299

A—s

largely dependent on her trade with foreign countries. This is brought out in an analysis of the import and export figures, which shows that, while the British Empire sells to India goods to the value of 50,000,000/. sterling, it buys from India goods to the value of 29\ millions only, and that, while foreign countries sell to India only 18,000,000/. sterling worth of goods, they buy from India goods to the value of no less than 66,000,000/. sterling. It is obviously, gentlemen, the interest of India to retain the goodwill of our foreign customers. The risk of damage to Indian trade from retaliation by foreign countries cannot he regarded as imaginary, notwithstanding the fact that a large proportion of Indian exports consists of raw materials useful to these countries in their industries. It had indeed been suggested that India is in a strong defensive position, as in the event of a war of tariffs she could resort to a discriminating export duty on certain classes of raw material. But apart from the economic objections to which such duties are open, especially as a feature in a scheme, of preferential tariffs primarily designed for the encouragement of exports, the practical difficulties in the way of the enforcement of such duties sc that they should operate by way of penalty against a particular country, would be insuperable. For the country thus penalised might obtain its supplies through the medium of British or of other foreign ports, instead of direct from India, and it would be impossible to prevent evasion of the duties in this manner. Besides, it is not clear that India enjoys an effective monopoly in any large number of articles that are essential to the existence of foreign industries. Even with regard to certain articles that are essential to the existence of foreign industries—even with regard to certain articles, such as raw jute, oil-seed, lac, teak wood, myrobalsams, and mohair, in respect of which it might be said that such a monopoly exists, it must be borne in mind that a substantial increase in price produced by an export tariff might lead, sooner or later, to the production of those articles in other countries, to the discovery of substitutes for them, or to a lessened demand. In any of those eventualities, the export trade of India would be seriously affected. On the question as to whether India would avoid risk by remaining outside preferential arrangements adopted for the rest of the British Empire, it might be urged on the one hand that foreign countries would recognise the attitude of India, and in the case of adopting measures of retaliation against the British Empire would exempt articles of Indian export from their scope. On the other hand, it might be said that India could not be certain of obtaining such an exemption, inasmuch as foreign countries might impose retaliating duties on Indian articles—and Mr. Deakin gave us an example of this the other day—with the object of attacking Great Britain by injuring Indian trade. Furthermore, if isolated from the rest of the Empire, India might be held to have forfeited any right to be supported against attacks made on her trade; whereas an essential condition of any general preferential scheme would doubtless be that the Empire would act as a united whole in any tariff war, and that any one member who might be attacked would be entitled to support from all the other members. That, I take it, gentlemen, is your idea. Mr. Deakin has referred to an incident which occurred with France a few years ago in regard to Indian coffee, and to another which occurred a little later with Russia in regard to Indian tea. The facts are as follows : —France had a fiscal dispute with Brazil. To put pressure on Brazil a double scale of duty on coffee, and some other kinds of Colonial produce, was introduced into the French tariff, and the higher scale was made applicable to countries which were not specially admitted to the lower scale. Indian coffee imported into France thus, quite incidentally, became subject to the higher duty. We ascertained that France had no grievance whatever against India, and did not desire to penalise Indian coffee,

Tenth Day. 2 May 1907.

Preferential Trade. (Sir James Maokay.)