The Case for Tariff Revision

...Here the foreign product gets under the canvas of "the greatest show on earth," commercially speaking...

...What is more likely to happen is that, by cutting down our purchases of foreign goods, we may be injuring the ability of foreign nations to purchase American goods...

...The fundamental characteristic of the new tariff is, of course, protection on farm produce...

...Threats of retaliation and discrimination against our goods may be taken with a grain of salt...

...When goods are imported into France or Germany or Great Britain, they are like the patrons of a one-ring circus, with a limited number of sideshows...

...To become industrial, we clapped duties on manufactured products and left raw materials on the free list...

...From the academic economist's point of view, of course, protection is indefensible...

...In fact, there is a growing feeling in administrative circles—and not solely among the ice-blooded breed of economic experts—that the United States is rapidly approaching the "ceiling" of tariff protection...

...If he compares that price with the foreign wholesale price, cost of transportation and duty, he will probably decide to go into the importing business for himself...

...Protection is a political barrier set up against the wildly ungovernable forces of supply and demand...

...It is an American political axiom that the woolen schedule will have to be raised whenever any duties are raised, so naturally the rates on every form of woolen goods, blankets, clothing, etc., as well as raw wool, are up...

...Nobody knows yet whether this protection will serve its purpose...

...Economists who consider the fact that our farmers produce an exportable surplus and that the price of this surplus is determined by the world price, are inclined to doubt that a tariff on corn and wheat can help the corn belt or the prairies to make both ends of the mortgage meet...

...You can get a pair of very good English shoes, retail, in London for $6.00 or $7.00...

...So the chemical rates go up...

...The real tariff on imported merchandise is collected after it has passed the Custom-House...

...Our raw materials, however, continued to sell for world prices...

...It contains the largest cash market in the world...

...It goes beyond the earlier idea of putting raw materials on the free list and putting a high duty on manufactured goods...

...It recognizes that there are certain types of goods—watches, for example—in which this country cannot hope to match the accumulated craftsmanship of the European nations...

...try to buy the same shoes in New York and the price will be $15.00—and there is no duty, while water transportation costs little more from London than does the rail transportation from St...

...wheat is stabilized at $.42 a bushel—an effective guarantee of dollar wheat or better to the farmer, for foreign wheat can scarcely be delivered at our elevators under $.60 a bushel...

...In six years of the Fordney tariff, several inadequacies have been revealed...

...If the new tariff demonstrates to the public mind and to its representatives in Congress that there is a practical limit to a protective tariff, it will be worth the entire special session of Congress and a couple of presidential messages...

...The show may be good—but there isn't any more...

...At all events, the beet-sugar producers have had the raw sugar duty boosted from $.022 to $.03 a pound...

...Meat of all sorts is up...

...milk is up...

...The philosophy of the new tariff bill is simple...

...The New England cotton industry has been having a hard time against the competition of new English weaves...

...The manufacturer will want higher rates on manufactures and raw materials on the free list...

...It is obvious that no protective tariff can work well indefinitely...

...While our foreign trade of $9,000,000,000 a year is less than 10 percent of our total domestic trade, yet even 1 percent may make the difference between profit and loss...

...The present bill merely sets out to correct some administrative faults of the Fordney act, and to give protection to farm products and to a few selected industrial commodities...

...if they do not, there will always remain expedients like the export debenture scheme or the now unpopular equalization fee to fall back on as a substitute...

...In this country, as an instance, there are several good watches—say, Waltham and Hamilton—which compare very favorably 124 THE COMMONWEAL June 5, 1929 to comparable Swiss watches, in price, workmanship and performance...

...However, when it comes to telling a man or a nation that it is inefficient and must therefore starve, that is something different and difficult...

...A protective tariff is their favorite device...

...In general, the case for tariff revision is identical with the general case for protection...

...Anything from 50 percent profit up is the rule, and this profit is charged against the duty paid as well as upon the cost of the product...

...It is for this reason that the course of the present tariff bill through Congress is being watched with anxious eyes in the Departments of State and Commerce, as well as in banks and importing houses...

...Our industrial prosperity was fostered by the tariff, and the prices of manufactured goods reflected tariff protection...

...Certain commodities on the free list such as bricks, were being brought here in ballast and so dumped on the market duty free...

...the labor leaders will want higher rates and so on...

...At the same time, this trifling $9,000,000,000 is a very appreciable element of world trade, and plays a far larger part in the economic life of other nations than it does in our own...

...Nobody supposes, at the same time, that we buy Argentine meat June 5, 1929 THE COMMONWEAL 125 because we adore the Argentine, that we buy Cuban sugar because of our affection for the Cubans, that we buy a large share of the Australian wool crop because we like the Australians, or that our heavy purchases of silk represent the measure of our respect for the good qualities of the Japanese people...

...uneconomic, no doubt—but it works...

...concrete similarly was beginning to make inroads on our eastern markets...

...It is in this direction that economic isolation if not economic madness lies...

...The ticket costs a little more but there are five rings, trained seals, performing elephants, clowns and fat ladies galore...

...fish is up...

...The effect of the new graduated rates is to squeeze out the inferior Swiss watches and watch movements which have been demoralizing the American market for moderately priced watches, and to stimulate the importation of the better Swiss watches...

...Between the present project and the final law lies one of those periods of political struggle and economic stress which we call a tariff fight...

...All signs point to a development according to Hoyle: the House bill passed after a struggle, the Senate rewriting the bill by "amendments," a wearisome joint committee wrangling through the dog days, and finally presenting a measure which, by trying to placate every interest in the country, satisfies nobody...

...The tariff on agricultural products, moreover, by extending increased protection to truck vegetables of all kinds, sets a premium on diversified farming which may induce the one-crop farmers in the South and Middle-West to reduce their production of exportable food, thereby raising the price of the staples...

...In this way, the new tariff may enable this country to profit by the high quality of European craftsmanship without injury to our own rank-and-file production...

...Louis normally paid on American shoes...

...The demands of the 100-percent protectionists and the clamor of the importer-banker group will obscure the fact that the present Fordney tariff—passed in the midst of post-war reconstruction—has had six years in which to test the current validity of the protectionist dogma and has done so successfully, but that its inadequacy in some directions unquestionably needs to be remedied...

...For example, if our film and automotive industries were cut off from their foreign markets, the result would be a very serious business depression...

...No matter what the cost or the intrinsic value of foreign goods, the rule of the importer is to charge all that the traffic will bear, and to limit his profits only by the law of diminishing returns...

...Our brief experience of the Underwood tariff before and after the war is clear warning that there is a lower limit, in the dear departed tariff-for-revenue-only theory...

...Foreign merchandise entering the United States may have to pay a high admission fee, but it gets a run for its money...

...In short, imported goods in this country get the run of the most important free-trade area on the face of the globe, and they have to be pretty poor to fail to pay their way...

...Tariff fights can make or break Presidents and parties, shape American political history and affect the destiny of nations...

...But there has never been a clear demonstration in American history of what, if anything, is the upper limit of the protective tariff...

...The product which cannot be sold in this ninetybillion-dollar market is yet to be found...

...For example, it was a simple invitation to deforestation for us to levy a duty on lumber but not to levy a duty on shingles, boards, etc...

...The sheep farmers have had the rate on raw wool raised from $.31 to $.34 a pound...

...So long as society fails to master the ghastly paradox of industrialism—overproduction and unemployment —such a brake as that supplied by a protective tariff is simply self-preservation...

...We are not only a great industrial nation but a great producer and exporter of raw materials...

...Now we are brightly engaged in taxing both raw materials and finished manufactures...

...In the same way, the French, Germans, English and Belgians are not going to stop buying our petroleum, cotton, wheat and copper simply because they are angered by our tariff rates...

...The industrial side of the schedule is far more easy to analyze than the agricultural...

...The new rates on cotton goods are levied on a more scientific basis and may help the languishing mills of Fall River and New Bedford...

...At best, it is an experiment, noble in motive...

...at worst, it will enable the middleman and the retailer to charge the consumer a few cents more...

...The politician and the statesmen intervene in the grisly perfection of economic law and try to see that they do not pay the full penalty for inefficiency...

...The farmers believe—or hope—that it will help them secure a better market for their crops...

...New duties on bricks and concrete were imposed...

...It may sound hard on the consumers, but it is no more unreasonable than the English Corn Laws of a century ago or the current French practice of levying "octroi" duties on the food brought into French cities...

...People who can remember the bankruptcies and unemployment of the 1920-1921 deflation may conclude that some brake on untrammeled economic forces is necessary...

...the importer and the international banker will want lower rates all round...

...the farmer will want lower rates on manufactures and high rates on agricultural produce...

...One anomaly begins to make its appearance in this proposed revision, an anomaly which reflects the economic character of the United States...

...Nobody knows what that limit is...

...The result was continued distress among the producers of raw materials, of whom the farmers were the most vociferous but who include the miners, lumber men, and such...

...Men and nations hardly ever starve quietly...

...Take shoes, for example, which happen to be on the free list...

...That this is true may be easily checked by anyone who will take the trouble to ascertain the prices asked —and received—for imported goods in any large American store...

...G.," acting in collaboration with an American company, and from the British Imperial Chemicals, Limited...

...Nobody buys from us just because they love us, but because they need our goods and because our goods are reasonably priced and serviceable...

...Not since the Payne-Aldrich bill of the Taft administration has the Republican party felt constrained to revise a Republican tariff...

...Where it will end, only time and the Senate can tell...

...Then again, the case of the United States is peculiar...

...corn and rice are up...

...There is a case on record of an importer of watches who last year, on a capital of $250,000, made a profit of $2,500,000...

...When, therefore, we raise the tariff we are beginning to endanger the purchasing power of our customers...

...If the new duties help the farmers out of their slough of economic despondency and political self-pity, the new tariff will be more than justified...

...On the other hand, we cannot match the small and exquisitely constructed instruments which the Swiss workmen, among whom the trade is a lifetime career and a family tradition, are equipped to make...

...The chemical industries —vital to national health, defense and industrial and agricultural progress—are suddenly being faced with a renewed competition from the German "I...

...Already the anvil chorus of criticism and denunciation of the bill introduced by Chairman Hawley of the House Ways and Means Committee has begun, and there is every reason to suppose that in the coming furore both sides will forget that there ever was a bona fide case for tariff revision on a restricted scale...

...This one should be as violent as it is unnecessary, in the light of the very modest revision justified by the facts...

...The economist believes that where one man can do a thing more efficiently than another, he should do it, and that when one nation can produce more cheaply than another, the latter should close up shop...