To what extent import duties should be increased in the case ofa change from free competition to the protective system, and howmuch they ought to be diminished in the case of a change from asystem of prohibition to a moderate system of protection, cannot bedetermined theoretically: that depends on the special conditions aswell as on the relative conditions in which the less advancednation is placed in relation to the more advanced ones.The UnitedStates of North America e.g.have to take into specialconsideration their exports of raw cotton to England, and ofagricultural and maritime products to the English colonies, alsothe high rate of wages existing in the United States; whereby theyagain profit by the fact that they can depend more than any othernation on attracting to themselves English capital, artificers, menof enterprise, and workmen.
It may in general be assumed that where any technical industrycannot be established by means of an original protection of fortyto sixty per cent and cannot continue to maintain itself under acontinued protection of twenty to thirty per cent the fundamentalconditions of manufacturing power are lacking.
The causes of such incapacity can be removed more or lessreadily; to the class more readily removable belong want ofinternal means of transport, want of technical knowledge, ofexperienced workmen, and of the spirit of industrial enterprise; tothe class which it is more difficult to remove belong the lack ofindustrious disposition, civilisation, education, morality, andlove of justice on the part of the people; want of a sound andvigorous system of agriculture, and hence of material capital; butespecially defective political institutions, and want of civilliberty and of security of justice; and finally , want ofcompactness of territory, whereby it is rendered impossible to putdown contraband trade.
Those industries which merely produce expensive articles ofluxury require the least consideration and the least amount ofprotection; firstly, because their production requires and assumesthe existence of a high degree of technical attainment and skill;secondly because their total value is inconsiderable in proportionto that of the whole national production, and the imports of themcan be readily paid for by means of agricultural products and rawmaterials, or with manufactured products of common use; further,because the interruption of their importation occasions noimportant inconvenience in time of war; lastly, because highprotective duties on these articles can be most readily evaded bysmuggling.
Nations which have not yet made considerable advances intechnical art and in the manufacture of machinery should allow allcomplicated machinery to be imported free of duty, or at least onlylevy a small duty upon them, until they themselves are in aPosition to produce them as readily as the most advanced nation.
Machine manufactories are in a certain sense the manufacturers ofmanufactories, and every tax on the importation of foreignmachinery is a restriction on the internal manufacturing power.
Since it is, however, of the greatest importance, because of itsgreat influence on the whole manufacturing power, that the nationshould not be dependent on the chances and changes of war inrespect of its machinery, this particular branch of manufacture hasvery special claims for the direct support of the State in case itshould not be able under moderate import duties to meetcompetition.The State should at least encourage and directlysupport its home manufactories of machinery, so far as theirmaintenance and development may be necessary to provide at thecommencement of a time of war the most necessary requirements, andunder a longer interruption by war to serve as patterns for theerection of new machine factories.
Drawbacks can according to our system only be entertained incases where half-manufactured goods which are still imported fromabroad, as for instance cotton yarn, must be subjected to aconsiderable protective duty in order to enable the countrygradually to produce them itself.
Bounties are objectionable as permanent measures to render theexports and the competition of the native manufactories possiblewith the manufactories of further advanced nations in neutralmarkets; but they are still more objectionable as the means ofgetting possession of the inland markets for manufactured goods ofnations which have themselves already made progress inmanufactures.Yet there are cases where they are to be justified astemporary means of encouragement, namely, where the slumberingspirit of enterprise of a nation merely requires stimulus andassistance in the first period of its revival, in order to evoke init a powerful and lasting production and an export trade tocountries which themselves do not possess flourishing manufactures.
But even in these cases it ought to be considered whether the Statewould not do better by making advances free of interest andgranting special privileges to individual men of enter prise, orwhether it would not be still more to the purpose to promote theformation of companies to carry into effect such primaryexperimental adventures, to advance to such companies a portion oftheir requisite share capital out of the State treasury, and toallow to the private persons taking shares in them a preferentialinterest on their invested capital.As instances of the casesreferred to, we may mention experimental undertakings in trade andnavigation to distant countries, to which the commerce of privatepersons has not yet been extended; the establishment of lines ofsteamers to distant countries; the founding of new colonies, &c.
