tion is not granted to the "colonial products" a reduction of the duty gives a preference whose absolute amount is sufficient to give control of the trade. The British preferences reduce the rates by only one-sixth, as it was estimated that a greater reduction was unneces

sary.

It should be noted, however, that the question whether the consumers in the mother country or the producers in the colony receive the chief benefit of the preferential rate depends mostly (if competition be free) on whether the favored colonies supply or do not supply the whole demand of the mother country. If they do not, the producers are likely to receive most of the benefit, even though all other markets are free to the products in question. There may, however, be intermediate agencies which absorb much of the benefit. e. g., shipping companies in cases where the preference is granted only for products transported in national vessels. The industrial nations as distinguished from their colonies have comparatively little direct interest in the tariff favors which their competitors give to their colonies. In so far as the colonial products are raw materials for manufacture, if the United States, for instance, admits them free from all sources, the preferential free admission by other countries. of the same products from their colonies (importation from other sources being dutiable) gives these other countries no competitive advantage and may by limiting the sources of their raw materials give the United States an advantage. But the American market for foodstuffs may be slightly narrowed, e. g., by the French differential duties on cereals and vegetable oils.

Manufactured articles are exported in considerable quantities from no colonies except the British Dominions and India, and of the total export only a small proportion goes to Great Britain. Accordingly the present effect upon American trade of differential duties upon manufactures entering the markets of the colonial powers is very small. The conclusion seems warranted that the preferential tariffs of the mother countries are without immediate and direct effects of importance upon the commercial rivals of these countries. But such tariffs may have important effects in the long run. In so far as they are effective in creating a specially favorable market for colonial products, they stimulate the development of the colonies along certain lines, and the competition of the favored colonies may eventually become of importance. Secondly, tariffs rates which attract the products of the colonies to the mother country build up direct shipping connections and give the exporters of the mother country an advantage in competing for the import trade of the colonies.

POLICIES OF THE COLONIAL POWERS.

With due allowance for the differences in the character of the trade to and from the colonies, the policies of the different powers in regard to preferences to colonial products in the home market are fairly consistent with their policies in regard to preferences in the colonial markets. In both markets there is a free list, which is at the same time nonpreferential for those articles whose exemption from taxation seems to offer a balance of advantage. In the colonies. machinery and other aids to economic development are usually free.

T

while in the mother country it is raw materials which are free. Since "colonial products" are generally taxed, and since a trade. study has not yet been made, it is impossible to say whether the countries which give a preference put a protective barrier about a larger proportion of their exports to their colonies than of their imports from those colonies. Colonies exporting "colonial products" receive greater preferential advantages than do those which export rubber, ivory, ores, phosphates, copra and other oil producers, wood, hides, cotton, jute, and other fibers.

The countries which generally maintain the open door in their dependent colonies have granted no preferences in their home markets except the few introduced by Great Britain in 1919. The powers which maintain preferential rates for their own products in the colonial markets have all granted certain favors also to colonial products in the metropolitan market, though these latter do not appear to be so great as the former. The benefit of these favors is also made contingent in some cases upon transportation in national vessels. Generally speaking, the favors to products of the assimilated colonies are greater than those to products from the colonies where the products of the mother country receive more limited 124 preferences. Thus colonial products from the assimilated colonies of France,125 Japan, and the United States enter the mother country free. Among the products of the preferential colonies those of the American colonies alone enter the mother country entirely free.128 The other preferential colonies, French, Spanish, Italian, and Portuguese, as well as those colonies of France, Spain, and Portugal where by exception the open door is in force, receive for their products various favors short of entire exemption from duty. A special Spanish law enumerates and exempts most products of the Canary Islands, Rio de Oro, and Spanish Morocco, but American Samoa is the one open-door colony whose products are entitled to free admission to the mother country, regardless of their nature.126

Products of all the nonassimilated French colonies according to the law of 1892 paid the French minimum duty, i. e., the rate paid by the same products from the most-favored foreign countries. Since 1892 numerous preferences have been introduced, both by general modifications, such as that by which colonial products were exempted from the increases of rates in 1910, and by specific exemptions, partial or entire, for certain products of certain colonies. The Protectorate of Morocco is, however, still treated for tariff purposes as a foreign country.1

127

The general rule for the Portuguese colonies since 1871 has been that their products enter Portugal on payment of one-half of the ordinary duties, but since 1892 this reduction has been limited for most of the colonies to goods transported in Portuguese vessels. By exception, a few articles enter free. As the Portuguese tariff levies

124 See note on p. 72. What is here meant is that the free admission of colonial products, as in the United States, France, and Japan, is a greater favor than the partial exemption from duty, e. g., in Portugal. But a statistical examination of the colonial trade under prevailing rates of duty might show cases in which the partial exemption was of greater importance than the entire exemption granted to products of other colonies.

125 For fiscal reasons France long maintained important exceptions, but since Jan. 1. 1914, these exceptions have been reduced in number and they are now confined to sugar and pepper. 16 In the case of the Philippines various limitations on this freedom were in force until 1913. See Chapter III, p. 205,

duties on raw cotton, hides, rubber, and some other items, and very high duties on coffee, tea, and sugar, these preferences were, before the war, of considerable importance, particularly those on coffee, tea, sugar, and raw cotton, preferences which came to about 4 cents, 20 cents, 3 cents, and 14 cents per pound, respectively.

128

From Spanish Guinea most of the colonial products actually exported enter Spain free with the exception of coffee and cocoa, which receive differentials of about 3 and 6 cents per pound, respectively. Cocoa, however, constitutes 98 per cent of this trade, so that the characteristic preference is a differential not unusually high on a percentage basis but very high in absolute amount. Practically all the products of Rio de Oro, Spanish Morocco, and the Canary Islands enter Spain free.

The Italians have granted tariff favors only to imports from Eritrea. About a dozen articles enter free from that colony under the protection of duties levied on similar products of all other origins. Perhaps the most important item (wheat) was removed from the list by the law of April, 1915, though at the same time Eritrean cattle were given a small preference by the imposition of a special duty on them by weight instead of by head.

Preferences in the home market are closely related to differential export duties in the colonies, and the two must be considered together. But they are not interchangeable, and although their effects are likely to be cumulative if both are in force at the same time, their separate and individual effects may be different. For instance, a differential import duty in Great Britain upon palm kernels would have no effect either upon the British crushing industry or upon exportation from the West African colonies as long as West Africa remained the chief source of supply and the German and other large markets were open. A differential import duty in Great Britain upon the finished product (the oil), if high enough, would transfer the crushing industry to Great Britain to an extent sufficient to supply at least the local market; 129 while the differential export duty in the colony, if the rate proves to be high enough and if it is not offset by countermeasures in other countries, will transfer to Great Britain the crushing industry for the whole supply from the British West African colonies. The benefit of a differential export duty in a colony is likely to accrue to consumers or manufacturers of the mother country; the benefit of the mother country differential import duties is likely to accrue to the colonial producer. In the case of the Portuguese colonies, where differentials both in the colonial export duty and in the home import duty run through the whole system, it would appear that the effect of these duties is cumulative and that the high rate of both differentials renders the total differential higher than any found in any other system.

In conclusion, the policies of the different countries in regard to the differentials affecting trade from the colony to the mother country may be summarized thus: Belgium and the Netherlands maintain preferences neither in the export duties of their colonies nor in the import duties of the mother country. That was also the policy and practice of Germany. Great Britain allowed no differential

129 25 per cent and 58 per cent of the ordinary duty. But see p. 562 for recent changes. 19 Or it would drive the consumers to the use of substitutes.

export duties in her colonies until one appeared in 1903; a few others have been added during the war; but in the home market no preference was extended to colonial products until the summer of 1919. Eritrea enjoys free entry to the Italian market for a dozen of her products, and several products of Somalia, including the most important, have differential export duties. But Libian exports to Italy have received no favors. None of these powers, therefore, has any thoroughgoing policy of favoring importations from its colonies.

On the other hand, Spain grants free importation to nearly all the colonial products actually imported, and on the chief exceptioncocoa from Fernando Po-there is a large import differential reenforced by a considerable differential in the colonial export duty. The Portuguese preference in the home market is generally 50 per cent of the high duties in force, and this is reenforced by a comprehensive system of differential export duties in the colonies. France and Japan grant free entry to the products of their assimilated colonies and France grants to the other and less important colonies favors of considerable importance; but she limits differential export duties to Indo-China, and there the rates are low. The United States alone grants free entry to the products both of its assimilated colonies and of its other possessions; the United States 130 and Japan have abolished export duties in their colonies. In respect, therefore, to trade from colony to mother country, the powers are divided into those which give few or no preferences to imports from their colonies and those which have relatively complete systems of large differentials. In this case Italy is found with the nonpreferential powers, otherwise the grouping is the usual one. The imports from the colonies are favored chiefly by exemptions, partial or entire, in the home market. Portugal alone has a comprehensive system of export preferences.

XI. PREFERENTIAL TARIFFS IN FAVOR OF NATIONAL SHIPPING.

The scope of this report does not call for a study of the general policies pursued by the nations in regard to shipping. Certain points, however, which relate to colonial trade have been noted, and may be summarized here.

As already explained, where tariff favors are limited to goods transported in national ships or transported directly from the place of origin, this limitation is imposed for the benefit of the merchant marine and offsets rather than supplements the favors conferred on colonial trade. For in general any limitation or condition attached to a favor operates to decrease the value of the favor; and the mere fact that a shipping restriction is imposed indicates that at least at the time of its imposition it was believed that a part or all of the colonial trade would find it more advantageous to use other than national vessels. Accordingly, a policy devoted to the stimulation of colonial trade calls by implication rather for freedom in the choice of transportation routes and agencies than for restrictions on them, and those countries which impose navigation restrictions do so because they foster their shipping with even more zeal than their colonial trade. It is evident, however, from the fact that ocean

130 Except in the Virgin Islands.

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freights for even the longest commercial routes are normally only a fraction of the value of most commodities, that tariff favors may easily be large enough to determine the course of the trade in spit of such shipping limitations as are likely under normal conditionto be attached to them.

National policies in regard to shipping may be distinguished as follows:

1. The trade between the mother country and its colonies and the intercolonial trade may be open to all vessels without discrimination (Great Britain, Netherlands, Belgium, and Germany).

2. This trade may be open to vessels of all nationalities but duti able merchandise may receive the preferential tariff rates only when it is transported "directly" from the country of origin (France and British Dominions and Colonies).

3. This trade may receive preferential tariff rates only if carrie in national vessels or may receive additional preferential reductions if so carried (Portugal).

4. This trade may be restricted to national vessels independently of tariff regulations (Spain, and in part of the United States, Por tugal, and Japan).

As the open-door colonies have no preferential tariffs, their shipping regulations have not been made the object of special investiga tion. Even after the introduction of certain preferences in Great Britain and in some of the Crown Colonies, the British have im posed no shipping restrictions upon the coastwise trade of Great Britain, upon the trade between Great Britain and the colonies, or upon the intercolonial trade. The Dominions regulate their own coastwise trade and have their own shipping laws. Belgium and Italy do not, and Germany did not, restrict to the national flag the shipping engaged in the colonial trade, though they all grant or granted subsidies, subventions, or some kind of indirect aid.131

The Netherlands allow the vessels of "reciprocating countries" 15: to engage in the trade between the Netherlands and their colonies. In the Dutch East Indies 80 ports are open to general trade and in the ports of territories not under direct Dutch administration foreign vessels may engage in the coasting trade; but the right is reserved to the Dutch Government to forbid this coasting trade to "ships belonging to (registering from) the realm in Europe or the Dutch East Indies." 133

Except Italy, all the countries which systematically 134 grant pref erences in their colonial trade pursue a restrictive policy in regard to shipping engaged in that trade. Most sweeping are the restrictions of those countries which prohibit, by general laws regardless of tariff preferences, all use of foreign vessels in colonial trade. These countries all limit coastwise navigation to national vessels.

131 Only one instance has been encountered in the course of this study in the way of a shipping restriction in the colonies of these countires; a virtual monopoly of harbor rights in German Southwest Africa was granted to a German steamship company under the guise of regulating the loading and discharging of vessels.

132 Apparently this means colonial powers which permit Dutch vessels to engage in the carrying trade between the mother country and its colonies, and also noncolonial powers. 133 Low No. 477, 1912. In addition to the ports open to general commerce there are "inland harbors " open only to Dutch and native vessels, but "the governor general is. under pressing circumstances, empowered to open the excluded coasting-trade ports to ships already permitted the entry into the general ports for specific trips in carrying specified cargoes."

134 Excluding Great Britain, in whose dependent colonies preferential tariffs are the ex ception rather than the rule.