Chapter 3
Nationalism, immigration, defence:
the Freetrade world view
While free trade and protection were fiscal policies, they were also metaphors for very different strategies for Australian capitalism. For the entire period from federation to fusion in 1909, there were skirmishes and open fights over a variety of related issues: over the Immigration Restriction Act from 1901 onwards; in 1903 and 1904 over Imperial Preference in tariff rates; and from 1905 over defence.
Many of these issues reflected the Freetraders’ lesser orientation to the Australian national state as a vehicle to advance the interests of Australian capitalism. They had been reluctant federalists. Where Deakin and the Victorian Protectionists were determined to build up the power of the new nation state and use it, the Freetraders had less interest in the powers given to the federal government. Whilst they applauded the establishment of free trade between the states, it was of modest importance, and the power to levy tariffs was likely to be more of a problem than a benefit. They supported the consolidation of the state military establishments into a national structure for reasons of economy and greater effectiveness, but were mostly happy to continue relying on the Royal Navy for defence. John Merritt has commented that some Freetraders…
imagined that all they really had to do was to arrange for a uniform currency and coinage, uniform weights and measures, an efficient and standardised posts and telegraphs service, and a defence force. This was the conservative approach.  It was limited in scope and was traditional in that the need for a central authority to supply and supervise these conveniences and services had largely initiated the Federation movement in the first place.
This relative disinterest created immense problems for the Freetrade party. It was competing with parties that had substantial national agendas, in tariff policy, immigration control, defence, industrial relations, and the promotion of a new nationalist ideology. It was often said that Reid had no policy, just “a necklace of negatives” in Deakin’s cutting phrase. This is usually attributed to Reid’s supposed “indolence”, yet it is more satisfactorily explained on the basis that the Freetraders preferred a minimalist federation, and often found themselves warning people not to believe the chimeras of protection, Arbitration, and other forms of state intervention and provision. However all this became electorally damaging.
Underlying the federal minimalism of the Freetrade party were profound economic interests. The great export industries, pastoral and mining, were still the major engines of economic growth in New South Wales, and this can be seen by the extraordinary growth in that state from 1901 to 1906 — especially when compared with Victoria, which relied much more on capital accumulation from manufacturing and food production for the domestic market (see Appendix, Tables 1 and 4). The fundamental economic strategy of New South Wales governments before federation was to improve infrastructure for their pastoralists, mining companies and traders. The great export industries did not need protection at home, and they were so competitive in price (and quality) that they would conquer any market not closed to them, which is why the dominant party came to identify itself as Freetrade. They had come to see their prosperity as a product of global conditions, access to markets all over the world, and hence their world-view was free trade and their security could only be underpinned by the global military might of the British Empire.
By contrast, the economic strategy of Victorian manufacturing from the 1880s, to capture new markets in the region, could only succeed if a tariff wall was built around them to keep out the more competitive exports of rival manufacturing economies. Tariff walls require military power to enforce them, and popular sentiment to accept the consequent higher prices, so protection, immigration control, military strength and nationalism became central elements in the Victorian strategic mix which called itself “protectionist”.
The Victorian strategy can be seen in its enthusiasm for federation, which at an economic level was partly aimed at grabbing as much as possible of the New South Wales market, which in turn required an Australian tariff wall against Victoria’s foreign competitors there. Michael Dunn argues that colonial manufacturers had dreamed of expanding into the immediate South Pacific and excluding their foreign rivals. This was no doubt one of the major motivations behind the Victorian government’s obsession during colonial times with every non-British movement into the South Pacific. They strenuously tried to get the British to stop the French sending convicts to New Caledonia and later taking part control of Vanuatu (the New Hebrides) and to keep Germany out of New Guinea.
Greg Melleuish has made a parallel argument from a liberal, culturalist perspective. He too sees two very different liberal traditions which “related to the different economic policies adopted by the two major colonies.” He sees the conflict as one “between two differing value systems regarding nature, human nature and foundations of human society.” The Freetraders of New South Wales had a view of the world that emphasised natural laws, harmony, internationalism and the brotherhood of man, whilst Victoria’s Protectionists emphasised an inward looking nationalism that saw the growing power of the state as the key to dealing with abuses. It was their “mingling of xenophobia and idealism that led to their success.” The long term consequences of the Victorian Protectionist victory were appalling; a “narrowing of cultural contacts” and an indifference, inwardness and “inability to care”. While Melleuish’s method is arbitrary, there is much truth in his description of the rival cultural approaches and ultimate consequences.
Some of the differences between Freetrade and Protectionist politics became clearer and more defined in the years immediately after federation in two major defence-related debates — over immigration policy and Imperial Preference. Before federation, both Sir Henry Parkes and George Reid had been prepared to push through legislation restricting Chinese, and later all Asian immigration into New South Wales. There appeared to be no substantial difference with Victoria. That changed with the first federal election in March 1901. The appointed federal ministry decided to campaign around a promise to introduce White Australia as a unifying policy, something to broaden its base of support during a strident debate over free trade and protection.
Reid objected; as far as he was concerned, the matter was not controversial and a side issue. There were hardly any Asian people entering Australia and the situation was under control. He had totally missed the point. For Labor and Deakin, the White Australia policy was not simply about who could or could not migrate, it was about defining the very nature of the Australian nation and Australian nationalism. There is no issue more important for a modern ruling class than constructing a nationalism that grips all classes in society; enabling it to maintain and strengthen its rule. It is an empirical fact that White Australia racism tied both the working class and the Labor party to Australian capitalism and the British Empire in a way that nothing else was capable of doing. The emergence of Japan as a great power, and the fear which that created, shifted the Labor party and most workers to accept both local and British militarism in a way they had never done before. When the Sydney Daily Telegraph wanted to discredit the revolutionary Industrial Workers of the World, it warned that they would invite Chinese and Japanese workers to Australia.
In parliament itself, the Freetrade party soon became identified as being “soft” on White Australia. The Freetrade party complained constantly about the severity and arbitrary nature of the provisions of the Immigration Restriction Act, and the offence it caused to Asian people and nations. They didn’t like the way it was associated with trade union attempts to limit labour market competition. It is significant that the one member of parliament to oppose and denounce the Act outright was the free trade ideologue and shipping magnate Bruce Smith. He declared that, “the foundation of the Bill is racial prejudice,” and asked “whether we British people are the most entitled to talk” of purity of race. He denounced the hysteria surrounding the issue, pointing to the infinitessimal numbers of Asian people coming to live in Australia. “I do not say that it is desirable that they should all be allowed to come here,” he said, agreeing with “the desire to keep…Australia as British as it is at the present time.”
But there is an obligation on our part to deal with this question in such a way that we do not unnecessarily offend the educated classes of those nations which are likely to be of great assistance to us in the future.
Smith was constantly interrupted by angry interjections. His position was shared by few in the Freetrade party, and Reid moved immediately to distance himself from it, but equally, Smith’s position was not disowned by his party.
Concern for the rapidly growing and profitable trade between Australia and Asia would have encouraged the Freetraders to challenge Deakin’s anti-Asian policies more vocally. Sandra Tweedie has found that the money value of Australian exports to the Far East quadrupled from 1901 to 1913, from 2.23% of total exports to 5.58%. The dominant components were expanding wool and ore sales to Japan, as well as flour sales to South East Asia. John Suttor, the NSW Agent in Kobe, Japan, constantly warned that Australian immigration laws and racist attitudes were “well known to our trade rivals and skilfully utilised to our detriment.“
Over the next few years, whilst there was a constant stream of racist agitation from the Labor party — about foreigners monopolising jobs in Western Australia’s mines, about Italians in the canefields — there was also constant agitation from Reid and his party over the administration of the Act. There was a series of scandals over non-British people being refused admittance — including British visitors having their domestic servants deported, and Asian visitors being arrested and locked up. In late 1904, the Reid government amended the Immigration Restriction Act to allow Japanese merchants, tourists and students to avoid the dictation test. Freetraders saw the Immigration Restriction Act as depriving Australia of immigrants. Over many years, the Pastoralists Review argued that:
There is only one rational policy to adopt for the colonisation of the Northern Territory. It is to let the white settlers introduce the coloured labour, accustomed to tropical conditions, which is requisite for the development of the country.
Not surprisingly, Labor politicians constantly attacked Reid either directly, or by association, saying that “those favorable to a Black Australia range themselves in this House behind the leader of the Opposition”. When pension legislation was introduced into federal parliament in 1908, Reid argued that they should be paid to “decent and reputable naturalized coloured persons” because of “the common humanity of all members of the human race”.
The other defence-related issue which sparked a major debate between the two sides, and illustrated the dilemmas facing Australian capitalists, was Imperial Preference, the idea that Australia should impose lower tariffs on imports from Britain (and the white, self-governing dominions). There was an intense pamphlet war on the subject from late 1903 through 1904, and Imperial Preference became a key element of the Deakinite electoral platform from 1903 onwards.
The debate was sparked by Joseph Chamberlain’s 1903 speech in Birmingham in which he called for the imposition of protective tariffs against manufactured imports. German and American industry had grown spectacularly behind high tariff walls. Britain’s industrial supremacy, the basis of its military and naval strength, had supposedly declined because of free trade. Chamberlain proposed the free entry of goods from the empire, and tariffs against everyone else, and wanted the self-governing colonies to give British exports preference too.
There was profound concern in both Australia and Britain at the relative decline in trade between Britain and Australia from the 1880s. Where 66.8% of Australian exports were shipped to the UK in 1894/5, the figure was only 39.1% in 1905. Where only 6% of shipping in Australian ports was non-British in 1881, it was 25% in 1914. Where Australia took 8.5% of Britain’s exports in the 1880s, it took only 5.5% in 1905-9. For the Deakinites, this decline in Britain’s industrial dominance and its trade with Australia were military questions. In a pamphlet agitating for Preferential Trade, BR Wise argued:
political considerations outweigh the economic. The substitution of States for individuals as the competing units of international commerce, the growth of Trusts, the rivalry for the possession of tropical and sub-tropical countries…forced upon us the gravest considerations both as to national defence and our Imperial destiny…fiscal considerations are of minor importance, when the existence of England as a world Power is menaced by many enemies.
The argument for Imperial Preference in Australia was bolstered by pointing out how little of Britain’s market for butter and other farm produce was filled by Australian exports, and held out the prospect of a massive market if only a tariff was imposed in Britain on butter, wheat and meat from non-Empire countries.
The Freetrade party came out immediately and opposed the Imperial Preference agitation, both in Australia and — remarkably — in Britain. In a glossy, promotional book produced for both British distribution and the December 1903 federal election in Australia, Reid politely attacked Chamberlain, arguing that free trade had been the reason for British commercial and industrial success. Where Chamberlain had complained about the United Kingdom “staggering” under the weight of empire, Reid asked: “Whose policy has added millions of square miles to the immense possessions of the British Empire during the past few years?” Senator Sir Josiah Symon warned that Chamberlain’s proposals “may involve England going back to the system of depression from which she emerged into prosperity in 1846.” FT Hickford MLA pointed to the Conservative party’s history of military spending, and linked this to its inclination for heavy tariffs. “The most military nations are now the most protective, and increased fiscal burdens follow a war,” he argued, and summed up the Freetrade party’s broader, internationalist vision.
Commerce is the civilizer of the world, and the extension of international trade and exchange interknitting countries together is the best guarantee for international peace and goodwill.
And Australia’s fundamental interest demanded production for the markets of the world, argued the Deputy Leader of the Freetrade Party, Sir William McMillan. “Australia has peculiar products, all of which even now England cannot consume or absorb.” SJ Jacobs, President of the General Council of the Chambers of Commerce of Australia, made the same point: “We want the world for our raw materials, so that our growth may not be stunted, may not be limited for want of a free market.” However Reid, ever the opportunist, was soon to accept the principle of Imperial Preference.
The friction and debates over immigration and Imperial Preference were dramatically overshadowed by Japan’s war against Russia, and its spectacular naval victory in the Battle of Tsushima in May 1905. This was to become one of the great turning points in Australian history. It gave rise to an immense hysteria and fear of Japan and spawned an avalanche of invasion literature and fantasies which warped Australian minds for a generation. It profoundly affected defence and foreign policy for the next four decades. To add to this sense of alarm, the Moroccan crisis of May-June 1905 saw Europe taken to the brink of war, and Britain decide to concentrate its navy in the North Sea. This inflamed the longstanding fear that Asia might attack when Britain was tied up in a European war.
Deakin had long been an anti-Asian demagogue, and Japan’s victory galvanised long standing fears he had held about Japan. In 1901, the Immigration Restriction Act had been “primarily aimed against the Japanese.” Two weeks after Japan’s victory over Russia, he gave an extensive interview to the Melbourne Herald outlining his concerns over defence. “Japan at her head-quarters is, so to speak, next door while the Mother Country is many streets away.” This was his first interview or speech on the subject since federation, and it was to be a constant theme for him from then on. Within weeks, Deakin was describing his program as “Protection, preferential trade, and population” — each point linking economic and military strategy.
I cannot dwell on the strongest reasons of all why white men should not only be found in Victoria and New South Wales, but in Queensland and every other part of Australia, and that is our peremptory and absolute need for self defence. We have to realise that it is much cheaper to have white settlers planted on the soil than to maintain a standing army to defend unoccupied territory.
It is possible that Deakin’s new alarm about Australian defence, and his new concern about what he saw as the threat from Japan, had an impact on his decision to bring down the Reid/McLean government — one of the great defeats suffered by the Freetrade party. The choice Deakin faced in June 1905 was, from his perspective, unappealing — he had always disliked and distrusted Reid, and was severely critical of his anti-socialist campaign. But Deakin had also denounced Labor, its politics and its caucus, and both Reid and Labor are equally attacked in his “Notice to Quit” speech. Tipping Reid out was an enormous risk, and it is possible that his willingness to finally take the risks involved was in part a result of the new sense of urgency he felt that nation building be pushed ahead, that the population be made to realise the dangers, and his belief that Reid did not share his views about Asia and defence. Indeed, one of the most significant features of Deakin’s Notice to Quit speech is the new emphasis he gives to defence and immigration, issues which are indissolubly linked in his mind.
Our defence forces are inadequate, our ports and harbours are comparatively undefended… There is no safety for us while we are but a handful of people on the fringe of a vast continent, offering a continual temptation to the aggressors of the world… Will nothing arouse us to the seriousness of the position until we hear the knocking of the foe at the gate?
The culmination of Deakin’s new sense of urgency about Japan came in December 1907, when he announced an entirely new defence policy for Australia. It included the formation of an independent Australian navy, involving huge levels of spending, and compulsory military service over three years for young men.
Reid disagreed with just about every aspect of Deakin’s new defence policy. He argued that there was no clear threat, saying that those who believed Japan to be the most likely invader ignored “the fact that the British naval power is at least twice as effective as it was ten years ago.” He denounced the naval scheme as a waste of a colossal amount of money, pointing out that it was opposed by the Royal Navy. He likened Deakin’s compulsory military service to the conscription policies of the militarist powers of Europe. And he condemned as dangerous Deakin’s plan to put Australians in charge of the armed forces. In all this, the limited nature of Reid’s Australian nationalism shone through.
The Prime Minister’s cry of “Australia for the Australians,” in matters of defence, is a contemptible, murderous cry… We want the very best men as leaders the Empire can give us… Patriotism is a grand point to start from, but it cannot supply the place of knowledge and experience gained in high and responsible command on active service…these commands should be for the best men — British or Australian…
Reid finished with an attack on Deakin’s implied militarism. “What an appalling outrage upon humanity, as well as common sense, are those gigantic preparations for war which are sanctified by professions of peace and goodwill!” According to Neville Meaney, “not until after Reid resigned from the leadership of the (Freetrade) party in 1908 were the senior free-trade members won over completely to the doctrine of the Japanese menace and the Yellow Peril.”
In August 1905, after Japan’s historic military victory, one of the leading Freetrade propagandists published an astonishing pamphlet which attacked Australian immigration policy as unjust, offensive to Asian people, and bound to create a dangerous enmity. Senator Edward Pulsford quoted extensively from official Japanese complaints about Australia’s legislation, and the implication their people were inferior. It praised Japan’s economic, political and military progress, arguing that the Japanese people more and more possessed “those qualities and aspirations which are specially honoured by English-speaking people.” Pulsford finished by declaring: “I look upon the whole of the inhabitants of Asia as my friends.” While Pulsford’s views were not those of the mainstream of Freetraders, neither was he out on a limb. The contrast with the Deakinite (and Labor) views of the world could not have been more complete.
The significance of these wider strategic differences between the Freetraders and Deakin was revealed in May 1909, when they were negotiating fusion. Not only did Deakin insist that the Freetraders accept the platform of his newly formed Commonwealth Liberal Party, he insisted on four points in particular, one of which was compulsory military service. Another demanded sufficient funds for the Commonwealth to meet its obligations, and the new navy was one of the Commonwealth’s biggest. A decade of debate, and Japan’s rise, had made Deakin intransigent over defence and White Australia. If there was to be fusion, Cook and the former Freetraders would have to accept a military strategy based on fear of Japan and a measure of independence from British control for Australia’s armed forces.