an important part in colonial trade. Originally these were located in "unoccupied" or in national territories, and it continues to be the rule that large trading firms tend to establish their branches first in the colonies of their own country. The same is true of banks, and much of the banking in colonies is carried on by branches of national banks.174 These financial and trade connections with the mother country are very important in forming and maintaining trade channels. The investment of national capital is also very important. Investment in railroads, for instance, leads not only to large orders for the initial equipment but also to a continued trade in materials and equipment for extensions, maintenance, and repairs uniform with the original installation.175 The immediate control of the purchase of supplies may remain with the capitalists in the mother country.17 Orders are frequently sent to the mother country because the colonial civil and mining engineers, architects, managers of industrial and commercial establishments, even when they are colonials, have received their training in the mother country and are familiar with the standards, the practices, and the equipment used there. All the factors which inspire interest and confidence in investors are apt to operate much more strongly in the mother country than among foreigners. The early history of the Congo offers a notable instance. In many cases ex-officials of the colonies have been prominent in the organization of companies to develop those colonies. If concessions are being given, even if there is no intentional discrimination, the nationals are most apt to have the information and the interest and the faith necessary for participation in the enterprises. Governmental action may play a part in the operation of these factors; there may be discrimination in the granting of concessions and in such points as the listing of securities which are open to the investment of trust funds, or which may be quoted on the national bourse. 178 177 While the export and import trades are often closely associated, on the whole the colonial powers do not occupy a position of such prominence in the export trade of their colonies as in the import trade. In some cases this may be explained partially by the absence or the smaller amounts of the tariff differentials affecting these two trades (see p. 51), but the same condition is found also in India and other open-door colonies. A further explanation seems to be that the industrial countries have emphasized their export trade and have not invoked in favor of their import trade the same interest, attention, 174 Or of colonial banks-e. g., in Newfoundland and the British West Indies branches of Canadian banks; or in Oceania of Australian and New Zealand banks. 175 The statements in this paragraph are regarding tendencies, and of course there are numerous exceptions. Investments of capital in colonies may develop trade with another country-e. g.. British capital in Canada has increased the demand for machinery, etc., from the United States. German commercial houses had established themselves in British colonies before any German colonies existed. 178 A very large proportion of the requirements of these industries [Indian cotton and jute mills, engineering works, collieries, and various small industries], particularly in Bengal, where the firms of managing agents are usually British, is purchased through the London office of the managing agents, and this largely accounts for the predominant position of British suppliers in the trade before the war." Board of Trade Journal, Aug. 7, 1919, p. 177. 177 As is the case in Great Britain. Proposed legislation in Great Britain would give relief to investors in colonial enterprises from the double income tax which now frequently falls on those who invest money outside of their own countries. 178 As is the case in France. 1 179 and financial machinery. Many a zealous colonist.who would give a conscious preference to the mother country in purchasing supplies sells the produce of his plantation to the highest bidder with hardly a thought of his nationality or the destination of the products.' The colonies produce so large a proportion of the exportable surplus of many articles that many countries must each take a share of their exports indirectly if not directly. A colony of one of the big industrial nations can obtain from the mother country practically all that it needs in the way of manufactures, but the whole world is dependent on India for jute and lac, on the French colonies for vanilla, on Formosa for camphor, on the Philippines for manila, and unless serious obstacles are put in the way these articles will go more or less directly from the colonies to many parts of the world. These various factors, political, economic, and social, have a cumulative effect. Some of them are strongest in the newest colonies, and the trade currents established at the outset tend to become fixed. But these factors are not so strong that they automatically throw a monoply of the trade into the hands of the national merchants.180 They simply give to the national commercial interests and enterprises advantages which may be overcome by foreign competitors who are able and willing to apply themselves with superior zeal and better methods. The geographical and other points mentioned above must be considered. Trade habits and the action of various trade factors may tend to the disadvantage as well as to the advantage of the mother country. The colony may develop resources whose natural outlet is in foreign countries. The development of the rubber plantations of Malaya and of the mineral resources of Algeria has led to decreases in the percentage of exports to the mother countries. During the war the United States became the market for the copra of the Pacific Islands, and the return cargoes gave Americans an increased hold on the markets of those islands for manufactured goods. The value of an assured market for palm kernals in Germany was formerly a factor in preventing Great Britian from establishing a palm kernal crushing industry. Canadian furs were sent unfinished to Germany and one of the largest items of Canadian import from Germany was finished furs. Normally, however, there is a sufficient market in the mother country, at least as an entrepôt, and the language, the habits of immigrants and officials, the investment of capital, the mercantile organization, the banking and shipping facilities all tend to reinforce one another and to promote the trade between the colony and the mother country. 179 Compare the statement of Prime Minister Hughes, of Australia, that he is not opposed to selling to the ex-enemy countries, but only to buying from them. (The Times Trade Supplement, Nov. 13, 1920. p. 202.) 10 The acquisition of political ascendancy in a given region is not necessarily followed by any increase in the percentage of trade falling to the dominant country. Great Britain's share in the import trade of Egypt decreased in the decade following the British occupation (Milner, England in Egypt, 1893, p. 263) and has continued to decrease. The percentages are: 1881, 57 per cent; 1891, 54 per cent: 1901, 36.5 per cent 1913, 30.4 per cent. But since Egypt's trade has been growing rapidly the smaller percentage of trade in 1913 was half again as valuable as was the larger percentage in 1901 (the figures being £5,568,000 and £8,496.000), and it is similarly much greater than was 57 per cent of the trade of 1881. Here, as in India, the rise of other industrial nations has cut into the semimonopoly at one time possessed by the British, but has not prevented a great expansion in the absolute amount of British trade. The annexation of Hawaii did not increase the share of the United States in the import trade of that territory. (Reciprocity and Commercial Treaties, p. 134.) XV. THE OUTLOOK IN REGARD TO PREFERENTIAL TARIFFS. The open-door policy, whether pursued as a freely adopted na tional policy or continued in accordance with treaty obligations, has been losing ground steadily for 20 years or more. Open-door agreements since 1900 have consisted of making more definite or reaffirming old guarantees for equality of treatment. "The conference of Algeciras in 1906 resulted merely in an elaboration of an open-door régime which had existed in Morocco for decades, and the Japanese pledge of 1910 in regard to Korea was simply to maintain for 10 years the status quo. Likewise the Anglo-French agreement of 1906, relating to the New Hebrides, followed earlier treaties, of which the first had been made in 1878, and the open-door provision of the Anglo-German-American treaty of 1899 in regard to Samoa repeated in effect a provision of the reaty of 1889. The treaty of Versailles and the covenant of the League of Nations explicitly provided for the open door only in central Africa, where it had long been maintained in accordance with the general act of the conference of Berlin and the Anglo-German declarations of the same year.181 "Furthermore, the principle of the maintenance of the open door in colonial possessions has been positively weakened in the last score of years. In 1896-97 the powers abandoned their right to the open door in Tunis and the last treaty restriction upon the assimilation of this territory was denounced in 1919. In 1905 the Italians abolished the open-door régime in Somalia in defiance of the act of Berlin. In 1909 the provision for the equal treatment of Spanish and American commerce in the Philippines expired. In 1912 the French protectorate over Morocco was recognized-a recognition which, however guarded, has led the French to feel that the situation has been fundamentally altered and to hope that the history of Tunis may be repeated." The year 1920 saw the expiration of Japan's pledge to maintain the status quo in Korea. The recent peace treaty with Germany apparently swept away the obligations of the AngloGerman declarations, 1885-1886, relative to the territories situated on the Gulf of Guinea and to the islands of the Pacific Ocean.182 In South-West Africa and Western Samoa differential tariffs have since been imposed. The peace treaty further deprived the Germans of their right to most-favored-nation treatment in Morocco, and this has been interpreted in France as foreshadowing the general recognition by the powers of a right on the part of the French to grant her citizens special tariff favors in Morocco.183 In this period in which have terminated so many treaty orligations in respect to the open door, the establishing of preferential tariffs has been going on steadily.184 In fact, since 1890 the whole 181 The treaty of Versailles perhaps implies an obligation to maintain the open door in the ex-Turkish territories; here the powers had not only enjoyed equal treatment but had had the benefit of the limited rate of import duties. See appendix to Chapter IV for a discussion of the mandated territories. 182 And the rights of Germany, but of course not those of the United States, under the Anglo-German-American treaty of 1899. See pp. 277, 576, and 577. 18 The French argument is that the other powers in assenting to the abolition of the German rights in Morocco implicitly assented to the renunciation of their own rights. See Chapter III, p. 206. 14 The Republic of Portugal has held the Portuguese colonies with a somewhat looser rein than did the monarchy, but the fundamental colonial law still requires a differential of at least 50 per cent in colonial import duties. The French have taken St. Pierre and Miquelon from the list of assimilated colonies and established a special tariff in whcih the preferences are less than formerly. In a few other isolated instances differential colonial tariff rates have been decreased, but on the whole the tendency has been decidedly in the other direction. preferential system may be said to have revived after a lapse of half a century. The protectionist reaction from the free-trade movement of the middle of the nineteenth century was in full swing in the late seventies, but it was not until the early nineties that it made its full appearance in the colonial tariffs of France, Spain, and Portugal. Of these countries, France is by far the most important colonial power, and France has not ceased to increase the tariff preferences which bind her and her colonies. Italy introduced preferences in 1905 in Somalia and later in Libia. Japan assimilated the tariffs of Formosa in 1909 and of Korea in 1920. In the British Empire the reestablishing of preferential tariffs has been effected entirely since 1897. While the motives which have induced the Dominions to adopt these preferences are mixed, and while protection is generally the principal object, the variety and amounts of the preference have on the whole steadily grown, and if Great Britain's enforcement of the preferential policy (1919) proves to be the beginning of a permanent change of policy, any chance that the Dominions might reverse their policy has apparently disappeared. Before 1913 there were, with only one important exception no preferences either in India or in the numerous Crown colonies. In 1913 half of the West Indies adopted a preferential system, and with the close of the war they have been followed by the other colonies of the West Indian group,iss and by Cyprus,186 while a few examples of the most extreme form of restrictions have been established in India and in the West African Colonies. The maintenance by the British Imperial Government of a pereferential tariff policy can scarcely fail to lead to the extension of such a policy among the Crown colonies. The war reenforced the spirit both of nationalism and of imperialism. The fiscal needs of the Government and the depression of industry alike suggest the exploitation of this spirit by the raising of tariffs and the enforcement of new or increased differentials. The era of colonial expansion is apparently not yet ended. The annexation of new territory continues, as well as the conversion of spheres of influence into protectorates and of protectorates into colonies. The chief acquisitions in recent times and the most probable acquisitions for the future have been and probably will be made by those powers which pursue the most exclusive trade policies, or by the British, who show signs of abandoning their free-trade and open-door tariff policy. The greater part of the world has already been occupied by the colonial powers, but there remain territories whose continued independence is in doubt--notably Persia, Afghanistan, Tibet, Abyssinia, and Liberia. Japan has already an economic hold upon Southern Manchuria, is making claims on Eastern Inner Mongolia, is advancing in China proper, and her future relations with Siberia remain unsettled. 185 Except Bermuda, whose legislature declined to ratify the agreement with Canada. 186 And by Fiji on Jan. 1, 1922. Even before the discovery of the mouth of the Congo River in 1483, the Portuguese claimed a monopoly of trade on the west coast of Africa. The daring merchants of the next two centuries, however, paid little attention to the Portuguese claims; frequent conflicts re- sulted; and between 1641 and 1667 the Portuguese were constrained 80 |