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facture. The sale of their manufactures enables them to buy food from foreign markets. The profits of commerce and of the carrying trade add to their wealth. The volume of trade is a fairly correct index of their national income.

But the circumstances are different in India. The external trade is carried on by foreign merchants with foreign capital. The profits of the trade come to Europe and do not remain in India. The, earnings of the foreign trade are not the earnings of the people. The volume of the foreign trade is not an index to their national income. In the year 1881-82, under Lord Ripon's reign of peace and comparative prosperity, the total imports and exports of India were 83 millions sterling. In 1900-1901, a year of famines and distress, the total imports and exports were 122 millions. Who that knows India, or has heard anything of India, will say that India earned more, or was better fed, and was more prosperous, in 1900–1901 than in 1881–82 ?

Commerce, even when carried on by foreign capital and foreign merchants, is beneficial to a country. It brings in articles cheaper than the country can produce. And it also brings a higher price for the home-produce than can be obtained at home. In both these ways commerce is beneficial, even though the profits of trade go to other lands. But in India, even this benefit is restricted because her foreign trade is forced, not natural. The excise imposed on cotton manufactures restricts the production of articles which the country could produce. And the Land Revenue system of India, as well as the Home Charges, forces the export of food grains, much of which the country needs for its own population. Thus large imports of cotton goods into India are secured by restrictions on the Indian industry. And large exports of food are compelled by a heavy Land Tax and a heavy Tribute.

CHAPTER IX
HISTORY OF TARIFFS

IN a previous chapter we have narrated the history of Indian Tariffs down to 1879, when Lord Lytton sacrificed an important source of Indian revenue in a year of war, famine, and deficit. His successor, the Marquis of Ripon, concluded the Afghan War, established peace, and secured a surplus. And his Finance Minister, Sir Evelyn Baring, now Lord Cromer, abolished the remaining Import Duties in March 1882,-excepting those on salt and liquors. There was some justification for the abolition of im– port duties in a year of peace and prosperity. Nevertheless, Lord Ripon and his Finance Minister would have acted more in the interests of the people of India, if they had, in the first instance, withdrawn the Cesses which had been imposed on land, since 1871, in addition to the Land Revenue. While agriculture, the main industry of the people, remained overtaxed, it was not fair to surrender a legitimate revenue derived from customs, which did not operate as a protection. No fresh import duties were levied for twelve years, between 1882 and 1894, except a small duty on petroleum imposed in 1888. But the steady increase in Military Expenditure which was made after Lord Ripon's departure from India, the large addition in the army sanctioned by Lord Dufferin, and the mischievous activity of Lord Lansdowne's Government beyond the frontiers, disturbed the financial equilibrium of India. And the fall of the rupee created difficulties in remitting to England the increasing Home Charges

which were paid in pounds sterling. It is remarkable

suggestion of Import vite the least of the Commit

how little of the increase in Indian expenditure, between 1884 and 1894, was due to improved domestic administration, and how much of it was due to extravagant military charges and impoverishing Home Charges. In 1894 the Indian Government found itself face to face with a deficit of over two million sterling.

Lord Herschell's Committee was appointed to inquire into the possibility of further taxation in India. The Committee came to the conclusion that, “ Of all the suggested methods of adding to the revenue, the reimposition of Import Duties would, according to the evidence before us, excite the least opposition, indeed it is said that it would be popular.” But the Committee took care to add that any attempt to re-impose duties on cotton goods would meet with great opposition.

Accordingly, in March 1894-twelve years after the abolition of Import Duties by Sir Evelyn Baring—they were re-imposed on articles imported into India, other than cotton. A duty of 5 per cent. ad valorem was imposed generally on all articles with a few exceptions. Iron and steel paid i per cent.; petroleum, which paid id. per gallon; and railway materials, industrial and agricultural machinery, coal, raw materials, grains, books, and miscellaneous articles were duty free. The Bill was vigorously opposed in the Legislative Council, specially on the ground of the omission of cotton from the schedules ; and Lord Elgin, in passing the Tariff Act in March 1894, hinted that it was not a final measure.

It was indeed a very temporary measure. For in December 1894 a fresh Tariff Act was passed, including cotton fabrics and yarns, on which a duty of 5 per cent. ad valorem was levied. But the Indian Government thought it wise to propitiate Manchester by imposing a countervailing Excise Duty of 5 per cent. upon yarns produced in Indian mills, which could compete with Lancashire yarns. As a rule, Lancashire manufactures, imported into India, are of the finer classes; and goods, produced at Indian mills, are of the coarser kinds. But in some of the medium yarns, the two supplies—Lancashire and Indian-might overlap; and a 5 per cent. Excise Duty was imposed for these “counts” in which there was an element of competition. The Indian yarns “above twenties,"—i.e. those of which more than 20 bundles of a specific length went to 1 lb.—were excised.

But British manufacturers were not satisfied. A debate took place in the House of Commons on January 21, 1895, and Sir Henry Fowler, Secretary of State for India, made a significant statement: “Her Majesty's Government would, in concert with the Government of India, consider the matter with a view to carry out loyally the declared intention to avoid protective injustice."

Six days after he received a deputation from Scotch manufacturers and exporters of dyed cotton goods to India, which specially brought forward two points :

(1) That they sent cotton yarns of low counts to Burma which had to pay a duty of 5 per cent., while yarns of Number 20 and under from Calcutta and Bombay paid no duty on entering Burma.

(2) That Indian goods paid 5 per cent. excise duty only on the grey yarns from which they were made, while bleached, dyed, woven, and printed British goods paid a 5 per cent. custom duty. Thus bleached, dyed, woven, and printed Indian goods enjoyed a fiscal advantage.

On May 27, 1895, Sir Henry Fowler received another deputation of Lancashire manufacturers and exporters of cotton goods. The deputation was invited to send a statement of facts and arguments. This was duly submitted. But the Liberal Government fell in June 1895, and Lord George Hamilton became Secretary of State for India with the return of the Conservatives to power.

The Conservative party were bound by many pledges and semi-pledges to the Lancashire voters. And they went further in making concessions to the Lancashire demand than the Liberals had done. In September

1895 Lord George Hamilton addressed a letter to the Indian Government, from which we make the following extracts:

"The Lancashire deputation lay stress on the statement that it is impossible to work fairly, to both the Indian and British manufacturer, an artificial dividing line at 20 s., or at any other count.”

"It would be best for India, as well as for the United Kingdom, that the Indian ports should be free from custom duties, as they practically were from 1882 to 1894. But if the condition of the Indian finances compels the Government to retain the import duties, then it is necessary that the duties should be placed on such a footing as will not infringe pledges that have been given, or afford ground for continued complaint and attack.”1

Slowly but surely the authorities adopted the fatal policy of putting an excise duty on all Indian woven goods. The line drawn at 20 s. count was to be removed ; yarns were to be freed; and all woven goods, including the coarsest Indian manufactures with which Lancashire did not compete, were to be excised.

On January 16, 1896, Lord Elgin wired to the Secretary of State, asking his approval to a new measure imposing a 33 per cent. duty on all woven goods, and exempting all yarns. Lord George Hamilton wired his approval on the next day; and an Indian Tariff Amendment Bill and a Cotton Duties Bill were introduced in the Governor-General's Council.

It can be easily imagined that this determination to revise the Tariff Act passed only a year before, and to subject to an iniquitous excise tax the coarse cotton goods of India, which did not compete with any European goods, raised angry protests from members of the Governor-General's Council - official and non-official, Indian and European. The debate took place on Feb

1 Despatch, dated September 5, 1895.

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