TARIFF (OF., Fr. tariffe, Fr. tarif, from Sp. tarifa, price-list, rate-book, from Ar. ta'rĭfa, ta'rīf, notification, inventory, from ‘arafa, to know). A schedule of duties or imposts levied upon goods as they pass from one State to another. A tariff may be levied upon foreign goods: (1) simply as a means of augmenting the revenues of a government, in which case it is a form of taxation (see Tax; Free Trade); or (2) as a means of retaliating upon foreign governments for similar restrictions imposed by them, in which ease it becomes an instrument of warfare serving a temporary purpose and designed in the end to secure commercial reciprocity; or (3) as a means of fostering artificially particular industries by protecting them wholly or in part against foreign competition. See Protection.
General History of Tariff Legislation. Tariffs for revenue seem to have been usual among the civilized nations of antiquity. Among the Greeks, especially the Athenians, a tariff was regularly resorted to as a means of revenue. This tariff was laid upon both exports and imports, and an additional tax was collected from vessels engaged in foreign traffic for the use of the harbors in which they anchored. The regular export and import duty at Athens was 2 per cent., though in time of war, when the State was in pressing need of large sums of money, it was often considerably augmented.
Import and export duties were regularly levied by the Roman State also for revenue. The name for this tax used by the Latin writers is portorium, a name applied likewise to transit duties and bridge tolls. In the provinces and in newly conquered countries, duties were collected by Roman officials known as portitores and publicani, and the sums were transmitted to the Roman treasury. In some cases, however, the central Government, as a particular favor, allowed the subject State to make its own customs laws, stipulating only that Roman citizens should be exempted from paying any duties that might be imposed. In B.C. 60 all portoria were abolished by the Lex Cæcilia so far as concerned the ports of Italy; but Julius Cæsar soon after restored them. Augustus Cæsar still further increased the number of dutiable commodities, and a long list of those which under the later emperors were subject to the payment of a duty is given in the Digest of Justinian. The rate of duty at Rome seems generally to have been 5 per cent., but under the later emperors a duty of 12½ per cent. (octava) is mentioned as the ordinary tax on imports.
In the Middle Ages the feudal lords individually claimed and exercised the right of imposing transit duties levied on all goods that passed by or through their possessions. Hence, says a recent writer, “the rivers and high-roads were fairly lined with custom-houses and toll-gates.” When feudalism gave way to monarchy and strong central government, the kings transferred to themselves the rights that had previously been exercised by the barons. They, too, erected custom-houses at all their frontiers, and even on the boundaries of their different provinces. So universal did these duties, local and national, become, that every Continental nation was covered with a network of customs lines. Various cities also had their local customs duties, of which the octroi collected at the entrance to several cities on the Continent, notably Paris, is a survival.
In England we first hear of a tariff for revenue under King Ethelred in or about the year 980. At that time duties on ships and goods were levied and ordered to be paid at Billingsgate, London. They were first acknowledged as a part of the King's revenue in the reign of Edward I., who received them by regular grant from Parliament, if we may accept the assertion of Sir Edward Coke, quoted by Blackstone. But wool, skins, and leather were taxable at the royal pleasure, these being the ‘hereditary customs’ of the Crown, known in the law-Latin as custuma antiqua. Subsequently, under the same King, special duties to be paid by foreign merchants only were levied (custuma nova), which were protective in their nature and not merely for revenue. The duty on ordinary goods in this reign was sixpence in the pound, which was raised to one shilling (5 per cent.) under Richard II., reduced to sixpence and again raised to eightpence, and finally fixed at the shilling rate, where it remained as late as the ninth year of the reign of William III. (1697). The King also had the right of prisage, i.e. of taking from every wine-importing vessel of twenty tuns two tuns for the royal use. This duty was called ‘tunnage’ to distinguish it from the other duties called ‘foundage.’ Customs duties were originally granted ‘for the defense of the realm,’ and especially for the protection of traffic on the high seas, and were at first given for a fixed period. To Henry VI., Edward IV., and their successors, they were given for life, until the reign of Charles I. whose unconstitutional levy of these duties without grant of Parliament formed one of the grievances against him. On the restoration of Charles II. the duties were again granted for life, and under William and Mary they were made perpetual and assigned to the payment of the national debt.
From an early period it was the custom in England to base tariff duties upon official valuations of imports and exports. A ‘book of rates’ containing such valuations is known to have been printed in 1545. The struggle between the first Stuarts and Parliament over questions of taxation was precipitated by the arbitrary action of James I. in raising the official rates without the consent of Parliament. In 1642 the latter body itself issued a book of rates without the assent of the sovereign. After the Restoration a new book of rates was issued in 1668 with the assent of both authorities. This enumerated as many as 212 articles for taxation ‘outward’ (i.e. export duties) and 1139 articles for import duties. Official valuations continued to be the basis for tariff purposes all through the eighteenth century, and this is one circumstance which makes it difficult to estimate correctly the value of England's exports and imports during that period. Another confusing practice which prevailed until as late a date as 1787 was that of assigning the proceeds from the duties on imports and exports to a variety of different purposes or ‘funds.’ As a consequence it was often very difficult even for customs officials to determine what was the aggregate rate to which a particular article was subject. Pitt's Customs Consolidation Act of 1787 did away with the separate funds by assigning all revenue from duties to the ‘consolidated fund.’ In this act some 1200 articles were rated for import duties and 50 for export duties. Another important achievement of Pitt's Ministry was the negotiation of a commercial treaty with France (1786) which went far toward freeing trade between the two countries from the restrictions by which it had long been hampered. The struggle against Napoleon caused the abrogation of this treaty, but it is no exaggeration to describe it as the first definite step in the direction of that free trade policy which England was to adopt some sixty years later. The next simplifications of the English tariff were those effected by Huskisson in 1824 and 1825, which consolidated some 450 trade and tariff acts into eleven and reduced the rates of duty on many articles, particularly exports. One of the most important results of the long struggle for the abolition of the Corn Laws (q.v.) was to simplify still further the English tariff. From 1842 to 1846, 390 duties, including all those on exports, were abolished and 503 were reduced; in 1846, 54 were abolished and 112 were reduced; in 1853, 123 were abolished, and finally, in 1860, 371 more were abolished and virtual free trade was achieved. An important incident of the latter year was the negotiation with France of a new commercial treaty which lowered the duty on wine and placed such important French products as silks, gloves, etc., on the free list. For both countries the treaty marked a long step in the direction of free trade, but in the case of France the policy appears to have lacked the support of public opinion and was followed after the Franco-Prussian War by a reaction toward protection. The reduction and abolition of duties continued in England after 1860, the next important change being the placing of sugar on the free list at a sacrifice of some £6,000,000 revenue in 1872. On the outbreak of the Boer War the English tariff included only nine principal items, cocoa, coffee, chicory, dried fruit, tea, tobacco, wine, beer, and spirits. The extraordinary revenue required in connection with that struggle led to the restoration of the duty on sugar, to the imposition of an export duty on coal, and finally to the restoration of light registration duties on grain and flour (3d. and 5d. per cwt. respectively).
In the tariff history of France the two commercial treaties with Great Britain that have been referred to stand out as prominent features. Down to the time of the first (1786) the tariff policy of the country had been dictated by extreme mercantilist views of trade. The importation of many commodities was prohibited altogether, while others were admitted only on payment of high duties. Nor was the tariff confined to foreign trade. Each petty province of France had its system of duties, with the result that it was not unusual for the prices of even such common articles as the grains and salt to differ by 100 per cent. or more on the same day in different parts of the country. It required nothing less than the Revolution (decree of 1790) to free the land from these restrictions on internal trade. The bitter national hostilities which grew out of the Revolution and the brilliant years of Napoleon's ascendency effectually stifled the aspirations for freer trade which ushered in the period. From 1815 until the negotiation of the second commercial treaty with Great Britain in 1860, the tariff policy of France was highly protectionist. The latter treaty was one of the fruits of the Anglomania of Napoleon III. and was followed by treaties drafted on equally liberal lines with the more important Continental States of Europe, including the German Zollverein (1865). These reduced the rates of duty on French imports to from 10 to 15 per cent. ad valorem. The same liberal policy was continued substantially until 1881, when an act was passed substituting specific for ad valorem, duties and incidentally increasing somewhat the rates. Protectionist sentiment increased alter 1881 and by 1892, when many of the commercial treaties negotiated at an earlier period expired, the country was ready for an out-and-out protectionist tariff, including not only high duties on agricultural products and manufactures, but also moderate bounties to producers of silk, flax, and hemp. At this time also the policy of providing maximum and minimum duties (see Reciprocity) was introduced. Since 1892 there has been no perceptible abatement in the demand for protection in France, and while French duties are moderate in comparison with those of the United States, she must be included among protectionist countries.
The tariff policy of the States now forming the German Empire first assumed definite form in the German Zollverein (q.v.). The importance of this early federation for tariff purposes in preparing the way for the German Empire is generally conceded. From the point of view of tariff history it is interesting because it enabled Prussia, which was inclined toward free trade during this period, to dominate the tariff policies of her smaller neighbors. A treaty negotiated with Austria in 1853 reduced the duties on trade between that country and the Zollverein and the even more liberal treaty with France, already referred to, secured the same result for trade with that country in 1865. On the eve of the Franco-Prussian War the tariff of the Zollverein was practically a tariff for revenue only. After the war a reaction toward protection set in. This is clearly indicated in the tariff adopted in 1879, by which the duties on both agricultural and manufactured articles were increased. The policy continued to be only moderately protective until 1902, when an act was passed which made very substantial concessions to the advocates of protection to agricultural interests. Among the most notable changes were an increase in the duties on grains (the duty on wheat was raised from 32 cents per cwt. to 90 cents) and on draught animals (the duty on horses valued at $250 or less was raised from $2.50 to $22.50).
The changes in the tariff policies of France and Germany that have been described have been paralleled pretty closely in the other countries of Continental Europe. England's example and other influences caused a movement in favor of free trade to extend all over Europe in the decade from 1860 to 1870. This was followed by a reaction toward protection in the more important countries, which has gained in volume until in Germany and Russia, at least, the movement is comparable with the protectionist movement in the United States.
Outside of Europe England's free trade example has been followed only by two or three of her own dependencies (e.g. India). Protective tariffs are found in Canada, in the Australian colonies, and in Cape Colony, and are well-nigh universal among the independent sovereignties. No country has, however, gone further in this direction than the United States.
History of Tariff Legislation in the United States. The earliest tariff in the history of the United States was that approved July 4, 1789. It is interesting to note that the preamble of the act establishing it states that one of its objects is “the encouragement and protection of manufactures,” at this early period laying down a principle afterwards adopted as the tenet of a political party. In 1817, at the beginning of President Monroe's administration. Congress abolished the internal taxes that had been made necessary by the cost of the War of 1812, and in his message the President recommended the imposition of a protective tariff pure and simple. A temporary protective duty had in 1816 been laid upon cottons and woolens, and in 1818 this was continued for a period of eight years. The rise of the party of Loose Construction, headed by Henry Clay, was favorable to the principle of protection, as the Strict Constructionists held that Congress could impose a tariff only for revenue. In 1819 a protective tariff bill passed the Lower House, but was rejected by the Senate. The election as Speaker, in 1820, of John W. Taylor, of New York, a declared high-tariff man, gave great encouragement to the Eastern manufacturers, and indicates the increasing influence of the protectionists, although in 1822 the Strict Constructionists were able again to defeat bills embodying the protective principle. In 1824, however, the friends of that principle secured a working majority in Congress, and after a prolonged debate adopted a bill whose essential principle was the exclusion from the American market of such foreign goods as competed with those manufactured in the United States.
In 1827 a convention held at Harrisburg, Pa. (July 30th), discussed at length the principle of protection. Only four of the slave States sent delegates. The result of the convention was a petition to Congress praying for an increase of duties on certain articles then manufactured in the United States, a request which the Secretary of the Treasury made prominent in his report of the following December. By this time a strong party had been founded to support the protective system, or the ‘American system,’ as it was popularly called. The famous ‘Tariff of 1828,’ adopted by Congress after a debate of six weeks, was the immediate result of this party's propaganda. This went further than any act had previously done in the direction of prohibitive duties. The chief articles on which protective duties were laid were woolen and cotton fabrics. At that time the value of the cotton goods annually imported from Great Britain was fully $8,000,000, and that of woolen goods about the same. The exports to Great Britain, on the other hand, of rice, raw cotton, and tobacco (the chief products of the South), reached the sum of $24,000,000 per annum. The Southern producers naturally feared that if the United States should by a high tariff practically prohibit the importation of a large proportion of British goods, retaliatory measures might lead to a diminution of the Southern exports to Great Britain. It was dissatisfaction with the tariff that led to the famous nullification movement in the South in 1832, in which year Congress, while modifying the act of 1828, distinctly recognized and retained the protective principle.
On March 3, 1833, the so-called Compromise Tariff, introduced by Henry Clay, was passed. It provided for the gradual reduction of the existing tariff until 1842, after which year the duties on all goods were to be 20 per cent. This measure for the time allayed the excitement in the South; but by the year 1842 it was seen that the financial consequences of the steady reduction of the tariff were extremely serious, since the Government revenues had decreased to such an extent as to be less than the expenses. A new tariff was manifestly necessary. The majority in Congress passed a bill which continued the duties imposed by the tariff of 1833, and provided for the division of any surplus revenue among the States. This was vetoed by President Tyler as being a violation of the compromise reached in 1833. A revenue tariff was also vetoed, because it contained the distribution clause, but on its being again passed, with this clause omitted, the President signed it (August 9, 1842). In 1846 a revenue tariff that eliminated altogether the principle of protection was passed, its aim being merely to provide an adequate revenue for the expenses of the Government. A still further reduction of duties was made by the tariff of 1857, which fixed them at the lowest figures shown by any tariff since that of 1816.
In 1861 the Republican Party passed the ‘Morrill Tariff,’ intended primarily to protect American manufactures. Twice in the same year (August 5th and December 24th) the duties were still further increased, less for protection, however, than in order to meet the expenses entailed by the Civil War.
The problems that were injected into politics by the war, and by the conditions resulting from it, relegated the tariff question to the background for many years. During this period duties were raised with little opposition to an unprecedented level. After the close of the war other questions still absorbed public attention, and it was not until 1880 that the tariff again became an important issue. The Republicans in nominating General Garfield embodied in their platform a strong declaration in favor of maintaining a scale of duties that should continue to protect American industries against foreign competition. The Democrats began to urge the expediency of modifying a tariff which had been framed to meet the conditions of a time of war, and which, they claimed, was not merely hampering commerce, excluding the United States from the markets of the world, but fostering monopolies by preventing healthful competition. They therefore declared for ‘a tariff for revenue only,’ which was afterwards explained as a tariff that should give ‘incidental protection.’ In 1882 provision was made by Congress for the appointment of a commission to report upon the expediency of a reduction of the tariff. This reduction became a question of pressing importance, since the revenues of the Government had so far exceeded its expenses as to accumulate in the treasury a very large and increasing surplus, which threatened to disturb seriously the financial system of the country. The Tariff Commission made its report, and in accordance with its recommendations the act of 1882, a distinctly protectionist measure, was passed. In 1884, the House being Democratic, the bill known as the ‘Morrison Horizontal Reduction Bill’ for lowering the tariff was hotly debated, but by a combination between the Republicans and the Democratic protectionists led by Mr. Randall, of Pennsylvania, it was defeated. The campaign of that year turned to some extent upon the tariff question, for the Democratic platform, while evading the question of protection, demanded a real reduction of tariff duties, as well as legislation to check the aggression of great corporations. The election of Mr. Cleveland appeared to show that the cry of ‘free trade’ had ceased to alarm the great body of voters, and that they were willing to hear argument upon the questions at issue. The new President's first message (December 16, 1885) recommended a reduction of the tariff, and his message in December, 1887, was devoted exclusively to this topic. In it he stated that the surplus in the treasury was nearly $140,000,000, demanded as a remedy the immediate abolition of the duties upon wool and other raw materials, and characterized the existing tariff laws as “vicious, inequitable, and illogical.” In accordance with the views of this message a new tariff measure, the ‘Mills Bill,’ removing the duty on wool, and aiming at an estimated annual reduction of revenue of fully $50,000,000, passed the House. The Republican Senate offered a substitute repealing the tax upon tobacco and reducing the duty on sugar one-half, thus securing an estimated reduction of $65,000,000 per annum. Neither bill became a law.
The defeat of the Democrats in the Presidential election of 1888 was possibly due to the prominence of the tariff question, but as the majority of the popular vote was on their side, it was seen that a reform or, at any rate, a revision of the tariff was sooner or later inevitable. Therefore, the Fifty-second Congress took up the matter in earnest, with the result that the famous McKinley Bill passed both Houses of Congress and was signed by President Harrison (September, 1890). By its provisions the annual reduction of revenue was estimated to be some $66,000,000, of which $6,000,000 was due to a reduction of internal revenue taxes, chiefly on tobacco. A bounty was provided to compensate producers of raw sugar for the abolition of the duty on that commodity.
One very important feature of the McKinley Act was the section added through the influence of James G. Blaine, then Secretary of State, and known as the reciprocity section. This provided that whenever the President shall be satisfied that the Government of any country producing and exporting sugars, molasses, coffee, tea, and hides, or any such articles, imposes duties upon products of the United States which in view of the free introduction of such sugar, molasses, etc., into the United States, he may deem to be reciprocally unequal and unreasonable, he shall have the power to suspend by proclamation the free introduction into the United States of such sugars, etc., from the country in question. See Customs Duties; Reciprocity.
On the return of the Democratic Party to power in 1893, an effort was made to carry out its promise of tariff reform. A bill framed by William L. Wilson passed the House, and after much amendment by the Senate became a law without the President's signature, August 27, 1894. It made a considerable reduction in many duties, admitted wool free, and provided for an income tax. It was still in the main, however, a protective measure. As a revenue law this act was a failure, partly because the Supreme Court declared the income tax feature unconstitutional and partly because of the business depression which began in the summer of 1893 and caused a marked falling off in imports. The dominant issue in the next Presidential campaign (1896) was the silver rather than the tariff question, but the election of the author of the McKinley Act was naturally construed as a popular verdict in favor of the policy with which his name was identified. A special session of Congress was called in March, 1897, and after prolonged debate the Dingley Act, copied closely in its leading provisions after the McKinley Act, became a law. The duties on wool, woolen goods, cutlery, pottery, and a few other articles were made even higher in this act than they had been in the act of 1890. Lumber was restored to the dutiable list, and hides, which had heretofore been admitted free, were taxed, out of deference to the wishes of the so-called ‘Silver Republicans’ in the Senate, who made this concession a condition to their adhesion. The sugar bounty provision of the McKinley Act was not revived, but the reciprocity provisions were, in modified form.
"in 1898 (June 13th) the so-called ‘War Revenue Law’ was passed to supply the revenue required in consequence of the war with Spain. An interesting feature of this law was that it relied upon increased internal revenue duties and a purely revenue duty of ten cents a pound on imported tea rather than on changes in the general tariff to secure the additional revenue required. The war taxes were repealed by the acts of March 2, 1901, and April 12, 1902 (except those on ‘mixed flour’). During the session of 1902 to 1903 earnest efforts were made in Congress by members of the Republican Party representing some of the States of the Middle West (e.g. Wisconsin) to effect a revision of those clauses of the Dingley Act supposed to be favorable to the ‘trusts,’ but without success.
Administrative Aspects of the Tariff. There is a marked difference in form between purely revenue tariffs, such as that of Great Britain, and protective tariffs like those of the United States and Germany. In the former only the few articles subject to duty are enumerated and unenumerated articles are admitted free. In the latter all articles that may claim free admission are expressly enumerated in the so-call ‘free list,’ and other articles are subject to duty either under the special schedules or under the so-called ‘drag-net clause,’ which imposes a certain rate of duty on unenumerated articles. The German tariff of 1902 enumerated nearly one thousand different classes of commodities, while in the American tariff of 1897 the free list alone contains nearly two hundred and fifty separate items.
Another difference that has frequently characterized protective and revenue tariffs in the United States is that the duties in the former are mainly specific, that is based on the quantities or the number of units of the commodities imported, while in the latter they are mainly ad valorem, that is a certain per cent. of the value of the commodities imported. The preference of protectionists for specific duties is to be explained partly by the greater certainty of such duties, since they cannot be evaded by undervaluations, and partly by their conviction that since protection rather than revenue is the object sought, the ordinary canons of taxation, which prescribe that taxes shall be in proportion to the value of the property taxed, may be disregarded. The identification of specific duties with protection appears to be confined to the United States, since even in free-trade England all the duties now imposed are specific. The administrative advantage of such duties, which are practically self-assessing, need scarcely be dwelt upon.
Bibliography. McCulloch, On Taxation (London, 1845); Sumner, Lectures on the History of Protection in the United States (New York, 1877); Ayers, Review of the Tariff Legislation of the United States (Newark, 1883); Mason, A Short Tariff History of the United States (Chicago, 1884); Hall, A History of Customs Revenue in England from the Earliest Times to the Year 1827 (London, 1885); Wagner, Finanzwissenschaft, especially the section on “Das Zollwesen Frankreichs und Englands” (Leipzig, 1883-1901); Bolles, The Financial History of the United States (New York, 1886); Dowell, History of Taxation and Taxes in England (London, 1888); Say, Dictionnaire des finances, articles “Entrepôt,” “Douane” (Paris, 1889); Goss, The History of Tariff Administration in the United States (New York, 1891); Taussig, Tariff History of the United States (New York, 1892); Leroy-Beaulieu, Traité de la science des finances (6th ed., Paris, 1899); Palgrave, Dictionary of Political Economy (London, 1899), articles “Import Duties,” “Export Duties;” Conrad, Handwörterbuch der Staatswissenschaften (Jena, 1900), articles “Zölle,” “Zollverein;” Dewey, Financial History of the United States (New York, 1903). See Free Trade; Protection; Reciprocity; Tax and Taxation.