Popular Science Monthly/Volume 74/May 1909/Tariff Revision from the Importer's Standpoint




THE exchange of commodities between the inhabitants of this world began at the point of time when original savagery first felt the influences tending toward semi-barbarism, and the purely physical control of man over his fellowman began slowly to yield to less brutal methods.

From that day, many thousands of years ago, until the present time, the advancement of civilization has been accurately measured by the state of commercial development, so that we now classify nations not by the numbers of their fighting men, but rather by the magnitude of their trade.

For a long period the free exchange and barter which sent Joseph and his brethren from Arabia down to Egypt and brought the Queen of Sheba to King Solomon's gates, ruled the known world over, and the caravans of Kenghis Khan or the sailor merchants of Cleopatra bought where they could buy the cheapest and sold where they could sell the dearest—duty free—be the market at home or abroad.

As the centuries passed and the people became less nomadic, the various nations were known each to each as producers of specific articles or classes of merchandise, and the tides of commerce began to flow in more fixed channels as the years ran. The spices of the east came westward for sale to the nations of Europe and the Atlantic coasts, while the stuffs and tapestries of Germany and Italy and the weapons of Spain found markets in both England and Asia. Except when some despot, requiring the gold to fill an empty exchequer, sold the privilege to trade in particular goods and thus created a monopoly, all the merchandizing from the beginning of the Christian era down to about 1600 was free and untrammeled of duty, either import or export.

From that time on, however, it was found that in various countries and with regard to various commodities, some restriction in the market and the method of their sale was necessary or the production languished and the goods disappeared.

The first duty laid upon goods coming into this country went into operation August 1, 1789.

The necessity for providing a national revenue was the first consideration with the new congress.

Within seventy hours of the opening of the organization James Madison introduced the subject of the Tariff, in part by the following words:

I take the liberty, Mr. Chairman, at this early stage of the business, to introduce to the committee a subject which appears to me to be of the greatest magnitude; a subject, sir, that requires our first attention and our united exertions. . . . The deficiency in cur treasury has been too notorious to make it necessary for me to animadvert upon that subject. Let us content ourselves with endeavoring to remedy the evil. To do this a national revenue must be obtained; but the system must be such a one that, while it secures the object of revenue, it shall not be oppressive to our constituents. Happy it is for us that such a system is within our power, for I apprehend that both these objects may be obtained from an impost on articles imported into the United States. In pursuing this measure, I know that two points occur for our consideration. The first respects the general regulation of commerce, which, in my opinion, ought to be as free as the policy of nations will admit. The second relates to revenue alone, and this is the point I mean more particularly to bring into the view of the committee. . . . The proposition made on this subject by Congress in 1783, having received generally the approbation of the several states of the union in one form or other, seems well calculated to become the basis of the temporary system which I wish the committee to adopt.

In closing, Mr. Madison offered a resolution declaring it to be the sense of the committee that specific duties should be levied on spirituous liquors, molasses, wines, teas, sugars, pepper, cocoa and spices, and an ad valorem duty upon all other articles; and also a tonnage duty upon American vessels in which merchandise was imported, and a higher rate upon foreign vessels.

From that day until this the United States has maintained a tariff. At times for revenue only, but in the main to produce a revenue and to protect home industries.

The act of August 10, 1790, was entitled "An act for laying a duty on goods, wares and merchandises imported into the United States ... for the discharge of the debts of the United States and for the encouragement and protection of manufacturers."

It should therefore be noted that from the very inception of our government the tariff has been recognized as exercising two distinct functions; to wit, to raise a revenue and as well to protect home manufacturers.

Since the act of 1790 there have been passed by Congress thirtythree distinct tariff acts up to and including the act of 1897. Of these the McKinley act of 1890, the Wilson act of 1894 and the Dingley act of 1897, being the one now in operation, are those of most interest to the importer of the present day.

Probably no tariff act was ever placed upon the statute books that did not contain mistakes and that was not open to criticism from one source or another. The most equitable, the most liberal act must hurt some individual.

The importer who purchases his goods in other countries to sell at home, is primarily a free trader, and as such regards each per cent, of duty laid upon his particular importation as a tax upon his business. Sometimes he is so short-sighted as to consider his own particular interests as paramount, and to forget the many intricate questions involved, all of which go to the proper conduct of the commercial scheme of an entire nation.

To-day the most experienced and intelligent business men are practically agreed upon the necessity of a tariff. The unsettled question which stands between the law maker and the importer is the rate. Both are now agreed as to the justice of the principle when equitably enforced; what remains is to agree upon what is equity to the importer, to the government, to the home producer and competitor and to the consumer.

I had the honor quite recently to suggest to the ways and means committee of Congress at one of the tariff revision hearings what I regarded as a "just tariff," which should be an act so drawn as to produce the needed revenue and at the same time protect home interests. Such protection should be equally divided between the capital that establishes, the labor that produces and the public that consumes.

I am still inclined to regard the definition both concise and correct.

Mr. Taft quite recently voiced his view of the tariff principle laid down in the republican platform in the following terms:

The measure of the tariff should be the difference between the cost of production of the article in this country and such cost abroad, and in the estimate of the cost of production abroad and in the estimate of the cost of production here there should be included among other elements what is regarded in each plan as a reasonable manufacturers' profit.

With this the importer finds no complaint, as a duty fixed along such lines would leave open to reasonable business competition all the fields wherein foreign and domestic merchandise naturally seeks a common market. What the importer does object to is the establishment of a duty which either strangles all competition, thus creating a monopoly for home products only, or a rate so high that the so-called "reasonable" manufacturer's profit becomes unreasonable, forces the consumer to pay too dearly for his goods, either foreign or domestic, and inevitably produces "trust" control in the lines affected.

Such a tariff is unjust and benefits no one but the home producer.

Under it the importer must necessarily pay a heavy bonus for the privilege of conducting his business; the consumer is compelled to pay a high price for his merchandise; and it is always unjust to labor, since the rate of duty is never used as a measure by which to regulate the wage scale. The sole beneficiary is the home producer who is enabled to realize a profit drawn from the pockets of three classes, the importers, the consumers and his own employees.

One of the best examples of a violation of the basic principle set forth by Mr. Taft is the present tariff rate upon watch movements imported in cases or without.

Fixed in 1897 through the efforts of certain interests in this country, it has resulted in the creation of a watch "trust," producing millions of profits, even while the labor employed was often so poorly paid as to be unsettled and to have gone upon strike a number of times, and the consumer has paid for his American-made watch 20 per cent, to 30 per cent, more than the Italian, the Englishman, or even the Swiss paid for the same article purchased abroad.

That such a condition is evil, and that it should be corrected, all true lovers of their country will agree, but too often "What is every one's business is no one's," and tariff revision along this and a score of other lines equally bad can only be hoped for if the facts are placed before the Congress in convincing form.

It must ever be remembered that those who are now benefited through the protection of the tariff are on the alert to prevent any revision which will reduce their profits, whether reasonable or unreasonable, while the importer can, at the most, be only secondarily interested. He must continue business under existing conditions, although he would prefer a change, but those most interested and to whose benefit such a change would most conduce—the great mass of consumers, the people, are individuals busy with their daily affairs and unable to give the time or afford the expense which would be necessitated by any concerted effort to correct the existing wrongs.

And a great number of wrongs exist under the present act. It is somewhat of a popular fallacy that duties are levied only upon luxuries, and that the average citizen, the one who does not buy diamonds or automobiles and who has never made a trip abroad, has little or no interest in tariff questions.

That this is an error is easily proved by a glance at the act itself. There are 705 separate paragraphs, 463 of which, covering more than six thousand different articles, impose duties running as high as 60 per cent, ad valorem. The remaining paragraphs, 242 in number, constitute the "free list." In the minds of the general public the "free list" should contain all the necessities of life; as a matter of fact it covers less than half a dozen articles regarded as necessities, tea, coffee, needles, ice.

With all the remaining "free of duty importations" the average citizen has nothing to do. The wool which enters into the manufacture of your hat and your clothing pays a duty ranging from 4 to 12 cents per pound; the linen you wear or that is upon your bed pays 60 per cent, ad valorem; your stockings pay 30 per cent, ad valorem and the hides which are imported to make leather for your shoes pay from 15 per cent, ad valorem up. Gloves are taxed from $1.75 per dozen pairs to $4.75 per dozen, and jewelry pays 60 per cent, ad valorem.

We need to import but little food stuffs, as we are able to produce enough to supply our home necessities, but if we eat imported food we pay a tax upon it ranging from 10 per cent, to 45 per cent, ad valorem.

It will therefore be seen that the tariff is a subject that affects every citizen, even though he is unconscious of it, and that its revision is a matter of almost universal interest.

And because of the universality of this question it can be understood how vitally it affects all who are home producers.

The man whose business has grown up under the wing of a protective tariff will never admit that the original "infant industry" has become a lusty youth able to care for itself. He rather appears before the committee on revision and with simulated anxiety presents reasons why the protective rate should be increased, hoping doubtless by such tactics to prevent any reduction.

So general has this procedure become during the past two months while the ways and means committee have been holding tariff hearings in Washington, that lately when any one appeared before them requesting an increase in the tariff the committee would propound to him the initial query: "Are you making money in your business?"

One of the most striking examples of this pronounced selfishness on the part of the home producers was evidenced in the hearings under the paragraphs protecting oranges, lemons and olives.

A large delegation appeared from the California fruit growers, who presented to the committee among other things the statement that in the past twelve years the lemon growers had realized less than 5 per cent, net upon their investments and that unless the duty upon citrus fruits, lemons and oranges could be at least doubled, that is, made $1.60 per box instead of as at present, 80 cents, the California interest in these fruits would be destroyed.

In reply to such statement there was presented to the committee the annual report of the U. S. Government Pomologist for 1907, showing the cost per acre of maintaining the average lemon grove to be about $370.86 while the average production of one carload of fruit per acre sold at an average price during the past five years of $696.00 per car; thus making a net profit of about 90 per cent, annually; or allowing the cost of the land as given by the Californians themselves, viz., $1,000 per acre, the annual returns would pay all yearly expenses and 33 per cent, upon the original investment.

No reply to this official "knock out" has been made by the citrus fruit growers, but it is not an isolated case. The rule is absolute that human nature, especially American human nature, gets all it can and keeps—if possible—all it gets. The public must look out for itself or fall under Commodore Vanderbilt's noted ban.

In the marts of trade no day passes that complaint is not voiced against the present tariff law. The mutations of eleven years have been such as to render scores of the paragraphs of that law and the duty rates imposed thereunder most inequitable and unjust. It is my belief that the so-called "good trusts" as well as the "bad trusts" have been the natural outgrowths of the tariff, and I further believe that while the good trusts should be continued and their interests safeguarded for the benefit, not of the trusts themselves, or their thousands of stockholders, but for the interests of the millions of consumers, the "bad trusts" should be shorn of the power to rob those millions of consumers, which power is now largely theirs through the protection which the present tariff gives.

To arrive at this desirable end and as well to protect his own interests is the aim of the reputable importer, and because of the reasons given above, the necessity of producing the required evidence which will prove where the evil conditions now exist, and of submitting such evidence to the Congress, devolves upon the importer.

In the parlance of the day "it is up to him" to present to those engaged in the revision of the tariff all the data required to establish the injustice of any of the present duty rates and to urge the correction of the same.

The subject is the most important which has been before the Congress in the past decade. The prosperity of the country and its people, our commercial supremacy, our national credit, all largely depend upon the result of the present tariff revision. If the new bill, which may become a law by July 1, 1909, and which surely will become a law before January 1, 1910, is just and equitable in its provisions, we may look with assurance for many years of prosperity; if on the contrary the new act retains many of the evils which have grown up under the present one, if it is so drawn as to protect favorites and to slur over or fail to eliminate the wrongs now existing within its provisions, we may anticipate commercial unrest, if not disaster, and all the attendant train of calamities.

Tariff revision, therefore, from the importer's standpoint, is of the first importance. Greater than the Canal question—for our country will go on in its magnificent career whether the Panama Canal be completed in seven years or fifteen—greater than any political issue—for experience has taught us that the people right political wrongs in the long run—greater than any questions affecting our army and navy, our insular possessions, or even the future of our ex-presidents—the question of tariff revision goes to the very vitals of national life. And this being so, the importer finds himself suddenly thrown into the lime light as the spokesman for—not alone his own interests—but as well the interests and further welfare of all the people, the great body of the nation, the consumers, and as the champion for them and to protect and ensure them in their rights for years to come, he accepts the responsibility and seeks to supply our law makers with the enormous mass of facts, and the needed evidence which they require in order to produce a finished tariff act, one that shall be grounded in "favoritism toward none and justice to all."