shares are allotted to the different factories had been more or less modified and made to conform to a changed standard. From year to year the trust became more and more popular with manufacturers, and they more and more readily agreed to join the syndicate. Whereas, in 1887-8, the total number of factories was 219 and the number of those in the syndicate was 171, the total number in existence in 1892-3 was 224, while those in the syndicate the same year numbered 203. In other words, the percentage of all factories in the syndicate had grown from 78 per cent. to 91 per cent. during those six years. Factories in the syndicate in 1892 represented fully 92 per cent. of the aggregate output of sugar in Russia. The fundamental principle of the trust was the right to produce as much sugar as the members might see fit, provided only that they should export the whole of their product above the amount fixed for distribution in the domestic market. According to the most elaborate and careful Russian study on the sugar question, the essential condition of the trust was that all the excess over and above the normal quantities of sugar needed for home consumption should be exported. "There can be no doubt," says this authority, 5 "that only the distressed condition of the industry caused by over-production and the resulting fall of prices brought about its organization. Very likely this over-production was considerably due to excessive tariff protection during the decade beginning with 1870 and 1880. Second, the effect of the agreement among the sugar manufacturers was a considerable alleviation and speedy termination of the sugar crisis of 1886. The majority of the sugar manufacturers stated emphatically to the Minister of Finance that unless an agreement had been reached in 1887 the consequence would have been the bankruptcy and closing up of * about a third of all the factories, and principally the weaker and smaller ones. * *

* *

*

5 Report of Prof. Janzhul, St. Petersburg, 1895, quoted in Monthly Summary of Commerce and Finance, January, 1902, pp. 2618-19.

"These exports are thus not an accidental feature of the syndicate agreement, but the basis on which the sugar syndicate is formed. It is quite manifest that if the sugar syndicate normally engages in unprofitable exports it must recoup itself in the domestic market by charging higher prices than are warranted by the normal conditions of its existence. All the foreign consumer gains is lost by the Russian consumer, and this without any necessity on the part of the Russian producer."

Although by 1892-3 it controlled more than 90 per cent. of the sugar factories of Russia, the sugar combination, with its elaborate mechanism, did not succeed in making the industry profitable. In 1894-5, moreover, the internal revenue tax was nearly doubled, being raised from 1 to 1.75 rubles. At that time application was made by the combined manufacturers to the government that it undertake the regulation of the industry. In consequence of this request the administration assumed the work of determining the quantity of sugar to be marketed at home, the quantity to be held as a reserve stock (ready for sale in case of an excessive rise in prices), and also the price, below which the reserve stock was to be held in the factory, and above which it was to be put on the market. None of the manufacturers were informed in advance of production as to the amount which they would be able to sell at home. That was left to be determined after the year's production had taken place and the relative proportion produced by each factory was known. Each was allowed to sell on the home market over and above a small fixed minimum an additional amount proportionate to his share of the total production. But, as matters go, the sale on the domestic market takes place at a price which renders the transaction very profitable. Each manufacturer wishes to gain as large a proportion of these profitable sales as he can. Hence comes a very large output, much of which has to be exported to foreign countries at an absolute loss. Of course, if all manu

facturers should increase their production in a similar proportion, the share of each in the domestic market would remain the same, and hence all would lose. The unsatisfactory character of the present situation is thus evident.

The bounty system, which has thus been sketched for some principal countries, and which also spread into several others, led very early to serious difficulties. So long as the beet sugar produced under it was not sufficiently large in amount to furnish a basis for export, the existence of bounties could not, of course, cause international difficulties. It was merely a question of how far the consumers of the various countries were willing to submit to conditions which imposed a serious burden upon them. So soon as the industry had, however, developed to a point where beet sugar was exported, the payment of a bounty on successive units of sugar meant that the domestic consumer was practically paying manufacturers to produce for the benefit of foreigners. This was true, no matter whether or not the export bounty arose out of technicalities connected with the return of an internal revenue tax, paid when the sugar was produced presumably for domestic consumption, and refunded when the sugar was exported. It made no difference whether or not this condition of affairs was aggravated by faulty methods of measuring the quantity of sugar extracted from a given amount of beets. The fact of importance was that the different countries were producing for export and were doing so through the agency of the bounty paid to manufacturers, who were thereby enabled to sell abroad at lower prices than they sold at home. The injustice to home consumers implied in this state of affairs will be granted by all those who do not believe in the extreme doctrines of State aid to private industry. Another consideration was, moreover, added when in some countries the bounty payments became so large as to absorb the whole of the internal revenue realized from sugar. Finally, the effect of these bounty-fed exports in lowering prices in neutral mar

kets, and thus destroying the profits of sugar producers in countries where no bounty was paid-as, for instance, in some of the cane-producing countries of South America is well known. A familiar instance of the economic disaster wrought by such a system is seen in the case of the English colonies in the West Indies, which of late years have been practically ruined by the sugar bounty legislation of Europe.

It goes without saying that the dangerous character of the bounty system was very early perceived, and that it was desired to get away from it. As is always the case, however, the existence of protection to the industry had created a strong party in each of the bounty-paying countries, which put forward all of the usual claims concerning vested rights and danger resulting from the abolition of protection. There was, of course, one argument of force in that connection. This was that, inasmuch as other countries had adopted the bounty system, it would be disastrous to the industry in any particular country should its bounty be abolished while other countries retained theirs. In other words, injustice would be done to the exporters of one country, were they left to compete on their own responsibility with the exporters of other countries, who, because of the existence of bounty legislation in the original country, had obtained retaliatory bounty legislation in order to hold their own in the competition. To abolish the bounty in only one country would mean, in a sense, that the government of that country had stirred up foreign competition, and had then left its export interests to fight this increased competition unaided. Moreover, unless a strong system of countervailing import duties should be enforced against bounty-fed sugars of foreign origin by those countries which might take the initiative in abolishing the bounty, the manufacturer who had been induced to enter the industry by reason of the existence of the bounty would not even be able to compete in his own market. Lastly, if such a system of countervailing duties should be enforced, it would

mean that the support of the overgrown sugar industry of the home country would fall exclusively upon the home consumer. Manufacturers would no longer be able to work off a part of their product abroad, even at low prices, and they would therefore be obliged to seek returns on their investment only by charging high prices for a comparatively small number of units of sugar to domestic consumers. The latter, in supporting their home sugar industry, would thus labor under a load even heavier than ever.

For all these reasons it early became apparent that it would be very desirable to obtain an international agreement for the abolition of sugar bounties. Efforts to get such an agreement began in a tentative way many years ago. As early, perhaps, as 1860, or shortly thereafter, negotiations on the subject were entered into between France and Belgium. The subject was also discussed between France and Great Britain, English refiners finding it very hard to compete in the French market, owing to the bounty system of that country. English colonial sugar, too, was beginning to suffer even at that date. Sugar conferences were held in Paris and London in 1863-4. November 8, 1864, France, Belgium and the Netherlands agreed to establish a uniform bounty system, so that their refiners would all stand on the same basis. In order to make the agreement effective, however, it was necessary to determine with great exactness a scale of equivalents between refined sugar and the different grades of raw sugar, so that a proper basis might be furnished for taxation. A commission which met at Cologne undertook to establish these equivalents and finally established a scale which was annexed to the treaty of 1864. This scale was unsatisfactory to refiners because the data used by the commission consisted of average returns, while many refiners were in the habit of working with grades of raw sugar which did not correspond to the averages. Nothing was done, and another conference in 1868 postponed the time when the new plan should go into effect