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tries adopt the principle of the most favoured nation treatment to those who are willing to offer them concessions, heavier duties being imposed where concessions are not forthcoming. What I wish to suggest by this line of argument is not the adoption of an aggressive commercial policy any more than in other foreign affairs, but merely an indication of a freedom and a willingness to use the powers which each nation possesses in regard to its trade and commerce and the terms on which it admits the goods of other countries. We should not allow these to lie aside like rusty unused weapons, but to hand and ready for use on occasion, employing them as they have been employed by Germany and the United States and other peoples, in order to secure fai/business—no more than fair business. lam not for a moment advocating that because the Empire has a giant's strength it should use it tyrannously 'ike a giant in relation to small foreign communities, or large ones, but merely that its possession of power should carry with it a responsibility for its exercise at need. We should be quite prepared to take whatever steps may be required to free us from obviously unfair competition in other markets, and to secure our people fair competition all round. If the nature of the whole of the commerce of the Empire be examined, as Sir Edward Law examined that of India, it will be seen that Great Britain had very little to fear from retaliation. Germany may be taken as one example. Last year 61,000,0007. of German exports went to British possessions. Could Germany retaliate against Great Britain for any preferential treatment which it may give to British Colonies, and thus put itself in danger of losing its present business, while 23 per cent, of the whole German export trade is"carried on with different parts of the British Empire ? The United States of America may be cited as another example. Every year the States send Great Britain and its possessions goods to the value of 175,000,000/., while the import of British goods into the United States does not amount to within 100,000,000/. of this sum. Tt is most unlikely that the FTnited States would risk losing so vast a volume of trade, amounting, as it does, to considerably more than half of its own export, in an attempt to penalise Great Britain for exercising the same policy of preference which the United States hold themselves free to adopt in regard to their own possessions, and even to other States with which they make reciprocal treaties. What may be fairly contended for in the present stage of the discussion in regard to preferential trade and fiscal retaliation, is the recognition that the principle which these phrases embody. whatever extension may be given to it, is a proper one to apply in the existing condition of the commercial relations of the foreign countries with Great Britain and its possessions. Tt is not as yet necessary to propound a definite schedule, which must in details be largely a matter" of mutual arrangement, differing almost with every country dealt with, and with the same countries at different times, but it may be olanced at to meet the objection, frequently beard, that however right the principle of preferential trade may be in theory, in practice it could not be applied to the Australian States. Tt is perfectly true that, as the second resolution of the Conference of 1902 indicated, it is not possible for the Commonwealth to abolish its customs duties, or reduce them in the abrogate in any considerable measure. What is possible is discrimination and readjustment in both countries by reciprocal concessions. Tt is and will remain necessary that at least the present amount of revenue should be obtained in Australia, but this allows ample room within which preference may be "-iven to British imports. Tn the first place, out of our total import in 1905 of 36,796.346/. (excluding specie), 12,521,766/. or 34 per cent., were free 'mods. That is notable in itself. Tn addition to this imports to the value of 11,000.000/. odd were dutiable at 15 per cent, and under, SO that two-thirds of our total imports were in these categories. 15 per

Xintli Uay. I May I HOT

PrEIEHF.NTIAI Tradk. (Mr. Deakin.)