Story: Customs and tariffs

Page 2. Encouraging local industry

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Vogel’s view

Although most tariff debates concerned revenue, some people saw tariffs as a means of encouraging domestic industrial growth. In 1869 the newly appointed colonial treasurer, Julius Vogel, suggested a protective tariff on imported goods to stimulate local industry, creating jobs and encouraging the development of the colony. Some objected that it would lead to a monotonous sameness in clothing. They were told that they could still import the latest fashions from London, but these would cost more.

All in the name

 

In proposing a border tariff on wheat in 1869 to protect the farming industry, Julius Vogel noted: ‘The word protection is an ugly one, and it would be better if we called it the development of local industry.’1

 

But free trade was a powerfully held ideology in Britain, and its colonial defenders, led by opposition leader Edward Stafford, leapt to defend this principle. Although taxing imports to raise revenue was legitimate, they said, doing so to assist local industry was not. Vogel’s suggestion of a tax on imported grain had raised the spectre of the English corn laws (which protected English corn against competition from imports, and had been repealed in 1849). Vogel’s attempts to encourage industry through tariffs failed, and he had to look elsewhere for ways to revive the economy.

Liberals

The idea of using tariffs for purposes other than revenue persisted. As treasurer in 1878 John Ballance had removed duties on basic foodstuffs. He campaigned on this principle as leader of a nascent Liberal party during the general election campaign of 1890. Ballance’s view, widely shared, was that items of importance to working families like sugar and tea should not have heavy duties imposed on them – the ‘free breakfast table’.

Over the next 20 years the Liberals remained committed to reviewing tariffs – but the only practical outcome was the appointment of the Seward Commission in 1895. The commission received derision for some of its conclusions (it suggested doubling the tariff on playing cards from sixpence to a shilling, on the grounds that cards were a vice). However it did draw attention to the many anomalies and curiosities in existing tariff schedules. Most were the result of special pleading by particular interests.

Fretting over saws

 

One anomaly noted by the Seward Commission was that of fret saws. Hand fret saws could be imported free, but treadle-driven fret saws attracted a tariff.

 

Perhaps for this reason, attempts to reform the tariff by Joseph Ward and then Richard Seddon came to very little. Lack of consistency in tariffs remained a problem for another century. In 1904 Seddon did initiate a preferential tariff for British goods, but the concessions were initially small.

Tariffs on imported industrial items crept upwards as the tariff was revised several times (notably in 1927) – but it generally continued to include a preference concession for British-manufactured goods.

1930s and imperial preference

The financial crisis of the 1930s stimulated rethinking on the tariff question. With the world economy in deep depression and New Zealand exports gravely affected, the coalition governments pressed for Empire free trade or, at least, imperial preference (lower duty on goods from British Empire countries).

But at the 1930 Imperial Conference and the 1932 Ottawa Conference called to deal with the consequences of recession, the UK government refused to budge. It was worried about the plight of British farmers and the effects of allowing free entry to New Zealand’s agricultural goods. The only achievement was exempting New Zealand from newly proposed British agricultural tariffs until 1937, in return for some small concessions relating to British-manufactured goods.

The pressures of returning prosperity, rather than the depression itself, turned government regulation of trade into a major instrument of economic management for the next half-century.

Footnotes:
  1. New Zealand parliamentary debates, vol. 6 (1869), p. 644. Back
How to cite this page:

Tony Simpson, 'Customs and tariffs - Encouraging local industry', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/customs-and-tariffs/page-2 (accessed 16 November 2019)

Story by Tony Simpson, published 11 Mar 2010