The following diagram illustrates the case of competition
with foreign transportation enterprises :



The railways B and C stand in a competitive relation with
regard to the freights from the production centre of country A
to the consumption point in country C. The line C may be
forced by this competition to grant exceptionally low rates
to freight from the country A, while no such compulsion
exists in motives of private profit for the granting of similar
rates to the domestic centre of production of the same goods,
since to the latter no other road to market is available.
The foreign product will in fact be given more favourable
terms than the domestic. A particularly apt illustration



170 ECONOMIC PROTECTIONISM

of this procedure was afforded by the competitive struggle,
especially keen in the decade of the 'nineties, between the
German and Austrian railways for the transportation of
Russian grain to southern Germany,

Such occurrences drew public attention to the economic
significance of railway tariffs ; the economic interest of the
community received continually greater emphasis, and finally
the freight rates on imports were transformed from an
obstacle into an instrument of the protective policy, from
a compensating into a supplementary impost. In this pro-
cess, however, a difficulty had to be overcome which lay
in the generally recognized commercial-policy principle of
inland parity or uniformity of treatment within the home
country. It is to be borne in mind that three prin-
ciples come into play in the mutual economic relations of
sovereign states. These are the principles of (1) reciprocity,
(2) most-favoured-nation, and (3) inland parity {Inlands-
paritat).
