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direction over the recipients of the subsidy. This is in fact a condition upon which any Parliament would require to be satisfied, before assenting to a subsidy. But it would obviously be not only highly inconvenient, but practically impossible for one Government to attempt to exercise this power within the jurisdiction of another Government.

Apart from these general objections, the particular proposal that such subsidies should vary in accordance with the preferential rebates accorded by each Dominion to United Kingdom products would seem impracticable, since—

(a.) It is impossible to arrive at any accurate measure of the money value of the preference to the British trader, as

such value must vary in every case in proportion to the severity of the foreign competition.

(b.) Moreover, in order to make any scheme of subsidies effective, the amount of the subsidies would have to be constant.

(c.) Incidentally, the effect of this proposal would be that, while the direct financial benefit of the preference given by the Dominion in each case would accrue to individual traders, the corresponding subsidy would be paid by the Home Government at the expense of the general taxpayer. On the other hand, even if it were practicable to tax the value of the preference in the hands of the trader who benefits by it, this would simply be to reverse the effect of the preference.

(d.) Such a differential subsidy might operate very unfairly in cases where the same preference is given by two Dominions, but where the volume of British exports differs. It is submitted that it would be inequitable to treat differently two Dominions who accord the same advantage to the Mother Country.

In addition to the above considerations, which, in the opinion of the Committee, show that the administrative difficulties render the proposal impracticable, the Committee are convinced that, were the scheme once adopted in principle, it would be difficult to put a limit to its extension, and it would become almost impossible to avoid budget burdens on a scale too heavy to be contemplated.

II.-Import Licences, and III-Purchase Board (Stabilisation of Prices).

The Committee are of opinion that a system of Prohibition and Licences would involve the establishment of a State Purchase Board and Price Control, and they are confirmed in their view by experience of control not only in Great Britain, but also in Canada, South Africa and India. Reasons for this opinion will appear later (see paragraph 6 (a) and (b) below).

But, in any case, the Committee cannot recommend the adoption of a system of Prohibition and Licences for the following reasons :

1. The system, whatever its purpose, is one to be avoided if any other is practicable, and only to be resorted to where no other can avail. The Genoa Conference, on 'the advice of the British. Empire Delegations, adopted a resolution (Articles 6, 7 and 8 of the Report of the Economic Commission, Cd. 1667) declaring that "These measures [i.e., import or export prohibitions or restrictions] constitute at the present time one of the gravest obstacles to international trade.

"In consequence, it is desirable that no effort should be spared to reduce them as soon as possible to the smallest number."

The reasons which weighed with the Genoa Conference when they adopted this resolution were generally identical with those set out in the following paragraphs, and they seem to apply with equal force to-day.

2. The operation of the system would produce a paralysing uncertainty in trade from the point of view of the producer, subject to the system of Prohibition. To take the particular case of meat, there would be difficulty in deciding not only how much he should kill, but also at what size he should maintain his herds, and he would probably find further difficulty in negotiating with shipping companies for freights, for the disposal of tonnage would be equally affected by the uncertainty.

Nor would there be only a risk of producers ceasing to produce, if they were liable to be excluded from the market; the importers, who would be directly subject to control, and whose interests would be injured by it, could never be relied on to deliver supplies promptly on the issue of a licence, if they thought they could profit by producing artificial shortages.

It would be impossible, in short, to count on obtaining, at the moment when they were needed, either the precise amount of supplies or the necessary means of shipment.

It is to be noted that this aspect of the licensing system formed, in the view of the Genoa Conference, the gravest indictment against it.

3. It would be most difficult, even with the best will, to administer the system fairly as between various foreign sources of supply and various importers. Constant complaints would be made by applicants who had been refused a licence, alleging that licences had been granted to their competitors in cases like their own. So long as there was more than one importer to be dealt with, the necessity would arise of making an allocation between them, and this difficulty would ultimately, if the policy were persisted in, involve the formation of a single importing agency.

4. The effect of a licensing system, as of an import duty sufficiently high to produce an equally exclusive effect, is to give. an enhanced value to goods admitted to the country; but there is the fundamental difference that the import duty is paid to the Exchequer, while under the system of Licences the corresponding

sum accrues to the profit of the foreign producer and/or importer of foreign produce,

5. Moreover, a grave objection to the proposal for Licensing lies in the fact that the duty thrown on the licensing authority would be too invidious to be borne.

It would have to grant licences in two events

(i.) If Empire supplies were inadequate.
(ii.) If prices were raised unduly.

In this connection the following points should be noted :-
(a.) The extreme difficulty of assessing accurately the supplies
that are likely to be forthcoming, and therefore, the
additional supplies to be admitted from foreign sources.
(b.) The further difficulty, in the case of meat, of deciding
whether chilled meat is to be excluded if alternative
supplies of frozen meat are available. A gradual
replacement of chilled meat by frozen would not provide
a solution of this dilemma.

(c.) The licensing authority would be placed in an impossible position, in which it would be assailed by consumers for refusing licences, and by Home and Dominion producers for granting them: the maximum of friction would result, and the whole scheme of Imperial development would be liable to be prejudiced.

(d.) Difficulty would arise, from the point of view of price, in determining what amounts of produce should be admitted, and at what price-level the market was to be stabilised. If the quantities admitted were sufficient to make the world price effective on the Home market, no benefit would inure to Empire producers; if not, the Empire price would govern the price of the relatively small proportion of foreign supplies.

6. State Purchase.-As previously mentioned, the Committee consider that the proposal for Import Licences (and indeed any system of Prohibition) would involve a State Purchase Board and Price Control, inasmuch as

(a.) The State could not risk finding itself short of supplies, and would, therefore, be compelled to maintain stocks in reserve, at heavy expense and with considerable risk of incurring losses.

(b.) Control by limitation of imports would create an irresistible demand for Price Control. It has been suggested that consumers might be represented on the controlling authority. If so, experience goes to show that Price Control would be one of their first demands, and the setting up of cumbrous and expensive machinery would become necessary.

The Purchasing Scheme is tantamount to Prohibition, coupled with an equivalent to Import Licences. But State Purchase is open to many of the objections enumerated above, and in addition to the following:

War-time experience has demonstrated that, under control, it is impracticable to let quality govern price, since the variety in quality is too great for the controlling authority to be able to take accurate account of it. Thus, in the case of meat control in Great Britain, it was not found possible to differentiate in price according to varying quality for the same cuts of meat.

Control is also costly, in that experience shows that the profit margins fixed must be governed by the least efficient elements in the controlled trade. Present day margins (in so far as they are excessive) are in no small measure a relic of the wide margins which it was in this way found necessary to establish under control.

Nor is it feasible to confine price control to any one stage. Once applied, it becomes necessary to extend it to all stages. Indeed ultimately the State might find itself involved not only in control, but in the necessity of taking over every phase of the business of marketing. And, having done so, it would probably find that margins had increased rather than diminished in consequence.

While, for all these reasons, the Committee have felt compelled to reject all the alternatives they have been asked to consider, they emphatically agree that it is in the interest of both producer and consumer that profit margins should be as small as is reasonably possible. This is a common interest of the Home and the Dominion producer.

The Committee, therefore, strongly recommend the closest co-operation, alike between Dominion Governments and the Home Government, and between Dominion producers' organisations and Home organisations, in concerting and carrying out any action which is possible for improving the marketing of Empire agricultural produce, including the provision of further statistical information. Signed on behalf of the Committee,

(Signed) P. LLOYD-GREAME, Chairman.

October 25, 1923.

IMPERIAL PREFERENCE IN PUBLIC

CONTRACTS.

The discussion of this subject was begun at the Sixth Meeting, held on Wednesday, the 10th October, 1923.

Existing Practice of British Government.

The Chancellor of the Exchequer, in opening the discussion, observed that while Imperial Preference included preference to the home supplier, and while, so far as the requirements of the public Departments were concerned, they were to a large extent met by manufacturers and producers in this country, the broad principle which His Majesty's Government had adopted was that in public contracts an effective preference should be given to goods produced within the Empire as compared with foreign goods. Early in 1919, following on a discussion in the Imperial War Cabinet, a circular instruction had been issued to all Government Departments, and this had been followed ever since.

No Fixed Percentage of Preference.

Recently, however, a closer investigation had been made in an endeavour to find out whether it would be possible to agree upon a uniform policy for all Departments, and in particular whether there should be laid down a fixed or a minimum percentage of preference. The conclusion had been come to that it was not desirable to fix any definite percentage, or any maximum, nor was it desirable to make any public announcement of the particular preferences given. Of course, for more than one reason it was necessary to retain power to suspend the preference if faced with certain circumstances.

Difficulty of stipulating for Empire Raw Materials.

A further point to consider was whether the preference should be extended to raw materials used in the manufacture of goods. required by a Department, but experience had shown that it was impracticable to lay down an invariable rule, since the exact origin of such materials was often impossible to trace. Nevertheless, administratively it is possible to ensure to a very large extent that the raw materials are Empire raw materials.

It had been suggested, on behalf of the Colonies and Protectorates, that tenders should be called for "duty paid" where a preference is given, so that the benefit of the preference should be secured in all cases. That substantially is the practice of the British. Government. The Chancellor gave instances to show that if there had been any exceptions they were practically negligible in quantity.

Practice of Colonies and Protectorates.

Mr. Ormsby-Gore said he had not much to add, but he would like to take up the point raised by the Chancellor of the Exchequer about the difficulty of tracing back to their raw material sources the

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