QUESTION. (Hansard, 16 May 1861)

THE EARL OF AIRLIE
asked the Under Secretary for India, Whether Her Majesty's Government have addressed any Representations to the Local Government of India on the Subject of the Customs' duties which were imposed last year on manufactured Articles imported into India? He said it might be inferred from the manner in which his question was put that those duties were imposed for the first time last year; but that would not be an entirely accurate impression, for duties varying from 5 to 20 per cent. had existed previously; and the late Mr. Wilson, whose loss was a great public calamity, proposed to equalize them by substituting an uniform duty of 10 per cent. That change, however, operated severely in the case of cotton and other articles. The Indian Government was doing its best to facilitate the exertions of those Gentlemen who were enlarging the growth of cotton in India; but as long as these Customs' duties on manufactured articles imported into India were maintained, what they were endeavouring to do with one hand the local Government were to some extent undoing with the other. It appeared to him that every Customs' duty imposed on English manufactures imported into India was a protective duty in another shape, and liable to all the objections to which protective duties were exposed. While, too, these duties tended to restrict the importation into India of cotton goods, they also checked the exportation of raw cotton to England. He saw it stated in a recent number of the Bombay Mail, that the imposition of a Customs' duty had developed quite a mania for cotton manufacturing in India. Eight companies were about to be started, and the working power of the mills was about to be increased tenfold. If this were so, it appeared to him that in thus causing an additional sum of money to be embarked in the cotton ma- 2089 nufacture of India we were reversing the policy we had adopted in this country and forcing capital into unnatural channels. That this was the case it further appeared from the Board of Trade returns; for, whilst there was an increase in almost all the articles imported into this country from other countries in the year 1860, as compared with 1859, yet, in the importation of raw cotton from India there was a falling off in 1860, as compared with 1859, of more than 16 per cent. and that although there was no general falling off in the importation of the material. If the month of January, 1860, and January, 1859, were taken by way of example, it would be found that the increase in the general importation of cotton was much larger in the first month of 1860 than it was in the first month of 1859. He would beg to ask his noble Friend how he accounted for this discrepancy, and how it was that the amount of cotton imported into England from India was less in 1860 than it was in 1859? It would not be difficult to show that the operation of such an impost was to take out of the pockets of the Indian taxpayers a sum much larger than it put into the Exchequer. Their Lordships must remember that these duties had been in operation barely a year, and that their injurious operation had been only partially developed. He trusted that his noble Friend would be able to give their Lordships some assurance that the effect of these Customs' duties, in stimulating the manufacture of cotton in India and diminishing the export of raw cotton from that country, had not escaped the attention of Her Majesty's Government.

EARL DE GREY AND RIPON
said, he thought it was scarcely necessary to say that the Government deprecated as much as the noble Earl himself anything which approached to a return to protection; and, he thought, sufficient proof would be afforded that no such object was contemplated, when it was recollected that these measures were brought in under the auspices of the late Mr. Wilson, than whom a more able or more consistent adherent to the principles of free trade this country had never known. It was necessary he should first remind their Lordships that with regard to the mode by which the revenue was to be raised in India they had very little choice. Its sources were very few, and were confined within very narrow limits. Under these circumstances, 2090 and considering the present state of Indian finance, which, as his noble Friend knew, had more than once shown large and formidable deficits, it became the imperative duty of Mr. Wilson and the Indian Government to do everything in their power to put the finances of India on an improved footing by an increase of taxation on the one hand and a large reduction of expenditure on the other, so that the revenue and the expenditure might be brought to an equilibrium. He must remind their Lordships of what had not been stated by his noble Friend, that the first change in the Customs' duties on these articles had been made not in 1860 but in 1859. In 1859 Mr. Wilson introduced a new Customs' tariff. That tariff was founded, no doubt, mainly on the principles which were ultimately adopted, but it also made a great change in the protective system, to which his noble Friend had not adverted. The previous system of finance imposed differential duties in favour of English produce. These differential duties were swept away. Under the new system there were certain articles of luxury on which at first a duty of 20 per cent was levied; but this was subsequently altered, and an equal duty of 10 per cent was levied on all imported goods. In the course of the year 1860, in order to carry out this equalization, the duty on one article was increased—namely, cotton yarn. The duty was raised at that time; and if he (Earl de Grey) were not mistaken it was the only duty which was raised by the tariff. He was not about to deny that under the increased duties which in 1859 and 1860 were levied upon English produce connected with the cotton trade more activity might have taken place in Indian manufacture, and that to that extent the duties might have had a protective effect. He could, however, assure his noble Friend that they were not imposed with any such object, and that whenever in the opinion of Her Majesty's Government these duties could be safely dispensed with, no consideration of protection would permit them to be retained. Assurances to that effect had already been given by his right hon. Friend the Secretary of State, and he hoped that persons in India who might engage in the industrial pursuits to which his noble Friend had referred, would receive the warning that the present duties would not be continued a single hour longer than was necessary for the finances of India. His noble Friend 2091 had referred to certain trade returns, from which he had gathered that there had been a great falling off in the cotton importation from India in 1860 as compared with 1859, and his noble Friend said he believed that was entirely owing to the Customs' duties which had been established. But his noble Friend had overlooked the fact that these duties were imposed in the year 1859, and not in 1860. This at least was clear, that the duty upon cotton piece goods was not increased in 1860. The whole of the falling off, therefore, to which his noble Friend had referred was clearly not attributable to the cause which his noble Friend had assigned. It was entirely a question of necessity. It was necessary to raise a sufficient revenue in India, and it was from a conviction of the necessity that the Government had sent out no instructions to India for the repeal of those duties. The total amount received from Customs' duties in 1858–9 was £2,867,681; in 1859–60 it was £3,872,000; and the estimated amount for 1860–1 was about £3,900,000. Under these circumstances his right hon. Friend had not thought it right to call upon the Indian Government to alter the Customs' tariff in this respect. His noble Friend had referred to the tariff of valuation which existed in Bengal. Grave objections had been expressed to that tariff; and in consequence of those objections a Commission had been appointed, and was sent to Calcutta to investigate the question. The result of the Report of that Commission was that the tariff had been revised, he believed with the approbation of the commercial public in Calcutta, and also with that of persons interested in the trade of England. In conclusion, he might say it was the earnest desire of Her Majesty's Government to promote the extension of English trade with the east whilst they endeavoured at the same time to provide for the revenues of India.

§ EARL GREY
said, this was a matter of considerable importance, and one which undoubtedly deserved their attention and consideration. The noble Earl who had just addressed the House had said that the character of Mr. Wilson was a sufficient guarantee that these duties were proposed in any way for the purposes of protection. He (Earl Grey) had himself had the pleasure of being personally acquainted with Mr. Wilson, and from his knowledge of Mr. Wilson's high character he could admit the force of that answer. But at the 2092 same time the facts stated by the noble Earl who had introduced the matter had not been disputed, and it was, judging from those facts, pretty clear that the practical effect of these duties was the stimulation to a very large extent of the cotton manufacture in India. He (Earl Grey) thought we ought not to look with any feeling of commercial jealousy on the natural increase of manufactures in India. No one condemned any commercial jealousy on subjects such as this more than he did—it was beneath them to consider it; but at the same time he thought it was for the interest of England no less than that of India that they should not misdirect the industry and capital of India. It was desirable for both countries that the industry and capital of India should be allowed to flow naturally into their proper courses, and should be left entirely to themselves. As far, however, as possible, it was desirable that the Customs' duties in India should be employed for the purpose of increasing in that country the production of raw material, and of promoting manufactures in this country: but, in all cases, the interests of the Indian population would be best consulted if they were left to themselves. It appeared that the duty of 10 per cent upon yarn and other things produced in this country tended to create a very great increase of mills in India, and also to create a good deal of speculation, and if that was the case no petty advantage which we could get from an increased Customs' duty could make up for the great loss which must be sustained from artificially directing the industry of India into a channel in which it would not otherwise flow. The noble Earl who last spoke (Earl de Grey) had quoted the very large increase which had taken place in the Customs' revenue, but he had not told them what portion of this increase was applicable to these particular articles. No one proposed to prevent the Government from getting as much revenue as they could by an increase of Customs' duties, if those duties did not act as protective duties. In our own country we had adopted the principle that all Customs' duties acted as protective duties that were levied on articles which were manufactured in this country and were also imported into it; and last year we carried that principle to almost a pedantic extent. He thought that his noble Friend was justified in asking that the same principle should be applied to India; and that we should not establish 2093 there protective duties against our own principal manufacturing industry, and protective duties which would at the same time have the effect of directing capital to India. They were all aware that the great difficulty of India at that moment was, that she could not find sufficient capital to develop her great natural resources, and the greater that want the more clear was the policy of avoiding any fiscal measure, whatever it was, which would artificially affect the distribution of wealth. As he had already said, any small revenue to be derived would not counterbalance the evil inflicted; for, as his noble Friend said, the tax was condemned on the great principle that it took far more out of the pockets of the people than was brought into the Exchequer; and, therefore, the greater the want of revenue the more careful should they be in imposing taxes, not to press more upon the resources of the country than was necessary to produce the revenue required. He was sure that the Government ought to lose no time in directing their attention to this subject, for it was much easier to prevent a great protective interest from growing up than to deal with it after it had been created: and where there was a great tendency to run into speculations of the kind to which he had referred, it was not enough for the Government to hold out a warning by saying "Do not rely upon these duties, for we shall repeal them as soon as we can do without them." It would be thought a great hardship if, after the speculations had been carried to any extent, mills had sprung up, and people had been collected together, there was to be a change of legislation which would subject the parties to a competition on which they had not calculated. Those considerations convinced him that his noble Friend was right in the view which he took; and he, therefore, hoped that the Government would at once direct their attention to it.