected nothing to insure success. At home she trains physically, intellectually, and morally her whole working population. She provides, indeed, for them an education which excites the admiration and almost the dismay of foreign observers. She protects her manufacturers in their own markets so that they may be able to submit to sacrifice in foreign markets. She subsidizes lines of steamers to carry German exports cheaply and directly, and authorizes her State railways to make special, and often nominal, rates of freight for oversea trade. Her whole public policy is deliberately directed towards the encouragement and extension of foreign trade.

Another danger that lies in wait for Imperial trade is the continuous extension of direct shipping services between foreign countries and the Colonies and India. The growth of trade between Germany and Australia, South Africa, East Africa, and the Indies is largely due to the regular services which have been established between German and colonial ports, supported as they are partly by direct bounties and still more by indirect bounties skilfully engineered through the State railways. One has only to see the rapid increase of foreign tonnage entered and cleared from colonial ports to realize what a vigorous assault is being made upon England's position as distributor of colonial produce to the rest of the world. And this extension of foreign shipping is certain to go on and even to become more accentuated. The vital importance of sea-power is only now being realized by the great nations of the world; just as last century witnessed the competition of land armaments, so this century will certainly see the rivalry of great navies. Sea-power, to be secure, must rest upon a large mercantile marine, so that, whatever be the cost, the growth of merchant shipping must be fostered by any country which looks forward to a great political and industrial future. France, Germany, and Japan realize this, as is shown by the various forms of subsidies which they grant. Russia and the United States have awakened to it, and in order to encourage shipping have confined their coasting trade to their own ships, even to the point of interpreting a coasting voyage as extending from Riga to Vladivostok, or from Boston to San Francisco or the Philippines.

A further very obvious and very real danger to Imperial trade arises from the similarity of the fiscal systems of the self-governing Colonies to those of foreign countries, and their dissimilarity from that of the Mother Country. The larger States, such as Canada and Australia, are in a position, and will in the future be increasingly tempted, to make reciprocity treaties with foreign countries, which may prove as injurious to inter-Imperial trade as they are certain to prove dangerous to Imperial unity.

What are the means by which these centrifugal tendencies can be neutralized, if not actually annulled?

We have seen that they involve questions of personal or commercial fitness, of geographical position, and of divergence of fiscal policy.

If we are to retain our position in the trade of our own Empire—not to speak of the trade of the world—we must take a leaf out of the book of our most successful competitors. The wonderful industrial progress of Germany during the past twenty-five years is by common consent in great part due to the admirable ladder of education she has constructed for her whole people. Those who have most carefully studied the German educational system, physical as well as intellectual, while fully acknowledging its drawbacks and its imperfections, are most impressed—it might almost be said are most depressed—by its marked superiority over our English system, if system it can be called. No doubt much is being done my secondary, for technical, and for commercial education in England; but, in spite of efforts for which we are all grateful, we are still at an enormous disadvantage as compared with Germany, America, and even with France and Switzerland. It is however, no use copying German or American methods unless we can acquire the spirit which underlies them. It has been said of the Americans that they are taught from their earliest years that whatever is being done can, and ought to be, better done. That is the attitude of mind which makes a people efficient and progressive.

What we are wanting in is not so much the actual instruments of education as the zeal and determination which in other countries are making such instruments effective. There is already an Imperial patriotism which rallies men to the ranks in defence of the Empire; there should be a like patriotism which would fill our schools now that danger threatens Imperial trade.

In saying this I have no desire to attach exclusive importance to education as a preparation for trade. Other elements count for much in the commercial success of a nation—natural aptitudes, inherited predispositions, and most of all, national character. The political and commercial fabric of the British Empire was built up by men and women who had to depend on character and not on book-learning to guide them. But, when all is said, it remains true that in these days of fierce international competition, no people, whatever its natural gifts may be, can afford to neglect systematic professional training.

From this point of view educational training in all its branches becomes one of the determining factors in the future of Imperial trade.

Then it is of paramount importance not only to trade, but to the whole future of the Empire, that we should improve all means of communication necessary to develop and facilitate transport from one part of the Empire to another. We noted in passing the tendency of distant Colonies to gravitate towards the nearest great industrial community, and it is easy to see how dangerous this tendency might become to Imperial trade, and even to the Imperial connection, if it were left unchecked. One of the ways to meet it is to reduce the distance that separates us from our Colonies by shortening the time of transit between us. The problem before us in the immediate future is to annihilate distance, to bring it about that produce can be poured from distant possessions into the home markets, and vice versâ, along the great Imperial trade-routes more easily and more rapidly than into markets that lie geographically thousands of miles nearer to them. Every time the period of transit is shortened even by a few hours the field of trade is widened. Something can be brought or sent which the few hours of delay, with its risks of deterioration in transit, made it not worth while to send before. It would be difficult to exaggerate the importance of communications to Imperial trade. The best hopes for the future lie in the development of direct telegraphic cables, great linking lines of railway, and, most of all, regular services of steamships between the different States of the Empire.

Sea communications, of course, stand upon a different footing from any others. Their maintenance and extension are absolutely vital. Attention has been called to the benefits which immediately accrued to both the export and import trade of Germany through the establishment of regular services of steamers between German and British colonial ports, and certain causes have been indicated for the probable rapid growth of foreign shipping in the immediate future. Those causes are not so much economic as political No modem State is in future likely to leave the development of its mercantile marine to the free and unaided play of economic forces. We did not do so ourselves, for our marine was fostered and built up under the regime of the Navigation Laws. In view of a situation which is changing under our very eyes, we shall, sooner or later, be compelled to adopt a definite policy with regard to shipping. In the interest not merely of Imperial trade, but of the Empire itself, we cannot continue much longer to leave the maintenance of our supremacy in shipping to the free play of purely economic forces. The most ardent advocate of laissez faire would admit that, situated as we are, shipping must always be considered and treated as a vital Imperial interest, and not as a private industry. The reservation of the coasting trade of the Empire to British ships is a weapon we can in extremity forge and make powerful use of by agreement with the self-governing Colonies. A short time ago Sir George Sydenham Clarke suggested the imposition of a small revenue duty upon all foreign imports entering the Empire, the proceeds of which would be used for subsidizing and developing means of communication within the Empire, and such a proposal is worthy of serious consideration. The direction, however, which State interference will take must depend upon the character of the competition we have eventually to meet.

While these are some of the main lines upon which centrifugal forces may be counteracted, in a lesser sphere much may be done to consolidate and simplify the conditions of Imperial trade by identical legislation and uniform administrative practice with regard to patents, trade-marks, bills of exchange, company law, bankruptcy, merchandise marks, and many other kindred questions.

Another suggestion of great importance is the formation of an Imperial bureau of commercial intelligence, which would bring into a common stock, and place at the disposal of all the sister States of the Empire, practical information as to their respective industrial conditions and commercial requirements.

I have endeavoured throughout this article to indicate briefly the part trade is playing in the evolution of a united Empire. Attention has been called to the steady growth of common obligations, to the close dependence—largely, but not wholly, financial—of most of the Colonies upon the Mother Country, to the vast fabric of reciprocal interests which not only unite the Colonies to the Mother Country, but are binding them with increasing strength to each other The old simple trade relationship of Mother Country and Colonies, in which the one supplied practically all requirements of manufactured goods and the other paid for them in raw materials, has passed away, and has been replaced by something far more highly organized and complicated. One by one the great Colonies are ceasing to be dependents, and are taking their places as allies of the Mother Country in the struggle for the world's trade, bringing to her aid all the wealth of their natural and developed resources. It is clear that in the variety of its commercial activities, in the multiplicity and abundance of its products, the British Empire is rapidly becoming a self-sufficing commercial State.

Is it destined to fulfil its great possibilities? Will the elements of solidarity or of separation prove the stronger? The answer, in my opinion, rests with us. The forces which tend to divide us can, with care and forethought, be weakened, while those which draw us together can be increased in strength. Political and commercial influences act and react upon each other. As was said earlier, all the deep-lying causes which are drawing the Empire into more intimate political relations are also bringing it into closer commercial relations, and vice versâ. We actually see the political concentration of the Empire taking place before our eyes in the gradual federation of the great groups of self-governing Colonies. The North American Colonies are already merged in the Dominion of Canada; the Australian Colonies constitute a united Commonwealth; at no very distant date South Africa will be a federated State from the Zambesi to the Cape. It cannot be questioned that this political concentration will facilitate, if it does not actually bring about, a corresponding commercial rapprochement throughout the Empire.

The chief immediate difficulty lies in the fact that the different States of the Empire have no common fiscal policy, and that differences of opinion, of practice, and of revenue requirements make the adoption of any such common policy seem well-nigh impossible.

The problem of 'preference' is undoubtedly extremely complicated. Nothing is to be gained by revising to recognise its difficulties, the large concession of principle at the outset, the delicate adjustment of interests, the thorny questions which might arise in the early days of its application. It is not my business to discuss them here. I cannot, however, admit that, where the interests at stake are so vital, where the actual circumstances are so favourable, where the ideal is in itself so fine, a satisfactory solution is beyond either the courage or the political gifts of our race.