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PUBLIC RECORD OFFICE, LONDON

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14. Finally I may perhaps add a word as to Colonial preference though it is not specifically indicated in the papers under consideration. Our present import duty is 12 per cent (10 per cent pre-war plus 2 per cent war tax) and is of course purely a revenue tax. We cannot afford to reduce it, at any rate below the old 10%. Preference therefore can only be adopted in our case by either making the 12% rate stereotyped for foreign goods while reverting to 10% for Empire goods or by making the rate for foreign goods say 15% (at least) while keeping the rate for Empire goods 124%. Having regard to our considerable dependence on America and France this must necessarily involve a considerable increase in the cost of living-a factor which must retard our development, since the cost is already burdensome enough to be repellant, while the penalising of two such prominent Allies will, as it seems to me, present a somewhat ignoble spectacle.

A. R. SLATER,

Colonial Secretary, Gold Coast. May 24th, 1917.

Enclosure VII in Confidential Despatch 15th August, 1917.

GOLD COAST.

No. 823.

GOVERNMENT HOUSE,

ACCRA.

8TH NOVEMBER, 1916,

SIR,

I have the honour to acknowledge the receipt of your Despatch No. 338 of the 1st June forwarding. copies of the Report of the Committee appointed to consider the position of the West African trade in Palm Kernels and other edible and oil producing nuts and seeds.

2. I have now the honour to enclose the following documents :-

i. A copy of a letter from the Attorney General to the Colonial Secretary forwarding a draft of a Bill which has been drawn up by him in consultation with the Treasurer, the Acting Comptroller of Customs and others.

ii. The Draft Bill in question.

iii. A copy of a Memorandum by the Acting Comptroller of Customs.

iv. Copies of Minutes by the members of the Executive Council on the subject of this proposed

legislation.

3. I propose to deal first with the Draft Bill. This has been framed strictly in accordance with the nstructions contained in your Despatch, but there are two matters to which I would venture to draw your attention. Reference to the letter of the Attorney General and to the Memorandum by the Comptroller of Customs will show that, owing to the manner in which consignments of kernels are dealt with on the English market, it will prove to be a matter of great difficulty to obtain "proof of crushing" in respect of any given shipment. It is probable that this point has already been brought to your notice; but I suggest that proof that a given consignment of kernels has actually been landed in a British port would perhaps suffice. The cost of unloading and reshipping, it is probable would prevent kernels which had once been landed in England being shipped elsewhere to be crushed. The suggestion made by the Attorney General in his minute that a Crushers' Association should be formed for the purpose of issuing the required certificate does not appear to me to merit consideration. There would probably be much objection to the inevitable publicity to which individual transactions would thereby be exposed, and it is to be feared that any such Association would be used to restrict prices artificially.

4. With reference to paragraph 8 of your Despatch under reply and to Clause 4 of the draft Bill, I venture to suggest that the power which it is here proposed to vest in the Governor in Executive Council, is one which is ordinarily recognised as belonging exclusively to the Legislative Council of a Crown Colony. In the recent Ordinance imposing an export duty on cocoa power has been taken, it is true, for the Executive Council to reduce or alter the duty in question within certain prescribed limits; and though this course is very unusual it in this instance found its justification in the fact that immediate action might on occasion be necessary to relieve the cocoa farmers in the event of a sudden fall of prices. To give to the Governor in Council power to increase a duty imposed by the Legislature is, however, a wholly new departure, and one

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moreover which is sure to be stoutly opposed, on grounds which it will not be easy to resist, by all the unofficial members of Council. I personally should view such a usurpation by the Executive Council of the powers hitherto entrusted solely to the Legislature with very grave misgivings, and I earnestly trust that you will be able to see your way to allow the necessary amendment to be made to this Clause of the Draft Bill.

5. With regard to the concluding paragraph of the Attorney General's letter forwarding the draft Bill I am in agreement with the opinion expressed by the Colonial Secretary which is as follows:-

"As regards the last paragraph of Enclosure I think provision for such a concession might be "made in so far as duty due on kernels consigned to the United Kingdom are concerned: i.e. "the duty due might be waived and the bond cancelled: as we have no desire to encourage ship-

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ments elsewhere (that being the theory) I do not see why we should remit (i.e. refund) duty which will have been already paid."

6. I note that, as stated in paragraph 3 of your Despatch, you are of opinion that there is no reason why the proposal to impose an export duty on all kernels which are shipped for crushing to any place beyond the limits of the British Empire should not be imposed forthwith. In these circumstances, I have felt great diffidence in dealing with this important question, and I have only collected the written opinions of my principal advisers, and now lay them before you, because this matter has never yet been locally considered, and it appears to me that before any final action is taken it is my duty to place you in possession of my own views and of those of the experienced officers whose opinions I have invited.

7. Although during my last leave in England I was a member of the Committee appointed to consider this question, its enquiry was not completed and its deliberations upon its Report had not been begun when I returned to duty in November last. I, therefore, had no opportunity of influencing its decisions; but I expressed the opinion to several of my colleagues that the imposition of the proposed export duty would inevitably tend to reduce local prices. This opinion was not shared by the members of the Committee who represented the West African mercantile interest; but my conviction as to its soundness remained unshaken, and having regard to local trade methods and conditions, I do not see how it is possible that any other effect should result. In this connection I would invite your attention to the following passage in the Memorandum drawn up by the Comptroller of Customs who, it will be noted, has throughout been actuated by a desire loyally to support the proposal. He writes :-

"He-viz. the exporter-will never know at the time of shipment whether he may or may not "have to pay the duty, and naturally as a business nan he will insure against loss to himself in the "matter by deducting the duty from the price he pays in the first instance to the native. The "net result will be that unless some other condition of exemption be found the native producer will "be victimised to the extent of £2 per ton whether or not the duty has to be paid." And again :--

Our merchant does not buy as a rule for a special market, and the fact that it is known at "the time of purchase that he may have to pay an export duty will give him a sort of excuse for

paying a lower price. He will not explain, of course, to the native seller that the kernels will to Hamburg only if they fetch £25 per ton there as against £20 per ton in Liverpool."

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In this connection, I should perhaps add that no change in taxation such as increased import duties has been suffered during recent years to be made without an immediate alteration of prices following which sufficed not only to defray the enhanced duties but also to leave an appreciable margin of profit in the hands of the merchants. Similarly, when in 1912 railway rates were reduced on the Sekondi-Kumasi line, no fall in the price of imported goods offered for sale at Kumasi, for example, followed, and the advantage, which it was intended the general public served by that line should reap, was mainly secured by the mer- cantile firms only. In the present instance I am convinced that the uncertainty which will prevail at the time of purchase as to whether an export duty will or will not have to be paid on any given load of kernels cannot fail to be taken advantage of with the result that the prices which the local producer will in future be able to obtain will certainly be considerably smaller than they otherwise would be.

8. I would also direct attention to Schedule A to the Acting Comptroller of Customs' Memorandum. From this it would appear that though the price of palm kernels at Liverpool was £22 68. Od. per ton in January, 1916, as against £22 58. Od. per ton in January, 1914, the local prices were from £3 10a. Od. to £6 per ton lower in the former than in the latter month. Even when all allowances have been made on account of increased freight &c., it is difficult to avoid the conclusion that the elimination of competition since the disappearance of the German Firms has had a markedly depressing effect upon local prices

9. Were the kernel industry in this Colony in a flourishing condition, or were it one upon which the native population was so dependent that no sudden fall in prices was likely to bring about its extinction, the risk, to which the imposition of an export tax cannot, I am persuaded, fail to expose it, might perhaps be run with impunity. In the Gold Coast, however, the working of palm kernels has of recent years become. progressively less popular, and the exports of this commodity have rapidly declined. These amounted in 1912 to 14,628 tons; fell in 1913 to 9,744 tons; to 5,633 tons in 1914; and to 4,061 tons in 1915. It is probable that the figures for the current year will show a still further decline.