556 TRANSACTIONS OF SECTION F, 
5. Interim Report on the Amount and Distribution of Income below 
the Income-tax Exemption Limit. 
MONDAY, AUGUST 30. 
The following Papers were read :— 
1. The Policy of Preferential Duties. By ArncuipaD B. CuarK, M.A. 
The policy of import duties differentiating in favour of trade between 
the different parts of the British Empire as against trade with foreign 
countries, has been advocated partly on economic and partly on political 
grounds. 
The object of this paper was to inquire whether, viewed from 
either standpoint, the policy is in the long run likely to benefit Great 
Britain, the self-governing colonies, or the Empire as a whole. 
Economic Standpoint.—(1) The self-governing colonies are clearly not 
at present prepared to take any serious step in the direction of free trade 
within the Empire. (2) Nor would they be likely to appreciate the 
adoption by the United Kingdom of a policy of all-round protection, 
colonial products merely receiving at British ports preferential treatment 
equivalent to that accorded to British goods at colonial ports. (3) On the 
other hand, any scheme such as that under which the United Kingdom 
is asked to tax imports from foreign countries, and to admit colonial produce 
free of duty as at present—while the colonies continue to tax her produce 
to an extent sufficient to protect their own industries, merely granting a pre- 
ference to British as against foreign goods—is clearly indefensible. 
(a) It is unlikely to increase materially Great Britain’s export trade to 
the colonies. This is shown by considering the nature of the foreign trade 
of the self-governing colonies, and is illustrated by an examination of the 
working of the Canadian preference. 
(b) It would inflict a heavy blow on Great Britain’s export trade to 
foreign countries, compared with which that to the self-governing colonies 
is insignificant. Not only would Great Britain lose the benefit of the 
‘most favoured nation’ treatment, but the taxation of food (which would 
inevitably be followed by the taxation of raw materials also) would, by 
raising its price, raise the cost of production of manufactured goods, and 
would thus handicap Great Britain in neutral markets. Moreover, the 
poorer the family the larger the proportion of the income spent on food, 
and thus the burden of a tax on food would fall most heavily on the poorest. 
Even then, if we concede what is open to question, viz., that the stimulus 
thus given to colonial producers would in the long run enable them to meet 
the demand of Great Britain without any rise in price, still in the interval 
irreparable mischief would be done. If the food-producing colonies have 
any faith in the attainment of this ideal of a self-sufficing Empire, and 
really desire to hasten its advent, an expedient surely less ruinous to the 
Empire as a whole would be found in the granting by them of bounties on 
exports of agricultural produce. 
But from the economic standpoint the whole policy of preferential duties, 
as an ideal, is unsound. It can only be defended as a half-way house, or a 
step in the direction of free trade. A real reduction of protective duties 
in favour of the United Kingdom would no doubt benefit not only the 
Mother Country, but Canada herself. By removing the leading strings of 
protection to some extent, it would so far set free Canada’s productive 
powers to follow their natural channels. But in that case a general 
reduction of duties all round would benefit Canada, and in the long run 
the United Kingdom also, still more. 
