Modern Economic Problems Part 18

Rates (and duties) may be by either specific or _ad valorem. Specific duties_ are those that are calculated and levied according to some physical test, as so much per pound, per yard, per hundred-weight, or per ton. _Ad valorem_ duties are those that are calculated and levied according to the value of the goods (usually as it was at the place of shipment) determined by an a.s.sessor, by invoice of sale, by statement of the importer under oath, etc. The actual duty collected on any article may result from various combinations of the two rates (as, to take an actual example, $4.50 a pound and 25 per cent _ad valorem_ on cigars and cigarettes) or _ad valorem_ with a minimum valuation so that on the cheaper goods the rate is specific.

Specific rates are more easily applied in administration, not offering the temptation to undervaluation and misrepresentation that _ad valorem_ rates do; on the other hand, specific rates do not adjust themselves to price changes as _ad valorem_ rates do. If the prices of goods go up the specific rate is relatively less and affords less of "protection" to the domestic producer; whereas if prices go down (as, in general trend, the prices of manufactured goods have done most of the time) the specific duties are relatively greater. To take a historical example, the specific rate of 6-1/4 cents a yard on cotton goods in 1816 which was at first in fact only about 25 per cent, within a few years became about 75 per cent and absolutely prohibitive. For this reason specific rates have most often been used in acts intended to increase the "protective" duties and often as a device for immediately raising rates; while _ad valorem_ rates have been more often used in acts prompted by the desire for less drastic exclusion and for a more adequate revenue; but there is no essential connection between the protective policy and specific rates. Indeed, in the period from 1897 to 1909, when most prices were rising, many of the specific rates under the Dingley Act, intended to be strongly protective, afforded less and less "protection."[1]

-- 3. Some technical features of the tariff. All goods not subject to duties are said to be on the _free list_. It is customary to group articles in _schedules_, of which there are fourteen in the law of 1913, designated from A to N (for chemicals, pottery, metals, wood, etc.), but the rates are not uniform for all the articles in each schedule. _Drawbacks_ are a certain amount, the whole or a part, of the duties that have been paid on imported commodities, which is paid back by the government on the reexportation of the goods.

_Compensatory duties_ (or compensatory rates) are those levied on certain manufactured articles with the purpose of raising their price as much as domestic producers' costs are raised by a tariff on their raw materials. Examples are a duty on woolen goods to offset a duty on wool, or a duty on shoes to offset one on hides. They may be intended to be partial or complete or more than sufficient, and are likely in any case to work either more or less to the advantage of the domestic producer than was intended. It may be that the conditions of supply are such that the home price of the raw materials is raised little or none by the tariff while the price of the finished product is considerably raised, or _vice versa._

-- 4. #The tariff, 1789-1815.# The main difficulty of government in 1781-1789 under the Articles of Confederation was lack of the power to obtain revenues by taxation. The separate states alone could levy duties, and a good many tariff restrictions on freedom of trade among them developed in this period. The Const.i.tution established the principle of entire freedom of trade among the states. The first act of Congress under the Const.i.tution levied a tariff, primarily for revenue purposes, but clearly having a protective purpose, in the view of some of the representatives. However, most of the separate rates, as well as the general average rate, were the lowest ever levied by Congress, except that there was no free list and that 5 per cent was imposed upon all goods not otherwise enumerated. _Ad valorem_ duties up to a maximum of 15 per cent (that on carriages) were laid upon certain articles of luxury, and low specific duties on a few articles such as gla.s.s, nails, iron manufactures, hemp, and cordage.

From 1789 until 1812, thirteen tariff laws, all told, were pa.s.sed. One after another many rates were raised to get larger revenues, but some goods were put upon the free list. The foreign trade, in both imports and exports, grew largely and with considerable regularity, rising then rapidly to a maximum in 1807. Then followed troublous times, with British Orders in Council and our embargo and nonintercourse acts until 1812, and war until 1815, trade falling off at first to one-half, and at last (in 1814) to less than one-twelfth of the former maximum. Just as trade was, in the war period, sinking to the vanishing point, the tariff rates were doubled in hopes of getting increased revenues needed for the war, but in vain.

[Ill.u.s.tration: FIG. 3. IMPORTS INTO THE UNITED STATES. 1821-18565

Many statistics bearing upon tariff history are graphically brought together here. This figure should be carefully studied in connection with the following sections. Observe how invariably in the years following a crisis, the amounts of dutiable imports and of duties collected have diminished, whether the tariff meantime was changed or not.]

-- 5. #The tariff, 1816-1845.# Tho rates had been rising, manufacturers had been making efforts to secure higher rates for protection, even as early as 1803. Effectual exclusion of foreign goods and consequent stimulus to the establishment of manufactures in the eastern states resulted, in the period 1808 and 1815, from the embargoes and the war.

On the return of peace imports were resumed on a large scale and the call for a higher tariff was loud. In the revision of 1816, rates in a number of cases were fixed higher than those before the war. Average rates are said to have been about 20 per cent. The rate on both cotton and woolen goods was 25 per cent (and the minimum on cotton goods was a specific rate of 6-1/4 cents a yard). High rates were imposed on pig iron (50 cents a hundred), hammered bar (75 cents a hundred), and rolled bar ($1.50 a hundred, equivalent to about 100 per cent _ad valorem_). Rates were raised on many other articles. The average _ad valorem_ rates collected in 1821 attained the remarkably high figures of 36 per cent on dutiable goods, and almost 35 per cent on free and dutiable together.

In 1824 in response to the growing sentiment in favor of the so-called "American policy of protection," many rates were still further increased, as those on cotton goods and woolen goods (to 33-1/3 per cent) and some kinds of iron. Cheap wool was now taxed 15 per cent and that valued over 10 cents a pound at 20 per cent (to be 30 per cent after 1826). In 1828, in the "tariff of abominations" which evoked much bitter criticism, the rates on all these goods were again raised, those on woolen goods being in some cases 100 per cent on the value, and those on iron being from 40 to 100 per cent on the value, and duties were levied on mola.s.ses, hemp, and flax. The results appear in the statistics of 1830, showing the average _ad valorem_ rates on dutiable imports to be nearly 49 per cent, and on free and dutiable together to be over 45 per cent. This marks a temporary high point in tariff rates. Revenues were then becoming excessive and that year the rates on tea and coffee and some other goods were reduced.

Violent protests, especially from the South, were made against the protective system, and the tariff became a more important political issue. Then in 1832 a number of changes were made, mostly downward; the iron tariff, for example, being reduced to about the level of 1824. Average rates were thus brought down to about 33 per cent on dutiable goods. The compromise tariff act of 1833 provided for a process of reduction during a period terminating in 1842, the cut to be small at first, then to be made more rapidly to bring the maximum rate on any article down to about 20 per cent.[2] These changes, while as yet incompleted had, in 1840, brought the average rates on dutiable goods down to but 30 per cent and on free and dutiable together to 15 per cent. The 20 per cent rate, however, remained in effect only two months in 1842, when it was replaced by a tariff with higher rates distinctly protective, pa.s.sed by the Whig party and which remained in force four years.

-- 6. #The tariff, 1846-1860.# The Democratic party coming into power, pa.s.sed the Act of 1846, called the Walker tariff, after the Secretary of the Treasury. As he was a believer in free trade, this act is often mistakenly described as a free-trade measure. It was, in truth, far from that. Most of the rates were indeed lower than those that had been in force between 1816 and 1846 (with the exception of those between 1840 and 1842), but still some of the rates were high (a few as high as 100 per cent) and many of them were strongly protective in nature. The fact that tea and coffee were on the free list is marked evidence that considerations of revenue did not dominate. The rate on cotton goods was 25 per cent and the rates on many of the most important other protected articles (iron, woolen goods, manufactures of iron, leather, paper, gla.s.s, and wood) were 30 per cent. The average rates under the act for its last eight years (to 1857) were on dutiable 26 per cent, on free and dutiable 23 per cent. The country prospered for eleven years under this tariff. In 1857, rates were again reduced, the more important protective rates from 30 per cent to a level of 24 per cent. This time partizan considerations played no part in the discussion. The revenues of the government had been excessive and the need of a reduction was admitted by nearly every one. The average _ad valorem_ rates under the nearly four years of the act of 1857 were about 20 per cent on dutiable and 16 per cent on free and dutiable (the lowest in the century between 1812 and 1913).

-- 7. #The tariff, 1861-1871.# The reduction of rates in 1857 was made just at the time when the country was at the height of a wave of prosperity and of speculation which culminated in the financial crisis of that year.[3] As always at such times, the government's revenues fell greatly. The first purpose in the revision of the tariff in 1861 was simply to restore the rates in the act of 1846. But the Morrill act which became a law just before Fort Sumter was fired upon, contained many higher rates and its purpose was avowedly protective.

This necessarily involved a sacrifice of possible revenues for the government.[4] Then from the beginning of the Civil War till its close some rates were raised almost every month with little scrutiny or debate. The average _ad valorem_ rate jumped from 19 per cent on dutiable in 1861 (under the law of 1857) to an average of 35 per cent in the three years, 1862-1865.

The most important tariff acts of the war were those of 1862 and 1864 by which large increases were made on many articles. These tariff acts were pa.s.sed in connection with far-reaching and burdensome applications of internal revenue taxes on many kinds of manufactures.

The tariff rates were primarily intended to offset these taxes, "to impose an additional duty on imports equal to the tax which had been put on the domestic articles," as was said by the sponsors of the bill. These rates were similar in purpose to compensatory rates, and in many cases they were more than sufficient to offset the internal taxes. Under the last of these acts the duties collected in the six years from 1865 to 1870 averaged nearly 48 per cent on dutiable and nearly 44 per cent on free and dutiable.

The remarkable fact was that soon after the war the internal revenue taxes began to be repealed one after another, and by 1872 nearly all those bearing upon general manufactures (apart from cigars and alcoholic beverages) were gone. The tariff, however, remained almost unaltered. This repeal of internal revenue taxation had the same "protective" effect as raising the tariff rates by so much. As if this were not enough for the protected interests, in 1867 the duty on woolens was further raised and in 1870 numerous other increases were made in the duties having a protective character. Some reductions were made, but these were almost all on articles of a distinctly "revenue"

character such as tea, coffee, sugar, mola.s.ses, spices, wines.

Revenues were superabundant for current expenses of government, and altho there was a large national debt, hardly any of it was redeemable at the time. There was therefore need to reduce taxation, but the attention of the consuming and tax-paying public was distracted by the somewhat pa.s.sionate political issues of the day. Besides, the public had not the technical knowledge or the unified opinion on this subject to protect itself against the greedy lobby in this process of tax revision. And so, selfish commercial interests could get nearly what they asked for in Congress, and the politicians at Washington, who had come to have a well-nigh superst.i.tious faith in the efficacy of very high protective duties, could quietly use the opportunity to raise the people's taxes for the people's good.

These virtual increases in the protective power of the rates in force are not evident in the statistics of average _ad valorem_ rates, because the higher rates in many cases were sufficient to exclude relatively more of the foreign products to which they applied.[5] The imports came, by a process of selection, to consist more largely of goods subject to lower rates. So the year 1868 showed the highest average rate on dutiable goods (48.6 per cent) of any year after the act of 1828 until that of 1890, and the rate fell somewhat each year until in the fiscal year 1872 it was 41.3 per cent.

-- 8. #The tariff, 1872-1889#. In 1872 the country was again, as in 1857, nearing the crest of a wave of prosperity and of speculation.

Imports and customs receipts attained new high points in our history, and, despite the enormous reductions of internal revenue taxation, the government's receipts continued to be excessive.[6] The important revenue articles, tea and coffee, were then transferred to the free list, as were also raw hides and paper stock and some other articles; the rate on salt was reduced one-half and that on coal almost as much.

Many other specific rates were reduced and the _ad valorem_ rates on a long list of articles were cut to "90 per cent of existing rates."

The effects of these reductions were mingled with those of the severe financial panic occurring in 1873 and of the depression following, which reduced especially the importation of luxuries bearing the higher rates. The average rate of the three (fiscal) years 1873 to 1875 was 39 per cent on dutiable (a fall of 9) and 28 on free and dutiable (a fall of 16). The ratio of imports entering free, which in 1872 was still only about 1 in 14, became the next year 1 in 4. But government revenues falling short in 1874, advantage was soon taken of the circ.u.mstance to repeal in 1875 with little discussion the horizontal cut of tariff rates made in 1872. The specific rates that had been reduced in 1872 were little changed, however. From 1876 to 1883 (8 fiscal years) nearly a third of the imports consisted of goods on the free list. The average rate on dutiable was over 43 per cent, and on free and dutiable was 30 per cent.

The tariff was a leading issue in the campaigns of 1876 and 1880. In 1876, the Democratic party's platform contained a plank for "a tariff for revenue only." It was a time of great industrial depression, and as is usual in such cases a large number of the electors held the party in power responsible for business adversity (as in turn they credit it with any more or less fortuitous prosperity). The Republican candidate Hayes, after a long contest in Congress, was declared elected by a margin of one electoral vote. His opponent, Tilden had received a quarter of a million more votes in the country as a whole.

In 1880, when business prosperity was rapidly returning, the party in power was successful by a goodly margin of votes in the electoral college, tho having a bare plurality of the popular vote. Garfield, the Republican candidate, was known as one of the more moderate protectionists and his opponent, General Hanc.o.c.k, who was without any political record, declared the tariff to be a "local issue," to be determined in the Congressional districts. The tariff issue was thus not very sharply drawn. The tragic death of President Garfield left no clear leadership. The tariff question from 1876 to 1884 was politically in the doldrums.

Yet there was undoubtedly a somewhat growing popular demand for some moderation of the very high duties. To this demand the friends of protection who were in power felt compelled to concede something--or to appear to do so. Congress appointed a Tariff Commission of which the Chairman was secretary of the wool manufacturers' a.s.sociation, and after a report the tariff act of 1883 was pa.s.sed. The net results were almost nil. Some rates were lowered, while others were raised with a definite protectionist purpose. The average rates for the next seven years, 1884-1890, were 45 on dutiable (an increase of nearly 2 per cent) and 30 on free and dutiable (unchanged as compared with the period ending 1883). In 1884, the Democratic party elected its presidential candidate (Cleveland) and a majority of the House, but as it did not control the Senate it could not pa.s.s any of the various proposed measures for a "reform" of the tariff. In 1888 the protective principle was a leading issue in the campaign. Altho Cleveland received a few ten thousands larger popular plurality than he had obtained four years before, and held the electoral votes of 18 of the states, he lost New York and Indiana by very narrow margins, a result in which other issues played a large part. Harrison was elected and the party favoring a high protective tariff came into power.

-- 9. #The tariff, 1890-1896#. The tariff act (known as the McKinley act) of October, 1890, followed. This was a general extension of the principle of protection. The rates on woolen goods were on the whole increased and made in more cases prohibitive. The rates on wool were increased. The rates on iron, which was already highly protected, were little changed except by the increase of the duty on tin-plates. The duty on sugar (in the main a revenue duty, yielding $55,000,000 a year) was removed and a bounty was granted to domestic sugar producers. In the next three (fiscal) years, 1892-1894, the average rate proved to be over 49 per cent on dutiable (4 per cent increase) and 22 per cent on free and dutiable (the remission of sugar duties accounting for the most of this fall of 8 per cent from the average under the preceding law--4 per cent fall from the last year of its operation). Particularly noticeable, however, was the increase in the proportion of goods entering free, which was nearly 55 per cent of all merchandise as contrasted with about 33 per cent between 1884 and 1890.

Again the political weather vane shifted. The month after the McKinley bill became law, the Congressional elections (November, 1890) returned an overwhelming Democratic majority in the House, altho this was a period of business prosperity, a fact usually favoring the party in power. In 1892, Cleveland, being again a candidate, was successful over Harrison by a largely increased plurality of the popular vote, and received almost double the electoral vote of his opponent.

The House was Democratic, and the Senate soon became so. Business prosperity was rising again to a high level, but there were many features of financial and speculative weakness in the situation, intensified by growing fear of a cheap money (silver dollar) inflation under the act of 1878 providing for the annual purchase of silver.

A financial panic occurred in September, 1893, six months after Cleveland's inauguration.

Nevertheless Congress enacted the next year, Aug. 28, 1894, the Wilson tariff act. The changes made by this legislation were not on the whole very great, but were nearly all in the direction of the lowering of the tariff. Most notable was the putting of raw wool upon the free list. Some rates on woolen goods were reduced, but hardly more than enough to offset the effects, upon manufacturers' costs, of the reduction of the tariff on raw wool. Likewise small reductions were made on cotton and silk goods, on pig iron, steel and tin plate and many other articles; and larger reductions on coal, iron ore, chinaware, and gla.s.sware. To make up for the expected reduction of receipts from other sources, a duty was laid again upon raw sugar, and an income tax law was pa.s.sed (this soon, however, to be declared unconst.i.tutional).

Under this law, for three fiscal years (1894-1897) the average rates were 41 per cent on dutiable and 21 per cent on free and dutiable,--pretty high rates. The proportion entering free under this act was actually less than under the McKinley act, partly because of the sugar item, and partly, probably, because of general business conditions.

-- 10. #The Dingley tariff, 1897-1909.# The campaign of 1896 was waged almost solely on the issue of free silver. Undoubtedly great numbers of voters supported William McKinley rather despite of, than because of, his high protectionist beliefs. But his inauguration was promptly followed by the pa.s.sage of the Dingley act of July 24, 1897, which embodied a marked increase of protective rates. A duty was again levied on wool, and also on hides which had been untaxed since 1872.

High rates were made for woolens, linens, silks, chinaware, and the rate on sugar was doubled. Provision was made for some reduction of rates by reciprocity agreements, but the conditions were so complex that the effect could not be great. This high protective tariff, thus enacted without popular discussion, remained almost unchanged for twelve years, the longest life, by one year, of any tariff act in our history,[7] The rate under the first full fiscal year of the law's operation, 1899, was the highest on dutiable in our history, 52 per cent, and was nearly 30 per cent on free and dutiable. In practical operation, however, the average rate steadily became more moderate because of the rapid rise of the general price level that was in progress throughout this period, amounting to 35 per cent from 1898 to 1909.[8] The average rate of duties collected for the period of 12 years was 47 per cent on dutiable and 26 per cent on free and dutiable. It was steadily falling and the last year, 1909, was 43 per cent on dutiable and 23 per cent on free and dutiable.

-- 11. #Sentiment favoring lower rates.# While the Dingley act was thus in operation showing declining average rates, sentiment was developing in every part of the country in favor of a further moderation of the tariff. This was due partly to the discontent resulting from steadily rising general prices, in which change the rise in the prices of food and of many other necessities was not fully compensated by the rise of the wages and incomes of the ma.s.ses. Partly the growth of this sentiment accompanied the agitation against trusts and the belief that protective duties in some cases were an aid to the formation of domestic monopolies. But more fundamentally, this changing sentiment was the result of the changing industrial conditions in America. The character of our foreign trade had altered greatly since the early nineties. We were importing relatively less and less of manufactured and finished products, and more of raw materials; and we were exporting less and less of raw materials and more of finished products. A growing number of manufacturers were feeling the need of cheaper raw materials and were looking hopefully toward an enlargement of their foreign trade.

The Republican platform in 1908, in view of the changing public sentiment, formulated a new rule for maintaining "the true principle of protection," namely, that it "is best maintained by the imposition of such duties as will equal the difference between the cost of production at home and abroad, together with a reasonable profit to American industries." This rule is very attractive in its suggestion at the same time of the idea of a moderation of the tariff and of an exact practical (not to say scientific) standard for the determination of the proper rate in every case.

The rule is, however, fallacious. "Costs of production" mean here the monetary costs of the enterpriser. Now a first difficulty is that costs are not uniform for all establishments in any one industry, and a tariff high enough to protect some is entirely too low to protect others. As long as a tariff rate is too low to exclude every unit of the foreign product its importation is conclusive proof that for some home producers the tariff rates fall short of the "true principle"

(better proof, indeed, than the most elaborate investigation by any tariff board could be). The indubitable truth is that no trade ever can take place (in a monetary regime) unless the monetary price is lower in the exporting than it is in the importing country. This virtually means that the product cannot be profitably exported unless the monetary costs of production ("together with a fair profit") of the article exported are for each party less than those of the other party in the other country.[9] The so-called "true principle" would lead thus to absolute prohibition of every article to which it was applied.

-- 12. #The Payne-Aldrich tariff, 1909-1913#. In the campaign of 1908 the Republicans admitted that the protective tariff needed to be revised, but they declared that it should be revised by its friends.

It was doubtless the general understanding that "revision" in this promise meant revision downward, tho this was left somewhat unclear in a campaign wherein the tariff played a somewhat minor part. The tariff act of 1909 (the Payne-Aldrich act) was the attempt of the successful party to redeem its promise in this regard. Many changes of rates were made, both downwards and upwards. It was estimated that rates were reduced in 584 instances, affecting 20 per cent of imports. These changes included placing hides upon the free list (before taxed 15 per cent), and cutting down the rate on leather, shoes, coal, lumber, iron ore, pig iron, and steel-rails. But on the other hand rates were increased in 300 instances (including many items in the cotton schedule). The general belief that little reduction was effected, on the whole, was confirmed by the experience under the act. As compared with the last two years (1908-1909) of the Dingley tariff the first two years of the Payne-Aldrich tariff showed a decline of 1.5 per cent, and on free and dutiable a decline of less than 3 per cent.

These reductions in the statistical results are no greater than occurred within like periods while the Dingley act continued in operation without change.[10]

No other tariff since "the act of abominations" in 1828 has called forth such widespread criticism as this one, and the tariff became a leading issue in the campaign of 1912. After 1910, the House being Democratic, many bills to reduce duties were presented, and some were pa.s.sed by both houses, but all were vetoed by President Taft mainly on the ground that it would be best to await the report of the tariff board which had been authorized and appointed for the purpose of ascertaining the cost of production referred to in the "true principle of protection."

-- 13. #The Underwood tariff, 1913#. After President Wilson was inaugurated, March 4, 1913, the tariff was at once taken up by Congress. The general features of the act that was pa.s.sed were as follows:

(a) Considerable additions to the free list of raw materials.

(b) Abolition of compensatory duties corresponding with the old rates on raw materials.

(c) Replacement of specific by _ad valorem_ rates in many cases.

(d) Taxation of plain kinds of goods less than fancy kinds--luxuries higher than necessities.

(e) Reduction of rates generally (most of the few increases being to correct some evident error in the old law).

(f) Application of the so-called compet.i.tive principle to rates intended to be protective, viz., to leave the rate just barely high enough to keep out foreign products.[11]

Articles placed on the free list were raw wool (which had borne a rate equivalent to about 44 per cent), metals, agricultural implements, raw sugar (the lower rate to go into effect gradually), coal, lumber, many agricultural products including live cattle, meats, wheat, corn, flax, tea, and hemp, and numerous manufactures including boots, shoes, gunpowder, wood pulp, and print paper.

Moderate reductions were made in the schedules for chemicals, earths, cotton goods, and sundries, while rates on various luxuries were either unchanged or raised. Left almost unchanged were the schedules for tobacco, for spirits and wines, and for silks (already very high).

This act was signed October 3, 1913, and had been in operation about nine months when the great war broke out in August, 1914. What its effects would have been under normal conditions we can judge little from the actual experience. The first eight months that the act was in operation, the _ad valorem_ rate on dutiable goods proved to be 36 per cent (about 4 per cent less than in the preceding year) and the rate on free and dutiable together about 14 per cent (over 3 per cent less than the preceding year). The first complete fiscal year (that of 1915) under the act, the average rate on dutiable goods was 33.5 per cent and that on all imports was 12.5 per cent. Evidently this is far from a "free trade tariff." The reduction in the average _ad valorem_ rate is less than was expected. Many of the reductions had little effect, the former rate having been much higher than was needed to exclude the goods. In other cases the old rates were but nominal and inoperative because they were upon goods regularly exported, not imported (e.g., farm products, cotton goods, and some other manufactures). But some of the reductions doubtless will force the less efficient plants in some industries touched to increase their efficiency or go out of business. Time, in any normal period, is needed for adjustment, but an adjustment of a most abnormal kind is in progress during the war. Imports from Europe have fallen greatly, while exports are enormously increased. Old industrial establishments have been converted to different and temporary uses. The conclusion of the war must bring a new readjustment that must cause a severe shock to some enterprises--and this must have been so under any possible variety of tariff.[12]

-- 14. #Some lessons from our tariff history.# Can we draw from the checkered course of tariff history in America clear lessons of wisdom for the future? At least certain negative conclusions may be safely drawn. It is a history of a vacillating public opinion toward the policy of protective duties. Always the policy has kept some hold on public sentiment, but it has varied in strength, now waxing, now waning. The time of revisions has been determined nearly always by varying needs of revenue. When more income has had to be raised, this has nearly always been made the occasion and pretext for increasing the degree of protection for many industries. This is not at all a necessary connection, for it would be possible to couple internal revenue taxes and customs duties in such a way that the rates would go up and down together and give the varying amounts of revenue required for the government without appreciably altering the relative profitableness of various private enterprises.

Our tariff history is too largely a record of special favors granted to cla.s.ses of citizens, to the citizens of certain localities, and to particular enterprises. This is apparent even in a general survey, but almost every more detailed examination of particular protective rates reveals evidence of suspicious and sometimes scandalous personal influences at work. The protective policy has always professedly been advocated for the general welfare to raise wages or to make the country prosperous, but the initiative has always been taken, and the valiant work in contributing funds for campaign purposes and in lobbying bills through Congress has been done, by the interested manufacturers. Even if it were beyond question sound in principle to exclude goods that can be bought more cheaply by trade, it is very doubtful whether any net good could have resulted from this policy as it has been in fact applied and followed. The frequent and unpredictable changes have been a great evil, and have again and again brought unmerited losses to the many in business and still greater and unearned gains to a favored few. It is incredible that such a hit-or-miss, in large part selfishly determined, policy could have been an important cause of our national prosperity. The fundamental causes of the general high wages and popular welfare that we have enjoyed is to be found rather in our rich natural resources, our capacity for self-government with free inst.i.tutions, and the industrial energies of our people.[13]

The revision of the tariff of 1913, viewed with non-partizan eyes, appears to have been carried out, to say the least, as consistently with regard to its professed doctrine, and as little influenced by the malevolent arts of the old-time Congressional lobby, as any debated tariff act in our history. It still contains on the whole a large measure of protection. Under various pretexts such as the danger of a flood of cheap goods after the close of the great war, attempts will be made to make it still more prohibitive. But one lesson of our tariff history is that such an act should be given a period of fair trial before extensive changes are made in it. Even further reductions should be cautiously undertaken and put into effect gradually. If the attempt is made through temporary rates to reduce the shock of the trade adjustments, of the "dumping" after the war, then the devising and administration of such measures should be delegated to an expert, disinterested, permanent tariff board. The task is to prevent temporary "unfair compet.i.tion" and sudden changes, rather than to raise permanent barriers to fair trade.[14]

[Footnote 1: It is evident that it is only through _ad valorem_ rates that it is possible to compare the average rate of duty for one tariff act, with that for another. As, however, every tariff act is made up of both specific and _ad valorem_ duties, it is only at the end of the year that an average _ad valorem_ rate can be estimated by comparing the total of duties collected with the total estimated value of the goods imported. Average _ad valorem_ rates are estimated in this way both on the dutiable goods alone, and on all goods, free and dutiable combined. There may be an element of error, even of misrepresentation, in such estimates. They do not give the simple test of the relative height of duties, or of the degree of "protection" that we might at first suppose. Just to the extent that a new and higher rate really operates to exclude imports (and thus is protective in its effect) the goods subject to that rate cease to form part of the total imports.