Labor’s tortured path
to protectionism

Paper submitted to the sixth biennial national
Labour History conference
Wollongong, October 1999

Phil Griffiths
Department of Political Science
Australian National University

Globalisation and economic rationalism have come to be associated with a wholesale attack on vital government services, jobs and working conditions, and there is a debate inside the Australian labour movement over what to do. Most of those opposed to the effects of globalisation see the nation state as the only defence working people have against the power of market forces, and appeal to the Labor Party to shift back towards its traditional orientation to protectionism and state-directed economic development. However there has long been another, albeit minority, current on the left which rejects both protectionism and free trade as bourgeois economic strategies benefiting, not the working class, but rival groups of Australian capitalists: in the words of Mick Considine, once the MHR for Barrier (NSW), “It is over the surplus value that is wrung from the working class in the place where they are exploited that the importers and the manufacturers quarrel.” It was with this in mind that last year I looked into some of the early debates within the Labor Party on free trade and protectionism and the process by which Labor moved towards protectionism as part of my History Honours thesis on “The decline of free trade in Australian politics, 1901-1909”.
According to the traditional account, it was Prime Minister Alfred Deakin’s policy of New Protection that was decisive in shifting Labor policy. Deakin promised that manufacturers protected by higher tariffs would be forced to share the benefits with workers and farmers, and the famous Harvester decision of 1907 seemed to fulfil the promise. Labor wrote New Protection into its platform at the July 1908 federal conference, thus, it is argued, accepting protection. WK Hancock wrote of Labor’s free traders that, “Deakin’s invention of a device which seemed to give direct protection to wages, turned them from hesitating converts into ardent testifiers and missionaries” of protection. And in an otherwise subtle biography of George Pearce, John Merritt wrote, that:
After the 1908 Brisbane conference, the fiscal question never again bothered the Federal Labour Party. The decision to support protection was loyally accepted by all members — further proof that the inevitable was recognised and perhaps an indication that had Watson and other leading protectionists chosen to force the issue it could have been settled earlier.
This paper will argue that these assertions are contradicted by the historical evidence. While Labor opinion did shift from 1901 to 1908, the party was divided and equivocal on protection until around 1914 and did not become unambiguously protectionist until 1919. Indeed, far from endorsing protection, the 1908 federal conference saw a backlash against it.

The sheer length and depth of Labor’s commitment to protectionism makes it difficult to imagine popular anti-protectionism within the early party. Yet in 1901, Labor had a substantial free trade minority, and Labor free traders played a significant role in shaping both tariff policy and national politics more broadly. At least four of the nine members of Andrew Fisher’s 1908-9 cabinet were free traders: William Morris Hughes, Senator George Pearce, Hugh Mahon and Josiah Thomas. In Britain at the time, free trade was almost a religion in the Labour Party, given its associations with cheap food and clothing, and the earlier struggle against the Corn Laws and Tory privilege. In 1901, most state Labor organisations refused to support either free trade or protection, leaving it to the individual MP to vote as they saw fit, protectionist Victoria being the exception.
Today we tend to think of tariff policy as having just one role, the protection of an industry from overseas competition, or, conversely, the opening of the Australian market to imports in order to ensure the international competitiveness of local industries. However, in 1901, there were three dimensions to the debates over tariffs: taxation, industry protection and class. For most colonies before federation, especially Victoria, tariffs were the source of much government revenue, and a high level of revenue was vital for the development of railways, ports, bridges, telegraphic services and other vital elements of infrastructure to the point where in 1897, the total revenue of the Australian colonial governments was a third of that of the British government. However, while tariffs in part facilitated economic development, they were also a tax, raising the price of imported goods and burdening those industries and those people who were expected to pay them. Thus in all colonies, there were from time to time conflicts between those who wanted to raise tariffs to finance more government activities, and those who preferred “retrenchment” to reduce the tax burden. There were also sectional conflicts over what commodities should be taxed, and sometimes this involved class conflict. For instance, tariffs on tea and kerosene were popular with the well-off because the burden was placed mostly on the working class, which resented them for the same reason.
There were four sources of free trade opinion within the pre-federation labour movement. Firstly there was the impact on self-educated workers of the ideological dominance of free trade amongst academic economists, British politicians, and in NSW, the mainstream press. NSW Labor MP William Morris Hughes reflected this when he declared that, “Free-trade does not profess to be a remedy; it simply professes to be…the natural order of things.” However this was not a doctrine to appeal to a party that was formed and built out of working-class discontent with the way things were, and which had set out to use the state machine to change things. Secondly, there were the small farmers whose prices were partly set by the world market, but who paid higher prices for farm machinery. Third were both employed miners and small mine-owners, for whom tariffs meant higher prices and threatened jobs rather than protecting them. The miners of Broken Hill and North Queensland elected Labor free traders to represent them in parliament, and West Australian Labor MHR Hugh Mahon summed up their approach in 1901 when he declared:
I do not consider it any function of government to rob me in order to put money into the pockets of capitalists. I do not consider it is any function of government to foster a factory in Footscray and close down a mine in Western Australia…
NSW Premier, George Reid, had given free trade a considerable radical veneer in the mid-1890s when he tried to introduce income and land taxes as part of a package to cut tariffs. The Legislative Council’s refusal to pass most of his measures, and his violent campaign against the Council, which promised to break its power, added to his radical image. But by the time Reid moved to federal politics as leader of the national Freetrade party, he had ditched all his radicalism, rejecting land and income taxes and eventually redefining his party as anti-socialist and anti-Labor. Where Reid’s Premiership had rested on Labor support, his shift to the right in federal politics brought him more and more into conflict with Labor, ultimately undermining the free trade current within Labor. Where Reid now promoted the revenue tariff as a legitimate method for raising funds for government, Labor free traders were uniformly hostile to it as a burden on the working class. As George Pearce constantly reminded people, Labor’s fiscal policy was for direct taxation through income and land taxes.
As well as a free trade current, Labor also had a large number of fiscal atheists, people who refused to choose between free trade and protection. This indifferentism was underpinned by two compelling observations. The first was that strife between free trade and protection had split the party and made it helpless in New South Wales in the early 1890s. It would be difficult to exaggerate the sensitivity within the entire Labor party on this point, and it was one of the factors which discouraged Labor protectionists from pushing the party to adopt a protectionist platform. The second observation was that neither fiscal policy had been of any benefit to the workers during the recent Great Depression. However unemployment had been highest in protectionist Victoria, leading Scott Bennett, a Victorian MLA, to express his scepticism at Labor’s 1905 federal conference:
whilst he had to vote with Victoria in this matter he was a fiscal atheist. The condition of the workers had not improved under Protection in Victoria, nor had it advanced in countries where they had Free-trade. 
Many, perhaps most, Labor politicians regarded the fiscal debate as being of second rank importance. JH Catts declared:
I am strong neither on free-trade nor protection. I do not think that the great problem which confronts Australia and other countries to-day is so much one as to increasing production or wealth as it is of securing a more equitable distribution of the wealth that is already produced.
The first Australian tariff was introduced by Customs Minister Charles Kingston in October 1901, and MPs debated virtually every single tariff proposed, sometimes at great length. While Labor was divided over free trade and protection, it
was united and solid against purely revenue duties, and took steps in caucus to select a list of such items upon which to vote as a party. In all sixteen items were agreed to, including tea and kerosene, cotton goods, etc. — all items which could not be produced in Australia as yet, and duties upon which pressed heavily upon the workers.
Indeed Labor MPs decided to vote solidly for reduced duties once it was apparent that far more revenue would be raised than strictly necessary. Labor concern over items for household consumption saw duties halved on arrowroot, bananas, blue, cocoa and chocolate, oatmeal, mustard, salt, and common soap; while duties were cut by a third on biscuits, candles, jams, jellies, and condensed milk.
One of the most revealing arguments was over proposals from the Protectionist government of Edmund Barton for a tax on tea. It was supported by conservative Freetraders from Victoria, New South Wales and South Australia, who wanted the revenue for their states and were attracted by the possibility of spreading the taxation load “across all classes”. Opposed to the tax were Labor, and radicals from both the Freetrade and Protectionist parties, who opposed its heavy burden on workers and the poor. The most significant feature of the vote, says historian Yvonne Larsson, was the way “it provided guidelines for the future division of the House when the fusion of the non-Labor groups took place in 1909.” The debate was eerily like the modern debates about the GST, with Labor opposing consumption taxes and most bourgeois politicians supporting them. According to Larsson, the Labor party voted with the Freetrade party in 50.39% of divisions, using its numbers to reduce duties and reduce the impact on working class people, small farmers and mining companies.
Deakin proposed New Protection to overcome this class-based suspicion of protectionism. The idea of new protection—linking minimum wages and conditions to protection of local industries—had first been mooted in the early 1890s by Victorian protectionists, though little had been done. But in 1906, with Victorian manufacturers up in arms about their sufferings at the hands of foreign competitors, Deakin moved to put the idea firmly at the centre of his political strategy. Deakin was specifically concerned that the American International Harvester combine was dumping agricultural machinery in the hope capturing the Australian market by driving local manufacturers out of business. Protectionists wanted an increased tariff, but many in the Labor Party argued that this would hurt farmers and give local manufacturers a huge bonus. According to Deakin’s biographer, JA La Nauze, Labor would only agree to a higher tariff if the benefits were shared with farmers and workers, and if the tariff increase was confined to agricultural machinery. In April 1906, Deakin declared, “Not only do we seek protection at the ports, but as a Liberal party we favour the new protection…which has as its motto justice between class and class.” The formula adopted was ingenious. A Customs (Agricultural Machinery) Bill was passed, which substantially raised tariffs, and hence the price of imported machinery. At the same time, an Excise (Agricultural Machinery) Bill was passed, which imposed an equivalent excise on locally made agricultural machinery, raising the price an identical percentage on locally made machinery. The Excise could be remitted to manufacturers who paid fair and reasonable wages, as determined by the Arbitration Court or a state wages board. Then and only then would the manufacturer benefit from the increased tariff.
The immense, potential significance of New Protection became clear in November 1907 when Arbitration Court judge Higgins brought down the Harvester decision, which determined the minimum level of wages that Victorian agricultural implements manufacturer, HV McKay, would have to pay to benefit from the special tariff. Higgins’ historic decision set a minimum wage of seven shillings a day, well above the wage rates paid to most manual workers at the time, and equal to the longstanding claim of many trade unions for a restoration of the seven shillings rate workers had come to expect before the crash of the 1890s. According to John Rickard:
The new protection had not been a primary interest of the labor party during 1906 in either parliament or the electorate… By the following year labor interest in the subject was increasing… then in November 1907 Higgins handed down the Harvester judgment, and this sealed the matter as far as the labour movement was concerned. Not only did new protection “work”, but with Higgins on the bench it seemed much more than just a satisfactory method of filling the gaps left by the State systems… In the party’s tradition of pragmatism the focus for labor attention now became the speedy extension of the new protection formula to all protected industries.
Higgins’ decision galvanised Labor and trade union opinion, and created immense excitement about the possibilities of New Protection. In 1908, JH Catts, the Labor MP for the Sydney electorate of Cook and a fiscal atheist, declared that “it was going to revolutionise the Christian world”, and that by its means “the ideas of socialism were very nearly approached.” Higgins’ decision came down in the middle of the debates on the new, protectionist tariff schedule proposed by Sir William Lyne in August 1907. According to Larsson, Labor’s attitude to the Lyne tariff was very different from its approach six years earlier. There was “no…Labour interest in the ‘breakfast table’ items as there had been in 1901-2.” Labor support for the Protectionists in divisions rose from 40% in 1901-2 to 90%, reflecting the confidence of most Labor MPs that New Protection would deliver benefits to workers in manufacturing.
This confidence was to be betrayed. Three days after parliament was prorogued having delivered the higher tariffs Lyne wanted, the High Court struck down the Excise (Agricultural Implements) Act, invalidating the Harvester judgment. There had been just seven months of New Protection euphoria. Labor’s 1908 federal conference took place about a fortnight later and delegates were very angry. Their primary concern was to reverse the High Court decision and ensure that the Commonwealth had the power to determine minimum conditions in protected industries. In the new Fighting Platform passed in 1908, “The New Protection” is listed second (after “Maintenance of White Australia”) and it is explained in the General Platform as "Amendment of Constitution to ensure effective Federal legislation for New Protection and Arbitration". Since there was no need to amend the Constitution to provide protection, since the manufacturers already had their protection, it is clear that when the conference talked about New Protection it was placing its primary emphasis on the protection of workers in already protected industries. That understanding is clear from the debate. There is no discussion at all of the fiscal issue; the debate is wholly about the virtues of giving the Commonwealth power over the states in industrial matters — a proposition that William Holman from New South Wales and some other delegates opposed. Whatever later historians may write, no-one in the Labor party believed they had adopted protection, nor did they believe that New Protection was the same as protection. The most that can be said is that they were prepared to accept protection providing it was part of a package that delivered decent, court-controlled wages and conditions for workers in manufacturing, historically the site of “sweating”.
Indeed, it appears that the rejection of New Protection by the High Court led to a backlash against protectionism within the Labor party, a backlash which helped delay its formal acceptance until 1919. Towards the end of the 1908 conference, the mover of the New Protection platform, Senator Givens, successfully moved for Labor to reimpose the excise taxes on Australian manufacturers which were part of Deakin’s New Protection legislation, but without the (invalidated) exemption for businesses paying fair and reasonable wages — a measure which would entirely negate the protective element of the tariff. Givens was bitter towards the manufacturers who had benefited from protection, and then appealed to the High Court to avoid sharing those benefits with their employees. He was determined to force them to support change to the Constitution, arguing that:
When Labour sought to secure an amendment of the Constitution to validate the New Protection, the manufacturers would no doubt be against them, but if the excise duties were re-enacted as taxation measures only, then, in order to escape that penalty, the manufacturers would no doubt be anxious to assist the passage of the New Protection. The manufacturers who had moved in this matter had broken faith with those who gave them increased protection.
In his thesis on socio-economic theory and practice of the parliamentary Labor party, David Stockley noted, “The star of the new protection had been much dulled for its committed followers by 1909.” In Victoria in July 1910, the party’s state executive expelled a prominent MLA, Martin Hannah, for setting up a new protectionist organisation which had begun lobbying the new federal Labor government for higher tariffs.
In April 1911, the new federal Labor government proposed an extensive constitutional amendment which would, inter alia, have enabled the federal government to make protection conditional on the provision of court-determined wages and conditions. Labor’s constitutional amendment was opposed by Deakin and the Fusion party and defeated at a referendum. With New Protection even more distant than before, there was a new attempt to get Labor to adopt protection at the next federal conference in 1912, which in itself undermines assertions that Labor had adopted protection in 1908. Delegate T. Chesson from Western Australia moved: “That plank No 2. — New Protection — be amended to read ‘effective protection.’” The backlash caused by the High Court’s invalidation can be seen in the speech made by the former Labor Prime Minister, Chris Watson, who
spoke as one who had advocated protection all along, and he did not think they were justified in disturbing the present plank…personally he did not want much of the old idea of protection for the manufacturer only. To ask the people of Australia to make sacrifices to encourage industries that did not pay fair wages did not appeal to him…
This was the tone of the discussion in general and the move was defeated. However, by late 1914, with Labor back in office, Customs Minister Frank Tudor prepared a new set of tariffs, more protectionist than those in force, but the Tudor tariff was dropped under the pressure of war. Nevertheless, it was not until the 1919 conference that a resolution was carried: “That a tariff be put upon imports, with a view to encouraging and developing Australian industries.” Even then the shadow of the High Court decision hung over the discussion, and there was opposition at the conference to protection on the basis that the tariff had led to high prices, and that the workers had not benefited in the way promised. This was not a resurgent free trade current; opposition to protectionism in 1912 and 1919 was argued from a class perspective.
But what of Labor’s parliamentary free traders? Did they, as is claimed, embrace protection in 1907-8? When Yvonne Larsson came to discuss the 1907-8 tariff debate, she noted that some Labor members:
still chose to support free trade. Hughes and Fowler represented the workers’ consumer interests in urban electorates while Poynton and Thomas Brown considered the small farmers’ interests in rural electorates. Thomas, Mahon and Frazer representing mining interests…
Thus there were only one or two Labor free traders in the House of Representatives in 1901 who were not voting to lower tariffs in 1907-8. Frazer and Poynton, who  joined the Labor caucus after the 1903 election, were still free traders in 1908, somewhat upsetting historical mythology. A reading of William Morris Hughes’ “Case for Labour” columns in the Sydney Daily Telegraph 1908-10 will find a number written from a free trade standpoint.
But if Labor’s free trade MPs did not accept protectionism in 1908, it is equally true that free trade made no headway within the Labor party after federation. Certainly, George Reid’s decision to redefine his party as anti-socialist and anti-Labor meant that free trade ideas were henceforth associated with Toryism. 
The wider structure of free trade politics was also unappealing to Labor, reflecting as it did the interests of the most competitive sections of business such as pastoral production and mining. These employers were those most often involved in the most bitter and violent disputes with the labour movement. So where bourgeois free trade extolled the unfettered market as the deliverer of prosperity and were out to remove all restrictions on trade, Labor free traders wanted to impose limits on the labour market in particular. Indeed, George Pearce, one of the two Labor free traders in the Senate, described the Labor party’s ideal as “the elimination of competition”, and Labor free traders such as Pearce, Hughes and Fisher were amongst the most active demanding the total exclusion of Asian and African immigrants.
In his unpublished biography of Pearce, John Merritt has given us an illuminating study of how one Labor free trader found his free trade beliefs undermined by his nationalism and racism, and his orientation to reform via the state. Merritt has constructed a narrative in which Pearce’s free trade beliefs gradually fell apart as he came to deal with a range of nationalist political issues, such as the expulsion of islander labour from the sugar industry, the protection of white workers from “unfair competition”, and defence. “While Pearce could argue rationally against protectionist theory,” Merritt wrote, “he could not so readily oppose the broader protectionism inherent in Australian nationalism.”
When Labor moved in 1901 that Australian mail contracts should only be given for vessels employing white men, Pearce spoke in favour of this “protective” clause. The expulsion of Islander labour from the sugar industry, and measures to compensate the growers, led to four Commonwealth Acts between 1901 and 1905. Pearce was deeply embroiled in these controversies. He supported the expulsion of Islanders, but initially opposed assistance to the industry, believing that most growers could survive without it. However when a bill was introduced in 1902, imposing an excise on sugar and a rebate for sugar grown using white labour, Pearce voted for it, as he did the following year when the rebate was converted into a sugar bonus. According to Merritt, Pearce felt
it was debatable whether compulsory withdrawal of cheap labour from the sugar industry involved excessive hardship for the growers and he [Pearce] suspected that at least the difficulties had been magnified. It rankled with him to think that the Government might be supporting uneconomic and inefficient production.
Through 1905, the growers agitated for an extension of the bonus, and a new trump card was played: some growers were now employing Chinese workers at low wages and competing successfully against their bonus-assisted rivals. Pearce responded angrily to this development, arguing that the sugar industry had no greater claim to protection from coloured labour within the Commonwealth than any other industry, and declaring that he would prefer a protective tariff on sugar rather than a bounty. His fellow West Australian free trader, Hugh Mahon, also fought against the bounty, and won a limitation on the period of its extension, to the considerable irritation of Queensland Labor MPs. Pearce moved an amendment to the bounty legislation to ensure that the growers who received the bounty paid decent wages — a formula which presaged New Protection. Merritt comments that, “Pearce’s approval of the excise rebate and the sugar bonus was reluctantly given for he knew both measures approximated to a form of protection.” Thus even before Deakin had moved to implement it, the logic of Australian nationalism, and of trying to use the state to improve wages and working conditions, had drawn the free trader Pearce towards New Protection, and to preferring a tariff over a bounty (which was the traditional free trade proposal). When the legislation to protect the agricultural machinery industry was introduced into parliament, Pearce declared that:
Although I am not a protectionist I look upon this as so important a departure in fiscal legislation that I am prepared to waive many of my fiscal objections in order to get it upon the statute book.
The heat was taken out of the tariff issue after 1908. Victorian manufacturers got most of the protection they were after when the Lyne tariff was passed, and after some initial hysteria, NSW exporters decided to accept higher tariffs in order to facilitate bourgeois political unity in the face of a rapidly growing Labor vote. The fusion of the three bourgeois parties/groups in May 1909 was on an explicitly protectionist basis, and meant that formerly free trade MPs were now required to argue for the promotion of Australian industries through protection. Thus there was no longer any substantial bourgeois pressure on Labor to oppose higher tariffs, and in the short term there was little pressure on Labor to increase tariffs either.
Deakin’s attempt to implement New Protection did have a substantial impact on Labor’s economic policy, because it showed the large number of fiscally uncommitted Labor MPs a way to use the state to regulate and guarantee minimum wages in manufacturing while protecting the employer from cheaper overseas imports. One measure of this success (and the decline of free trade as a focus of opinion within the party) is the eventual abandonment of Labor’s platform for a referendum to decide the fiscal issue. In 1904 Labor MPs voted to enter an alliance with the radical protectionists led by Isaac Isaacs. All Labor’s free traders voted against the alliance except Hughes. To mollify them and maintain party unity, the parliamentary party insisted that the fiscal issue should be put to a referendum. The referendum proposal was included in the Labor platform adopted by the 1905 federal conference, and was one of Labor’s major policies at the 1906 election. Labor’s caucus minutes show constant pressure by Pearce during the parliamentary session of 1907 to get caucus to make a decision on how to implement the policy, to no substantial effect. Labor’s caucus minutes note a Referendum Committee report being presented to caucus on 20 November 1907, days after the Harvester judgment was brought down. “Several amendments were given notice of; Discussion ensued & debate adjourned on motion of F.G. Tudor.” And that was the last it was mentioned in caucus. The tariff was passed in May 1908, and the referendum plank was removed from the Fighting Platform at the 1908 conference after a brief discussion.
But the historical mythology that sees New Protection as the end of the debate within the labour movement is unsustainable. The High Court’s decision to strike down Deakin’s legislation saw a backlash against protection within the Labor Party, not least within its most protectionist branch. All the class-based objections to protection were brought back into focus: employers got the benefit, workers faced higher prices, and the movement was divided as “one section of workers…make an arrangement with manufacturers for which all other workers will be obliged to pay”. These class objections gained deeper roots within the party during the subsequent decade, as rising industrial militancy encouraged the growth of socialist and revolutionary ideas. The process by which Labor finally embraced protectionism was beyond the scope of my research. Certainly, the experience of rapid manufacturing development during the First World War, when overseas competition largely dried up, changed the minds of many bourgeois free traders, and we might expect that it had the same impact on Labor politicians. That would be a fruitful research project for the future.