How then does the persistent Free Trader relate to the special case of
the "key industry," of which we heard so much during the war, and hear
so little to-day? I have said that the question of maintaining any given
industry on the score that it is essential for the production of war
material is a matter of military administration, and not properly a
matter of fiscal policy at all. But the plea, we know, has been made the
ground of a fiscal proceeding by the present Government, inasmuch as the
special measure known as the Dyestuffs (Import Regulation) Act of 1920
forbids for ten years the importation of dyestuffs into this country
except under licence of the Board of Trade. Dyestuffs include, by
definition, all the coal-tar dyes, colours, and colouring matter, and
all organic intermediate products used in the manufacture of these--the
last category including a large number of chemicals such as
formaldehyde, formic acid, acetic acid, and methyl alcohol. The
argument is, in sum, that all this protective control is necessary to
keep on foot, on a large scale, an industry which in time of war has
been proved essential for the production of highly important munitions.
What has actually happened under this Act I confess I am unable to tell.
Weeks ago I wrote to the President of the Board of Trade asking if,
without inconvenience, he could favour me with a general account of what
had been done in the matter of issuing licences, and my letter was
promised attention, but up to the moment of delivering this address I
have had no further reply. I can only, then, discuss the proposed policy
on its theoretic merits.[1] The theoretic issues are fairly clear.
Either the licensing power of the Board of Trade has been used to
exclude competitive imports or it has not. If it has been so used, it is
obvious that we have no security whatever for the maintenance of the
industry in question in a state of efficiency. In the terms of the case,
it is enabled to persist in the use of plant and of methods which may be
inferior to those used in the countries whose competition has been
excluded. Then the very object posited as the justification for the Act,
the securing of a thoroughly efficient key industry necessary to the
production of munitions, is not attained by the fiscal device under
notice. If, on the other hand, there has been no barring of imports
under the licence system, the abstention from use of it is an admission
that it was either unnecessary or injurious or was felt to be useless
for its purpose.
[Footnote 1: The promised statistics were soon afterwards sent to Mr.
Robertson by the Board of Trade. They will be found in the _Liberal
Magazine_ for September, 1922, p. 348.--ED.]
And the common-sense verdict on the whole matter is that if continuous
and vigilant research and experiment in the chemistry of dye-making is
held to be essential to the national safety, the proper course is for
the Government to establish and maintain a department or arsenal for
such research and experiment, unhampered by commercial exigencies. Such
an institution may or may not be well managed. But a dividend-earning
company, necessarily concerned first and last with dividend earning, and
at the same time protected against foreign competition in the sale of
its products, cannot be for the purpose in question well managed, being
expressly enabled and encouraged to persist in out-of-date practices.
This being so, the whole argument for protection of key industries goes
by the board. It has been abandoned as to agriculture, surely the most
typical key industry of all; and it has never even been put forward in
regard to shipbuilding, the next in order of importance. For the
building of ships of war the Government has its own dockyards: let it
have its own chemical works, if that be proved to be necessary.
Protection cannot avail. If the Dyestuffs Act is put in operation so as
to exclude the competition of foreign chemicals, it not only keeps our
chemists in ignorance of the developments of the industry abroad: it
raises the prices of dyestuffs against the dye-using industries at home,
and thereby handicaps them dangerously in their never-ending competition
with the foreign industries, German and other, which offer the same
goods in foreign markets.
The really fatal competition is never that of goods produced at low
wages-cost. It is that of superior goods; and if foreign textiles have
the aid of better dyes than are available to our manufacturers our
industry will be wounded incurably. It appears in fact to be the
superior quality of German fabric gloves, and not their cheapness, that
has hitherto defeated the competition of the native product. To protect
inferior production is simply the road to ruin for a British industry.
Delicacy in dyes, in the pre-war days, gave certain French woollen goods
an advantage over ours in our own markets; yet we maintained our vast
superiority in exports by the free use of all the dyes available. Let
protection operate all round, and our foreign markets will be closed to
us by our own political folly. Textiles which are neither well-dyed nor
cheap will be unsaleable against better goods.