LETTERS TO OVERSEAS READERS.
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No. 4. —Empire Preference and Kindred Matters.
THE BUDGET PROPOSALS made by the Chancellor of the Exchequer in the House of Commons on May let will remain historic, for the reason that they acknowledged openly for the first time the principle of mutual preference as between Great Britain and the Oversea Dominions. They did not, of course, embody anything approaching a complete scheme and can only be regarded as representing a modest beginhing. It happens, however, that motor vehicles and their parts and accessories figure among the few classes of manufactured goods to which the principle of Empire Preference has been applied in the first instance. Moreover the list also includes liquid fuels, such as are used in motorcar engines.
For the Moment there is no immediate advantage accruing to the greater part of the Empire Overseas as a result of a preferential tariff on motor vehicles. This preference may act as a stimulant towards the creation of manufacturing industries in various parts. of the Empire and, .probably, in the first instance, these will be concerned with accessories and components rather than with complete vehicles. In the meanwhile, more importance, from the point of view of the Overseas reader, attaches to the proposal to give preferential terms to motor fuels imported into Great Britain from any other part of the .Empire. There are undoubtedly many considerable oil deposits that have not as yet been seriously exploited. The production of motor spirit from crude oil varies as regards expense and difficulties with variations in the composition of the crude oil itself. Thus, it may well happen that there exist oil fields of considerable capacity which, hitherto, have not been worked, because the cost of producing light fuels would be somewhat heavy, and this would make it impossible to compete on equal terms with the products of foreign wells. A really substantial preference might, therefore, lead to extremely important developments.
It seems rather a pity that, in the first instance, a preference amounting to a remission of only one-sixth of the duty is proposed, while the preference in respect of motorcars amounts to one-third of the duty. On the subject of fuels, we must also remember that the preference can only operate so long as the petrol tax or something nearly equivalent to it remains in force, The Chancellor of the Exchequer has made it clear that he does not like this tax, because the high costs of collection swallow up an abnormal percentage of the proceeds. Consequently, he has ideas of abandoning the tax in favour of some new scheme of licence duties on cars. If this step were taken, the preference accorded to Empire fuels would die a natural but premature death, and any industry built up on the strength of that preference would be placed in a difficult position.
It is, however, certain that British motor manufacturers will strenuously resist any proposal to impose big licence duties in place of the petrol tax. They would, of course, welcome the abolition of the tax, but they would by no means welcome the substitution of another form of taxation whichhas very marked disadvantages. Licence duties must almost certainly be based on horse-power, which must be estimated with the help of some formula. Directly we give designers cause to pay special attention to some arbitrary formula, we, almost inevitably, encourage abnormal design of one kind or another. A formula may, for instance, lead to the production of excessively long stroke engines, or, if a different formula is chosen, it may lead exactly to the reverse. Evidently, we do not want designers to be spending their time trying to build to an arbitrary formula, when they ought to be given a free hand and be merely set to produce the best possible engine obtainable at the price limit indicated to thein In -the circumstances, I think we may take it for granted that there will he very strong opposition to any proposal for altering the ba.sii of taxation to any appreciable extent. Manufacturers know that, if they are coerced into turning out more or less freak machines for the home market, they will lose their hold of the oversea markets altogether. They realize that their future depends alniost entirely on the holding of oversea trade, and they will take good care that the Government fully realizes the position.
For myself, though I should, of course, like to see motoring in Great Britain as free of taxation as pos-:, sible, still I feel that it would be rather a good thing if we could perpetuate an import duty on all liquid fuel with a very substantial rebate or preference in respect of Empire products. Such an arrangement-, should, of course, be reciprocal as among all selfgoverning portions of the Empire. One of its conse-'„ quenees would, I think, be to direct still more atten-. tion to the possibilities of alcohol as a fuel. A long time has passed since We received news from Australia as to the progress of the work which the Alcohol Committee there has taken in hand. My impression is that, in Australia as in Great Britain, the thing has to be held up for lack of sufficiently generous financial support by the Government. If it became clear that, with the assistance of preferential' treatment actually provided, alcohol fuel could be pro• duced in and distributed throughout the Empire at a really competitive price, we should irtmediately have very strong influences set in motion to get rid of irritating excise restrictions and to put the whole Process on a, thoroughly commercial and economic basis. • Reverting to the matter of preferential tariffs on .motor vehicles, we must, I think, expect some rather difficult "questions to come up sooner or later: It is easy to talk about British products, but it is very difficult to define what the term really means. There are few pieces of complex machinery which can be stated truthfully to be the product of any one country. We must, therefore, take some arbitrary percentage of the value of the product and say that, if anything in excess of this percentage is represented by expenditure on Britis1j. labour and material, the product can fairly be called British. The question is, what percentage to select. If we put it too low, the inevitable result is that goods which are, in fact, made of foreign manufactured parts brought on to British ground and then put together are liable to be classified as British. We can easily see how some very difficult points may arise from time to time in this connection.