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have a reactionary system. They believe they have a progressive system. They have free imports even to precisely the extent necessary. That is to say, the raw materials of manufacture are as clearly exempt from duty in Germany, for instance, as they are in this country. Do we realise, amid all the pedantic and unreal jargon of our controversies, that about 40 per cent. of the imports of the United States are free ; that more than half the imports of Germany and France are free. That untaxed raw material gives the maximum employment for capital and labour, the maximum increase of national power, wealth, population, and well-being. To secure this result more effectually from the import of the crude product, the foreign finished article is taxed. Are we seriously to threaten fiscal attack upon foreign nations in the endeavour to compel them to import more manufactures and less of the raw material which is already free ? That you, sir, should contemplate such a policy is an extraordinary example of the power of the insular tradition in economics over one of the acutest minds in existence. We have no right to demand that foreign nations shall arrange their tariffs more in our interests and less in their own. We have no right to insist that they shall change their methods. Our right is to adopt the same for ourselves or not to do it, as we please. There is another issue which illustrates the cumulative inconsistencies and difficulties of “Retaliation.” What is the immediate object f Will it recover us, under any circumstances, a single market we have lost 7 I venture to affirm with complete conviction and tolerable certainty that Retaliation cannot be successful to any extent that would secure an increase of trade upon the whole Continent of Europe equal to what we have derived from the Canadian preference clause alone. Is this policy likely to pull down what Protection has built up f No, you will not say so ; and, if not, it is a proposal to administer pills to the earthquake. The American iron and steel trades upon their present scale were founded under the 30 per cent. tariff imposed after the Civil War, practically forty years ago. What could Retaliation do at this period to reverse the overwhelming development of natural resources and technical efficiency which has been created under that tariff f Since 1879 there has been a marvellous expansion in every important German industry. A mitigation of Protection at this moment would do nothing to arrest the industrial impetus gathered during the twentyfive years of past Protection since Bismarck's decisive and wise departure. We are told that Retaliation for the purpose of securing freer access to markets abroad is to be mysteriously combined with some method for preventing dumping here ! How 7 Without a general national tariff, such as Mr. Chamberlain proposes, in what way is it to be done In 1879 Germany, when Protection began, produced 2,220,000 tons of pig-iron —less than a third of our output. Last year she produced the enormous quantity of Io,080,000 tons, or far and away more than our output. Our chief trouble in respect of dumping arises from the fact that Germany now surpasses us in the scale of the industry. Mr. Chamberlain's tariff, which would give British capital equal scope and security, might once more reverse the positions. Retaliation never can. A permanent tariff will enable us to prevent dumping. Retaliation can only enable us to carry on diplomatic correspondence about dumping after dumping has occurred. And above all, at what measure of increased access to the great Protected markets are we to aim How are we to deal with the separate circumstances of each country Russia and the United States erect the most formidable tariffs against us. Their export of manufactures to us is in each case a small fractional part of their total shipments to this market, and is as dust in the balance by comparison with the interests that would be disturbed in the home market by any great reduction in the height of the tariff wall. We can bring no pressure of any kind to bear upon the United States or Russia without resorting to taxation of food. But if we could make Retaliation effective against those two Powers by threatening heavy duties upon their agricultural produce, what then f Here is precisely where the mischief of Retaliation works out in its anti-Imperial character. If we pursue our virtuous efforts to compel other nations to adopt Cobdenism, we give them every right to intervene in our fiscal controversies in their turn for the purpose of compelling us to remain Cobdenite. A delicate dilemma this for Mr. Chamberlain's adherents. By pinning itself to Retaliation in the shape of the Sheffield proposals, this country, in denying fiscal freedom to other nations, would forfeit it for herself. In the case of the United States and Russia, at least, Retaliation could not obtain better treatment for our manufacturers except upon terms that would bind us to refuse the Colonies preference for their agriculture. But how are we to deal with Germany and France f Germany is compelled to maintain a high corn law for military purposes. Upon Bismarck's original principle of Protection all round, an equivalent tariff must be maintained for manufacture. The parties in the Reichstag one and all will see that it is maintained. The economic despatches of Lord Lansdowne are not going to

break up the old Prussian foundations of German military power. Germany is of all countries that upon which we could bring the strongest commercial pressure to bear. She is at the same time a better customer in her turn than any other foreign country. She flinches visibly before the prospect of seeing her great export to this country seriously hit by a tariff. But she has survived McKinleyism and Mélinism, and has increased her trade in the long run both with the United States and France. Berlin, upon the balance of rather anxious calculations, would allow us to take our course. With France the case is stronger still. Cobden's treaty, our only important modern example of commercial negotiation, and one which seemed to influence very considerably the Sheffield speech, was after all forced upon France by Napoleon III. against the passionate dislike of the French people. This was a singular sort of Radical achievement that we could not desire to repeat if even it were possible. “If we had been still under the Constitutional regime"—said the Protectionist who held his umbrella over Cobden's head as they left the Corps Legislatif together in a shower of rain—“If we were still under the Constitutional régime, your treaty would never have passed. Not twenty-five members of the Chamber would have been for it.” France would far rather that we should put our tariff up than that we should pull her tariff down. The Protectionist system is rooted in her national instinct and in her social organisation. As Bismarck said in this connection, France has been Protectionist since Colbert. If we directly endeavoured to meddle with her fiscal arrangements it would be fatal to the political relations between the two countries. Again, there is the great practical difficulty that the agricultural majority in France, having no intention of abandoning Protection for itself, cannot think of denying under the tariff a fair equivalent for manufacture. How can we seriously propose to continue the suggestion that Lord Lansdowne should begin the hopeful task of trying to pull to pieces the national organisations of Europe in the name of Retaliation ? Politically, as in France, so elsewhere. Either we should fail and be stultified by the Governments, or we should succeed and be hated by the peoples. Economically, this policy is foredoomed to failure by the inextricable association of protective and financial purposes in the tariffs of all the great Powers. Even the American Democrats, while reducing the Dingley rates, would maintain for “revenue only ” a tariff higher than the present protective rates of almost any country in Western Europe. Russia raises from the tariff what she could raise from no other source of taxation. Neither Germany nor France could dispense with heavy duties upon manufactured goods without dislocating their Budgets. And once more, if some countries yielded tolerable concessions while others did not, what human faculty could work a piecemeal or intermittent tariff against selected nations. The cost of collecting the petty proceeds would be greater than that of manipulating Mr. Chamberlain's general tariff for the purpose of raising many millions of revenue. It would be intolerable to the country and ruinous to business that some interests should be temporarily protected and some not, according to the particular country upon which we thought it necessary to inflict fiscal punishment. We cannot work fiscal reform upon the principle of the “In-and-Out" clause. No country has ever attempted in this way to conduct a policy involving all the inconveniences of a bad tariff with none of the advantages of a good one. Retaliation would be infinitely pernicious if it were not quite impossible. In no case will the counties have anything to do with Retaliation ; and since we know that no method of this kind can abolish foreign tariffs or secure fiscal equality, it would be well to make it clear to the Unionist manufacturers and Unionist rank and file in the industrial boroughs that Retaliation implies our remaining a free importing island in return for some small illusory abatement of foreign tariffs. A national tariff, while placing British capital and labour upon a permanent footing of competitive equality with their commercial rivals, would bring a more powerful leverage to bear upon the present protective rates of other countries than the Foreign Office could ever exert. The real object of Retaliation appears to be to enable the members of the Government to claim the name of Free Traders and to repudiate that of Protectionists. But we are all universal Free Traders in theory. May we not all take it for granted f And whether any of us call ourselves FreeTraders is as immaterial to the argument as though both parties to the Russo-Japanese conflict were to go into the present war under the name of Peace Rescriptists. The whole strength of that section of the party which does not intend to swerve under any circumstances from either of the main purposes of the Imperial programme will nevertheless be given to maintain his Majesty's Ministers in office for as long as the situation in the Far East or in South Africa may render it necessary. But since the Wharton amendment we can no longer justify upon fiscal reasons the support we shall continue most firmly to extend on patriotic grounds. If the Sheffield proposals me an equal competitive conditions as against foreign manufactured goods, there will be unity upon at least one question broad and solid enough to offer a foundation for the party. Otherwise the party must be shattered as all men now perceive. If Retaliation does not mean a general tariff then there is no agreement between the Government policy on the one hand, and either the national or the Imperial branches of Mr. Chamberlain's programme on the other. If the General Election is fought on Retaliation it will be most assuredly and disastrously lost on Retaliation ; nor will the Unionist party return to power again except as the decisive advocates of a permanent tariff for the defence of British industry as well as of Imperial union through Federal Trade. But, above all, this battle we are engaged in is a battle of belief, and the Prime Minister of England cannot afford to be a passive spectator of a political struggle in which, whatever may be the issue, the destinies of the Empire are most assuredly at stake. If we are right, lead us : if we are wrong, let us be resisted. Men must take sides in this matter, where clean decision sooner or later must divide as with a knife conviction from conviction. You have explained that you are in sympathy with Mr. Chamberlain's ideals and are actuated by no opposition of principle to his methods. In this struggle of a great cause against great forces the party must walk by faith, its leaders must lead by principle. They cannot wait for ever upon expediency. You tell us to convert the people. Yes, but will you help us to convert them ż Will you cast aside even now the dead formulas of this controversy and take up its living causes f No finer and sterner moral question ever confronted a leader in English politics. We, who write such things with no glad hearts, out of a loyalty to the Empire that is greater than our loyalty to you, are no longer certain how you will answer us, but we know well that your answer will be significant for much in all our fortunes.

I beg, sir, to remain,
your obedient servant,
PREFERENCE.

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