^/e.^-^. CORNELL UNIVERSITY LIBRARY BOUGHT WITH THB INCOME OF THE SAGE ENDOWMENT FUND GIVEN IN 189I BY HENRY WILLIAMS SAGE DATE DUE »(HIM^ 1 j i gayLoro PRINTED IN U.S.A. HF1753 .TaT'igiT""" '■"'"'>' ^^ l«IMaa!S&,SLte,.,Hnited States olin 3 1924 032 519 336 Cornell University Library The original of tliis book is in tlie Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924032519336 By r. W. TAUSSIG The Tariff History of tHe United States (Questions of the Day Series, No. 47) Fifth Edition, revised and with additional material, including a Consideration of the ■ Aldrich-Payne Act of 1909. 12°. $1.50 net. The Silver Situation in tHe United States {Questioas of the Day Series, No. 74) Third Edition, revised. 12°. 75 cents. G. P. PUTNAM'S SONS New York — London The Tariff History United States BV F. W. TAUSSIG, LL.B., Ph.D. HBNRV LEE PROFESSOR OF ECONOMICS IN HARVARD UNIVERSITY FIFTH EDITION REVISED, WITH ADDITIONAL MATERIAL, INCLUDING A CONSIDERATION OF THE ALDRICH-PAYNE ACT OF 1909 G. P. PUTNAM'S SONS NEW YORK AND LONDON ZTbe 'KnicRerbocRet press / Copyright, 189a BY G. P. PUTNAM'S SONS FIFTEENTH IMPRESSION Copyright, 1910 BY G. P. PUTNAM'S SONS Ube 1Knic)iecbocf!ec ipreee, mew tfiocbelle, n. J}. NOTE TO THE FIRST EDITION. Of the papers printed in this volume none is now presented to the public for the first time. The essay on " Protection to Young Industries as Applied in the United States " was first published in Cambridge in 1882, and was republished in a revised edition in New York in 1883. The paper on " The Tariff of 1828 " appeared in the Political Science Quarterly for March, 1888. That on " The History of the Tariff between 1 830 and i860 " was printed in the Quarterly Journal of Economics for April, 1888. " The History of the Present Tariff " was published in New York in 1885. All, however, have been revised for the p.esent volume, and considerable additions have been made. I have avoided repetitions, so far as this was possible, and have attempted to connect the narrative of the separate parts. Although not originally written with the design of presenting a complete history of our tariff legislation, these papers cover in some sort the entire period from 1789 to 1887. F. W. T. Cambridge, Mass., July, 1888. CONTENTS. ix Ae Tariff. — Unsuccessful Tariff Bill of 1867, — Act of 1870.— Situation in 1872. — Reform Bill in the House. — Ten per Cent. Reduction Proposed. — Policy of Protectionists. — Act of 1872. — Repeal of Tea and Coffee Duties, 1873. — Ten per Cent. Reduction Repealed. Chapter III. — How Duties were Raised above the War Rates 194 Woollens Act of 1867. — The Compensating System. — Wool and Woollens Duties of 1864. — Act of 1867. — Duty on Wool ; on Woollen Cloths ; on Flannels, Carpets, Dress Goods. — Comment on the ad- Valorem Duty. — Comment on the Specific Duties. — The Woollens Act a Heavy Protective Measure in Disguise. — Doubtful Effect on the Manufacture. — Copper Act of 1869. — Steel Rails, 1870. — Marble, 1864-1870.— Other Cases Where Duties were Increased. — Character of These Measures. ZnKVT%VL VJ .—The Tariff Act of 1883 . . .230 Tariff Commission of 1882. — Act of 1883 ; How Passed. — Duties Raised in 1883 : Woollen Dress Goods, Woollen Cloths, Cottons, Iron Ore, Steel ; Other Articles. — Duties Reduced in 1883 : Wool, Woollens, Cotton, Iron, Steel Rails, Copper, Other Articles. — Duties on Wheat, Corn, Untouched, — General Character of the Act. Chapter V. — The Tariff Act of tSgo . . .251 Unsuccessful Attempts at Legislation in 1884-86. — President Cleveland's Message in 1889. — The Mills' Bill and the Senate Bill in 1888.— The Election of 1888.— Passage of Tariff Act of 1890. — Changes in the Wool Duties : Clothing, Combing, and Carpet Wools. — Changes in the Duties on Woollens, Dress Goods, Cottons, Other Textiles. — Extension of the Minimum System. — Iron, Steel, Rails, Copper, Tin Plates,— The Sugar Duty Repealed, and a Bounty Given — The Re- ciprocity Provisions and their Probable Working. — Tho (^estion of Further Extending Protection Squarely Pre- -sented. CONTENTS. Cyikvt^^YI.— The Tariff Act of 1S94 • • .284 Democratic Victories in the Elections of i8go and 1892. — Diffi- culties of the Democrats. — Passage of the Act of 1894. — Re- moval of the Wool Duty. — Corresponding Changeson Woollens. — Other Textiles. — Duties on Coal and on Iron Ore Reduced, not Repealed. — Iron and Steel. — Ad-valorem Duties Favored by House, Specific by Senate. — The Sugar Question. — Reasons for and against a Duty on Raw Sugar. — Such a Duty Finally Imposed, with the Income Tax. — Duty on Refined Sugar. — The Sugar Trust. — Final Outcome. — Disappointment of Tariff Re- formers. — General Character of the Act. Cka-vt-erYU— The Tariff Act of iSg? . . ,321 Political Overturn of 1896. — Peculiar Position of the Republi- cans. — Need of Revenue. — Passage of the Tariff Act at the Extra Session of 1897. — Re-imposition of Wool Duties. — Compound Duties Re-imposed on Woollens. — Cottons Little Changed. — Specific Duties on Silks and Linens — Iron and Steel Left Unchanged, except Some Special Articles — New Con- ditions in the Iron Industry. — Steel Rails and Tin Plate. — Higher Specific Duties on Sugar, with Additional Duty on Re- fined Sugar Similar to that of 1894.— Reciprocity Provisions. — Uncertain Financial Yield. — General Character of the Act. Future of the United States as a Manufacturing Country. Chapter Ylll.—The Tariff Act of igog . 361-40S The Act of 1897 Undisturbed for Twelve Years. — Causes of its Stability. — A New Doctrine in 1909, that of Equalizing Costs of Production. — Criticism of it. — The Tariff 'BiU of igog before the House Committee. — Reductions and Advances Pro- posed. — Final Passage by the House. — The Senate Advances Duties. — Final Settlement in Conference Committee. — Duty on Hides Repealed. — Coal, Iron Ore, Lumber at Reduced Rates. — Iron and Steel. — Steel Rails. — Leather and Shoes. — Advances in Duty : Cottons, Silks, Hosiery. — High Cost of Labor in these Cases. — Wool and Woollens, and Sugar, Vir- tually Unchanged. — Sugar from Philippines Admitted Free.— CONTENTS. XI New Position of the Sugar Duty. — Some "Jokers." — Maxi- mum and Minimum Provisions. — The Tariff Board. — Con- clusion : No Downward Revision of Serious Consequence. Appendix — Tables : 409-417 I. — Imports and Duties, 1860-IQ07. II. — Duties of 1861, and those of 1864' which were retained, without change, till 1883. III. — Revenue from internal taxes and from the tariff, 1860- 1907. IV. — Product, Imports, and Foreign and Domestic Prices of Copper, 1875-1886. V. — Product, Imports, and Foreign and Domestic Prices of Steel Rails, 1871-1908, Index 419- THE TARIFF HISTORY OF THE UNITED STATES. PART I CHAPTER I PROTECTION TO YOUNG INDUSTRIES AS APPLIED IN THE UNITED STATES. I. THE ARGUMENT FOR PROTECTION TO YOUNG INDUSTRIES. Of the arguments in favor of protection, none has been more frequently or more sincerely urged than that which is expressed in the phrase " protection to young ■ industries." None has received so generally the approval of economists, even of those little disposed to acknowl- edge the validity of any reasoning not in accordance with the theory of free exchange. Mill gave it the weight of his approval in a passage which has been frequently cited. Later English writers have followed him in granting its intrinsic soundness. The reasoning of List, the most prominent protectionist writer among the Germans, is based, so far as it is purely economic, on this argument, and since List's time the argument has taken an estab- lished place in German treatises on political economy, even though it be admitted that the conditions to which it fairly applies belong to the past. 2 PROTECTION TO VOUNG INDUSTRIES. The argument is, in brief, that it may be advantageous to encourage by legislation a branch of industry which might be profitably carried on, v/hich is therefore sure to be carried on eventually, but whose rise is prevented for the time being by artificial or accidental causes. The essential point of the argument lies in the assumption that the causes which prevent the rise of the industry, ^and render protection necessary, are not natural and permanent causes, — not such as would permanently pre- vent, under a state of freedom, the growth of the industry. Let it be supposed, for instance, that the industry to be encouraged is the cotton manufacture. The natural ad- vantages of a given country for making cotton cloths are good, we may suppose, in comparison with the advantages for producing other things. The raw material is cheap, power for machinery is abundant, the general intelhgence and industry of the people — which, since they admit of but very slow change, must be considered natural advan- tages — are such as to fit them for complex industrial operations. There is no permanent cause why cotton goods should not be obtained at as low cost by making them at home as by importing them ; perhaps they can even be produced at lower cost at home. But the cotton manufacture, let it be further supposed, is new; the machinery used is unknown and complicated, and re- quires skill and experience of a kind not attainable, in other branches of production. The industry of the country runs by custom in other grooves, from which it THE ARGUMENT FOR PROTECTION. 3 is not easily diverted. If, at the same time, the com- munication of knowledge be slow, and enterprise be hesitating, we have a set of conditions under which the establishment of the cotton manufacture may be pre- vented, long after it might have been carried on with advantage. Under such circumstances it may be wise to encourage the manufacture by duties on imported goods, or by other analogous measures. Sooner or later the cotton manufacture will be introduced and carried on, even without assistance ; and the government's aid will only cause it to be established with less friction, and at an earlier date, than would otherwise have ^een the case. It may_ illustrate more clearly the conditions under which suc h assistance may be useful, to point out tho se under which it is superfluous. The mere fact that an industry is young in years — (has been undertaken only within a short period of time-^does not supply the con- ditions under which protection is justified by this argu- ment. An industry recently established, but similar in kind to other branches of production already carried on in the country, would hardly come within its scope. But where the industry is not only new, but forms a departure from the usual track of production ; where, perhaps, ma- chinery of an entirely strange character, or processes hitherto unknown, are necessary ; where the skill and ex- perience required are such as could not be attained in the occupations already in vogue ; under these circumstances protection may be applied with good results, if no natural <\. PROTECTION TO YOUNG INDUSTRIES. disadvantages, in addition to the artificial obstacles, stand in the way. The manufacture of linen goods in the United States, at the present time, probably supplies an example of an industry which, though comparatively new, can hardly be said to deserve protection as a young in- dustry. The methods and machinery in use are not essentially different from those of other branches of tex- tile manufactures. No great departure from the usual track of production is necessary in order to make linens. Manufactures of the same general character are estab- lished on all sides. Work-people and managers with experience in similar work can be easily found. Moreover, the means of obtaining and communicating knowledge at the present time are such that information in regard to the methods and machinery of other countries can be easily obtained, while workmen can be brought from abroad without difficulty. Those artificial obstacles which / might temporarily prevent the rise of the industry do : not exist, and it may be inferred that, if there are no permanent causes which prevent linens from being made as cheaply in the United States as in other countries, the manufacture will be undertaken and carried on without needing any stimulus from protecting duties. There are two sets of conditions under which it is sup- posable that advantages not natural or inherent may be found in one country as compared with another, under which causes merely temporary and accidental may pre- vent the rise of certain branches of industry in the second THE ARGUMENT FOR PROTECTION. 5 country, and under which, therefore, there may be room for the application of protection. These are, first, the s tate of things in a new country which is rapidly growin g : in population, a nd in which, as population becomesmoj; dense, there is a natural change fi'OTn tixclusive devotion to the extractive industries toward greater attention to those branches of production classed as manufactures. The transition from a purely agricultural state to a more divgxsifced^^ystem of industn^'may be refairdeSVm the i ^ * "*" ■■— -r ill « i m i Mil -inftTinriiM i „||||Ji,i«i«i" irrwip m i n ■■ m ii » complete absence of other . occupations than agriculture, beyond the time when it might advantageousl;ji;__take place. Secondly, when great improvements take place in some of the arts of production, it is possible that the new process may be retained in the country in which they originate, and may fail to be applied in another country, through ignorance, the inertia of habit, and perhaps in consequence of restrictive legislation at the seat of the new methods. Here, again, the obstacles to the intro- duction of the new industry may be of that artificial kind which can be overcome most easily by artificial means. ..Now, both these_s ets of c_o nditi{"),P'^ seem to hav e been fu l- filled in the U nited^ States in the beginning of the igth century ^The country was normally emerging, to a con- siderable extent, from that state of almost exclusive devo-{ tion to agriculture which had characterized the colonies. At the same time great changes were taking place in the mechanical arts, and new processes, hardly known outside of England, and held under a practical monopoly 6 PROTECTION TO YOUNG INDUSTRIES. there, were revolutionizing the methods of manufacturing production. Under these circumstances there would seem to have existed room for the legitimate application of protection for young industries. The more detailed examination in the following pages of the industrial condition of the country during the ear- lier part of the 19th century will bring out more clearly the reasons why protection may then have been useful. It may be well, however, to notice at this point one difference between those days and the present which must seriously affect the application of the argument we are considering. Even if we were to suppose the conditions of 1810 to exist now ; if the country were now first beginning to attempt manufactures, and if a great revolution in manu- facturing industry happened to make the attempt pecu- liarly difficult ; even then the obstacles arising from the force of custom, and from the want of familiarity with new processes, would be much more easy to overcome now than sixty years ago. The ties of custom in industry have become much loosened in the last half century; cap- ital and labor turn more easily to new employments. The railroad, the telegraph, the printing-press, the immense increase in the facility of communication, the constant change in methods of production in all industries, have tended to make new discoveries and inventions common property, and to do away with advantages in production based on other than permanent causes. It is true that there are still appreciable differences in the ai-ts of pr©. THE ARGUMENT FOR PROTECTION. "J duction in different countries, and that some may have a superiority over others based on the merely accidental or temporary possession of better processes or more effective machinery. But the United States hardly lagS behind in the industrial advance of the present day, and where tfeey / dc«4abor under artificial or factitious disadvantages, these cannot endure long or be of great consequence under a system of freedom. Eighty years ago, however, the state of things was very different. The conditions were then in force under which protection might be needed to enable useful indus- tries to be carried on. The argument for protection to young industries was accordingly the most effective of those urged in favor of the protective policy. During the twenty years which followed the war of l8i2 the pro- tective controversy was one of the most important fea- tures in the political life of the nation ; and the young ' industries argument was the great rallying-cry of the pro- tectionists. It is of interest to examine how far protec- tion of the kind advocated was actually applied, and how far it was the cause, or an essential condition, of that rise of manufactures which took place. The object of this paper is to make such an investigation. II. THE INDUSTRIAL HISTORY OF THE UNITED STATES, AND THE COURSE OF PROTECTIVE LEGISLA- TION, FROM 1789 TO 1838. The early economic history of the United States may be divided into , two period s. The first, which is in the main a continuation of the colonial period, lasted till about the year i8p8 ; the embargo marks the beginning of the series of events which closed it. The second began in 1808, and lasted through the generation following. It was during the second period that the most decided at- tempt was made to apply protection to young industries in the United States, and with this period we are chiefly concerned. During the first period the country was, on the whole, in the same industrial condition in which the colonies had been. The colonies had been necessarily engaged almost exclusively in agriculture, and in the occupations closely connected with it. The agricultural community could not get on without blacksmiths, carpenters, masons, shoe- makers, and other artisans, and these existed side by side with the farmers. In those days, it must be remembered, INDUSTRIAL HISTORY OF THE UNITED STATES. 9 handicraft workmen of this kind occupied a more import- ant place in industrial organizations than they do at the present time. They mad-e many_ai±icles_a»d-p€f{e«9a€4- iaany.JS£J3Mces which are now the objects.o£-manufacturing production and of extensive trad e, and come.within the range of internation al dealings. Many tools, were then made by individual blacksmiths, many wares by the car- penter, many homespun cloths fulled and finished at the small fulling-mill. Production of this kind necessarily takes .plac.e_at_the_locality where consumption goes on. In those days the division of labor between distant bodies of men had been carried out to a comparatively slight extent, and the scope of international trade was therefore much more limited. The existence of these hqmiicKA workmen a ccounts for the numerous notices of " manu- factures " which Mr. Bishop industriously collected in his " History of Manufactures," and is not inconsistent with the mainly extractive character of the industry of the*" colonies. What could be imported at that time was im^ ported, and wa<^ paid f"*" by *'h'^ pvprirtitinn nf ■xaxic.xtXJ^ tuxaJLpxo.duce. The exportation took place, so far as the northern colonies were concerned, largely to the West • Indies. From the West India trade the means for pay- ing indirectly for the imported goods were mainly ob- tained. There were some important exceptions to this general state of things. Ship-building was carried on to a considerable extent in New England, where abundance of material and the necessity of transportation by water lO PROTECTION TO YOUNG INDUSTRIES. made such an industry natural. The production of uii- manufactured iron was carried on to a considerable extent ; for at that time the production of pig and bar iron tended to fix itself in those countries where wood, the fuel then used, was abundant, and was therefore an industry much more analogous to agriculture than it has been since the employment of coal as fuel. In the main, however, the colonies made only such manufactures as could not be im- ported. All manufactured goods that could be imported were not made at home, but obtained in exchange for agricultural exports. This state\ of things was little changed after the end of the Revolutionary war and the adoption of the Constitu- tion. The year 1789 marks no such epoch in economic as it ,does in political history. Agriculture, commerce, and the necessary mechanic arts, continued to form the main occu- pations of the people. Such goods as could be imported continued to be obtained from abroad in exchange for exports, mainly of agricultural produce. The range of importable articles was, it is true, gradually extending. .Cloths, linens, and textile fabrics were still chiefly home- spun, and fine goods of this kind were still in the main the only textile fabrics imported. But with the great growth of manufacturing industry in England during this time, the range of articles that could be imported was growing wider and wider. During the Napoleonic wars the American market was much the most important for the newly established English manufactures. Large quanti- INDUSTRIAL HISTORY OF THE UNITED STATES. II ties of cotton and woollen goods were imported, and the importations of manufactures of iron, in regard to which a similar change in production was then taking place, also increased steadily. Sooner or later the change in the course of production which was going on in England must have had, and did have, a strong influence on the eco- nomic condition of the United States ; but for the time being this influence was little felt, and the country con- tinued in the main to run in the grooves of the colonial period. This absence of development was strongly promoted by the peculiar condition of the foreign trade of the country up to 1808. The wars of the French Revolution opened to this country profitable markets for its agricultural products in the West Indies and in Europe, and profit- able employment for its shipping, both in carrying the increased exports and in a more oriless authorized trade between the belligerent countries and their colonies. For many years the gains arising from these sources, though not regular or undisturbed, were great, and afforded every inducement to remain in the occupations that yielded them. The demand for agricultural products for exporta- - tion to the belligerent countries and their colonies was large, and the prices of wheat, corn, and meat were corre- spondingly high. The heavy exports and the profits on freights furnished abundant means for paying for im. ported goods. Importations were therefore large, and imported goods were so cheap as to afford little induce- 12 PROTECTION TO YOUNG INDUSTRIES. ment for engaging in the production of similar goods at home.' The tariff legislation of this period was naturally much influenced by the direction taken by the industries of the ' The following tables of imports and' exports show the influence of these circumstances on the foreign trade of the country. The exports of foreign produce show the swelling of the carrying-trade. The price of flour shows the effect on the prices of agricultural produce. The influ- ence of the temporary stoppage of the war in Europe during the time of the Peace of Amiens is clearly seen. Year. Gross Imports. 000 Omitted. Gross Exports. 000 Omitted. Exports of For- eign Produce. Price of Flour 000 Omitted. per Bbl. 179I 29,200 lg,ooo 500 . . . 92 31.500 20,700 1.750 $ 5.07 93 31,100 26,100 2,100 6.21 94 34.600 33,000 6,500 7.22 95 69,750 48,000 8,500 12.05 96 81,400 67,000 26,300 12.43 97 75,400 56,800 27,000 9.00 98 68, 500 61,500 33.000 8.78 99 79,000 78,600 45.500 g.62 1800 9 1 , 200 71,000 39.100 9.85 01 111,300 94,000 46,600 10.45 Peace of ( 02 Amiens. \ 03 76,300 72,000 35.700 6.75) 6.73) 64,700 55.800 13,600 04 85,000 77,700 36,200 8.22 05 120,600 95.500 53.200 10.28 06 129,400 101,500 60,300 7 30 07 138,500 108,300 59,600 7.00 08 57,000 22,400 13,000 5.60 09 59.400 52,200 20,800 6.qo 10 85,400 66,700 24,400 9.66 11 53.400 61,300 16,000 10.00 12 77,000 38,500 8,500 8-75 13 22,000 27,900 2,800 8.50 14 13,000 6,900 150 7-70 The tables of imports and exports are from the Treasury Reports. The last table, giving the price of flour, isin " American State Papers, Finance." HI.. 536. INDUSTRIAL HISTORY OF THE UNITED STATES. I3 country. The peculiarly favorable conditions under which agriculture and commerce were carried on prevented the growth of any strong feeling in favor of assisting manufac- tures. Much has been said in the course of the protective controversy about the views of the fathers of the repub- lic. But for ne arly twpnty year'^ after the formation of thg. Union other subjects so absorbed the attention of public men that nn di'tinrt opinion nppenn in their ntternnrei f or or against pr pt^rt ivp diitj 'e<;. Considering the state of economic knowledge in those days, the example set by European countries, and the application of the colonial system before the days of independence, we cannot be surprised that some disposition was shown to impose pro- tective duties. It is curious that in the first session of Congress these were advocated most earnestly by the representatives from Pennsylvania, who took their stand from the first as unflinching advocates of a protective policy. On the other hand, the current toward more lib- eral views, which had set in so strongly after the writings of the French economists and the publication of the " Wealth of Nations," had made its way to the United States. One might expect to find its influence most strong among the followers of Jefferson, whose political philosophy led them in general to oppose government interference. But both Federalists and Republicans were influenced in their attitude to the question of protection most of all by its bearing on the other more prominent questions on which parties began to be divided. 14 PROTECTION TO YOUNG INDUSTRIES. M adison harl mainf a inprl fke-prinriple of free intercourse in i78q.' and Je fferson in 1787 had extolled the virtues of ,a simple agricultural State." But in 1793, when the Fed- eralists and Republicans began to differ on questions of foreign policy, and especially on the attitude the country should take in the wars of the French Revolutionj T.ef- ferson advocate d vigorous measur es of protection directed against En gland, and Madison brought forward a set of resolutions based on his recommendations.' On the other hand, Fisher Ames had said, in 1789, that the general gov- ernment should nurture those industries in which the individual States had an interest ; but in 1794, when his political views led him to oppose Madison's resolutions, he called the whole theory of protection an exploded dogma.* 1/ The first tariff act, that of 1789, was protective in in- tention and spirit. The Congress of the Confederation had framed a plan for a general five per ce nt, duty, with a few specific duties on articles like tea,.£offee, and sugar, — a. plan wJlo.se_failu.re was one of the most important gvents leading to the ad option of the Constitution. When Congress met in 1789, this scheme, which had aimed solely at procuring the needed revenues, was presented ' "Annals of Congress," 1789, pp. 112-114. ' " Notes on Virginia, Works," VIII., 404. • See Jefferson's " Report on Commerce, Works," VII., 637 ; and Madi son's resolutions of 1794, based on Jefferson's Report, " Annals of Con- gress," 1794, pp. 155, 209. * " Annals of Congress," 1789, p. 221 ; 1794, p. 342. INDUSTRIAL HISTORY OF THE UNITED STATES. 1 5 anew by Madison, who advocated it not only on financial grounds but on the general principles of free trade. But several of the States, especially Massachusetts and Penn- sylvania, had imposed protective duties before 1789; and they were desirous of maintaining the aid then given to some of their industries. Moreover, the feeling of resent- ment against--€rTeat~B£it ain was stro ng. Consequently, MadlstHt^ai-mplo pj gposal w aajeplaced^bv a more compli, catgjLscbeme. The general duty of five per cent, was re- tained on all goods not otherwise enumerated. On certain articles of luxury, higher ad valorem rates were fixed, the highest, on carriages, being fifteen per cent. Specific duties were imposed on some selected articles, such as hemp, cordage, nails, manufactures of iron, and glass. These articles were selected, and made subject to the specific duties, with the clear intent of stimulating do- mestic production. The general range of duties was by no means such as would have been thought protec- tive in later days ; but the intention to protect was there.' The legislation of the next-tweuly yiiais, ii®35jever, brought no -fiirther ap pre(jfiK1p f^pvp1ripn^&n±-£j...tTip_prn. 1|ecliig_pDlicy. For a short time after 1789, it may be possible to detect a drift in favor of protective duties, ' On the act of 1789, see the monograph by William Hill, " The First Stages of the Tariff Policy of the United States," in Publications of the American Economic Association, vol. VIII., No. 6. This valuable paper has led to a modification of the account of the act of 1789 given in previ- ous editions of the present book l6 PROTECTION TO YOUNG INDUSTRIES. which doubtless was strengthened by the powerful ad- vocacy of protection in Hamilton's " Report on Manu- factures " (1792). But that famous document had little, /if any, effect on legislation. The moderate policy of 1789 was maintained. The duties were increased from time to time as more revenue was needed, but they were in all cases moderate. Those which were most distinctly protective had no appreciable influence in diverting the i industry of the country into new channels. No action ) at all was taken for the encouragement of the produc- tion of textiles, of crude iron, and of the other articles which later became the great subjects of dispute in the protective controversy. The industrial situation changed abruptly i n 180 8. The complications with England and France led to a series of measures which mark a turning-point in the industrial history of the country. The Berlin and Milan decrees of Napoleon, and the English orders in Council, led, in December, 1807, to the Embargo. The J^on- latgr cpurse A ct followed in 1809. .^iar-with England was declared in 1812. During the war, intercourse with England was prohibited, and all import duties were >i doubled. The last-mentioned measure was adopted in the hope of increasing the revenue, but had little eflect, for foreign trade practically ceased to exist. This series of restrictive measures blocked the accustomed channels of exchange and production, and gave an enormous ^stimulus to those branches of industry whose products INDUSTRIAL HISTORY OF THE UNITED STATES. 17 had before been imported. Establishmen ts for the manufacture of cotton goods, woollen cloths, iron, glass, pottery, and other articles, .aprang-iip with a mushroom growth. We shall have occasion to refer more in detail to this growth when the history of some of these manu- factures xomes to be considered separately. It is sufficient here to^note that the restrictive legislation of 1808-15 was, for the time being, equivalent to ^treai£_pi2tec£kiQ. The consequent rise of a considerable class of manufac-fl turers, whose success depended largely on the continuanc&l of protection, formed the basis of a strong movement fonf more decided limitation of foreign competition. ^ Some signs of the gradual growth of a protective feeling appear before the close of the war.' It was natural that the patriotic_fervor which the events of the period of re- striction and war called out for the first time in our his- tory, should bring with it a disposition to ea couraf^e- ^he p£od«€feie-H-atJa£tirLe of a number of manufactured articles, of which the sudden interruption in the foreign supply caused great inconvenience. Madison, whose views on this subject, as on others, shifted as time went on and circumstances changed, recommended the encouragement of .manufactures ; and in some of jQay's earlier speeches we can see the first signs of the_Anierican syst£«i-of the ' It is curious to note that in 1802-1804, during the temporary lull that followed the Peace of Amiens, the committee reports seem to show a drift toward protection. See " American State Papers, Finance," II., pp. 29, 80, and the report on the Barbary Powers Act of 1804, " Annals of Congress," 1804, pp. 946-950. 1 8 PROTECTION TO YOUNG INDUSTRIES. future." The feeling in favor of the manufactures that had sprung up during the time of restriction obtained some clear concessions in the tariff act of 1816. The control of the policy of Congress at that time was in the hands of a knot of young men of the rising generation, who had brought about the war and felt in a measure responsible for its results. There was a strong feeling among these that the manufacturing establishments which had grown up during the war should be assisted. There was little feeling, however, either in Congress or among the people, such as appeared in later years, in..iayjD£_of_a^£ermanent strong protective policy. Higher duties were therefore granted on those gdods in whose production most interest was felt, textile fabrics ; but only for a litoited-^ieried. Cotton and woollen goods were to pay 25 per cent, till 1 8 19; after that date they were to pay 20 per cent. A proviso, intended to make more secure this measure of protection, was adopted in regard to a njinimum^duty on cotton goods, to which reference will be made in another connection. These and some other distinctly protective provisions were' defended by Calhoun, mainly on the ground of the need-of rnaking^iroyision for the exigencies ► of another war ; and on that ground they were 'Adopted, and at the same time limited. The general increase of ' See Madison's message of 1809, "Statesman's Manual," I., 389; and Clay's speech of 1810, "Works,'' I., 195. Madison never gave up his general acceptance of the principle of free trade, but admitted it to be inapplicable to articles needed in time of war, and in circumstances to which the young-industries' argument applied. See his " Works," III.. 4a. INDUSTRIAL HISTORY OF THE UNITED STATES. duties under the act of 1816, to an average of about twenty per cent., was due to the necessity of providing for the payment of the interest on the heavy debt con-*' tracted during the war. / For some time after the close of the war and the enactment of the tariff of i8i6,..there-was-n-o-press-u-Fe.for a more vigorous application of protective principles. The general expectation was, that the country would fall back < into much the same state of things as that which had ex- isted before 1808 ; that agriculture and commerce would again be as profitable as during the previous period, and would be as exclusively the occupations of the people. Such an expectation could not iu Llii. lULUlV uf LWags be entirely fulfilled, but for a time it was encouraged by several accidental circumstances. The, harvests- in Europe for several seasons werg_iiadr-and caused a- stronger de- mand and higher price for the staple food products. The demand for cotton was large, and the price high. Most ' important of all, the currency was in a state of complete- disarrangement, and concealed and supported an unsound economic condition. Under cover of the excessive issues of practically irredeemable bank-notes, the prices of all commodities were high, as were the general rates of wages and rents. The prices of bread-stuffs and provisions, the- staples of the North, and of cotton and tobacco, the staples of the South, were high, not only absolutely, but relatively, and encouraged continued large production of these articles. The crices of most manufactured 20 PROTECTION TO YOUNG INDUSTRIES. goods were comparatively low. After the war the im- ports of these from England were very heavy. The long pent-up stream of English merchandise may be said to have flooded the world at the close of the Napoleonic wars. In this country, as in others, imports were carried beyond the capacity for consumption, and P2ce_s felljpuch below the normal rates. The strain of this over-supply and , fall of prices bore hard on the domestic manufacturers, especially on those who had begun and carried on opera- tions during the restrictive period ; and many of them were compelled to cease production and to abandon their works. This abnormal period, which had its counterpart of -f- feverish excitement and speculation in Europe, came to an end in jSxS-ig. The civilized world then settled down to recover slowly from the effects of a generation of war and destruction. In the United States the cur- rency bubble was pricked in the latter part of 1818. Prices began tg .fall rapidly and heavily, and continued to fall through 18 19. The prices of the agricultural staples of the North and South underwent the greatest change, "^or the harvests in Europe were again good in 18 18, the > English corn-laws of 1816 went into operation, and the demand for cotton fell off. A new scale of monetary ex- change gradually went into operation. During the period of transition there was, as there always is in such periods, much suffering and uneasiness ; but gradually the difficul- ties of adjusting old contracts and engagements were overcome, and the habits of the people accommodated INDUSTRIAL HISTORY OF THE UNITED STATES. 21 themselves to the new regime. Within three or four years after iSig.the effects of the crash were no longer felt in most parts of the country. Two results which it is important to note in this con^ . nection followed from the crisis of 1819: first, a great alteration in the position and prospects of manufacturing"^ industries ; and second, the rise of a strong public feeling in favor of protecting these industries, and the final en-*^ actment of legislation for that purpose. The first of / these results was due primarily to the fact that the fall in prices after TS1/9 did not- gn gr'^atlj ^ affec t most manufac- tured _goods.asJjLdid.-other- articles. The p^uces'oFmanu- factured goods had already declined, in consequence of the heavy importations in the years immediately follow- ing the war. When, therefore, the h gsvy faj JJjQok-^-ce in 1 8 19 in the prices of food and of raw materials, in the gains of agriculture, in money wages and money rents, the genera l result was advantag eous for th emanufacturerssy. They were put into a position to produce with profit at,^ the lower prices which had before been unprofitable, a»d|- to meet more easily foreign competitiorfr After the first shock was over, and the system of exchange became cleared of the confusion and temporary stoppage which must attend all great fluctuations in prices, this result was plainly felt.' It is easy to see that the whole process ' " The abundance of capital, indicated by the avidity with which. loans are taken at the reduced rate of five per cent. , the reduction in the wages of labor, and the decline in the price of property of all kinds, all concur favor- ably for domestic manufactures. " — Clay Speech of 1820. " Works," I., 419, 22 PROTECTION TO YOUNG INDUSTRIES. was nothing more than the evolution of the new state of things which was to take the place of that of the period before 1808. In that earlier period manufactured goods, so far as they could be obtained by importation at all, were importedclieaply and easily by means of large ex- ports and freight earnings. These resources were now largely cut off. Exports -declined, and imports in the end had to follow them. The lightening of the English corn-law, and the general restriction of trade and naviga- tion by England and other countries, contributed to strengthen this tendency, and necessarily served to stimu- late the growth of manufactures in the United States. That growth was indeed complicated and made more striking by the revolution which was then taking place in many departments of manufacturing industry. Especially in the production of textile fabrics^jjiachinery was rapidly displacing — in England had already largely displaced — production by hand on a small scale. Home-spun textiles were gradually making room for the products of the spin- ning-jenny and the power-loom. The state of things that followed the crisis of i8i8-i9~was favoraWe-to- the rise of . manufactures ; but the change took place not so much by an increase in the relative number of persons engaged in such occupations, as in the substitution of manufactures in the modern sense for the more simple methods of the previous period.' ' According to the census returns of 1820 and 1840, the only two of the earlier returns in which occuoations are enumerated, there were engaged INDUSTRIAL HISTORY OF THE UNITED STATES. 23 JL. The second effect of the change that followed the financial crisis of 1819, was the strongL-protecttve move^ ment which exercised so important an influence on the- political history of the next generation. T h^ diminiil-in n of the ^Qxe^ ^ deman d, and the fall in., the-pri£es_of staple products, naturally gave rise to a cry for a home market. The absence of reciprocity and the restrictive regulations of England, especially in face of the comparatively liberal import duties of this countrj^, furnished an eflective argu- ment to the advocates of protection. Most effective, how- ever, was the argument for protection to young industries/- which was urged with persistency during the next ten or in manufactures and the mechanic arts in 1820, 13.7 per cent, of the work- ing population ; in 1840, 17 i per cent. In New England 21 per cent, were so engaged in 1820, 30.2 per cent, in 1840 ; in the Middle States 22.6 percent, in 1820, 28 per cent, in 1840. Mac Gregor, "Progress of America," II., lOl. There are no census figures before 1820. In 1807 it was loosely estimated that out of 2,358,000 persons actively employed, 230,000 were engaged in mechanics and manufactures — less than 10 per cent. Blodgett, " Thoughts on a Plan of Economy," etc. [1807] p. 6. The fluctuations in the exports of wheat flour, which was the most im- portant article of export among agricultural products during the early part of the century, tell plainly the story of the country's foreign trade. They were as follows, the figures indicating millions of dollars : Yearly average, i8»3-7 (expanded trade) . . . .8.2 " " i8«8-l» (restriction) 4.0 " " i8i»-i2 (restrictions removed) . . . 13.5 " 1813-15 (war) 5-5 " " 1814-17 (temporary revival) . . . 14.5 Year 181I 6.0 " 1819 5.0 •• i82» 4-3 During the decade 1820-1830, when matters settled down to a normal state, the yearly export was between four and five millions of dollars. See " Quarterly Reports of the Bureau of Statistics," 1883-84, No. 4, pp. 523, 524. 24 PROTECTION TO YOUNG INDUSTRIES. fifteen years. The character and history of this early pro- tective movement will be discussed elsewhere.' Here it is sufficient to note that its effect on legislation was not merely to maintain the protective provisions of the tariff of 1816, but much to extend^the protec tive element_in Ariff legislation. Already in 1818 it had been enacted that the duty of 25 per cent, on cottons and woollens should remain in force till 1826, instead of being reduced to 20 per cent, in 18 19, as had been provided by the act of i8i6. At the same time the duty on all forms of unman- ufactured iron was considerably raised ; a measure to which we shall have occasion to refer in another connec- tion. In 1820, while the first pressure of the economic revulsion bore hard on the people, a vigorous attempt was made to pass a high protective tariff, and it barely failed of success, by a single vote in the Senate. In 1824 the protectionists succeeded in passing the tariff of that year, which increased all duties considerably. Four years later, in the tariff of 1828, the p rotectiy.g .movement -reached its highest point. The measures which followed in 1832 and 1833 moderated the peculiarly offensive pro- ' visions of the act of 1828, but retained the essential parts of protection for some years longer. On the whole, from 1 8 16 on, there was applied for some twenty years a con- tinuous policy of protection ; for the first eight years with much moderation, but after 1824 wiik . hi.gh_jduties, and stringent measures for_£nfQrciag.-them. ' In the next essay, pp. 68-75. III. THE COTTON MANUFACTURE. We turn now to the history of some of the industries to which protection was applied during this long period, in order to determine, so far as this is possible, how far' their introduction and early growth were promoted or rendered possible by protection. We shall try to see how far and with what success protection to young industries was applied. The most important of them, on account both of its magnitude and of the peculiarly direct applica- tion of protection to it, is the cotton manufacture ; and we are fortunate in having, at the same time, the fullest and most trustworthy accounts of the early history of this industry.' During the first of the two periods into which we have divided the early economic history of the United States, several attempts were made to introduce the manufacture of cotton by the machinery invented by Hargreaves and Arkwright in the latter part of the i8th century. One or ' In S. Batchelder's ' ' Introduction and Early Progress of the Cotton Man- ufacture in the U. S." (1863) ; G. S. White's " Memoir of Samuel Slater " (1836J ; and N. Appleton's " Introduction of the Power-loom and Origin of Lowell " (1858). 25 26 PROTECTION TO YOUNG INDUSTRIES. two of these attempts succeeded, but most of them failed, and the manufacture, which then was growing with marvel- lous rapidity in England, failed to attain any considerable development in this country. In 1787 a factory using the ne:^fi machinery was established at Beverly, Mass., and obtained aid from the State treasury ; but it was soon abandoned. Similar unsuccessful ventures were made at Bridgewater, Mass., Norwich, Conn., and Pawtucket, R. I., as well as in Philadelphia. The spinning-jenny was introduced in all these, but never successfully operated.'' The first successful attempt to manufacture with the new machinery was made by Samuel Slater, at Pawtucket, R. I. Slater was a workman who had been employed in Arkwright's factories in England. He joined to mechani- cal skill strong business capacity. He had become famil- iar with the system of carding, drawing, roving, and mule- spinning. Induced to come to the United States in 1798 by prizes offered by the Philadelphia Society for Promot- ing Manufactures, he took charge in the following year of a cotton-factory which had been begun and carried on with little success by some Quakers of Pawtucket. He was suc- cessful in setting up the Arkwright machinery, and became the founder of the cotton manufacture in this country. Through him machinery, and instruction in using it, were obtainable ; and a few other factories were begun under ' Batchelder, p. 26 seq.; White, ch. III. The cotton-mill at Norwich, built in 1 790, was operated for ten years, and then abandoned as unprofit- able. — Caulkins, " Hist, of Norwich," p. 6g6. THE COTTON MANUFACTURE. 27 his superintendence. Nevertheless, the manufacture hardly maintained its hold. In 1803 there were only four factories in the country.' The cotton manufacture was at that time extending in England at a rapid rate, and the imports of cotton goods from England were large. The Treasury reports of those days give no separate statements of the imports of cotton goods ; but in 1807 it was esti- mated that the imports of cotton goods from England amounted to eleven million dollars' worth — a very large sum for those days.' The consumption of cotton goods was large ; but only an insignificant part of it was supplied by home production, although later developments showed that this branch of industry could be carried on with dis- tinct success. The ease with which these imports were paid for, and the stimulus which this period, as described in the preceding pages, gave to agriculture and com. merce, account in part for the slowness with which the domestic manufacture developed. The fact that raw cot- ton was not yet grown to any considerable extent in the country, together, doubtless, with the better machinery and larger experience and skill of the English, account for the rest. When, however, the period of restriction began, in f 1808, the importation of foreign goods was first impeded, and soon entirely prevented. The domestic manufacture accordingly extended with prodigious rapidity. Already 'Bishop, " Hist, of Manufactures," II., 102.' ' See the pamphlet by Blodgett " On a Plan of Economy," etc., already cited, p. 26. 28 PROTECTION TO YOUNG INDUSTRIES. during the years 1 804-8 greater activity must have pre- vailed ; for in the latter year fifteen mills had been built, running 8,000 spindles. In 1809 the number of mills Ibuilt shot up to 62, with 31,000 spindles, while 25 more mills were in course of erection.' In 1812 there were 50 factories within thirty miles of Providence, operat- ing nearly 60,000 spindles, and capable of operating loo,- 000.° During the war the same rapid growth continued, rendered possible as it was by the increasing supply of V raw cotton from the South. The number of spindles was said to be 80,000 in 181 1, and 500,000 in 1815. In 1800, 500 bales of cotton had been used ; in 1805, 1,000 bales. In 1810 the number consumed rose to 10,000; in 1815, it was 90,000.° These figures cannot be supposed to be ' Gallatin's Report on Manufactures in 1810 ; " Amer. State Papers, Finance," II., 427. » White: " Memoir of Slater," p. 188. ' See the Report of a Committee of Congress on the Cotton Manufacture in 1816 ; " Amer. State Papers, Finance," III, 82, ?4. This estimate re- fers only to the cotton consumed in factories, and does not include that used in household manufacture. The number of spindles for 1815, as given in this report, is probably much too large. In Woodbury's Report of 1836 on cotton, the number of spindles in use in factories is given as follows : In 1805 . . 4, 500 spindles. " 1807 . . 8,000 " " 1809 . . 31,000 " " 1810 . . 87,000 " 1815 . . 130,000 " " 1820 . . 220,000 " " 1821 . . 230,000 " " 1825 . . 800,000 " Exec. Doc," I Sess., 24 Congr., No. 146, p. 51. It need not be said that these figures are hopelessly loose ; but they are sufficient to support the general assertions of the text. THE COTTON MANUPACTVRE. 29 at all accurate ; but they indicate clearly an enormously rapid development of the manufacture of cotton. The machinery in almost all these new factories was for spinning yarn only. Weaving was still carried on by the hand-loom, usually by weavers working in considerable numbers on account for manufacturers. Toward the end of the war, however, a change began to be made almost as important in the history of textile manufactures as the use of the spinning-jenny and mule : namely, the substitu- , tion of the power-loom for the hand-loom. The introduc-'' tion of the power-loom took place in England at about the same time, and some intimation of its use seems to have reached the inventor in this country, Francis C. Lowell. He perfected the machine, however, without any use of English models, in the course of the year 1814. In the same year it was put in operation at a factory at Waltham, Mass. There for the first time the entire pro- cess of converting cotton into cloth took place under one roof. The last important step in giving textile manufac- tures their present form was thus taken.' When peace was made in 1815, and imports began again, the newly established factories, most of which were badly equipped and loosely managed, met with serious embarrassment. Many were entirely abandoned. The manufacturers petitioned Congress for assistance ; and they received, in 1816, that measure of help which the public was then disposed to grant. The tariff of 1816 'Appleton, pp. 7-1 1 ; Batchelder, pp. 60-70. 30 PROTECTION TO YOUNG INDUSTRIES. levied a duty of 25 per cent, on cotton goods for three years, a duty considered sufificiently protective in those days of inexperience in protective legislation. At the same time it was provided that all cotton cloths, costing less than 25 cents a yard, should be considered to have cost 25 cents and be charged with duty accordingly ; that is, should be charged 25 per cent, of 25 cents, or 6|- cents a yard, whatever their real value or cost. This was the first of the minimum valuation provisos which played so considerable a part in later tariff legislation, and which have been maintained in large part to the present time. A similar minimum duty was imposed on cotton-yarns.' At the time when these measures were passed, the minimum provisos hardly served to increase appreciably the weight of the duty of 25 per cent. Coarse cotton cloths were then worth from 25 to 30 cents, and, even without the provisos, would have paid little, if any thing, less than the minimum duty. But, after 1818, the use of the power- loom, and the fall in the price of raw cotton, combined greatly to reduce the prices of cotton goods. The price of coarse cottons fell to 19 cents in 18 19, 13 cents in 1826, and %\ cents in 1829.'' The minimum duty became proportionately heavier as the price decreased, and, in a few years after its enactment, had become prohibitive of the importation of the coarser kinds of cotton cloths. ' The minimum system seems to have been suggested by Lowell. Apple- ton, p. 13. Compare Appleton's speech in Congress in 1833. — "Congres- sional Debates," IX., 1213. " Appleton, p. 16. THE COTTON MANUFACTURE. 31 During the years immediately after the war, the aid given in the tariff of 1816 was not sufificient to prevent severe depression in the cotton manufacture. Reference has already been made to the disadvantages which, under the circumstances of the years 18 15-18, existed for all manufacturers who had to meet competition from abroad. But when the crisis of 1818-19 had brought about a re- arrangement of prices more advantageous for manufac- turers, matters began to mend. The minimum duty became 1 more effective in handicapping foreign competitors. At 1 the same time the power-loom was generally introduced.— Looms made after an English model were introduced in the factories of Rhode Island, the first going into opera- tion in 1817 ; while in Massachusetts and New Hampshire the loom invented by Lowell was generally adopted after 1816.' From these various causes the manufacture soon became profitable. There is abundant evidence to show that shortly after the crisis the cotton manufacture had fully recovered from the depression that followed the war." The profits made were such as to cause a rapid ' Appleton, p. 13 ; Batchelder, pp. 70-73. ^ The following passage, referring to the general revival of manufactures, may be quoted : '' The manufacture of cotton now yields a moderate profit to those who conduct the business with the requisite skill and economy. The extensive factories at Pawtucket are still in operation. ... In Phil- adelphia it is said that about 4,000 looms have been put in operation within the last six months, which are chiefly engaged in making cotton goods, and that in all probability they will, within six months more, be increased to four times that number. In Paterson, N. J., where, two years ago, only three out of sixteen of its extensive factories were in operation ... all are now in vigorous employment. " — " Niles's Register," XXI., 39(1821). Com- 32 PROTECTION TO YOUNG INDUSTRIES. extension of the industry. The beginning of those man- ufacturing villages which now form the characteristic economic feature of New England falls in this period. Nashua was founded in 1823. Fall River, which had grown into some importance during the war of 1814, grew rapidly from 1820 to 1830.' By far the most important and the best known of the new ventures in cotton manu- facturing was the foundation of the town of Lowell, which was undertaken by the same persons who had been en- gaged in the establishment of the first power-loom factory at Waltham. The new town was named after the inventor of the power-loom. The scheme of utilizing the falls of the Merrimac, at the point where Lowell now stands, had been suggested as early as 1821, and in the following year the Merrimac Manufacturing Company was incorporated. In 1823 manufacturing began, and was profitable from the beginning; and in 1824 the future growth of Lowell was clearly foreseen." pare Ibid., XXII., 225, 250 (1822) ; XXIII., 35, 88 (1823) ; and passim. In Woodbury's cotton report, cited above, it is said (p. 57) that " there was a great increase [in cotton manufacturing] in 1806 and 1807 ; again during the war of 1812 ; again from 1820 to 1825 ; and in 1831-32." ' Fox's " History of Dunstable " ; Earl's " History of Fall River," p. 20 seq. "^ See the account in Appleton, pp. 17-25. One of the originators of the enterprise said in 1824 : " If our business succeeds, as we have reason to expect, we shall have here [at Lowell] as large a. population in twenty years from this time as there was in Boston twenty years ago." — Batchel- der, p. 6g. In Bishop, II., 309, is a, list of the manufacturing villages of 1826, in which some twenty places are enumerated. THE COTTON MANUFACTURE. 33 From this sketch of the early history of the cotton manufacture we may draw some conclusions. Before 1808 the difficulties in the way of the introduction of this branch of industry were such that it made little progress. These difficulties were largely artificial ; and though the obstacles arising from ignorance of the new processes and from the absence of experienced workmen, were partly removed by the appearance of Slater, they were sufficient, when combined with the stimulus which the condition of foreign trade gave to agriculture and the carrying trade, to prevent any appreciable development. Had, this '' period come to an end without any accompanying politi- cal change — had there been no embargo, no non-inter- course act, and no war with England — the growth of the cotton manufacture, however certain to have taken place in the end, might have been subject to much friction and \ loss. Conjecture as to what might have been is danger- ous, especially in economic history, but it seems reasonable to suppose that if the period before 1808 had come to an } end without a jar, the eager competition of -well-estab- \ lished English manufacturers, the lack of familiarity with ( the processes, and the long-continued habit, especially in New England, of almost exclusive attention to agriculture, commerce, and the carrying trade, might have rendered slow and difficult the change, however inevitable it may have been, to greater attention to manufactures. Under such circumstances there might have been room for the legitimate application of protection to the cotton manu- 34 PROTECTION TO YOUNG INDUSTRIES. facture as a young industry. But this period, in fact, came to an end with a violent shock, which threw indus- try out of its accustomed grooves, and caused the striking growth of the cotton manufacture from 1808 to 181 5. The transition caused much suffering, but it took place sharply and quickly. The interruption of trade was equiv- I alent to a rude but vigorous application of protection, \ which did its work thoroughly. When peace came, in 181 5, it found a large number of persons and a great amount of capital engaged in the cotton manufacture, and the new processes of manufacture introduced on an extensive scale. Under such circumstances the industry was certain to be maintained if it was for the economic interest of the country that it should be carried on. The dutiesof the tariff of 1816, therefore, can hardly \ be said to have been necessary. Nevertheless, they may ; have been of service. The assistance they gave was, it is true, insignificant in comparison with the shelter from all foreign competition during the war. Indeed, most manu- facturers desired miich higher duties than were granted.' It is true, also, that the minimum duty on cottons was least effective during the years immediately after the war, when the price of cottons was higher, and the duty was (^therefore proportionately less high. e wages we get a mucli better selection of hands, and tliose capable and willing to per- form a much greater amount of labor in a given time. The American man- ufacturer also uses a larger share of labor-saving machinery than th? Eng- lish " (p. 829). THE WOOLLMN MANUPACTU&E. 45 tain the woollen manufacture. The period of youth had then been past. It appears that direct protective legislation had even less influence in promoting the introduction and early growth of the woollen than of the cotton manufacture. The events of the period of restriction, from 1 808 to 18 15, led to the first introduction of the industry, and gave it the first strong impulse. Those events may indeed be considered to have been equivalent to effective, though crude and wasteful, protective legislation, and it may be that their effect, as compared with the absence of growth before 1808, shows that protection in some form was needed to stimulate the early growth of the woollen manufacture. But, by 18 15, the work of establishing the manufacture had been done. The moderate duties of the period from 1816 to 1828,/ partly neutralized by the duties on wool, may have something to sustain it ; but the position gained in 1815 would hardly have been lost in the absence of these.duties. By 1828, when strong pro- tection was first given, a secure position had certainly been reached. V. THE IRON MANUFACTURE. We turn now to the early history of the iron manufac- ture, — the production of crude iron, pig and bar. We shall examine here the production, not of the finished article, but of the raw material. It is true that the pro- duction of crude iron takes place under somewhat different conditions from those which affect cotton and woollen goods. The production of pig-iron is more in the nature of an extractive industry, and, under ordinary circum- stances, is subject in some degree to the law of diminishing returns. To commodities produced under the conditions of that law, the argument for protection to young indus- tries has not been supposed, at least by its more moderate advocates, to apply, since the sites where production wih be carried on to best advantage are apt to be determined by unalterable physical causes." It happens, however, that changes in the processes of production, analogous to those which took place in the textile industries, were made at about the same time in the manufacture of crude ' See, for instance, List, " System of National Economy," Fhila., 1856^ pp. 296-300. 46 THE IRON MANUFACTURE. 47 iron. These changes rendered more possible the success- ful application of the principle of protection to young industries, and make the discussion of its application more pertinent. There is another reason why we should consider, in this connection, the raw material rather than the finished article. The production of the latter, of the tools and implements made of iron, has not, in general, needed protection in this country, nor has protection often been asked for it. The various industries by which crude iron is worked into tools and consumable articles were firmly established already in the colonial period, and since then have maintained ):hemselves with little diiificulty. The controversy on the protection of the iron manufac- ture has been confined mainly to the production of pig. and bar-iron. It is to this, therefore, that we shall direct our attention. The production of pig- and bar-iron will be meant when, in the following pages, the " iron manu- facture " is spoken of. During the eighteenth century England was a country importing, and not, as she is now, one exporting, crude iron. The production of pig- and bar-iron was accordingly encouraged in her colonies, and production was carried on in them to an extent considerable for those days. Large quantities of bar-iron were exported from the American colonies to England.' The manufacture of iron was ' See the tables in Bishop', I., 629, and Scrivenor, " History of the Iron Trade," p. 81. In 1740 the total quantity of iron produced in England was about 17,000 tons ; at that time from 2,000 to 3,000 tons annually were regularly imported from the American colonies. 48 PROTECTION TO YOUNG INDUSTRIES. firmly established in the colonies according to the meth- ods common at the time. During the second half of the eighteenth century, however, the great change took place in England in the production of iron which has placed |that country in its present position among iron-making countries, and has exercised so important an influence on the material progress of our time. Up to that time char- coal had been used exclusively for smelting iron, and the iron manufacture had tended to fix itself in countries where wood was abundant, like Norway, Sweden, Russia, and the American colonies. About 1750 the use of coke in the blast furnace began. The means were thus given for producing iron in practically unlimited quantities, without dependence for fuel on forests easily exhaustible ; and in the latter part of the century, when the steam- engine supplied the motive power for the necessary strong blast, production by means of coke increased with great rapidity.' At the same time, in 1783 and 1784, came the inventions of Cort for puddling and rolling iron. By these the transformation of pig-iron into bar-iron of convenient sizes was effected in large quantities. Before the inven- tions of Cort, pig-iron had been first converted into bar under the hammer, and the bar, at a second distinct oper- ation in a slitting mill, converted into bars and rods of con- venient size. The rolled bar made by the processes of puddling and rolling — which are still in common use — is ' See the good account of the importance of the use of coke (coal) in Je- vons, " The Coal Question," ch. XV., pp. 309.316. THE IRON MANUFACTURE. 49 inferior in quality, at least after the first rolling, to the hammered and slit iron, known as hammered bar, pro- duced by the old method. Cort's processes, however made the iron much more easily and cheaply, and the lower price of the rolled iron more than compensated, for most purposes, for its inferior quality. At the same time these processes made easy and fostered the change from production on a small scale to production on a large scale. This tended to bring about still greater cheapness, and made the revolution in the production of iron as great as that in the textile industries, and similar to it in many im- portant respects. During the period 1789- 1808 these changes in the iron manufacture were too recent to have had any appreciable effect on the conditions of production and supply in the United States. The manufacture of iron, and its trans- formation into implements of various kinds, went on without change from the methods of the colonial period. Pig-iron continued to be made and converted into ham- mered bar in small and scattered works and forges.' No pig-iron seems to have been imported. Bar-iron was im- ported, in quantities not inconsiderable, from Russia" ; but no crude iron was imported from England. The im- portations of certain iron articles, not much advanced be- yond the crude state, such as nails, spikes, anchors, cables, showed a perceptible increase during this period.' ' French, " Hist, of Iron Manufacture," p. l5. ° Ibid., p. 13. 2 The imports of iron, so far as separately stated in the Treasury reports, may be found in Young's Report on Tariff Legislation, pp. XXVI. XXXVI. Cp. Grosvenor, " Does Protection Protect?" pp. 174, 175. 50 PROTECTION TO YOUNG INDXfSTRIES. Whether this increase was the result of the general con- ditions which tended to swell imports during this period, or was the first effect of the new position which England ivas taking as an iron-making country, cannot be deter- mined. Information on the state of the industry during this period is meagre ; but it seems to have been little affected by the protective duties which Congress enacted on nails, steel, and some other articles. No protection was attempted to be given to the production of pig or bar-iron, for it was thought that the domestic producers would be able to compete successfully with their foreign competitors in this branch of the iron-trade. During the period of restriction from 1808 to 1815, the iron and manufactures of iron previously imported, had to be obtained, as far as possible, at home. A large in- crease in the quantity of iron made in the country accord- ingly took place. The course of events was so similar to that already described in regard to textile manufactures that it need not be referred to at length. When peace came, there were unusually heavy importations of iron, prices fell rapidly, and the producers had to go through a period of severe depression. ,x' In 1816 Congress was asked to extend protection to the manufacture of iron, as well^ as to other industries,- /The tariff of 1816 imposed a duty of 45 cents a hundred- weight on hammered-bar iron, and one of $1.50 a hun- dred-weight on rolled bar, with corresponding duties on ' sheet, hoop, and rod iron. Pig-iron was admitted under THE IRON MANUFACTURE. 51 an ad valorem duty of 20 per cent. At the prices of bar- iron in 1816, the specific duty on hammered bar was equivalent to about 20 per cent.,' and was, therefore, but little higher than the rates of 15 and 17^ per cent, levied in 1804 and 1807. The duty on rolled bar was much higher, relatively to price, as well as absolutely, than that on hammered bar, and was the only one of the iron duties of 1816 which gave distinct and vigorous protection. These duties were not found sufficient to prevent the manufacturers from suffering heavy losses, and more effec- / tive protection was demanded. In 18 18, Congress, by a special act, raised the duties on iron considerably, at the same time, as was noted above,'' that it postponed the reduction from 25 to 20 per cent, on the duty on cottons and woollens. Both of these measures were concessions to protective feeling, and they may have been the result of an uneasy consciousness of the disturbed state of the country and of the demand for protection which was to follow the financial crisis of the next year.' The act of 1818 fixed the duty on pig-iron at 50 cents per hundred- weight — the first specific duty imposed on pig-iron ; ham- mered bar was charged with 75 cents a hundred-weight, instead of 45 cents, as in 1816; and higher duties were put on castings, anchors, nails, and spikes." These duties ' See the tables of prices in French, pp. 35, 36. ' Ante, p. 27. ' There is nothing in the Congressional debates on the acts of 1818 to show what motives caused them to be passed. * " Statutes at Large," III., 460. 52 PROTECTION TO YOUNG INDUSTRIES. were comparatively heavy ; and with a steady fall in the price of iron, especially after the crisis of 1818-19, they became proportionately heavier and heavier. Neverthe- less, in the tariff of 1824 they were further increased. The rate on hammered bar went up to 90 cents a hundred- weight ; that on rolled bar still remained at $1.50, as it :had been fixed in 1816. In 1828 a still further increase was made in the specific duties on all kinds of iron, al- though the continual fall in prices was of itself steadily increasing the weight of the specific duties. The duty on pig-iron went up to 62^ cents a hundred-weight ; that on hammered bar to a cent a pound (that is, $1.12 a hundred- weight); that on rolled bar to $37 a ton. In 1832 duties were reduced in the main to the level of those of 1824, and in 1833 the Compromise Act, after maintaining the duties of 1832 for two years, gradually reduced them still further, till in 1 842 they reached a uniform level of 20 per cent. On the whole, it is clear that after 1818 a system of increasingly heavy protection was applied to the iron manufacture, and that for twenty years this protection was maintained without a break. From 1818 till 1837 o*" 1838, when the reduction of duty under the Compromise Act began to take effect to an appreciable extent, the duties on iron in its various forms ranged from 40 to lOO per cent, on the value. It is worth while to dwell for a moment on the heavy duty on rolled iron — much higher than that on hammered iron — which was adopted in 1816, and maintained through- THE IRON MANUFACTURE. 53 out this period. Congress attempted to ward off the competition of the cheaper rolled iron by this heavy dis- criminating duty, which in 1828 was equivalent to one hundred per cent, on the value. When first established in 1 8 16, the discrimination was defended on the ground that the rolled iron was of inferior quality, and that the importation of the unserviceable article should be impeded for the benefit of the consumer. The scope of the change in the iron manufacture, of which the appearance of rolled iron was one sign, was hardly understood in 18 16 and 1818, and this argument against its use may have repre- sented truthfully the animus of the discriminating duty. But in later years the wish to protect the consumer from impositions hardly continued to be the motive for retain- ing the duty. Rolled bar-iron soon became a well-known article, of considerable importance in commerce. The discriminating duty was retained throughout, and in 1828 even increased ; it was still levied in the tariff of 1832 ; it reappeared when the Whigs carried the tariff of 1842 ; and it did not finally disappear till 1846. The real mo- tive for maintaining the heavy tax through these years undoubtedly was the unwillingness of the domestic pro- ducers to face the competition of the cheaper article. The tax is a clear illustration of that tendency to fetter and impede the progress of improvement which is inhe-j rent in protective legislation. It laid a considerable burden on the community, and, as we shall see, it was of no service in encouraging the early growth of the iron 54 PROTECTION TO YOUNG INDUSTRIES. industry. It is curious to note that the same contest against improved processes was carried on in France, by a discriminating duty on English rolled iron, levied first in 1816, and not taken off till i860.' After 18 1 5 the iron-makers of the United States met with strong foreign competition from two directions. In the first place, English pig and rolled iron was being pro- duced with steadily decreasing cost. The use of coke be- came universal in England, and improvements in methods of production were constantly made. Charcoal continued to be used exclusively in the furnaces of this country ; for the possibility of using anthracite had not yet been dis- covered, and the bituminous coal fields lay too far from what was then the region of dense population to be avail- able. While coke-iron was thus driving out charcoal-iron for all purposes for which the former could be used, the production of charcoal-iron itself encountered the com- petition of Sweden and Russia. As the United States advanced in population, the more accessible forests became exhausted, and the greater quantity of charcoal-iron need- ed with the increase of population and of production, could be obtained at home only at higher cost. The Scandinavian countries and Russia, with large forests and a population content with low returns for labor, in large part supplied the increased quantity at lower rates tha* the iron-makers of this country. Hence the imports of iron show a steady increase, both those of pig-iron and ' Ame, " Etudes sur les Tarifs de Douanes," I., 145. THE IRON MANUFACTURE. 55 and those of rolled and hammered bar; the rolled bar coming from England, and the hammered bar from Sweden and Russia. The demand for iron was increasing at a rapid rate, and there was room for an increase both of the domestic production and of imports; but the rise in imports was marked. Notwithstanding the heavy duties, the proportion of imported to domestic iron from 181 8 to 1840 remained about the same." Since importations continued regularly and on a con- siderable scale, the price of the iron made at home was clearly raised, at the seaboard, over the price of the for- eign iron by the amount of the duty. The country, there- fore, paid the iron tax probably on the greater part used, whether of foreign or domestic origin, in the shape of prices from forty to one hundred per cent, higher than those at which the iron could have been bought abroad. ' Ofi the production and imports of iron in the years aftT 1830 the reader is referred to the remarks on p. 124, and to the " Quarterly Journal of Eco- nomics, " vol. II. , p. 377. Until the middle of the decade 1820-30 the annual product of pig-iron is supposed to have been about 50,000 tons, vrhile in the second half of the decade it is put at 100,000 tons and more. The imports of crude iron averaged about 20,000 tons per year in 1818-21, about 30,000 tons in 1822-27, and rose to an average of about 40,000 tons in 1828-30. These figures as to imports refer mainly to bar-iron ; and as it required in those days about l| tons of pig to make a ton of bar (French, p. 54), some additions must be made to the imports of bar before a proper comparison ■can be made between the domestic and the imported supply. An addition must also be made for the considerable imports of steel, sheet-iron, anvils, anchors, and other forms of manufactured iron. Figures of imports are given in Grosvenor, pp. ig8, igg ; of domestic production, by R. W. Ray- mond, in A. S. Hewitt's pamphlet on " A Century of Mining and Metallur« gy," page 31- il 56 fHOij^CTION TO YOUNG INDUSTRIES. i The fact that the manufacture, notwithstanding the heavy and long-continued protection which it enjoyed, was unable to supply the country with the iron which it needed, is of itself sufficient evidence that its protection as a young industry was not successful. It is an essential condition for the usefulness of assistance given to a young industry, that the industry shall ultimately supply its products at least as cheaply as they can be obtained by importation ; and this the iron manufacture failed to do. There is, however, more direct evidence than this, that the manufacture was slow to make improvements in production, which might have enabled it eventually to furnish the whole supply needed by the country, and in this way might have justified the heavy taxes laid for its benefit. Pig-iron continued to be made only with char- coal. The process of puddling did not begin to be intro- duced before 1830, and then inefficiently and on a small scale.' Not until the decade between 1830 and 1840, at a time when the Compromise Act of 1833 was steadily de- creasing duties, was puddling generally introduced." The iron rails needed for the railroads built at this time — the first parts of the present railroad system — were supplied exclusively by importation. In 1832 an act of Congress had provided that duties should be refunded on all im- ported rails laid down within three years from the date ' See an excellent article, by an advocate of protection, in the American Quarterly Review, Vol. IX. (1831), pp. 376, 379, which gives very full in- formation in regard to the state 0/ the iron manufacture at that date. ' French, p. 56. THE IRON MANUFACTURE. 57 of importation. Under this act all the first railroads imported their rails without payment of duty. Finally, the great change which put the iron manufacture on a firm and durable basis did not come till the end of the decade 1 830-40, when all industry was much depressed, and duties had nearly reached their lowest point. That change con- sisted in the use of anthracite coal in the blast-furnace. A patent for smelting iron with anthracite was taken out in 1833 ; the process was first used successfully in 1836. In 1838 and 1839 anthracite began to be widely used. The importance of the discovery was promptly recog- nized ; it was largely adopted in the next decade, and led, among other causes, to the rapid increase of the produc- tion of iron, which has been so often ascribed exclusively to the protection of the tariff of 1842. With this change the growth of the iron manufacture on a great scale prop- erly begins." It seems clear that no connection can be traced between the introduction and early progress of the iron manufac- ture, and protective legislation. During the colonial pe- riod, as we have seen, under the old system of production of iron, the country had exported and not imported iron. The production of charcoal-iron and of hammered bar was carried on before the adoption of the Constitution. During the first twenty years after 1789, the iron-makers ' Swank's Report on " Iron and Steel Production," in the Census of 1880, p. 1 14. A fuller discussion of the introduction of the use -of anthra- cite, and of the effect of protective duties after this had been done, will be found at pages 122-134. 5 8 PROTECTION TO YOUNG INDUSTRIES. ; still held their own, although the progress of invention 1 elsewhere, and the general tendency in favor of heavy im- ! ports, caused a growing importation from abroad. The production of iron by the old methods and with the use of charcoal was therefore in no sense a new industry. If the business of making charcoal-iron could not be carried on or increased during this and the subsequent period, the cause must have lain in natural obstacles and disad- vantages which no protection could remove. After 1815, the new regime in the iron trade had begun ; the use of coke in the blast-furnace, and the production of wrought- iron by puddling and rolling, had changed completely the conditions of production. The protective legislation which began in 18 18, and continued in force for nearly twenty years, was intended, it is true, to ward off rather than to encourage the adoption of the new methods ; but it is conceivable that, contrary to the intentions of its au- thors, it might have had the latter effect. No such effect, however, is to be seen. During the first ten or fifteen years after the application of protection, no changes of any kind took place. Late in the protective period, and at a time when duties were becoming smaller, the pud- dling process was introduced. The great change which ^ marks the turning-point in the history of the iron manu- / facture in the United States — the use of anthracite — be- gan when protection ceased. It is probably not true, as is asserted by advocates of free trade,' that protection had ^ E. g., Grosvenor, p. 197. • THE IRON H^NUFACTURE. 59 dny appreciable influeiice in retarding the use of coal in making iron. Other causes, mainly the refractory nature of the fuel, sufficiently account for the failure to use an- thracite at an earlier date. The successful attempts to use anthracite were made almost simultaneously in Eng- land and in the United States.' The failure to use coke from bituminous coal, which had been employed in Eng- land for over half-a-century, was the result of the distance of the bituminous coal-fields from the centre of popula- tion, and of the absence of the facility of transportation which has since been given by railroads. It is hardly prob- able, therefore, that protection exercised any considerable harmful influence in retarding the progress of improve- ment. But it is clear, on the other hand, that no advan- , tages were obtained from protection in stimulating prog- ress. No change was made during the period of protec- tion which enabled the country to obtain the metal more cheaply than by importation, or even as cheaply. The duties simply taxed the community ; they did not serve to stimulate the industry, though they probably did not appreciably retard its growth. We may therefore conclude that the duties on iron during the generation after 181 5 formed a heavy tax on consumers ; that they impeded, so far as they went, the industrial development of the coun- try ; and that no compensatory benefits were obtained to offset these disadvantages. ' Swank, pp. 114, 115. VI. CONCLUDING REMARKS. The three most important branches of industry to which protection has been applied, have now been ex- amined. It has appeared that the introduction of the cotton manufacture took place before the era of protec- tion, and that — looking aside from the anomalous condi- tions of the period of restriction from 1808 to 181 5 — its early progress, though perhaps somewhat promoted by the minimum duty of 1816, would hardly have been much, retarded in the absence of protective duties. The manufacture of woollens received little direct assistance before it reached that stage at which it could maintain itself without help, if it were for the advantage of the country that it should be maintained. In the iron man- ufacture twenty years of heavy protection did not ma- terially alter the proportion of home and foreign supply, and brought about no change in methods of production. It is not possible, and hardly necessary, to carry the inquiry much further. Detailed accounts cannot be ob- tained of other industries to which protection was ap- plied ; but so far as can be seen, the same course gf 60 1 / CONCLUDING REMARKS. ^3 f vents took place in them as in the thre The stimulus ' /e have followed. The same general coi^^ps shows that he manufactures of glass, earthenware, ].^t some artifi- '"oagging, sail-duck, cordage, and other articKuni^^t for protection was applied during this time with md. "°t t>^ vigor. We may assume that the same general ef{ o^ i^^ absence of effect, followed in these as in the other *!£. i"" , It is not intended to speak of the production of agricuf-' tural commodities like sugar, wool, hemp, and flax, to which also protection was applied. In the production of these the natural advantages of one country over another tell more decidedly and surely than in the case of most manufactures, and it has not often been supposed that they come within the scope of the argument we are con- sidering. Although, therefore, the conditions existed under which it is most likely that protection to young indus- tries may be advantageously applied — a young and unde- veloped country in a stage of transition from a purely'' agricultural to a more diversified industrial condition ; this transition, moreover, coinciding in time with great changes in the arts, which made the establishment of new industries peculiarly difficult — notwithstanding the pres- ence of these conditions, little, if any thing, wa-s gained by the protection which the United States maintained in the first part of this century. Two causes account for this. On the one hand, the character of the people rendered the transition of productive forces to manufactures com- CriON TO YOUNG INDUSTRIES. : on the other hand, the shock to eco- aring the restrictive period from 1808 to ily prepared the way for such a transition. . of the people for mechanical arts showed ii- ^. Naturally it appeared with most striking re- .1 those fields in which the circumstances of the .ntry gave the richest opportunities ; as in the applica- tion of steam-power to navigation, in the invention and improvement of tools, and especially of agricultural im- plements, and in the cotton manufacture. The ingenuity and inventiveness of American mechanics have become traditional, and the names of Whitney and Fulton need only be mentioned to show that these qualities were not lacking at the time we are considering. The presence of such men rendered it more easy to remove the obstacles arising from want of skill and experience in manufactures. The political institutions, the high average of intelligence, • the habitual freedom of movement from place to place and from occupation to occupation, also made the rise of the existing system of manufacturing production at once more easy and less dangerous than the same change in other countries. At the same time it so happened that the embargo, the non-intercourse acts, and the war of 1812 rudely shook the country out of the grooves in which it was running, and brought about a state of confu- sion from which the new industrial system could emerge more easily than from a well-settled organization of indus- try. The restrictive period may indeed be considered to CONCLUDING REMARKS. 63 have been one of extreme protection. The stimulus which it gave to some manufactures perhaps shows that the first steps in these were not taken without some artifi- cial help. The intrinsic soundness of the argument for protection to young industries therefore may not be touched by the conclusions drawn from the history of its trial in the United States, which shows only that the in- tentional protection of the tariffs of 1816, 1824, and 1828 ■ had little effect. The period from 1808 till the financial crisis of 1818-19 was a disturbed and chaotic one, from which the country settled down, with little assistance from protective legislation, into a new arrangement of its pro- ductive forces. The system of protective legislation began in 18 16, and was maintained till toward the end of the decade 1830-40. The Compromise Act of' 1833 gradually undermined it. By 1842 duties reached a lower point than that from which they had started in 18 16. During this whole period the argument for protection to young industries had been es- sentially the mainstay of the advocates of protection, and the eventual cheapness of the goods was the chief advan- tage which they proposed to obtain. It goes without saying that this was not the only argument used, and that it was often expressed loosely in connection with other arguments. One does not find in the popular discussions jj of fifty years ago, more than in those of the present,! precision of thought or expression. The " home market " argument, which, though essentially distinct from that for 64 PROTECTION TO YOUNG INDUSTRIES. young industries, naturally suggests itself in connection with the latter, was much urged during the period we are considering. The events of the War of 1812 had vividly impressed on the minds of the people the possible incon- venience, in case of war, of depending on foreign trade for the supply of articles of common use ; this point also was much urged by the protectionists. Similarly the want of reciprocity, and the possibility of securing, by re- taliation, a relaxation of the restrictive legislation of for- eign countries, were often mentioned. But any one who is familiar with the protective literature of that day, — as illustrated, for instance, in the columns of " Niles's Regis- ter," — cannot fail to note the prominent place held by the young-industries argument. The form in which it most commonly appears is in the assertion that protection norm- ally causes the prices of the protected articles to fall, ' an assertion which was supposed, then as now, to be suffi- ciently supported by the general tendency toward a fall in the price of manufactured articles, consequent on the great improvement in the methods of producing such articles. Shortly after 1832, the movement in favor of protec- tion, which had had full sway in the Northern States since 1820, began to lose strength. The young-industries ' See, for instance, the temperate report of J. Q. Adams, in 1832, in which this is discussed as the chief argument of the protectionists. Adams, though himself a protectionist, refutes it, and bases his faith in protection chiefly on the loss and inconvenience suffered through the interruption of foreign trade in time of war. The report is in " Reports of Committees, 32d Congress," ist Session, vol. V., No. 481. CONCLUDING REMARKS. 65 argument at the same time began to be less steadily- pressed. About 1840 the protective controversy took a new turn. It seems to have been felt by this time that manufactures had ceased to be young industries, and that the argument for their protection as such, was no longer conclusive. Another position was taken. The arguments was advanced that American labor should be protected from the competition of less highly paid foreign labor. The labor argument had hardly been heard in the period which has been treated in the preceding pages. Indeed, the difference between the rate of wages in the United States and in Europe, had furnished, during the early period, an argument for the free-traders, and not for the protectionists. The free-traders were then accustomed to point to the higher wages of labor in the United States as an insuperable obstacle to the successful establish- ment of manufactures. They used the wages argument as a foil to the young-industries argument, asserting that as long as wages were so much lower in Europe, manufac- turers would not be able to maintain themselves without aid from the government. The protectionists, on the other hand, felt called on to explain away the difference of wages ; they endeavored to show that this difference was not so great as was commonly supposed, and that, so far as it existed, it afforded no good reason against adopt- ing protection.' About 1840, the positions of the con- ' See, among others. Clay's Tariff Speech of 1824, "Works,"!., 465. 466. (£ PROTECTION TO YOUNG INDUSTRIES. tending parties began to change.' The protectionists be- gan to take the offensive on the labor question : the free- traders were forced to the defensive on this point. The protectionists asserted that high duties were necessary to shut out the competition of the ill-paid laborers of Eu- rope, and to maintain the high wages of the laborers of the United States. Their opponents had to explain and de- fend on the wages question. Obviously this change in the line of argument indicates a change in the industrial situa- tion. Such an argument in favor of protection could not have arisen at a time when protective duties existed but in small degree, and when wages nevertheless were high. Its use implies the existence of industries which are supposed to be dependent on high duties. When the protective system had been in force for some time, and a body of in- dustries had sprung up which were thought to be able to ' Same signs of the appeal for the benefit of labor appear as early as 1831 in a passage in Gallatin's " Memorial,'' p. 31, and again in a speech of Web- ster's in 1833, "Works," I., 283. In the campaign of 1B40, little was heard of it, doubtless because other issues than protection were in the foreground. Yet Calhoun was led to make a keen answer to it in a speech of 1840, " Works," III., 434. In the debates on the tariff act of 1842, we hear more of it ; see the speeches of Choate and Buchanan, Co«,g7'. Globe, 1841-42, pp. 950, 953, and Calhoun's allusion to Choate, In Calhoun's "Works," IV., 207. In 1846 the argument appeared full-fledged, in the speeches of Winthrop, Davis, and others, Congr. Globe, 1846, Appendix, pp , 967, 973, 1114. See also a characteristic letter in Niles, vol. 62, p. 262. Webster's speech in 1846, " Works," V., 231, had much about pro- tection and labor, but in a form somewhat different from that of the argu- ment we are nowadays familiar with. See also the monograph by G. B. Mangold, " The Labor Argument in the American Protective Tariff Discussion," Bulletin of the University of Wisconsin, No. 246 (1908), CONCLUDING REMARKS. 6/ pay current wages only if aided by high duties, the wages argument naturally suggested itself. The fact that the iron manufacture, which had hitherto played no great part in the protective controversy, became, after 1840, the most prominent applicant for aid, accounts in large part for the new aspect of the controversy. The use of the wages argument, and the rise of the economic school of Henry C. Carey, show that the argument for young industries was felt to be no longer sufificient to be the mainstay of the protective system. The economic situation had changed, and the discussion of the tariff underwent a corresponding change. CHAPTER II. THE EARLY PROTECTIVE MOVEMENT AND THE TARIFF OF 1828. In the present essay we shall consider, not so much the economic effect of the tariff, as the character of the early protective movement and its effect on political events and on legislation. The protective movement in this country has been said to date from the year 1789, even from before 1789 ; -and more frequently it has been said to begin with the tariff act of 1816. But whatever may have been, in earlier years, the utterances of individual public men, or the occasional drift of an uncertain public opinion, no stiang—popular inQBem-ent-ioi^initexxtion can be -traced, before the crisis of 1818-19. The act of 1816, which is generally said to mark the beginning of a distinctly protective policy in this country, belongs rather to the earlier series of acts, beginning with that of 1789, than to the group of acts of 1824, 1828, and 1832. Its highest permanent rate of duty was twe.ntj^£er_cent., an increase over the previous rates which is chiefly accounted for by the heavy interest charge on the debt incurred during the war. But after the crash of 1819, a movement hi^f^yor of protection set in, which 68 THE EARLY PROTECTIVE MOVEMENT. 69 was backed by a strong popular feeling such as had been absent in the earlier years. The causes of the ne^ mn v.p-^ ment are not far to seek. On the one hand there was a great collapse in the grices of land and of agricultural products, which had been much inflated during the years from 1815 to 1818. At the same time the foreign markets for grain and provisions, which had been highly profitable during the time of the Napoleonic wars, and which there had been a spasmodic attempt to regain for two or three years after the close of our war in 181 5, was almost entirely lost. On the other hand, a large number of manufacturing^ industries had grown up, still in the early stages of growth, and still beset with difficulties, yet likely in the end to_ hold their own and to prosper. That disposition to seek a remedy from legislation, which always shows itself after an industrial crisis, now led the faEmers.to-ask for a home market, while the manufacturers wanted protection for young industries. The distress that followed the crisis brought out a plentiful crop of pamphlets in favor of pro- tection, of societies and conventions for the promotion of domestic industry, of petitions and memorials to Congress for higher duties. The movement undoubtedly had deep root in the feelings and convictions of the people, and the powerful hold which protective ideas then obtained influ- enced the policy of the nation long after the immediate effects of the crisis had Ceased to be felt.' ' The character of the protective movement after 1819 is best illustrated by tlie numerous pamphlets of Matthew Gary. See especially the " Appsal ^0 THE EARLY PROTECTIVE MOVEMENT. , The first effect of this movement was seen in a series of measures which were proposed and earnestly pushed in Congress in the session of 1819-20. They included a bill for a general increase of duties, one for shortening credits on duties, and one for taxing sales by auction of imported goods. The first of these very nearly took an important place in our history, for it was passed by the House, and failed to pass the Senate by but a single vote. Although it did not become law, the protective movement which was expressed in the votes and speeches on it re- mained unchanged for several years, and brought about the act of 1824, while making possible the act of 1828. Some understanding of the state of feeling in the differ- ent sections of the country is necessary before the peculiar events of 1828 can be made clear, and it may be conven- iently reached at this point. /T|if ctrnngVinlH pf thf pr^^-fTt'v "^"■v'Tn-'^t-ivi'i in the Middle, and Westerii_states_Q£-.th-0se days — in New York, New Jersey, Pennsylvania, Ohio, and Kentucky. They were the great agricultural States ; they feh most keenly the_loss of the foreign market of the early years of the century, and were appealed to most directly by the cry for a home market. At the same time they had been most deep- ly involved in the inflation of the years 1816-19, and were in that condition of general distress and confusion which to Common Sense and Common Justice " (1822) and " The Crisis : A Sol- emn Appeal,'' etc. (1823). " Niles's Register," which had said little about tariff before iSig, thereafter became a tireless and effective advocate of protection. THE EARLY PROTECTIVE MOVEMENT. 7 1 leads people to look for some panacea. The idea of pro- tection as a cure for their troubles had obtained a strong hold on their minds. It is not surprising, when we consider the impetuous character of the element in American democ- racy at that time represented by them, that the idea was applied in a sweeping and indiscriminate manner. JThey wan^ed_ protection not only for the manufactures ,that were to bring them a home market, but for many of their own products, such as wool, hemp, flax, even for wheat and corn. For the two last mentioned they asked aid more particularly in the form of higher duties on rum and brandy, which were supposed to compete with spirits distilled from home-grown grain. A duty on molasses was a natural supplement to that on rum. Iron was al- ready produced to a considerable extent in Pennsylvania and New Jersey, apd for that also protection was asked. In New England there was a strong opposition to many, of these demands. The business community of New England was still made up mainly of importers, deal- ers in foreign goods, shipping merchants, and vessel- owners, who naturally looked with aversion at measures that tended to lessen the volume of foreign trade. More- over, they had special objections to many of the duties asked for by the agricultural states. Hemp in the form of cordage, flax in the form of sail duck, and iron, were important items in the cost of building and equip- ping ships. The duties on molasses and rum were aimed at an industry carried on almost exclusively in New England : 72 THE EARLY PROTECTIVE MOVEMENT. the importation of molasses from the West Indies in ex- change for fish, provisions, and lumber, and its subsequent manufacture into rum. Wool was the raw material of a rapidly growing manufacture. So far the circumstances led to opposition to the protective^movement. On the other hand, the manufacture of cotton and woollen goods was increasing rapidly and steadily, and was the moving force of a current in favor of protection that became stronger year by year. We have seen that the beginning of New England's manufacturing career dates back to the War of 1812. Before 1820 she was fairly launched on it, and between 1820 and 1830 she made enormous advances. The manufacturers carried on a conflict, unequal at first, but rapidly becoming less unequal, with the merchants and ship-owners. As early as 1820 Connecticut and Rhode Island were pretty firmly protective ; but Massa- chusetts hesitated. Under the first weight of the crisis of 1 819, the protective feeling was strong enough to cause a majority of her congressmen to vote for the bill of 1820. But there was great opposition tojhhatjitll, and a^ter 1820 the protective feeling died _down.' In 1824 Massachusetts was still disinclined to adopt the protective system, and it was not until the end of the decade that she came 'The vote on the bill of 1820, by States, is given in Niles, XVIII., 169. Of the Massachusetts members 19 voted yes, 6 no, and 4 were ab- sent. Of the New England members 19 voted yes, 9 no, and g were ab- sent. The opposition to the bill in Massachusetts was the occasion of a meeting at which Webster made his first speech on tariff, which is not re- printed in his works, but may be found in the newspapers of the day. THE EARLY PROTECTIVE MOVEMENT. 73 squarely in line with the agricultural states on that sub- ject. The So.uth±Qok_ita,.5taad.AgsijJ5.L.the protective systemr with' a promptness aqd decision characteristic of the po- litical history of the slave states. The opposition of the Southern members to the tariff bill of 1820 is significan t of the chan gp in thq nF^t'i''" nf t he protective movemen t between 1816 and 1820. The Southern leaders had advo- cated the passage of the act of 18 16, but they bitterly op- posed the bill of 1820. It is possible that the -Missouri Compromise .stcuggle had opened their eyes to the con- nection between slavery and free trade.' At all events) they had grasped the fact that slavery made the growth of \ manufactures in the South impossible, that manufactured \ goods must be bought in Europe or in the North, and/ that, wherever bought, a protective tariff would tend to make them dearer. Moreover, Cotton was not yet King, and the South was not sure that its staple was indispensa- ble for all the world. While the export of cotton on a large scale had begun, it was^eared that England, in re- taliation for high duties on English goods, might tax or exclude American cotton. Such was in 1820 the feeling in regard to the protective^'" system in the different parts of the country. After the failure of the bill of that year, the movement for higher duties seems for a while to have lost headway. The low- ' But no reference was made to the Missouri struggle in the debates on the tariff bill of 1820. 74 THE EARLY PROTECTIVE MOVEMENT. est point of industrial and commercial depression, so far as indicated by the revenue, was reached at the close of 1820, and, as affairs began to mend, protective measures received less vigorous support. Bills to increase duties, similar to the bill of 1820, were introduced in Congress in 1 82 1 and 1822, but they were not pressed and led to no legislation.' Public opinion in most of the Northern States, how- ever, continued to favor protection ; the more so because, after the first shock of the crisis of 18 19 was over, recov- ery, though steady, was slow. As a Presidential election approached and caused public men to respond more readily to popular feeling, the protectionists gained a de- ^ cided victory. The tariff of 1824 was passed, tfee££ai and the giost direct fruit of the early protective mov ement. The Presidential election of that year undoubtedly had an effect in causing its passage ; but the influence of politics and political ambition was in this case hardly a harmful one. Not only Clay, the sponsor of the American System, ' but Adams, Crawford, and Jackson were declared advo- cates of protection. Party lines, so far as they existed at all, were not regarded in the vote on the tariff. It was carried mainly by the votes of the Western and Middle ' See the interesting account of a. Cabinet meeting in November, 1821. in " J. Q. Adams's Memoirs," vol. V., pp. 408-411. " The lowest point of the depression was reached at the close of last year " [1820]. Calhoun thought "the prosperity of the manufacturers was now so clearly estab- lished that it might be mentioned in the message as a subject for congratu- lation." Crawford said " there would not be much trouble in the ensuing session with the manufacturing interest," and Adams himself " had no ap- prehension that there would be much debsite on manufacturing interests." THE EARLY PROTECTIVE MOVEMENT. 75 States. The South was in opposition, New England was ^' divided ; Rhode Island and Connecticut voted for the bill, Massachusetts and the other New England states were ' decidedly opposed.' The opposition of Massachusetts was the natural result of the character of the new tariff. The most important changes made by it were in the in£]xaaed_xJuties on iron, lead, wool, hemp, cotton-bagging, and other articles whose protection was desired chiefly by the Middle and Western States. The duties on textile fabrics, it is true, were also raised. Those on cotton and woollen goods went up from 25 to 33^ per cent. This increase, however, was offset, so far as woollens were concerned, by the imposition of a duty of 30 per cent, on wool, which had before been ad- mitted at 15 per cent. The manufacturers of woollen goods were, therefore, as far as the tariff was concerned, in about the same position as before.' The heavier duties ' John Randolph said, in his vigorous fashion, of the tariff bill of 1824 : " The merchants and manufacturers of Massachusetts and New Hampshire repel this bill, while men in hunting shirts, with deerskin leggings and moccasins on their feet, want protection for home manufactures." — "De- bates of Congress, 1824, p. 2370. ' This can be shown very easily. The cost of the wool is about one half the cost of making woollen goods. Then we have in 1816 : Duty on woollens .... 25 per cent. Deduct duty on wool, \ of 15 cent. . 75 " Net protection in 1816 .... 17J " And in 1824 we have : Duty on woollens 33^ per cent. Deduct duty on wool, ^ of 30 per cent. .15 " Net protection in 1824 . . . i8| " The rise in duties both on wool and on woollens took place gradually by the terms of the act of 1824. The calculation is based on the final rates, which were reached in i826> 76 THE EARLY PROTECTIVE MOVEMENT. on iron and hemp, on the other hand, were injurious to the ship-builders. The man ufacture of textiles was ra pidly extending in all the New England States. At first that of cottons re- ceived most attention, and played tlie most important part in the protective controversy. But by 1824 the cotton industry was firmly established and almost inde- pendent of support by duties. The woollen manufacture was in a less firm position, and in 1824 became the promi- nent candidate for protection. Between 1824 and 1828 a / strong movement set in for higher duties on woollens, / which led eventually to some of the most striking features \ of the tariff act of 1828. \ The duties proposed and finally established on wool- lens were modelled on the minimum duty of 1816 on cottons. By the tariff act of that year, it will be remem- bered, cotton goods were made subject to a general ad ■mfe^asLduty of 25 per cent. ; but it was further provided that "all cotton cloths, whose value shall be less than 25 cents per square yard, shall be taken and deemed to have cost 25 cents per square yard, and shall be charged with duty accordingly." That is, a specific duty of six and a quarter cents a square yard was imposed on all cottou cloths costing twenty-five cents a square yard or less. The minimum duties, originally intended to affect chiefly East Indian goods and goods made from East Indian cotton, had an effect in practice mainly on goods from England, whether made of American or of Indian cotton. In a few THE EARLY PROTECTIVE MOVEMENT. yy years, as the use of the power loom and other improve- ments in manufacture brought the price of coarse cottons much below twenty-five cents, the minimum duties be- came prohibitory. How far they were needed in order to promote the success and prosperity of the cotton manu- facture in years following their imposition, we have already discussed.' At all events, whether or not in consequence of the duties, large profits were made by those who entered on it, and in a few years the cheaper grades of cotton cloth were produced so cheaply, and of such good quality, that the manufacturers freely asserted that the duty had become nominal, and that foreign com- petition no longer was feared. This example had its effect on the manufacturers of ' woollen goods, and on the advocates of protection in gen- eral. In the tariff bill of 1820, minimum duties on linen and on other goods had been proposed. In 1824 an edj^^ nest effort was made to extend the minimum system to woollens. The committee which reported the tariff bill of that year recommended the adoption in regard to woollens of a proviso framed after that of the tariff of 1 8 16 in regard to cottons, the minimum valuation being eighty cents a yard. The House first lowered the valua- tion to forty cents and finally struck out the whole proviso by a scant majority of three votes.' There was one great obstacle in the way of a high duty on cheap woollen ' See above, pp. 25-36. ' The vote was 104 to loi. " Annals of Congress,'' 1823-24, p. 2310. 78 THE EARLY PROTECTIVE MOVEMENT. goods : they were imported largely for the use of slaves on Southern plantations. Tender treatment of the pecul- iar institution had already begun, and there was strong opposition to a duty which had the appearance of being ; aimed against the slave-holders. The application of the minimum principle to other than cheap woollen goods apparently had not yet been thought of; but the idea was obvious, and soon was brought forward. dK After 1824 there was another lull in the agitation for protection. Trade was buoyant in 1825, and production ■ profitable. For the first time since 181 8 there was a swing in business operations. This seems to have been particularly the case with the woollen manufacturers. During the years from 1815 to 1818-19, they, like other manufacturers, had met with great difficulties ; and when the first shock of the crisis of the latter year was over, matters began to mend but slowly. About 1824, however, according to the accounts both of their friends and of their opponents on the tariff question, they extended their operations largely.' It is clear that this expansion, such as it was, was not the eiTect of any stimulus given by the tariff of 1824, for, as we have seen, the encouragement given the woollen manufacturers by that act was no greater than had been given under the act of 1816. At all events, the upward movement lasted but a short time. ' See the Report of the Harrisburg Convention of 1827 in Niles, XXXIII., rog ; Tibbits, "Essay on Home Market" (1827), pp. 26, 27 j Henry Lee, " Boston Report of 1827," pp. 64 seq. THE EARLY PROTECTIVE MOVEMENT. 79 In England a similar movement had been carried to the extreme of speculation and had resulted in the crisis of /1 825-26. From England the panic was communicated to the United States ; but, as the speculative movement had not been carried so far in this country, the revulsion was less severely felt. It seems, however, to have fallen on the woollen manufacturers with peculiar weight. Parlia- ment, it so happened, in 1824 had abolished almost en- tirely the duty on wool imported into England. It went down from twelve pence to one penny a pound.' The imports of woollen goods into the United States had in 1825 been unusually large ; the markets were well stocked ; the English manufacturers were at once enabled to sell cheaply by the lower price of their raw material, and pushed to do so by the depression of trade. A vigorous effort was now made to secure legislative aid to the woollen makers, similar to that given the cotton manufacturers. Massachusetts was the chief seat of the woollen industry. The woollen manufacturers held meet- ings in Boston and united for common action, and it was determined to ask Congress to extend the minimum sys- ' It is sometimes said that this reduction of the wool duty in England was undertaken with the express purpose of counteracting the protective duties imposed on woollens in the United States. But there is little ground for supposing that our duties were watched so vigilantly in England, or were the chief occasion for English legislation. The agitation for getting rid of the restriction on the import and export of wool began as early as 1819, and during its course very little reference, if any, was made to the American duties. See the sketch in Bischoff's " History of the Woollen and Worsted Manufactures," vol. II.- chapters I and 2. 8o THE EARLY PROTECTIVE MOVEMENT. tern to woollen goods.' The legislature of the State passed resolutions asking for further protection for wool- lens, and these resolutions were presented in the federal House of Representatives by Webster.'' A deputation of . manufacturers was sent to Washington to present the case to the committee on manufactures. Their efforts promised to be successful. When Congress met for the session of 1826-27, the committee (which in those days had charge of tariff legislation) reported a bill which gave the manufacturers all they asked for. This measure contained the provisions which, when , finally put in force in the tariff '^fj_£28, b'^'^ftrnp thf --.l-ijpf-f oX the mo st vi olent attack by_the_ opponen ts of protec- Vtlon. It made no change in the nominal rate of duty, which was to remain at 33^ per cent. But minimum val- uations were added, on the plan of the minima on cottons, in such a way as to carry the actual duty far beyond the point indicated by the nominal rate. The bill provided that all goods costing less than 40 cents a square yard were to pay duty as if they had cost 40\cents ; all costing more than 40 cents and less than $2.50 were to be charged as if they had cost $2.50 ; all costing between $2.50 and $4.00 to be charged as if they had cost $4.00. A similar ' The memorial of the manufacturers to Congress is in Niles, XXXI., 185. It asks for minimum duties, on the ground that ad valorem duties are fraudulently evaded. For the circular sent out by this committee, see ibid., p. 200. ' "American State Papers, Finance," V., 599 ; " Annals of Congress," 1826-27, P- loio. THE EARLY PROTECTIVE MOVEMENT. 8 1 course was proposed in regard to raw wool. The ad valo- rem rate on raw wool was to be 30 per cent, in the first place, and to rise by steps to 40 per cent. ; and it was to be charged on all wool costing between 16 cents and 40 cents a pound as if the wool had cost 40 cents. The effect of this somewhat complicated machinery was evi- dently to levy specific duties both on wool and on wool- lens. On wool the duty was to be, eventually, 16 cents a pound. On woollens it was to be 13^ cents a yard on woollens of the first class, 83^ cents on those of the second class, and $1.33^ on those of the third class. The minimum system, applied in this way, imposed ad ' valorem duties in form, specific duties in fact. It had some of the disadvantages of both systems. It offered*^ temptations to fraudulent undervaluation stronger than those ofifered by ad valorem duties. For example, under the bill of 1827, the duty on goods worth in the neigh- borhood of 40 cents a yard would be 13^ cents if the value was less than 40 cents ; but if the value was more than 40 cents, the duty would be 83-^ cents. If the value could be made to appear less than forty cents, the im- porter saved 70 cents a yard in duties. Similarly, at the next step in the minimum points, the duty was 83^ cents if the goods were worth less than $2.50, and $1.33^ cents if the goods were worth more than $2.50. The tempta- tion to undervalue was obviously very strong under such a system, in the case of all goods which could be brought with any plausibility near one of the minimum points. 82 THE EARLY PROTECTIVE MOVEMENT. - On the other hand, the system had the want of elasticity which goes with specific duties. All goods costing be- tween 40 cents and $2.50 were charged with the same duty, so that cheap goods were taxed at a higher rate than dear goods. The great gap between the first and second minimum points (40 cents and $2.50) made tliis objection the stronger. But that gap was not the result of accident. It was intended to bring about a very heavy duty on goods of the grade chiefly manufactured in this country. The most important domestic goods were worth about a dollar a yard, and their makers, under this bill, would get a protective duty of 83-^- cents a yard. The object was to secure a very high duty, while retaining nominally the existing rate of 33-^ per cent. The woollens_bill ■QL-J827 had a fate similar to that of the general tariff bill of 1820. It was passed in the House, but lost in the Senate by the casting vote of the Vice-President. In the House the Massachusetts mem- bers, with one exception, voted for it, and both Senators from Massachusetts supported it.' This bill having failed, the advocates of protection de- termined to continue their agitation, and to give it wider scope. A national convention of protectionists was de- termined on." Meetings were held in the different States ' " Congressional Debates," III., logg, 496. ° It is not very clear in what quarter the scheme of holding such a con- vention had its origin. The first public suggestion came from the Phila- delphia Society for the Promotion of Domestic Industry, an association founded by Hamilton, of which Matthew Carey and C. J. Ingersoll were at this time the leading spirits. THE EARLY PROTECTIVE MOVEMENT. 83 in which the protective policy was popular, and delegates were appointed to a general convention. In midsummer of 1827 about a hundred persons assembled at Harris- burg, and held the Harrisburg con vention, w ell known in ■ its day. Most of the delegates were manufacturers, some were newspaper editors and pamphleteers, a few were politicians." The convention did not confine its attention to wool and woollens. It considered all the industries which were supposed to need protection. It recom- mended higher duties for the aid of agriculture ; others on manufactures of cotton, hemp, flax, iron, and glass ; and finally, new duties on wool and woollens. The move- ment was primarily for the aid of the woollen industry ; other interests were included in it as a means of gaining strength. The duties which were demanded on woollens were on the same plan as those proposed in the bill of i827',''differing only in that they were higher . 'YVc ad valo- rem rate on woollen goods was to be 40 per cent, in the first place, and was to be raised gradually until it reached 50 per cent. It was to be assessed on minimum valua- tions of fifty cents, two dollars and a half, four dollars, and six dollars a yard. The duty on wool was to be twenty cents a pound in the first instance, and was to be raised each year by 2\ cents until it should reach fifty cents a pound. Needless to say, the duty would be pro- ' Among the politicians was Mallary of Vermont, who had been chairman of the committee on manufactures in the preceding Congress, and became the spokesman of the protectionists in the ensuing session, when the tarifif of 1828 was passed. 84 THE EARLY PROTECTIVE MOVEMENT. hibitory long before this limit was reached. Wool cost- ing less than eight cents was to be admitted free.' >L At this point a new factor, which we may call " politics," began to make itself felt in the protective movement. The natural _£ressure of public opinion on public men had exercised its effect in previous years, and had had its share in bringing about the tariff act of 1824 and the woollens bill of 1827. But the gradual c rystallization o f two parties, th g Aj^anr; and JarWgnn parties. — WJlig-S. and Democrats, as they soon came to be called — put a new face on the political situation, and had an unexpected effect on tariff legislation. The contest between them had begun in earnest before the Harrisburg convention met, and some of the Jackson men alleged that the con- vention was no more than a demonstration got up by the Adams men as a means of bringing the protective move- ment to bear in their aid ; but this was denied, and such evidence as we have seems to support the denial.'' Yet ' The proceedings of the convention, the address of the people, the me- morial to Congress, etc., are in Niles, XXXII. and XXXIII. ' I have been able to find little direct evidence as to the political bearing of the Harrisburg convention. Matthew Carey, in a letter of July, 1827, while admitting he is an Adams man, protests against " amalgamating the question of the presidency with that for the protection of manufactures. " Niles, XXXII., 389. The (New York) Evening Post, a Jackson paper, said the convention was a manceuvre of the Adams men ; see its issues of August I and August 9, 1827. This was denied in the National Intelli- gencer (hAzxai) of July 9th, and also in the (New York) American (Kd.3xa.i) of luly gth. The Evening Post admitted (August nth) that "doubtless many members of the convention were innocent of political views," and that " the rest were induced to postpone or abandon their political views.'' Van 8ureu apparently suspected that the convention might have a political THE EARLY PROTECTIVE MOVEMENT. 8$ the Adams men were undoubtedly helped by the protec- tive movement. Although there was not then, nor for a number of years after, a clear-cut division on party lines between protectionists and so-called free traders, the Adams men were more firmly and unitedly in favor of prntprtinn than their opppnents. Adams was a protec- ■=^Qnist, though not an extreme one ;.,£laY, the leader and spokesman of the party, was more than any other public man identified, with the-Atm_erica}x_syatem. They were at least willing that the protective questiott-should be brought into, the fareground of the political contest." ^^ The position of the Jackson men, on the other hand, meaning, and warned its members against forming ' ' a political cabal " ; cf. the National Intelligencer of July 26th. But among the delegates from New York were both Jackson and Adams men. See Hammond, " Politi- cal History of New York," II., 256-258; Niles, XXXII., 349. Niles, who was an active member of the convention, denied strenuously that poli- tics had any thing to do with it. Niles, XXXIV., 187. — Since the above was put in type, however, a letter of Clay's has been found which seems to indicate that the movement for holding such a convention was at least started by the anti-Jackson leaders. The letter is printed in the " Quar- terly Journal of Economics," vol. II., July, 1888. ' There is ground for suspecting that the Adams party would have been willing to make the tariff question the decisive issue of the presidential campaign. Clay made it the burden of his speeches during his journey to the West in the early summer of 1827. Very soon after this, however, the correspondence between Jackson and Carter Beverly was published, and fixed attention on the " bargain and corruption " cry. That was the point which the Jackson managers succeeded in making most prominent in the campaign. Clay dropped the question of protection ; he found enough to do in answering the charge that in 1825 a corrapt bargain had made Adams President and himself Secretary of State. See Clay's speech at Pittsburg, June 20, 1827, in Niles, XXXII., 299. On June 29th, Clay published his first denial of the "bargain and corruption" charges. Ibid., p. 350 Cf. Parton, " Life of Jackson," -III., ijl. 86 THE EARLY PROTECTIVE MOVEMENT. was a very difficult one. Their party had at this time no settled policy in regard to the questions which were to be the subjects of the political struggles of the next twenty years. They were united on only one point, a determi- nation to oust the other side. On the tariff, as well as on the bank and internal improvements, the various elements of the party lipid very HifFe rent op inions. The Southern members, who were almost to a man supporters of Jack- son, were opposed unconditionally not only to an increase of duties, but to the high range which the tariff had al- ready reached. They were coa vinced, an d in the main justly convinced, that the taxes levied by the tariffieTh' with peculiar weig ht on the slave S tates, and their opposi- tion was already tinged with the bitterness whjrh madp possible, a few years later, the attempt at i|ullification of the ^kriff of 1832. On the other hand, the p rotective policy was popular throughout the North, more especially in the very States whose votes were essential to Japks Qi in New York, Pennsylvania, and Ohio. The Jackson men needed the votes of these States, and were not so confi- dent of getting them as they might reasonably have been. They failed, as completely as 'their opponents, to gauge the strength of the enthusiasm of the masses for their candidate, and they did not venture to give the Adams men a chance of posing as the only true friends of domes- tic industry. The twentieth Congress met for its first session in December, 1827. The elections of 1826, at which its THE EARLY PROTECTIVE MOVEMENT. 87 members were chosen, had not been fortunate for the ad- ministration. When Congress met there was some doubt as to the political complexion of the House ; but this was set at rest by the .election to the speakership of the Dem- ocratic candidate, Stephenson of Virginia.' The new Speaker, in the formation of the committees, assumed for ' his^party the direction of the measures of the House. On the committee on manufactures, from which the tarifl report and the tariff bill were to come, he appointed five supporters of Jackson and two supporters of Adams. The chairmanship , however, was given to one of the latter, Mallary , of Vermont, who, it will be remembered, had been a member of' the Harrisbiirg convention. Much doubt was entertained as to the line of action the committee would follow. The Adams men feared at first that it would adopt a policy of simple delay and inaction. This fear was confirmed when, a few weeks after the beginning of the session, the committee asked for power to send for persons and papers in order to obtain mojre information on the tariff, — a request which was opposed by Mallary, their chairman,' on the ground that it was made only as a pretext for delay. The Adams men, who formed the bulk of the ardeht^jiotectioaists, voted with him against granting the desired power. But the South- ern members united with the Jackson men from the ' Stephenson's election is said to ha^ve been brought about by Van Buren's influence; Parton, "Life of Jatkson," III., 135. It is worth while to bear this in mind, in view of the Vart played by Van Buren later in the session. \ 88 THE EARLY PROTECTIVE MOVEMENT. North, and between them they secured the passage of the resolution asked by the committee.' The debate and vote on the resolution sounded the key-note of the events of the session. They showed that the Jackson men from the South and the North, though opposed to each other on the tariff question, were yet united as against the Adams men."" But the policy of delay, if such in fact had been enter- tained by the opposition, was abandoned. On January 31st, the committee presented a report and a draft of a tariff bill, which showed that they had determined on a new plan, and an ingenious one. What that plan was, Calhoun explained very frankly nine years later, in a sf)eech reviewing the events of 1828 .and d&fen4i«g:±he. course taken by himself and his Southern f ell ow-m >rn b^rg^ y.a/'^K high-tariff bill was to be laid before the House. It was to contain not only a high general range of duties, but duties especially high on those raw materials on which New England wanted the duties to be low. It was to satisfy the protective demands of the Western and Middle States, and at the same time to be obniiziaus to thej^ew, EfLgland— members. The Jackson men of all shades, the protectionists from the North and the free-traders from ' The power granted to the committee by this resolution, to examine witnesses, was used to a moderate extent. A dozen wool manufacturers were examined, and their testimony throws some light on the state of the woollen manufacture at that time. See the preceding essay, pp. 42-44, ^ In "Congressional Debates," IV., 862, 870. 2 Speech of 1837 ; " Works," III., 46-51. THE EARLY PROTECTIVE MOVEMENT. 89 the South, J tyere tQ _unite in preventing any amendment-&: that bill, and no other, was to be voted on. When the final vot^ came, the Southern men were- to turn around and vote against their own measure. Th^New England men, and the Adams men in general, would be unable to swallow it, and would also vote against it. Combined, they would prevent its passage, even though the Jackson men from the North voted for it. The result expected w; that no tariff bill at all would be passed during the session, which was the object of the Southern wing of the opposi- tion. On the other hand, the obloquy of defeating it would be cast on the Adams party, which was the object of the Jacksonians of the North. The tariff bill would be defeated, and yet the Jackson men would be able to parade as the true " friends of domestic industry." The bill by which this ingenious solution of the difficul- ties of the opposition was to be reached, was reported to the House on January 31st by the committee on manu- factures.' To the surprise of its authors, it was eventually passed both by House and Senate, and became, with a few unessential changes, the tariff act of 1828. '^ The committee's bill in the first place proposed a large increase of duties on almost all raw materials. The duty on pig-iron was to go up from 56 to 62^ cents per hun- dredweight, that on hammered bar-iron from 90 to 112 cents per hundredweight, and that on rolled bar from $30 'The bill as reported by the committee is printed in "Congressional Debates," IV., 1727 : 90 THE EARLY PROTECTIVE MOVEMENT. to $37 per ton. The increase on hammered bar had been asked by the Harrisburg convention. But on pig and on rolled bar no one had asked for an increase, not even the manufacturers of iron who had testified before the committee." /Ihe most important of the proposed duties on raw materials, however, were on hemp, flax, and wool. The existing duty on hemp was $35 per ton. It was proposed to increase it immediately to $45, and further to increase it by an annual increment of $5, till it should finally reach $60. Hemp of coarse quality was largely raised in the country at that time, especially in Kentucky. It was suitable for the making of common ropes and of cotton bagging, and for those purposes met with na competition from imported hemp. Better hemp, suitable for makirjg cordage and cables, was not raised in the country at all, the supply coming exclusively from importation. The preparation of this better quality (" water-rotted " hem^) required so much manual labor, and labor of so disagree- able a character, that it would not have been undertaken in any event by the hemp growers of this country." ' See the testimony of the three iron manufacturers who were examined, " American State Papers, Finance," V., 784-792. Mallary, in introducing the bill, said : " The committee gave the manufacturer of iron all he asked, even more." " Congressional Debates,'' IV., 1748. 'Gallatin, "Memorial of the Free-Trade Convention " (1831), p. 51. This admirable paper, perhaps the best investigation on tariff subjects ever made in the United States, is unfortunately not reprinted in the edition of Gallatin's collected works. The original pamphlet is very scarce. The memorial is printed in U. S. Documents, 1st session, 22d Congress, Senate Documents, vol. I., No. 55. THE EARLY PROTECTIVE MOVEMENT. 9I Under such conditions an increase of duty on hemp could be of no benefit to the American grower. Its effect would be simply to burden the rope-makers and the users of cordage, and ultimately the ship-builders and ship- owners. Essentially the same state of things has contin- ued to our own day. The high duties on hemp, which have been maintained from tpe outset to the present time, have never succeeded in .checking a large and con- tinuous importation. The facts were then, and are now, very similar with flax ; yet the same duty of $60 per ton' was to be put on flax. On wool a proposal of a similar kind was made. The duty under the tariff of 1824 had been 30 per cent. This was to be changed to a mixed specific and ad valorem duty, the first mixed duty ever enacted in the United States. Wool was to pay seven cents a pound (this was reduced to four cents in the act as finally passed), and in addition 40 per cent, in 1828, 45 per cent, in 1829, and thereafter 50 per cent. The object of the mixed duty was to make sure that a heavy tax should be put on coarse wool. The coarse wool, used in the manufacture of carpets and of some cheap flannels and cloths, was not then grown in the United States to any extent, and, indeed, has been grown at no time in this country, but has always been imported, mainly from Asia Minor and from South America. Its cost at the place of exporta- tion was in 1828 from four to ten cents a pound.' The 'Gallatin, "Memorial," p. 67. 92 THE EARLY PROTECTIVE MOVEMENT. price being so low, a simple ad valorem duty would not have affected it much. But the additional specific duty of seven (four) cents weighted it heavily. The ad valorem part of the duty reached the higher grades of wool, which were raised in this country ; it was calculated to please the farmer. The specific part reached the lower grades, which were not raised in this country, and was calculated to annoy and embarrass the manufacturers. This double object, and especially the second half of it, the Jackson men wanted to attain, and for that reason the policy of admitting the cheap wool at low rates was set aside, — a policy which has been followed in all our protective tariffs, with the sole exception of that of 1828.' Another characteristic part of the scheme was the handling of those duties on woollens that corresponded to the duties on cheap wdol. It had been customary to fix low duties on the coarse woollen goods made from cheap wool, partly because of the low duty on the wool ^ It was followed in 1824, 1832, 1842, and again in the wool and woollens act of 1867, on which the existing duties [1887] are based. The rates on wool have been : 1828 1832 1842 1867 General duty on wool 30 per cent. 4C. plus 40 per cent. 3c. plus 30 per cent. IOC.-I2C. plus II per cent. Duty on cheap wool 15 per cent. on wool under IOC. free, wool under 8c. 5 per cent, on wool under 7c. 3C. on wool under I2c. THE EARLY PROTECTIVE MOVEMENT. 93 itself, and partly because coarse woollens were used largely for slaves on Southern plantations. Thus in 1824 woollen goods costing less than 33J cents a yard had been ad- mitted at a duty of 25 per cent., while woollens in general paid 33|- per cent. In 1828 this low duty on coarse woollens was continued, although thewool of which they were made was subject for the first time to a heavy duty. The object again was to embarrass the manufacturers, and make the bill unpalatable to the protectionists and the Adams men. The same object appeared in the duty on molasses, which was to be doubled, going from five to ten cents a gallon. A spiteful proviso was added in regard to the drawback which it had been customary to allow on the exportation of rum distilled from imported molasses. The bill of 1828, and the act as finally passed, expressly refused all drawbacks on rum ; the intention obviously being to irritate the New Englanders. ^The animus ap- peared again in the heavy duty on sail-duck, and the re- fusal of drawback on sail-duck exported by vessels in small quantities for their own use.' In the duties on woollen goods the changes from the schedule proposed by the Harrisburg convention were on the surface not very great ; but in reality they were im- portant. The committee gave up all pretence of ad ' Sail-duck was charged 9 cents a yard, with an increase of \ cent yearly, until the duty should finally be 12^ cents. This was equivalent to 40 or 50 per cent. In 1824 the duty had been 15 per cenuv^ Drawback wa.s refused on any quantity less than 50 bolts exported in one vessel at one tiiii^. 94 THE EARLY PROTECTIVE MOVEMENT. valorem duties. This was not an insignificant circum- stance ; for the ad valorem rate of the minimum system was said by its opponents to be no more than a device for disguising the heavy duties actually levied under it. 'T'he committee brushed aside this device, and made the duties on woollens specific and unambiguous. On goods costing 50 cents a square yard or less, the duty was 16 cents; on goods costing between 50 cents and $1.00, 40 cents; on those costing between $1.00 and $2.50, $i.oo; and on those costing between $2.50 and $4.00, $1.60. Goods costing more than $4.00 were to pay 45 per cent. These specific duties, it will be seen, were the same as if an ad valorem duty of 40 per cent. had. been assessed, on the minimum principle, on valuations of 50 cents, $1.00, $2.50, and $4.00. The changes from the Harrisburg con- vention scheme were, therefore, the arrangement of specific duties in such a way^tha^t-they were-et-New England. At the same tim'g,' some of these very features, especially the hemp, wool, and iron duties, served to make the bill popular in the Western and Middle States, and made opposition to it awkward for the Adams men. The whole scheme was a characteris- tic product of the politicians who were then becoming prominent as the leaders of the Democracy, men of a type very different from the statesmen of the preceding generation. Clay informs us that it was one of the many devices that had their origin in the fertile brain of Van ' " Congressional Debates," IV., 2274. See the statement of the effect of the minimum system in " State Papers," 1827-28, No. 143. Davis (of Massachusetts) said that the minimum of $1.00 " falls at a point the most favorable that could be fixed for the British manufacturer. » * * It falls into the centre of the great body of American business." " Congres- sional Debates," IV., 1894, 1895. See to the same effect the speech of Silas Wright, Hid., p. 1867. 96 THE EARLY PROTECTIVE MOVEMENT. Buren.' Calhoun said in 1837 that the compact between the Southern members and the Jackson leaders had come about mainly through Silas Wright ; and Wright made no denial.' The result of this curious complication of wishes and motives was seen when the tariff bill was finally taken up in the House in March. Mallary, as chairman of the com- mittee on manufactures, introduced and explained the bill. Being an Adams man, he was of course opposed to it, and moved to amend by inserting the scheme of the Harrisburg convention. The amendment was rejected by decisive votes, 102 to 75 in committee of the whole," and 1 14 to 80 in the House. The majority which defeated ' " I have heard, without vouching for the fact, that it [the tariff of 1828] was so framed on the advice of a prominent citizen, now abroad [Van Bu- ren had been made minister to England in 1831], with the view of ulti- mately defeating the bill, and with assurances that, being altogether unac- ceptable to the friends of the American system, the bill would be lost." Clay's speech of February, 1832. "Works "II., 13. ' See Calhoun's speech of 1837, as cited above, p. 88. In the debate of 1837, Wright admitted the compact with the Southern members, but said that he had warned them that the New England men in the end might swallow the obnoxious bill. " Congressional Debates," XIII., 922, 926-927. Wright was a member of the committee on manufactures, was the spokes- man of the Jackson men who formed the majority of its members, and had charge of the measure before the House. Jenkins, " Life of Wright," pp. 53-60. The Adams men saw through the scheme at the time. Clay wrote to J. J. Crittenden, in February, even before the House began the discussion of the bill : " The Jackson party are playing a game of brag on the subject of the tariff. They do not really desire the success of their own measure ; and it may happen in the sequel that what is desired by neither party will command the votes of both." " Life of Crittenden," I., 67. ' " Congressional Debates, " IV., 2038. THE EARLY PROTECTIVE MOVEMENT. gj the amendment was composed of all the Southern mem- bers, and of the Jackson members from the North, chiefly from New York, Pennsylvania, Ohio, and Kentucky. The minority consisted almost exclusively of friends of the administration.' Mallary then moved to substitute that part only of the Harrisburg convention scheme which fixed the duties on wool and woollens ; that is, the original minimum scheme, with a uniform duty of forty per cent, on wool. This too was rejected, but by a narrow vote, 98 to g^.' The Jackson men permitted only one change of any moment : they reduced the specific duty on raw wool from seven cents, the point fixed by the committee, to four cents, the ad valorem rate remaining at 40 per cent.' The duty on molasses was retained, by the same combination that refused to accept the Harrisburg scheme.'' The Southern members openly said that they meant to make the tariff so bitter a pill that no New Eng- land' member would be able to swallow it.' ' See Niles, XXXV., 57, where the various votes on the bill are ana- nalyzed. The vote en Mallary's amendment was : Yeas ... 78 Adams men, 2 Jackson men ... 80 Nays ... 14 " " 100 " "... 114 " " Congressional Debates," IV., 2050. * The Adams men seem to have opposed this reduction. The vote was : Yeas ... 10 Adams men, 90 Jackson men . . . 100 Nays ... 79 " "20 " " ... 99 * On reducing the molasses duty, the vote was : Yeas ... 72 Adams men, 10 Jackson men ... 82 Nays ... 19 " "95 " " . . . . 114 '• Most of the Southern members kept silence during the debates on the details of the bill. After its third reading, McDuffie and others made long speeches against it. One of the South Carolina Congressmen, however, y8 THE EARLY PROTECTIVE MOVEMENT. When the final vote on the bill came, the groups of members split up in the way expected by the Democrats. The Southern members, practically without exception, voted against it. Those from the Middle and Western States voted almost unanimously for it. The Jackson men voted for their own measure for consistency's sake ; the Adams men from these States joined them, partly for political reasons, mainly because the bill, even with the obnoxious provisions, was acceptable to their constitu- ents. Of the New England members, a majority, 23 out of 39, voted in the negative. The affirmative votes from New England, however, were sufficient, when added to those from the West and the Middle States, to en- sure its passage. The bill accordingly passed the House.' This result had not been entirely unexpected. The real struggle, it was felt, would come in the Senate, where the South and New England had a proportionately large representation. In previous years the Senate had main- tained, in its'action on the tariff bills of 1820 and 1824, a said frankly : " He should vote for retaining the duty on molasses, because he believed that keeping it in the bill would get votes against its final pas- sage'' "Congressional Debates," IV., 2349. The Jackson free-traders from the North (there vifere a few such) followed the same policy. See Cambreleng's remarks, ibid., "iy^fi- See also the passage quoted in Niles, XXXV., 52. ' The vote was : Yeas .... 61 Adams men, 44 Jackson men . . . 105 Nays .... 35 " " 59 " "... 94 If six of those New England members who voted yea, had voted nay, the bill would have failed. Niles, loc. cit. THE EARLY PROTECTIVE MOVEMENT. 99 much more conservative position than the House.' But in 1828 the course of events in the Senate was in the main similar to that in the House. The bill was referred to the committee on manufactures, and was returned with amendments, of which the most important referred to the jj^ty on m olassesand to the du <^'"pg "" wr^nllpn gnr^rlg The duty on molasses was to be reduced from 10 cents, the rate fixed by the House, to ']\ cents. The duties on' woollen goods, in the bill as passed by the House, had been made specific, equivalent to 40 per cent, on minimum valuations of 50 cents, $i.cx3, $2.50, and $4.00. The Sen- ate committee's amendment made the duties ad valorem in form, to be assessed on the minimum valuation just mentioned. The rate was to be 40 per cent, for the first year ; thereafter, 45 per cent." ' The tariff of 1824 was much changed in the Senate from the shape in which it had been passed by the House. " Annals of Congress," 1823-24, pp. 723-735. ' It was expected that this change to ad valorem duties would have still another effect. According to the method then in use for assessing ad valo- rem duties, the dutiable value of goods imported from'-Europe was ascer- tained by adding 10 per cent, to the cost or invoice value. See the act of 1828, " Statutes at Large," IV., 274, substantially re-enacting the provi- sions of the revenue-collection act of 1789, " Statutes at Large," I., 141. It was expected that by the force of this provision the effect of the ad valo- rem rate, under the Senate amendment, would be to increase the duty not merely to 45 per cent., but to 49^ per cent. Hence Webster, in his speech on the bill, spoke of the amendment as carrying the duty " up to 45 or per- haps 50 per cent, ad valorem." " Works." III., 231. But the Secretary of the Treasury, Rush, finally decided, very properly, that the provision did not apply to duties assessed on minimum valuations, thereby causing much dissatisfaction among the protectionists. See " Congressional Debates," VI., 802. too TBE EARLY PROTECTIVE MOVEMENT. Other amendments were proposed, all tending to make the bill less objectionable to the New England Senators. Most of them were rejected. The proposed reduction on molasses was rejected by the same combination that had prevented the reduction from being made in the House. The Southern Senators, and those from the North who supported Jackson, united to retain the duty of lo cents. When Webster moved to reduce the duty on hemp, only the New England Senators voted with him. Again, an attempt was made to increase the duty on coarse wool- lens, on which, it will be remembered, the House had put a low rate, notwithstanding the heavy duty on coarse wool. The Senate, by a strict party vote, retained the duty as the House had fixed it. One of the amendments, however, was carried — that which changed the duties on woollens to an ad valorem rate of 45 per cent. Two Democratic Senators, Van Buren and Woodbury, who had voted with the South against other amendments, voted in favor of this one. It was carried by a vote of 24 to 22, while all others had been rejected by a vote of 22 to 24.' With this amendment, the bill was finally passed by the Senate, the vote being 26 to 21. The Southern Sena- tors (except two from Kentucky, and one each from Ten- nessee and Louisiana) voted against it. Those from the Middle and Western States all voted for it. Thosf* from New England split ; six voted yea, five nay. The result ' The votes in the Senate are given in Niles, XXXIV., 178, 179, 196. THE EARLY PROTECTIVE MOVEMENT. lOI seems to have depended largely on Webster . His col- league Silsbee voted nay, and Webster himself had been in doubt a week before the final vote.' Finally he swal- lowed the bill ; and he carried with him enough of t he New EnglaiuLSenators^ to ensure its passage. Webster defended his course to his constituents on the'' ground that the wool lens ame ndment (fixing the 45 per cent, ad valorem rate) hadjnad£..J: he bill much more favor - a ble to the manuf acturers. He said he should not have voted for it in the shape in which the House passed it.' Calhoun made the same statement in 1837, in the speech to which reference has already been made.' No doubt the slight change on woollens mollified in some degree the-New England men ; but after all, political motives, or, as Webster put it, " other paramount considerations," caused them to swallow the bill. They were afraid to reject it, for fear of the effect in the approaching campaign and election.'' ' " Memoirs of J. Q. Adams," VII., 530, 534. ^ In a.speech made a month later ; printed in his " Works," I., 165. In the House, the representative from Boston liad voted against the bill, and Webster commended his action. In his Senate speech Webster had said that, even at the 45 per cent, rate, the duty on woollens was barely suflS cient to compensate for the duty on wool. " Works," III., 241. '" Works," III., 50, 51. Calhoun even accused Van Buren of being the "real author" of the tariff of 1828. He said that, but for Van Buren 's vote in favor of the woollens amendment, there would have been a tie on the amendment ; his own casting vote as Vice-President would have de- feated it ; the bill, without the amendment, would have been rejected by Webster and the other New England Senators. Therefore, Van Buren was responsible for its having been passed. ■•After the final vote in the House, John Randolph said : " The bill re- I02 riiE EARLY PROTECTIVE MOVEMENT. ^t he act of 1828 had thus been passed in a form ap- proved by n^ pnp . It was hardly to be expected that a measure of this kind should long remain on the statute- book, and it was superseded by the act of 1832., During the intervening four years s ever a l causes combined to le ad to more moderate application of the protectiye.principle. The prjQitective^ feeling diminished./ ^Public opinion in the North had been wellnigh unanimous in favor of protec- tion between 1824 and 1828; but after 1828, although there was still a large preponderance for protection, ' there was a strong and active minority against it^, The tariff question ceased to be an important factor in politics, so that this obstacle to its straightforward treatment was removed. And, finally, there was a strong desire to make ferred to manufactures of no sort or kind, except the manufacture of a President of the United States." In 1833, Root, a representative from New York, said : " The act of 1828 he had heard called the' bill of Abom- inations. ... It certainly grew out of causes connected with President- making. It was fastened on the country in the scuffle to continue the then incumbent in office, on one side, and on the other to oust him and put an- other in his stead. . . . The public weal was disregarded, and the only question was : Shall we put A or B in the presidential chair ? When it was thought necessary to secure a certain State in favor of the then incum- bent, a convention was called at Harrisburg to buy them over. [See, how- ' ever, the note to p. 84, above.] On the other side another convention was called, who mounted the same hobby. The price offered was the same on both sides : a high tariff. One candidate was thought to be a favorite, because he was supposed to be a warm friend of the protective system, and would support a high tariff ; but they were told, on the other side, that their candidate would go for as high a tariff.'' " Congressional Debates," IX., 1104, 1105. 'As Gallatin admits: "It is certain that at this time (1832) the tariff system is supported by a majority of the people and of both Houses of Congress." " Works," II., 455. THE EARLY PROTECTIVE MOVEMENT. 103 >> some concession to the growing opposition of the South. It is true that in 1832 Clay and the more extreme protec-\, tionists wished to retain the act of 1828 intact, and to effect reductions in the revenue by lowering the non-pro- tective duties only.' But most of the protectionists, led by Adams, took a more moderate course, and consented to the removal of the abominations of 1828. Even before 1832 some changes were made. In 1830 ' the molasses abomination was got rid of. The duty on molasses was reduced from ten cents a gallon to five cents, the rate imposed before 1828, and the drawback on ex- portation of rum was restored,' At the same time the '■ duties on tea, coffee, and cocoa were lowered, as one means of reducing the revenue.' The most importan£-step_taken in 1832 was the entire abolition of the minimum system. Woollen goods were subjected to a simple ad valorem duty of 50 per cent. The minimum system, as arranged in the act of 1828, had been found to work badly. The manufacturers said it had been positively injurious to them.' As might have * been expected, it led to attempts at evasion of duties, to undervaluation, and to constant disputes at the cus- '" Works," I., 586-595- '' " Statutes at Large," IV., 419. The act seems to have passed without debate or opposition. ^ Ibid., p. 403. t * Browne, of Boston, a manufacturer who had actively supported the minimum system, declared: "I could manufacture to better advantage under the tariff of 1816 than under that of 1828 ; for the duty on wool was then lower, and that on cloths a better protection." Niles. XLI., 204, 104 THE EARLY PROTECTIVE MOVEMENT. tom-houses. The troubles arose mainly under the dollar minimum. Goods worth $1.25 or $1.50 were invoiced so as to bring their values below $1.00, in order to escape the duty under the next minimum point, $2.50. The difficulties were ascribed to the depravity of foreign ex- porting houses and to the laxity of the revenue laws, and in 1830 a special act in regard to goods made of cot- ton or wool was passed, making more stringent the pro- visions for collecting duties. But the troubles continued nevertheless,' and, in truth, they were inevitable__und€r /a system which imposed specific duties graded accord- ing to the value of the goods. Similar duties exist in the present tariff (1887) on some classes of wool and woollens, and lead to the same unceasing complaints of dishonesty and fraud, and the same efforts to make the law effective by close inspection and severer penalties. In 1832, the protectionists themselves swept away the minimum system. The ad valorem duty of 50 per cent, which was put in its place was felt to be not without its ' " Statutes at Large," IV., 400. See the speeches of Mallary, " Congres- sional Debates," VI., 795-803, and of Davis, ibid., p. 874, for instances and proofs of the frauds. The act provided for forfeiture of goods fraudulently undervalued ; but no verdicts under it could be obtained. At the protec- tionist convention held in New York in 1831, one of the speakers said: " The same mistaken current of opinion vrhich prevailed on 'change, en- tered and influenced the jury-box. Men thought the law rigorous and severe. They considered it hard that a man should forfeit a large amount of property for a mere attempt to evade an enormous duty. In two years there was but a single case pursued into a court of justice.'' Niles, XLI., 203. See also the Report on Revenue Frauds, made by a committee of this same convention, in Niles, XLI., Appendix, p. 33. THE EARLY PROTECTIVE MOVEMENT. lOS dangers in the matter of fraud and under-valuation, but it was harmless as compared with the minimum system of 1828.' The other " abominations" of the act of 1828 were also done away with in 1832. The duty on hemp, which had been $60 a ton in 1828, was reduced to a duty of $40. Flax, which had also been subjected to a duty of $60 a ton in 1828, was put on the free list. The duties on pig- and bar-iron were put back to the rates of 1824. The duty on wool alone remained substantially as it had been in 1828, being left as a compound duty of 4 cents a pound and 40 per cent. But even here the special abomination of 1828 was removed; cheap wool, costing less than 8 cents a pound, was admitted free of duty. In fact, the protective system was put back, in the main, to where it had been in 1824. The result was to clear the tariff of the excrescences which had grown on it in 1828, and to put it in a form in which the protectionists could advo- cate its permanent retention. Even in this modified form, however, the system could not stand against the attacks of the South. In the fol- lowing year, 18 3;^, the com pi^eflfrise tariff was passed. It provided for a gradual and steady reduction of duties.> That reduction took place; and in July, 1842, a general ' J. Q. Adams, who was most active in framing the act of 1832, tried to embody the " home valuation" principle into it ; but in vain. " Congres- sional Debates," VIII., 3658, 3671. He also tried to give the government an option to take goods on its own account at a slight advance over the declared value ; but this plan also was rejected. Ibid., p. 3779. I06 THE EARLY PROTECTIVE MOVEMENT. level of 20 per cent, was reached. Two months later, in September, 1842, a new tariff act, again of distinctly pro- tective character, went into effect. But this act belongs to a different period, and has a different character from the acts of 1824, 1828, and 1832. T]ie,.ear ly prote ctive mo vement , whichbe^an in 1 8 10. an^-wa s-the cause o f ' the legislation of the fo llowing ji ecade. lost its vigor after 1832. Strong popular sentiment in favor of protection wellnigh disappeared, and the revival of protection in 1842 was due to causes different from those that brought about the earlier acts. The change in popular feeling is readily explained. The primary object of the protective legislation of the earlier period had been attained in 1842. The movement was, after all, only an effort, half conscious of its aim, to make more easy the transition from the state of simple agriculture and commerce which pre- vailed before the war of 1812, to the more diversified condi- tion which the operation of economic forces was reason- ably certain to bring about after 18 15. The period of tran- sition was passed, certainly by 1830, probably earlier. At all events, very soon after 1820 it was felt that there was not the same occasion as in previous years for measures to tide it over, and a decline in the protective feeling was the natural consequence. Not the least curious part of the history of the act of 1828 is the treatment it has received from the protec- tionist writers. At the time, the protectionists were far from enthusiastic about it. Niles could not admit it to THE EARLY PROTECTIVE MOVEMENT. 107 be a fair application of the protective policy,' while Mat- thew Carey called it a " crude mass of imperfection," and admitted it to be a disappointment to the protectionists.' In later years, however, when the details of history had been forgotten, it came to be regarded with more favor. The duties being.„Qn_ their iaceJiigh.er-than~those of pre- vious years, it was considered a better application o f pro- tective principles. Henry XL rarpy,_Qnj yhose author ity*' restj3aay^jhejiccauii^ts-ef^crttr--e6on.omic histojyy-ea-Hed- it " an-adm irable tar iff." ° He represented it as having had great effect on the pros2Hity of the country, and his statements have often been repeated by protectionist writers. It is almost impossible to trace the economic effect of any legislative measure that remains in force no more than four years ; and certainly we have not the materials for ascertaining the economic effects of the act of 1828. Taken by itself, that act is but a stray episode in our poyv litical history. It illustrates the change in thei:hara cter oP our public men and our public life which took place during the Jacksonian time. As an economic measure, it must be considered, not by itself, but as one of a series of 'Niles, XXXVII., 81 ; XXXVI., 113, and elsewhere. Niles objected especially to the $1.00 minimum on woollens. ' See his " Common-Sense Address " (1829), p. XI.; " The Olive Branch,'' No. III., p. 54 ; No. IV., p. 3 (1832). ^See his " Review of the Report of D. A. Wells " (1869), p. 4 ; and to the same effect, "Harmony of Interests,'' p. 5, and "Social Science,'' II., 225. I08 THE EARLY PROTECTIVE MOVEMENT. measures, begun tentatively in 1816, and carried out more vigorously in 1824, 1828, and 1832, by whig h a prot ective, polir^^jwas_maintain£d_£o.t-sottre twenty years. It is very doubtful whether, with the defective information at our disposal, we can learn much as to the effect on the pros- perity of the country even of the whole series of tariff acts. Probably we can reach conclusions of any value only on certain limited topics, such as the effects of protection to young industries during this time ; as to the general effect of the protective measures we must rely on deduction from general principles. At all events, no one can trace the economic effects of the act of 1828. To ascribe to it the supposed prosperity of the years in which it was in in force, as Henry C. Carey and his followers have done, is only a part of that exaggeration of the effect of pro- tective duties which is as common among their opponents as among their advocates. \ CHAPTER III. THE TARIFF, 1830-1860. In the years between 1832 and i860 there was great vacillation in the tariff policy of the United States ; there were also great.il-uettta-tiQns_in_the G&UFse-trf-4rade-and in- dustry. A low tariff was succeeded by a high tariff, which was in turn succeeded by another low tariff. Periods of undue inflation and of great demoralization, of prosperity and of degression, followed each other. The changes in the rates of duty and the fluctuations in industrial history have often been thought to be closely connected. Protec- tionists have ascribed prosperity to high tariffs, depression to low tariffs ; free traders have reversed the inference. It is the object of the present essay to trace, so far as this can be done, the economic effect of tariff legislation during the thirty years of varying fortune that preceded the civil war. First, by way of introduction, -a sketch must be given of the history of the tariff. We begin with the tariff act of 1832, a distinctly protectionist measure, passed by the Whigs, br National Republicans, which put the protective system in a shape such as the advocates of protection lioped it might retain permanently. It levied high duties 109 no THE TARIFF, 183O-1860. on cotton and woollen goods, iron, and other articles to which protection was meant to be applied. On arti- cles not produced in the United States, either low duties were imposed, as on silks, or no duties at all, as on tea and coffee. The average rate on dutiable articles was about 33 per cent. In 1833, the Compromise Tariff Act was passed, and remained in force until 1842. That act, there can be little doubt, was the result of an agreement between Clay and Calhoun, the leaders of the protectionists and free traders, while it secured also the support of the Jackson administration. Clay had been hitherto the most uncom- promising of the protectionists ; Calhoun had represented the extreme Southern demand that duties should be re- duced to a horizontal level of 15 or 20 per cent." The compromise provided for the retention of a considerable degree of protection for nearly nine years, and thereafter for a rapid reduction to a uniform 20 per cent. rate. The tariff of 1832 was the starting-point. All duties which in that tariff exceeded 20 per cent, were to have one tenth of the excess over 20 per cent, taken off on January i, 1834; one tenth more on January i, 1836; again one tenth in 1838; and another in 1840. That is, by 1840, four tenths of the excess over 20 per cent, would be gone. ' The Nullifiers had said that such a horizontal rate was the least they were willing to accept. See the Address to the People of the United States by the South Carolina Convention, in the volume of " State Papers on Nul- Ufication," published by the State of Massachusetts, p. 69. THE TARIFF, 183O-1860. Ill Then, on January i, 1842, one half the remaining excess was to be taken off ; and on July i, 1842, the other half of the remaining excess was to go. After July i, 1842, therefore, there would be a uniform rate of 20 per cent, on all articles. Obviously, the reduction was very gradual from 1833 till 1842, while in the first six months of 1842 a sharp and sudden reduction was to take place. Considered as a political measure, the act of 1833 may deserve commendation. As an economic or financial measure, there is little to be said for it. It was badly drafted. No provision was made in it as to specific duties; yet it was obviously meant to apply to such duties, and the Secretary of the Treasury had to take it on himself to frame rules as to the manner of ascertaining the ad valorem equivalents of specific duties and making the reductions called for by the act.' Again, the reduc- tions of duty were irregular. Thus on one important article, rolled bar-iron, the duty of 1832 had been specific, — $1.50 per hundredweight. This was equivalent, at the prices of 1832, to about 95 per cent. The progress of the reductions is shown in the note.''. Up to 1842, they were ' The instructions issued from the Treasury Department may be found in " Exec. Doc." 1833-34, vol. I., No. 43. It has been thought that the act did not apply to specific duties ; but this is a mistake. ^ Year. Duty, per cent. 1834 87 1836 80 1838 72.5 1840 65 Jan. I, 1842 42.5 July 5, 1842 20 This calculation is. on the basis of the prices of 1833. If prices changed 112 THE TARIFF, 1830-1860. comparatively moderate ; but in the six months from Jan- uary I to July I, 1842, the duty dropped from 65 to 20 per cent. Producers and dealers necessarily found it hard to deal with such changes. It is true that a long warning was given them ; but, on the other hand, Con- gress might at any moment interfere to modify the act. Finally, and not least among the objections, there was the ultimate horizontal rate of 20 per cent. — a crude and. indiscriminating method of dealing with the tariff prob- lem, which can be defended on no ground of principle or expediency. The 20 per cent, rate, according to the terms of the act, was to remain in force indefinitely, that being the concession which in the end was made to the extremists of the South.' As it happened, however, the 20 per cent, duty remained in force for but two months, from July i till September I, 1842." At the latter date the tariff act of 1842 went (and they did change greatly), the rates under the Compromise Act would vary materially from those given in the text ; since the ad valorem equiva- lent of the specific duty, and its excess over 20 per cent., were ascertained for each year according to the prices of that year. ' Clay, who drafted the act, probably had no expectation that the 20 pel Tent, rate ever would go into effect. He thought Congress would amend before 1842, and intended to meet by his compromise the immediate emer- gency only. See his " Works," vol. II., pp. 131, 132. He tried to show \ppleton and Davis, two leading representatives of the protectionists, that " no future Congress would be bound by the act." See Appleton's speech on the Tariff Act of 1842, " Appendix to Cong. Globe," 1841-42, p. 575. ' The Compromise Act was so loosely constructed that doubt was enter- tained whether under its terms any duties at all could be collected aftei June 30, 1842. The point was carried before the Supreme Court, which ■iecided, however, that the rate of 20 per cent, was in effect during the two THE TARIFF, 1 8 ^O- 1860. 113 into force. That act was passed by the Whigs as a party measure, and its history is closely connected with the political complications of the time. The Whigs had broken with President Tyler, and had a special quarrel with him as to the distribution among the States of the proceeds of the public lands. Tyler vetoed two successive tariff bills because of clauses in them in regard to distri- bution. The bill which he finally signed, and which became law, was passed hurriedly, without the distribution clause. Attention was turned mainly to the political quar- rel and to the political effect of the bill in general.' The act, naturally enough, was a hasty and imperfect measure, of which the details had received little consideration. The duties which it levied were high, — probably higher than they would have been had the tariff discussion been less affected by the breach between Tyler and the Whigs. Though distinctively protective, and proclaimed to be such by the Whigs, it had not such a strong popular feeling behind it as had existed in favor of the protective measures of 1824, 1828, and 1832. In the farming States the enthusiasm for the home-market idea had cooled per- ceptibly ; and in the manufacturing States the agitation came rather from the producers directly interested than months before the act of 1842 went in force. (Aldridge vs. Williams, 3 Howard, 9.) Justice McLean dissented ; and there is much force to his dissenting opinion and to the argument of Reverdy Johnson, the counsel against the government. ■ A full account of this struggle is in Von Hoist's " Constitutional His- tory," vol. III., pp. 451-463. 114 THE TARIFF, 183O-1860. from the public at large. There is much truth in Cal- houn's remark that the act of 1842 was passed, not so much in compliance with the wishes of the manufacturers^ ^s because the politicians wanted an issue." The act of 1842 remained in force for but four years. It was in turn superseded by the act of 1846, again a political measure, passed this time by the Democrats. The act of 1846 carried out the suggestions made by Secretary Walker in his much debated Treasury Report of 1845. Indeed, it may be regarded as practically framed by Walker, who professed to adhere to the principle of free trade ; and the act of 1846 is often spoken of as an instance of the application of free-trade principles. In fact, however, it effected no more than a moderation in the application of protection. The act established several schedules, indicated by the letters A, B, C, D, and so on. All the articles classed in schedule A paid 100 per cent., all in schedule B paid 40 per cent., all in schedule C paid 30 per cent., and so on for the rest. Schedule C, with the 30 per cent, duty, included most articles with which the protective controversy is concerned, — iron and metals in general, manufactures of metals, wool and woollens, man- ufactures of leather, paper, glass, and wood. Cottons were in schedule D, and paid 25 per cent. Tea and coffee, on the other hand, were exempt from duty. ' " Works," vol. IV., pp. 199, 200. Calhoun thought that a good deal was due also to the influence of the ' ' moneyed men " who wanted the Treasury to be filled. THE TARIFF, 183O-1860. Ilg The act of 1846 remained in force till 1857, when a still further reduction of duties was made. The revenue was redundant in 1857, and this was the chief cause of the reduction of duties. The measure of that year was passed with little opposition, and was the first tariff act since 1 8 16 that was not affected by politics.' It was agreed on all hands that a reduction of the revenue was imperatively called for, and, except from Pennsylvania, there was no opposition to the reduction of duties made in it. The framework of the act of 1846 was retained, — the schedules and the ad valorem duties. The duty on the important protective articles, in schedule C, was lowered to 24 per cent., cottons being transferred, moreover, to that sched- ule. Certain raw materials were at the same time admitted free of duty. The act of 1857 remained in force till the close of the period we now have under examination. We begin with a high protective tariff in 1832; then follows a gradual reduction of duties, ending in 1842 with a brief period of very low duties.. In the four years 1842-46 we have a strong application of protection. In 1846 begins what is often called a period of free trade, but is in reality one of moderated protection. In 1857 the protection is still fur- ther moderated, and for a few years there is as near an approach to free trade as the country has had since 1816. ' Seward said, in 1857, that " the vote of not a single Senator will be governed by any partisan consideration whatever." Appendix to " Con- grrssional Globe," 1856-57, p. 344 ; and see Hunter's speech, ibid., p. 331. Il6 THE TARIFF, 183O-1860. Turning now to the economic effect of this legislation, we have to note, first, its connection with the general prosperity of the country. That there was a distinct connection is asserted by both protectionists and free trad- ers. The protectionists tell us that the compromise tariff caused the disastrous crises of 1837 and 1839 > ^^^^ ^^ high tariff of 1842 brought back prosperity ; that depres- sion again followed the passage of the act of 1846, and that the panic of 1857 was precipitated by the tariff act of 1857. On the other hand, free traders not infrequently describe the period between 1846 and i860 as one of ex- ceptional prosperity, due to the low duties then in force. It would not be worth while to allude to some of these assertions, if they were not so firmly imbedded in current literature and so constantly repeated in many accounts of our economic history. This is especially the case with the curious assertion that the crises of 1837 and 1839 were caused by the compromise tariff of 1833, or connected with it. This assertion had its origin in the writings of Henry C. Carey, who has been guilty of many curious versions of economic history, but of none more remarka- ble than this. It may be found in various passages in his works ; and from them it has been transferred to the writings of his disciples and to the arguments of protec- tionist authors and speakers in general.' Yet no fair- ' References to the supposed effects of the act of 1833 abound in Carey's works. As good a specimen as any is this : "Agitation succeeded in pro- ducing a total change of system in the tariff of 1833. * * * Thencefor TSE TARIFF, 183O-I860. II7 minded person, having even a superficial knowledge of the economic history of these years, can entertain such notions. The crises of 1837 and 1839 were obviously due to quite a different set of causes — to the bank troubles, the financial mistakes of Jackson's administration, the in- flation of the currency, and to those general conditions of speculation and unduly expanded credit which give rise to crises. The tariff act had nothing whatever to do with them. Indeed, the reductions in duty under it, as we have ward the building of furnaces and mills almost wholly ceased, the wealthy English capitalists having thus succeeded in regaining the desired control of the great American market for cloth and iron. As a consequence of their triumph there occurred a succession of crises of barbaric tendency, the whole terminating, in 1842, in a scene of ruin such as had never before been known, bankruptcy among the people being almost universal," etc. " Let- ters on the Iron Question " (1865), p. 4, printed in his "Miscellaneous Works " (1872). To the same effect, see his "Financial Crises," p. 18; "Review of Wells' Report," p. 5; " Social Science," II., p. 225. Professor Thompson makes the same statement in his " Political Economy," p. 353. See also Elder, "Questions of the Day" (1871), pp. 200, 201. Senator Evarts, in ii speech made in 1883, ascribed to the act of 1833 " a bank- ruptcy which covered the whole land, without distinction of sections, with ruin." The pedigree of statements of this kind, which are frequent in cam- paign literature, can be traced back to Carey. Doubtless Carey wrote in good faith ; but his prejudices were so strong as to prevent him from taking a just view of economic history. Oddly enough, Calhoun ascribed the crisis of 1837 to the fact that duties under the act of 1833 remained too high. The high duties brought in a large revenue and caused a surplus in the Treasury ; the deposit and distribution of this brought inflation and speculation, and eventually a crisis (" Works," tV., p. 174). No doubt the high duties were one cause of the government surplus, and thereby aided in bringing about the crisis, so that this view, incomplete as it is, has more foundation than Carey's explanation. On the other hand. Clay, as might be expected, took pains to deny that the act of 1833 had any thing to do with the troubles of the years following its passage (," Works," II., pp. 530, 531 ; edition of 1844). Il8 THE TARIFF, 1830-1860. seen, were slight until 1840, and could hardly have influ- enced in any degree the breaking out of the panics. Even if the reductions of duty had been greater, and had been made earlier, they would probably have had no effect, favorable or unfavorable, on the inflation of the earlier years or on the depression which followed. We may dispose at this point of a similar assertion oc- casionally made in regard to the crisis of 1857, — that the tariff act of 1857 caused or intensified it. This view also is traceable, probably, to Carey. It appears in his writ- ings and in those of his disciples.' In fact, the crisis of 1857 was an unusually simple case of activity, speculation, over-banking, panic, and depression ; and it requires the exercise of great ingenuity to connect it in any way with the tariff act. As it happened, indeed, the tariff was passed with some hope that it would serve to prevent the crisis. Money was accumulating in the Treasury ; and it was hoped that by reducing duties the revenue would be diminished, money would be got out of the Treasury, and the stringency, which was already threatening, prevented." ' Carey speaks in one place of "the terrific free-trade crisis of 1857." " Letters to Colfax," p. 15 ; "Financial Crises," p. 8 ; " Review of Wells," p. 5 (all in his " Miscellaneous Works "J. Thompson ("Political Econ- omy," p. 357) says : " In 1857, Congress reduced the duties twenty-five per cent. * * * It at once intensified all the unwholesome tendencies in our commercial and industrial life. * * * Another great panic followed through the collapse of unsound enterprises." ' See a letter from a Boston merchant to Senator Wilson, ' 'Congr. Globe, 1856-57, Appendix," p. 344 ; and the statement by Senator Hunter, ibid. , 329. THE TARIFF, 183O-1860. 1 19 The reduction failed to prevent the panic ; but, at the time, it would have been considered very odd to ascribe the disaster to the tariff act. On the other hand, it has been very often said that the ^activity of trade in 1843-44 was due to the enactment of the protective tariff act of 1842. There may be a degree of truth in this. The unsettled state of legislation on the tariff before the act of 1842 was passed must have been an obstacle to the revival of confidence. After July i, 1842, there was the uniform duty of 20 per cent. ; nay, it was doubtful whether there was by law even that duty in force. It was certain that Congress would wish not -to retain the horizontal rate, but would try to enact a new tariff law ; yet the quarrel between the Whigs and Tyler made the issue quite doubtful. Such uncertainty neces- sarily operated as a damper on trade ; and the passage of any act whatever, settling the tariff question for the time being, would have removed one great obstacle to the re- turn of activity and prosperity. It is even possible that the passage of the act of 1842 may have had a more direct effect than this. No doubt, in the regular recurrence of waves of activity and depression, the depression of 1840- 42 would soon have been followed, in any event, by a period of activity. The point at which activity will begin to show itself under such circumstafhces is largely a mat- ter of chance. It begins, for some perhaps accidental reason, with one industry or set of industries, and, the materials for general revival being ready, then spreads /20 THE TARIFF. 183O-1860. quickly to the others. In the same way, when the mate- rials for a crisis are at hand, a single accidental failure may precipitate a general panic. In 1842-43 the high duties of the tariff act probably helped to make profits large for the time being in certain manufactures, notably those of cotton and iron. Prosperity in these set in, and may have been the signal for a general revival of confi- dence and for a general extension of business operations. To that extent, it is not impossible that the protective tariff of 1842 was the occasion of the reviving business of the ensuing years. But it is a very different thing from this to say that the tariff was the cause of prosperity, and that depression would have continued indefinitely but for the re-establishment of high protec- tive duties. In truth, there has been a great deal of loose talk about tariffs and crises. Whenever there has been a crisis, the free traders or protectionists, as the case may be, have been tempted to use it as a means for overthrowing the system they opposed. Cobden found in the depression of 1839—40 a powerful argument in his crusade against the corn laws, and knew that a return of prosperity would work against him.' Within a few years, the opponents of protection in this country have found in general de- pression a convenient and effective argument against the tariff. In the same way, the protectionists have been tempted to use the crises of 1837 and 1857, and conversely ' See passages in Morley's " Life of Cobden," pp. 162. 163, 210. THE TARIFF, 1830-1860. 121 the revival of 1843-44, to help their case. But the effect of tariffs cannot be traced by any such rough-and-ready method. The tariff system of a country is but one of many factors entering into its general prosperity. Its influence, good or bad, may be strengthened or may be counteracted by other causes ; while it is exceedingly diffi- cult, generally impossible, to trace its separate effect. Least of all can its influence be traced in those varia- tions of outward prosperity and depression which are marked by " good times " and crises. A protective tariff may sometimes strengthen other causes which are bring- ing on a commercial crisis. Some such effect is very likely traceable to the tariff in the years before the crisis of 1873. It may sometimes be the occasion of a revival of activity, when the other conditions are already favora- ble to such a revival. That may have been the case in 1843. But these are only incidental effects, and lie quite outside the real problem as to the results of pro- tection. As a rule, the tariff system of a countryl operates neither to cause nor to prevent crises. They/ are the results of conditions of exchange and produc- tion on which it can exercise no great or permanent influence. Remarks of the same kind may be made on the fre, quent assertion that the prosperity of the country from 1846 to i860 can be traced to the low duties then in force. He who is convinced, on grounds of general rea- soning and of general experience, that the principles of 122 THE TARIFF, 1830-1860. free trade are sound and that protective duties are harm- ful, can fairly deduce the conclusion that the low tariffs of 1846 and 1857 contributed, so far as they went, to gen- eral prosperity. But a direct connection cannot be traced. A number of favorable causes were at work, such as the general advance in the arts, the rapid growth of the rail- way system and of ocean communication, the Californian gold discoveries. There is no way of eliminating the other factors, and determining how much can be ascribed to the tariff alone. Even in the growth of international trade, where some direct point of connection might be found, we cannot measure the effect of low duties ; for international trade was growing between all countries under the influence of cheapened transportation and the stimulus of the great gold discoveries.' The inductive, or historical, method absolutely fails us here. ' The growth of foreign trade under the tariffs of 1846 and 1857 was cer- tainly very striking. In Grosvenor's " Does Protection Protect ? " there is a table showing the imports and exports per head of population from 1821 to 1869, in which it is stated that the annual average per head of popula- tion was : Imports. Exports. In 1843-46, $4.66 $5.22 " 1847-50, 6.35 6.32 " 1851-55, 9.IO 7.35 " 1856-60, 10.41 9.45 The imports and exports were, in millions of dollars : Annual average of the four years 1843-46, " " " " 1847-50, " " five " 1851-55, " " " 1856-60, Imports. 92.7 138.3 231. 305. Exports. 100 136.8 X86.2 278.2 But how are we to measure the share which low duties had in promoting this growth ? THE TARIFF, 183O-1860. 1 23 J We turn n ow to an other inquiry, as to the effect of the fluctuating duties of this period on the protect ed indus- tries!__That inquiry, it is hardly necessary to say, leads us to no certain con clusion as,tP the^ffect of jthe-duties on the welfare of th ^ country at large. It is quite conceiv- able, and indeed on grounds of general reasoning at least probable, that any stimulus given to the protected indus- tries indicated a loss in the productive powers of the com- munity as a whole. But it has often been asserted, and. again often denied, that the duties caused a growth of certain industries ; and it is worth while to trace, if we can, the_tangible effect in this direction, even though it be but a part of the total effect. It is the production of iron in the unmanufactured form that has been most hotly discussed in the protective con- troversy. And in regard to this, fortunately, we have good, if not complete, information. The duty on pig-iron had been 62^ cents a hundred- weight under the tariff act of 1828. In 1832 it was re- duced to 50 cents, or $10 per ton. This rate was equiva- lent to about 40 per cent, on the foreign price at that time; and, under the Compromise Act of 1833, it was gradually reduced, until it reached 20 per cent, in 1842. Under the act of 1842, the duty was again raised to $10 a ton. In 1846 it was made 30 per cent, on the value, and in 1857 24 per cent. As the value varied, the duty under the last two acts varied also. In 1847, ^ time of high prices, the duty of 30 per cent, was equal to $5.75 per 124 THE TARIFF, 183O-1860. ton ; in 1852 it was only $3.05 ; in 1855 it was as high as $6; in i860 it again fell to $3.40.' The duty on bar-iron was of two kinds until 1846, — a duty on hammered bar-iron, and another heavier duty on rolled bar-iron. The duty on hammered bar was, in 1832, fixed at 90 cents per hundredweight, or $18 per ton. That on rolled bar was nearly twice as heavy, being $30 per ton, or nearly 100 per cent, on the value. These duties were reduced under the Compromise Act ; and, as we have seen, the reduction on rolled bar was very great, and, in 1842, very sudden. Under the act of 1842, the duty on hammered bar was made $17 per ton, that on rolled bar $25 per ton. The act of 1846 gave up finally the discrimination between the two kinds, and admitted ' The duty from year to year, on the average for the fiscal years ending June 30th, is given in the following table. The foreign value, on which the duty was computed, is also given. The figures are compiled from the tables given in French, " History of Iron Manufacture," p. 70, and in the " Re- port of the Iron and Steel Association for 1876,' ' p. 182. Duty (30 per cent, till 1857, Year ending June 30th. Average value. 24 per cent, after 1857.) 1847 . . . $19.90 $5-95 1848 15.80 4-75 1849 13-30 4.00 1850 12.70 3.80 1851 12.60 3-75 1852 10.20 3-05 1853 13-40 4.00 1854 18.00 S.40 1855 20.00 6.00 1856 19.80 5-95 1857 19.50 5-85 1858 17.60 4.20 1859 15.20 3-65 i860 14.10 3-4Q THE TARIFF, 183O-1860. I25 both alike at a duty of 30 per cent. ; and the act of 1857 admitted them at 24 per cent.' Before proceedi ng to examine the econjjmic effec t of^ these duties, it should be said that our information as to theproduction of iron is in many ways defective, and that the statements relating to it in the following para- graphs cannot be taken to be more than roughly accurate. The government figures give us trustworthy infortnation fts to the imports ; but for the domestic production we must rely, at least for the earlier years, on estimates which are often no more than guesses. Nevertheless, the general trend of events can be made out pretty clearly, and we are able to draw some important conclusions.' It seems to be clear that the importation of iron was somewhat affected by the duties. The years before 1842, when the compromise tariff was in force, were years of such disturbance that it is not easy to trace any effects clearly to the operation of the tariff ; but imports during these years were a smaller proportion of the total con- sumption of iron than they were during the period after ' Between 1832 and 1842, an exception had been made for one class of rolled iron, — iron rails actually laid down on railroads. These were ad- mitted free of duty ; or, rather, a drawback was granted of the full amount of duty due or paid on them. Between 1828 and 1832, a drawback had been granted such as to make the duty on railroad iron only 25 per cent. After 1842, however, it was charged with duty like any other iron. 'The reader who wishes to examine further the data as to the production of iron before i860, is referred to the Appendix to the Quarterly Journal of Economics ioT April, 1888, vol. II., pp. 377-382, where I have considered the figures in detail. 126 THE TARIFF, 183O-1860. 1846. It must be remembered that from 1830 till 1842 all railroad iron was admitted free of duty, and that a large part of the imported iron consisted of rails. If this quantity be deducted from the total import, the remaining quantity, which alone was affected by the duties, becomes still smaller as compared with the domestic product. In 1841 and 1842, when duties began to be low under the operation of the Compromise Act, imports were larger in proportion to the home product. On the other hand, in the four years, 1843-46, under the act of 1842, they show a distinct decrease. After 1847, they show as distinct an increase, and continue to be large throughout the period until i860. In the speculative and railroad-building years, from 1852 to 1857, *^he importation was especially heavy ; and in 1853 and 1854 the total quantity of iron imported was almost as great as the home product. The most effective part of the iron duties until 1846 was the heavy discriminating duty on rolled bar-iron. That duty amounted (from 18 18 till 1846, except during a few months in 1842) to about 100 per cent. Rolled iron, made by the puddling process and by rolling, is the form of bar-iron now in common use. The process was first applied successfully by Cort in England about 1785, and in that country was immediately put into extensive use. It made bar-iron much more cheaply and plentifully than the old process of refining in a forge and under a hammer ; and, at the present time, hammered bar of the old-fashioned kind has ceased to be made, except in com- THE TARIFF, 183O-1860. 127 paratively small quantities for special purposes. Cort's processes of puddling and rolling were practicable only through the use of bituminous coal and coke. The abundant and excellent coal of Great Britain gave that country an enormous advantage in producing rolled iron, as it had already done in smelting pig-iron, and put her in that commanding position as an iron producer which she continues to occupy to the present day. When rolled iron first began to be exported from England to foreign countries, it aroused strong feelings of jealousy, being so much cheaper than other iron. Several countries fought against the improvement by imposing discriminating duties on it." That course was adopted in the United States. In 1818, a discriminating duty was put on rolled iron, partly because it was said to be inferior in quality to hammered iron, and partly from a feeling in favor of pro- tecting the domestic producers of hammered iron. The duty was retained, as we have seen, till 1846. Its eiifect was neutralized in part by the free admission of railroad iron, which was one form of rolled iron ; but, so far as it was applied to rolled iron in general, it simply prevented the United States from sharing the benefit of a great im- provement in the arts. It had no effect in hastening the use of the puddling and rolling processes in the country. Though introduced into the United States as early as ' In France a discriminating duty equivalent to 120 per cent, was im- posed in 1833 on iron imported by sea, i. e., on English iron. Arme, " Tarifs de Douanes," I., 144, 145. The discrimination was maintained until 1855. Ibid., 271. 128 THE TARIFF, 183O-1860. 1817, these processes got no firm hold until after anthra- cite coal began to be used, about 1840, as an iron-making fuel.* We turn now to the history of the domestic production. By far the most important event in that history is the use of anthracite coal as a fuel, which began about 1840. The substitution of anthracite for wood (charcoal) revo- lutionized the iron trade in the United States in the same way as the use of bituminous coal (coke) had revolution- ' The first puddling and rolling mill in the United States was put up in Pennsylvania in 1817. The first puddling in New England was done as late as 1835. Wood was used as fuel at the outset. Swank, " Iron in All Ages," 166, 330. The effect of the duty on rolled iron cannot be better described than in the clear and forcible language used by Gallatin in 1831 : " It seems impracticable that iron made with charcoal can ever compete with iron made from bituminous coal. * * * A. happy application of anthracite coal to the manufacture of iron, the discovery of new beds of bituminous coal, the erection of iron-works in the vicinity of the most East- erly beds now existing, and the improved means of transportation, which may bring this at a reasonable rate to the sea-border, may hereafter enable the American iron-master to compete in cheapness with foreign rolled iron in the Atlantic districts. On those contingencies the tariff can have no effect. To persist, in the present state of the manufacture, in that particu- lar competition, and for that purpose to proscribe the foreign rolled iron, is to compel the people for an indefinite time to substitute a dear for a cheap article. It is said that the British iron is generally of inferior quality ; this is equally true of a portion of that made in America. In both cases the consumer is the best judge, — has an undoubted right to judge for himself. Domestic charcoal iron should confine itself to a competition with the for- eign iron made from the same fuel." Gallatin added, prophetically : "Your memorialists believe that the ultimate reduction of the price of American iron to that of British rolled iron can only, and ultimately will, be accomplished in that Western region which abounds with ore, and in which are found the most extensive formations of bituminous coal." — " Memorial of the Free-Trade Convention,'' pp. 60, 61. THE TARIFF, 183O-1860. I29 ized the English iron trade nearly a century before. Up to 1840, pig-iron had been smelted in this country with charcoal, a fuel which was expensive, and tended to be- come more and more expensive as the nearer forests were cut down and wood became less easily attainable. Char- coal pig-iron could not have competed on even terms with the coal-made English iron. But between 1830 and 1840 it was protected by the heavy duties on English iron ; ~ and, under their shelter, the production in those years steadily increased. There seems to be no doubt that, with lower duties or no duties at all, the domestic production would have been less, and the import greater. In other words, the duty operated as a true protective duty, hampering international trade and increasing the price of the home product as well as of the imported iron. In 1840, however, anthracite coal began to be applied to the making of pig-iron. The use of anthracite was made possible by the hot blast, — a process which was put in successful operation in England at nearly the same time.' The importance of the new method was immediately appreciated, and predictions were made that henceforth there would be no longer occasion for importing iron, even under the 20 per cent, duty of the Compromise Act. Many furnaces were changed irom the charcoal to the ' The hot blast was successfully applied in a furnace in Pennsylvania in 1835, but the experiment was not prosecuted. In 1837, Crane applied it in Wales, and about the same time the process was successfully used in this country. Swank, " Iron in All Ages," 268-273 ; French, " History of the Iron Trade," 58-60. 130 THE TARIFF, 183O-1860. anthracite method.' At very nearly the same time, as it happened, the tariff act of 1842 was passed, imposing heavy duties on all kinds of iron, among others on the railroad iron which had hitherto been admitted free. Very shortly afterwards a general revival of trade set in. Under the influence of these combined causes, the pro- duction of iron was suddenly increased. The exact amount of the increase is disputed ; but the production seems to have risen from somewhere near 300,000 tons in 1840-41, to 650,000 or more in 1846-47. Some part of this great growth was certainly due to the high protection of 1842 ; but, under any circumstances, the use of anthra- cite would have given a great stimulus to the iron trade. This is shown by the course of events under the tariff acts of 1846 and 1857. The production remained, on the whole, fairly steady throughout the years when these acts were in force. There was, on the whole, an increase from between 500,000 and 600,000 tons in the earlier years of the period to between 800,000 and 900,000 tons in the later years. For a few years after the passage of the act of 1846, the reduction of the duty to 30 per cent, had little, if any, effect. Prices were high both in England and in the United States ; for it was a time of active railroad building in England, and consequently of great demand for iron. The ad valorem duty was correspond- ' See tlie notices in Hazard's "Statistical Register," I., pp. 335, 368 ; III., p. 173 ; IV., p. 207. That great results were at once expected from the new method is shown by an interesting speech of Nicholas Biddle's. ibid., II., p. 230. THE TARIFF, 183O-1860. 131 ingly high. In 1850-51 the usual reaction set in, prices went down, production decreased, and the iron-masters complained.' But the natural revival came after a year or two. Prices rose again ; production increased, and continued to increase until i860. Although the duty, which had been $9 a ton under the act of 1842, was no more than $3 and $4 under the 24 per cent, rate which was in force during the years 1858, 1S59, and i860, and although these were not years of unusual general activity, the domestic production showed a steady growth. The country was growing fast, many railroads were in course of construction, much iron was needed. An un- diminished home product was consumed, as well as largely increased imports. The most significant fact in the iron trade, however, is to be seen, not in the figures of total production, but in the shifting from charcoal to anthracite iron. While the total product remained about the same, the component elements changed greatly. The production of anthracite ' The iron-masters admitted that the act of 1846 had been sufficiently protective when first passed. But in 1849 and 1850, they began to com- plain and ask for higher duties. See " Proceedings of Iron Convention at Pittsburg (1849)," p. 9 ; " Proceedings of Convention at Albany," pp. 27, 42. They certainly had a legitimate subject for complaint in the operation of the ad valorem duty, in that it tended to exaggerate the fluctuations of prices. When prices abroad were high, the duty was high ; when prices abroad were low, the duty was low. Consequently, the price of foreign iron in the United States, which is the sum of the foreign price and the duty, fluctuated more widely than the foreign price alone. This was cer- tainly an evil, especially with an article whose price was liable under any conditions to vary so much as the price of iron. See the table above, p. 124. 132 THE TARIFF, 183O-1860. iron rose steadily : that of charcoal iron fell as steadily. The first anthracite furnace was built in 1840. In 1844 there were said to be twenty furnaces, making 65,000 tons annually.' Thence the production rose with hardly an interruption being in 1844 " 1846 " 1849 " 1854 " 1855 " 1856 65,000 gross tons. 110,000 " " 115,000 " " 308,000 net " 343,000 " 394,000 " " As the anthracite iron production increased, that of char- coal iron decreased. Under the tariff act of 1842, a large number of new charcoal furnaces had been put up.' Many of these had to be given up under the combined competition of anthracite and of English iron. Some maintained themselves by using coke and raw bituminous coal, in those parts of the country where bituminous coal was to be had * ; others disappeared. That at least some ' See a " Letter of the Philadelphia Coal and Iron Trade to the Commit- tee on Finance" (pamphlet, Philadelphia, 1844). 'The figure for 1846 is that given in Taylor, "Statistics of Coal," p. 133. Swank gives the figure for 1846 as 123,000 (gross ?) tons. " Iron in All Ages," p. 274. The figures for 1849-56 are from Lesley, " Iron Manufacturers' Guide (1859)," pp. 751,752. Those given by Grosvenor, " Does Protection Protect ? " p. 225, vary somevfhat ; but the differences are not great. ' See the figures in Grosvenor, p. 215. There were built in 1843 9 char- coal furnaces ; in 1844, 23 ; in 1845, 35 ; in 1846, 44 ; in 1847, 34 ; in 1848, 28 ; in 1849, I4- * The use of coke began in the United States about 1850, but was of little importance until after 1856. The use of raw bituminous coal was in- troduced about 1850 in the Shenango and Mahoning valleys (on the border THE TARIFF. 1830-1860. 133 of them should disappear was inevitable. Charcoal iron for general use was a thing of the past ; and the effect of the tariff of 1842 was to call into existence a number of furnaces which used antiquated methods, and before long must have been displaced in any event by anthracite furnaces The use of anthracite not only stimulated the produc- tion of pig-iron, but also that of rolled iron and railroad bars. Anthracite was first used in puddling and reheating in 1844 and 1845/ and thenceforward rolled iron was made regularly in large quantities. In 1856 the production of rolled iron was nearly 500,000 tons.' Iron rails first began to be made while the tariff act of 1842 was in force, though the steps towards making them were taken even before that act put an end to the free admission of Eng- lish rails.' With the decline in railroad building and the between Pennsylvania and Ohio), where there is suitable coal. Swank, " Iron in All Ages," pp. 281-284. In the " Report of the American Iron and Steel Association for 1876 " (prepared by Swank), the following figures are given of the production of iron with the various kinds of fuel. I have selected a few typical years : Anthracite Charcoal Bituminous coal Year. iron. iron. and coke iron. Total. 1854 339,000 342,000 55,000 736,000 1856 443,000 370,000 70,000 883,000 1858 362,000 285,000 58,000 705,000 i860 519,000 278,000 122,000 919,000 The figures here denote net tons. ' Speech of A. S. Hewitt, in ' ' Proceedings of Iron Convention at Albany " (1849), p. 54. ^ Lesley, "Iron Manufacturers' Guide," p. 761. 3 See >i pamphlet, "Observations on the Expediency of Repealing the Act by which Railroad Iron is Released from Duty," 1842. It gives an ac count of large rolling mills then being erected at Danville, Pennsylvania. 134 THE TARIFF 183O-1860. general fall in iron prices, which took place in 1849, niany of the rail mills stopped work. But the business revived with the general prosperity which set in early in the dec- ade, and the production of rails steadily increased until 1856. Under the influence of the crisis of 1857 i* ^^11' but soon rose again, and in i860 was more than 200,000 tons.' I To sum up : The high duty on iron in its various forms between 1832 and 1841, and again in 1842-46, impeded amportation, retarded for the United States that cheapen- ing of iron which has been one of the most important factors in the march of improvement in this century, and maintained in existence costly charcoal furnaces long after that method had ceased in Great Britain to be in general use. The first step towards a vigorous and healthy growth of the iron industry was in the use of an- thracite in 1840. That step, so far from being promoted by the high duties, was taken in a time when duties were qn the point of being reduced to the 20 per cent, level. Hardly had it been taken when the high duties of the tariff act of 1842 brought about (not indeed alone, but in conjunction with other causes) a temporary return to the ' See the figures given in " Report of Iron and Steel Association foi 1876," p. 165. The production of rails is there stated to have been : Ln 1049 " 1850 . • :£4,uuu 44,000 " 1854 . . • 108,000 " 1856 180,000 " 1857 162,000 " i860 205,000 THE TARIFF, 183O-1860. I35 old charcoal process. A number of new charcoal furnaces were built, unsuited to the industry of the time and cer- tain to succumb before long. Under the lower duties from 1846 to i860, the charcoal production gradually be- came a less and less important part of the iron industry, and before the end of the period had been restricted to those limits within which it could find a permanent market for the special qualities of its iron.' On the other hand, the lower duties did not prevent a steady growth in the making of anthracite iron ; while the production of railroad iron and of rolled iron in general, also made pos- sible by the use of anthracite, showed a similar steady progress. There is no reason to doubt that, had there been no duty at all, there would yet have been a large production of anthracite pig- and rolled iron. Meanwhile the country was rapidly developing, and needed much iron. The low duties permitted a large importation of foreign iron, in addition to a large domestic production. The comparative cheapness and abundance of so import- ant an industrial agent could not have operated other- wise than to promote material prosperity. J /We turn now to another industry, — the manufacture of Cotton goods, by far the largest and most important branch of the textile industry. Here we are met at the ' Charcoal iron has qualities which cause a certain quantity of it to be in demand under any circumstances. Since it settled down, about i860, to its normal place as a supplement to coal-made iron, the product has steadily increased with the growing needs of the country. In the years 1863-65 the annual product was about 240,000 tops. In 1886 it was 460,000 tons, 136 THE TARIFF, 183O-1860. outset by the fact that, at the beginning of the period which we are considering, the cotton manufacture was in the main independent of protection, and not likely to be much affected, favorably or unfavorably, by changes in duties. Probably as early as 1 824, and almost certainly by 1832, the industry had reached a firm position, in which it was able to meet foreign competition on equal terms.' Mr. Nathan Appleton, who was a large owner of cotton factory stocks, and who was also, in his time, one of the ablest and most prominent advocates of protective duties, said in 1833 that at that date coarse cottons could not have been imported from England if there had been no duty at all, and that even on many grades of finer goods competition was little to be feared. In regard to prints, the American goods were, quality for quality, as cheap as the English, but might be supplanted, in the absence of duties, by the poorer and nominally cheaper English goods, — an argument, often heard in our own day, which obviously puts the protective system on the ground of regulating the quality of goods for consumers. The gen- eral situation of the cotton manufacture, as described by ' Appleton, was one in which duties had ceased to be a factor of much importance in its development." ' See the previous essay on ' ' Protection to Young Industries, " Part III. , where an account is given of the history of the cotton manufacture up to 1824. " See Appleten's speech on the Verplanck bill of 1833, " Congressional Debates," IX., pp. 1216-1217. Compare his remarks in the same vol- ume at p. 1579. THE TARIFF, 183O-1860. 1 37 During the extraordinary fluctuations of industry and the gradual reduction of duties which ensued under the compromise tariff of 1833, the business of manufacturing cottons was profitable and expanded, or encountered de- pression and loss, in sympathy with the industry of the country at large, being influenced chiefly by the expansion of credit and the rise of prices before 1837 and 1839, ^"^ the crisis and liquidation that followed those years. Not- withstanding the impending reductions of duty under the Compromise Act, large investments were made in the business in the earlier part of the period. Thus, in 1835- 36, the Amoskeag Company began on a large scale its operations in Manchester, N. H.' The depression at the close of the decade checked growth for a while, but did not prevent new investments from being made, even before the passage of the act of 1842 settled the tariff uncertainty." The best informed judges said that the causes of increase or decrease of profit had been, as one might expect, the same as those that produced fluctua- tions in other branches of business ; and they made no mention of duties or of tariff.'' Appleton's account of the ' Potter, " History of Manchester,'' p. 552. The Stark Mills were built in 1838, the second Stark Mills in 1839. ' Earl, " History of Fall River," pp. 35-37. " From the panic of 1837, which affected every business centre in the country, Fall River seems to have speedily recovered, since within a, few years from that date nearly every mill in the place was enlarged, though only one new one was built." Ibid., p. 53. ^ See the answers from T. G. Gary, treasurer of a Lowell mill, and from Samuel Batchelder to circulars sent out in 1845 by Secretary Walker. Batch- 138 THE TARIFF, 183O-1860. stage reached by the industry finds confirmation in a care- ful volume on the cotton manufacture in the United States, published in 1840 by Robert Montgomery. This writer's general conclusions are much the same as those which competent observers reach for our own time. Money wages were about twice as high in the United States, but the product per spindle and per loom was considerably greater. The cotton, in his time, was not so well mixed, not so thoroughly cleaned, not so well carded in the United States as in England ; but, on the other hand, the Americans were superior in ordinary power-loom weaving, as well as in warping and dressing. Elaborate tables are given of the expenses per unit of product in both countries, the final result of which, when all things were considered, showed a difference of three per cent, in favor of the American manufactures. Calculations of this kind, which are common enough in discussions of protective duties, are apt to express inadequately the multiplicity of circumstances which affect concrete indus- try ; yet they may gauge with fair accuracy the general conditions, and in this case were made intelligently and without bias. It is worth noting that Montgomery attrib- utes the success of the Americans in exporting cottons to elder, our most trustworthy informant on the early history of the cotton manufacture, writes that " the increase and decrease of profit from 1831 to 1 844 have conformed very nearly to the general prosperity of the country. '' The circulars and answers are printed in the appendices to Walker's Re- port. Exec. Doc. 1845-46, vol. II., No. 6, pp. 215, 216, 313. THE TARIFF, 183O-1860. I39 greater honesty in manufacturing and to the superior quality of their goods." During the years following the passage of the act of 1842, by which the duties on cottons were increased largely, the manufacturers made high profits. In Secre tary Walker's Report, and in other attacks on protective duties, much was made of this circumstance, the high profits being ascribed to the new duties. The protec- tionists denied the connection, and a lively controversy ensued. ° The truth seems to be that the case was not different from that usually presented in economic phe- nomena, — several causes combined to produce a single general effect. The high duties very likely served, in part, to enable a general advance of profits to be main- tained for several years. But there was also an increased ' See " Montgomery's " Cotton Manufacture," pp. 29, 38, 82, 86, 91, loi. The tables of expenses are on pp. 124, 125 ; the remarks on quality of goods, on pp. 130, 194 ; on wages and product, on pp. 118-121, 123. Montgomery was superintendent of the York Factories at Saco, Maine, of which Samuel Batchelder was treasurer. Allusions to Montgomery's book, and confirmation of some of his conclusions, may be found in Batchelder's " Early Progress of the Cotton Manufacture," p. 80 and following. At a convention in favor of protection, held in New York in 1842, com- mittees were appointed on various industries. The committee on cottons reported a recommendation to Congress of minimum duties on plain and printed goods, but added that these duties were '" more than is necessary for much the largest part of the cotton goods, '' and that "most of the printed calicoes are now offered to the consumer at lower prices than they could be imported under a tariff for revenue only. " ' See T. G. Gary, " Results of Manufactures at Lowell," Boston, 1845 ; N. Appleton, " Review of Secretary Walker's Report," 1846; and the speeches of Rockwell, " Congr. Globe," 1845-46, pp. 1034-1037, and Win- throp, ibid., Appendix, p. 969. I40 THE TARIFF, 1830-1860. export to China, which proved highly profitable. More- over, the price of raw cotton was low in these years, lag- ging behind the advance in the prices of cotton goods ; and, as long as this lasted, the manufacturers made large gains. The fact that prosperity was shared by the cotton manufacturers in England shows that other causes than the new tariff must have been at work. On the other hand, when the act of 1846 was passed, the protectionists predicted disaster ' ; but disaster came not, either for the country at large or for the cotton in- dustry. Throughout the period from 1846 to i860 the manufacture of cotton grew steadily, aiTected by the gen- eral conditions of trade, but little influenced by the lower duties. Exact figures indicating its fortunes are not to be had, yet we have enough information to enable us to judge of the general trend of events. The number of spindles in use gives the best indication of the growth of cotton manufacturing. We have no trustworthy figures as to the number of spindles in the whole country ; but we have figures, collected by a competent and well-informed writer, in regard to Massachusetts. That State has always been the chief seat of the cotton manufacture, and its progress there doubtless indicates what took place in the country at large. The number of spindles in Massachu- ' Abbott Lawrence predicted in 1849 that " all this [a general crash] will take place in the space of eighteen months from the time this experimental bill goes into operation ; not a specie-paying bank doing business will be found in the United States." " Letters to Rives," p. 12. Appleton made a similar prediction in his " Review of Walker's Report," p. 28. THE TARIFF, 183O-1860. setts, which was, in round numbers, 340,000 in 183 1, had nearly doubled in 1840, was over 800,000 in 1845, and was over 1,600,000 in i860, having again nearly doubled during the period of low duties.' The same signs of growth and prosperity are seen in the figures of the consumption of raw cotton in the United States, which, compiled independently, reach the same general result. Between the first half of the decade 1840^50, and the second half of the decade 1850-60, the quantity of raw cotton used in the mills of the United States about doubled. The annual consumption, which had been about 150,000 bales in 1830, rose to an average of more than 300,000 bales in the early years of the next decade, and again to one of more than 600,000 bales in the years 1850-54. In the five years immediately preceding the civil war, the average annual consumption was about ' The follow lie following figures are given by Samuel Batchelder in a " Report to the Boston Board of Trade," made in i860 (published separately ; the essen- tial parts printed also in " Hunt's Merchants' Magazine," xlv., p. 14) : Spindles in Massachusetts ; In 1831 . . . 340,000 " 1840 . . . 624,500 (other sources make it 665,000). " 1845 . . . 817,500 " 1850 . . . 1,288,000 " 1855 . . . 1,519,500 " i860 . . . 1,688,500 For Ne-v England, and the United States as a whole, Batchelder gives the following figures, taken from De Bow, for the years 1840 and 1850. They are not entirely trustworthy, but may be accepted as roughly accurate. We add the census figures for i860 : Spindles in New England. United States. 1840 . . 1,597,000 . . 2,H2,000 1850 . . 2,751,000 . . 3,634,000 i860 . . 3,859,000 . . 5,236,000 142 THE TARIFF, 183O-1860. 800,000 bales. During these years the consumption of cotton in Great Britain seems to have increased at very nearly the same rate.' Such figures indicate that the cotton manufacture was advancing rapidly and steadily. Another sign of its firm position is the steady increase during the same period in the exports of cotton goods, chiefly to China and the East. The value of the cotton goods exported averaged but little over $3,000,000 annu- ally between 1838 and 1843, rose to over $4,000,000 between 1844 and 1849, '^^s nearly $7,000,000 a year between 185 1 and 1856, was over $8,000,000 in 1859, ^"lus the duty ; importation will cease ; and yet a virtual tax will still be levied in the shape of prices higher than those which would obtain if there were no duty. Whatever be the details of the working of a protective duty, it \% prima facie less desirable than a revenue duty, on the simple ground that the tax serves not to yield revenue, but to offset the greater cost of making the commod'cy at home. Whether the stimulus to domestic production brings other benefits to the community, sufficient tt^ compensate for this disadvantage of protective duties involves the whole problem of the operation of inter- national trade ; indeed, the discussion spreads over the 1 88 HISTORY OF THE EXISTING TARIFF. entire range of economic principles, and can be settled only by reasoning in which all those principles are taken into account. The history of the duties on tea and coffee is curious. In the early days of the Republic, when the need of revenue was pressing, they were subjected to duties which for those times were heavy. But in 1830, when the revenue became more than ample, and when there was also a strong feeling in favor of maintaining protective duties, tea, coffee, and cocoa were put on the free list. The situation in 1830 was not unlike that in 1872, except that the feeling through the North in favor of maintaining the protective duties was probably stronger at the earlier date. From 1830 to the Civil War, these revenue articles remained free of duty. The tariff acts of 1846 and 1857, though supposed to be based on revenue principles, made no attempt to secure revenue from this certain and simple source. Protective duties are as certainly taxes as are those on tea and coffee ; but in the latter case no domestic producers ask for the retention of the taxes ; consequently the revenue duties, unsupported by any strong interest, are easy victims when a curtailment of the national revenue becomes convenient or necessary. For our present purpose it sufifices to point out that the removal of the tea and coffee duties in 1872 served to fix for a long time the character of our legislation on the revenue articles of which they are the type. Step by step, in the various tariff acts passed since the war, all the non-protective duties have been swept away. By far REDUCTION OF THE TARIFF. 189 the most important recent legislation in this direction was the removal of the duties on sugar in the act of 1890, a change which, like the removal of the tea and coffee duties in 1872, emphasized the determination of the protectionists to give up the simplest and surest sources of revenue rather than yield an abatement of the protective duties. To return from this digression to the tariff act of 1872. The free-traders were on the whole satisfied with it ; they thought it a step in the right direction, and the beginning of a process of reform. The protectionists, however, believed that they had won a victory ; and, as events proved, they were right." It is not within the purpose of this volume to discuss the intrinsic merits of a " horizontal reduction," such as was carried out in the act of 1872. Undoubtedly it is a simple and indiscriminating method of approaching the problem of tariff reform. The objections to it were very prominently brought forward when Mr. Morrison, during the session of 1883-84, proposed to take off ten per cent, from the duties, in exactly the same way that the tariff of 1872 had taken off ten per cent. It is certainly curious that this method, when proposed by Mr. Morrison in 1884, should be vehemently denounced by protectionists ^ Mr. Hayes, in the speech already referred to, spoke of ' ' the grand re- sult of a tariff bill reducing duties fifty-three millions of dollars, and yet leav- ing the great industries almost intact. The present tariff (of 1872) was made by our friends, in the interest of protection." And again . "A reduction of over fifty millions of dollars, and yet taking only a shaving off from the protection duties. " igo HISTORY OF THE EXISTING TARIFF. as crude, vicious, unscientific, and impractical, although, when proposed by Mr. Dawes in 1872, it received their earnest support. There is, however, one objection to such a plan which was hardly mentioned in connection with Mr. Morrison's bill, but was brought out very clearly by the experience of 1872. This is, that a horizontal re- duction can very easily be revoked. The reduction made in 1872 was repealed with little difficulty in 1875. After the panic of 1873, imports greatly diminished, and Ten per with them the customs revenue. No further cent, reduc- thought of tax reduction was entertained ; tion re- , , . . , pealed in ^^^ soon a need of mcreasmg the revenue was 1875- felt. In 1875 Congress, as one means to that end, repealed the ten per cent, reduction, and put du- ties back to where they had been before 1872.' The repeal attracted comparatively little attention, and was ' It was far from necessary, for revenue purposes, to repeal the ten per cent, clause. Mr. Dawes (who advocated in 1875 the repeal of his own measure of 1872) attempted to show the need of raising the tariff by assum- ing that a fixed sum of $47,000,000 per year was necessary for the sinking- fund, — that the faith of the government was pledged to devoting this sum to the redemption of the debt. But it was very clearly shown that the government never had carried out the sinking-fund provision in any exact way. In some years it bought for the sinking fund much less than the one per cent of the debt which was supposed to be annually redeemed ; in other years (notably in 1869-73) it bought much more than this one per cent. The same policy has been followed in recent years. There can be little doubt that the need of providing for the sinking fund was used merely as an excuse for raising the duties. See Mr. Wood's remarks, Congr. Record, 1874-75, PP- 1187, 1188, and' HOW DUTIES WERE RAISED. 221 ments which had treated imported ores, and to aid the domestic producers of copper in pocketing large profits. The displacement of the imported copper by the Lake Superior product would have come in any case ; for, as events proved, the sources of supply in this country were rich enough not only to oust foreign competitors at home, but soon to invade the market abroad. With the aid of the duty, the mining companies were able to form a combination which fixed the price of copper within the country at a higher price than that ruling abroad. When it was impossible to dispose of the entire product within the country, large quantities were sent abroad and sold at whatever price could be got, — lower in any case than the domestic price. The great profits secured by those who were shrewd and fortunate in developing the mines were doubtless due in the main to the unsurpassed rich- ness of the copper deposits. But they were increased by the copper duty of 1869; and thus for a series of years the great natural resources of the country became a cause not of abundance and cheapness, but of curtailment of supply and dearness.' Still another instance of the increase of duties since the war is to be found in the case of steel rails. Before 1870 steel rails had been charged with duty under the head of still, if a bill is introduced which gives protection to copper, trusting to the magnanimity of the Representatives from the West who have wool and cop- per protected, I should probably vote for the bill." — Ibid., p. 161. ■' On the effect of the copper act, see Mr. Wells's Essay, already referred to, in the Cobden Club series, pp. 518-521 Cf. the "Report of the Tariff Comm.," pp. 2554-2577. See also Appendix, V., where the total pro- duction of copper in each year, prices at home and abroad, etc. , are given. 222 HISTORY OF THE EXISTING TARIFF. "manufacturers of steel not otherwise provided for," and Steel rails, as such had paid forty-five per cent. The 1870. tariff act of 1870 changed this to a specific duty of \\ cents per pound, or $28 per gross ton. At the time, the change caused an increase, but no very great increase, in the duty. The Bessemer process of making steel had hardly begun to be used in 1870, and the price of steel rails at that time in England was about $50 per ton. The ad-valorem rate of forty- five per cent., calculated on this price, would make the duty $22.50 per ton, or not very much less than the duty of $28 per ton imposed by the act of 1870. Between 1870 and 1873, the price of steel rails advanced in Eng- land, and the specific duty of $28 imposed in the former year was not higher than the ad-valorem rate of forty-five per cent, would have been. But after 1873 the prices of Bessemer steel and of steel rails steadily went down. As they did so, the specific duty became heavier in propor- tion to the price. By 1877 the average price of steel rails in England was only a little over $3 1 per ton ; and since 1877 the English price has not on the average been so high as $28 per ton. The duty of $28, which this country imposed, therefore became equivalent to more than one hundred per cent on the foreign price. The result of this exorbitant duty was an enormous gain to the producers of steel rails in the United States. The patent for the use of the Bessemer process was owned by a comparatively small number of companies ; and these companies, aided by a ITOW DUTIES WERE RAISED. 2i^ patent at home and protected by an enormous duty against foreign competitors, were enabled for a time to ob- tain exceedingly high prices for steel rails. During the great demand for railroad materials which began on the revival of business in 1879, 3-^ TffE TARIFF ACT OF 1883. 239 classification, or coupled with reductions of other articles in the same schedules. Had a separate bill been brought forward, proposing the higher duties contained in the act, it certainly could not have passed. We may turn now to an examination of the cases in which duties were reduced in 1883. The schedules in the tariff which have the greatest effect on the welfare of the country are those fixing the duties on iron and wool ; and to these we will first give our attention. The change in the duty on wool was suffi- ciently simple. The ad-valorem rate was taken off. The duty of 1867, it will be remembered, had been, on wools costing less than thirty-two cents, ten cents per pound plus eleven per cent, ad valorem, and, on wools costing more than thirty-two cents, twelve cents per pound plus ten per cent, ad valorem. These ad-valorem rates of eleven and ten per cent, were taken off, and the rates left simply at ten and twelve cents per pound. In regard to the greater part of the wools raised in the United States, this reduction was purely nominal. It left the duty on the cheaper grades of wool, raised in Texas and in the Terri- tories, at a point where it was still entirely prohibitory. So far as concerns the higher grades of wools, such as are raised in Ohio and neighboring States, the reduction was real, though so small in amount that it practically left the situation unchanged." On carpet wools the duty was ' The duty in the act of 1883 was ten cents on wool costing thirty cents or less, and twelve cents on that costing more than thirty cents. The change (in the line of division, according to value) from thirty-two to thirty cents was not without importance ; and, as far as it went, it evident^ tended to •neutralize the reduction. Sub t\i9 £ul/i'tii> Wool Mf,,ia.i\., 11, ioq. 240 HISTORY OF THE EXISTING TARIFF. reduced from the former rates of six and three cents a pound, to five and two and a half cents. These wools are practically not raised in the United States at all ; and the reduction on them was again real, though slight. On the whole, the changes in the duty on this raw material indicated a desire to make concessions to the opponents of protection. Greater reductions would prob- ably have been made but for the fear of arousing among the wool growers a feeling of opposition to the protective system as a whole. Little can be said in favor of the duty on wool ; and even on strictly protectionist grounds much can be said against it. Notwithstanding the cum- brous machinery of compensating duties, it undoubtedly has a hampering influence on the wool manufacture, and has been one factor, though perhaps not the most im- portant, in confining this industry to the limited range that is so often complained of. As a tax on raw materials, it tends to bear with heavier weight than would be the case with the same duty on a finished product ; since it is advanced again and again by the wool dealer, the manu- facturer, the cloth dealer, the tailor, each of whom must have a greater profit in proportion to the greater amount of capital which the wool duty and the higher price of wool make it necessary for him to employ. So strong and so clear are the objections to duties of this kind that hardly another civilized country, whatever its general policy, attempts to protect wool.' ' Not only England, but countries like France, Germany, Austria, Italy, which have applied protective duties in recent years, admit wool free. THE TARIFF ACT OF 1 883. 241 Moreover, the reduction of a duty of this kind can take place with exceptional ease. Wool is not produced, as a rule, in large quantities, by persons who devote themselves exclusively to this as a business. It is mainly produced by farmers, whose chief income comes from other sources, and on whom a reduction of duty and a fall of price would fall with comparatively little weight. In the Western States and Territories, it is true, wool is grown on large sheep ranches, by producers with whom- it is not a subsidiary business. But the qualities of wool grown there are least affected by the duty. While the price of Territory wools is probably higher than the price of similar wools abroad, it is by no means higher by the full extent of the duty. The argument for the consideration of vested interests is consequently less strong than in the case of manufactures in which a large plant is invested, and where the interests of a large body of workmen are involved in the retention of things as they are. We turn now to the reductions of duty on woollen goods, which would naturally follow the lower duty on wool. It has been seen that the ad-valorem, or Woollens. protective, duty was not decreased at all, and that on the finer classes of woollens it was increased from thirty-five to forty per cent. But the specific, or compen- sating, duty was reduced from fifty cents to thirty-five cents a pound. The woollens duty of 1883 was thirty-five cents a pound and thirty-five per cent, on goods costing less than eighty cents per pound, and thirty-five cents 16 242 HISTORY OF THE EXISTING TARIFF. and forty per cent, on goods costing more than eighty cents. The lowering of the specific duty was in part called for by the reduction of the duty on wool ; but the decrease was somewhat larger than the reduced duty on the raw material made necessary. The compensating duty in the new act was fixed on the assumption that no more than three and one half pounds of wool are used in making a pound of cloth ; whereas the act of 1867, it will be remembered, was framed on the basis of four pounds of wool to the pound of cloth. This may be called a tacit confession that the compensating duty of 1867 had been excessive ; and the new arrangement took away some of the protection which was formerly given by the specific duty. But the changes were more nominal than real. So far as the finer grades of woollens were con- cerned, it was more than offset by the increase in the ad-valorem duty from thirty-five to forty per cent. So far as the cheaper grades of woollens were concerned, it had no real effect. The duty on these was prohibitory before, and it remained prohibitory. Such a change has no effect on trade or prices, and brings no benefit to con- sumers. Precisely similar is the state of things in regard to flannels, blankets, and similar goods. On these also the specific duty was reduced, on the cheapest grades from a rate of twenty cents a pound to rates of ten and twelve cents. But the new rates were still high enough to shut out importation, and brought about no change beyond that of the figures on the statute-book." ' Complaint was made that the act of 1883 reduced the duties on goods more than the duties on wool. *»» Mjti Hayes's articles in Bulletin THE TARIFF ACT OF 1 883. 243 Changes of precisely this kind are to be found in other parts of the act of 1883. The rates on the cheap grades of cotton goods, for instance, show a considera- Cottons. ble reduction. On the lowest class of unprinted goods the duty had been five cents per yard ; it was made two and one half cents. But the old duty had for many years ceased to have any appreciable effect on the prices of cotton goods. The common grades of cottons can be made, as a rule, as cheaply in this country as anywhere in the world ; in fact, some of them are regularly exported in large quantities. If the duty on such cottons were entirely abolished, it is probable that they could not be imported ; and it is certain that a very small duty would suffice to shut out from our market all foreign competi- tors in them. Under these circumstances a reduction of duty like that of 1883 could be of no effect whatever. The same holds good of almost all the various reductions in the specific duties on plain and printed cotton goods. Wool Mf., vol. xiii. This was certainly the case with worsted goods, which were admitted at specific duties not sufficient to compensate for the duties on wool. The mistake in adjusting these duties was made by Mr. Hayes himself, in the bill framed by the Tariff Commission. It led to a long struggle on the part of the manufacturers to get a construction of the act of 1883 making worsteds dutiable as woollens. The Democratic admin- istration of 1885-89 refused to adopt such a construction ; the Republican administration in 1889 did so, but the courts, when a case was tried before them, promptly decided that the remedy was not to be found by miscon- struing the statute ; and in 1890 a special act was passed, in advance of the general tariff act of that year, making worsteds dutiable as woollens. A good brief statement of this episode is in the Report of the Secretary of the Treasury for 1887, p. 35. The Bulletin Wool Mf. is full of it from 1886 to 1889, and a detailed account of the last steps in l88g is in vol. xx. The special act is in 26 Statutes at Lar^i 105. 244 HISTORY OF THE EXISTING TARIFF. These changes also were nominal. On the other hand, in the case of the finer cotton goods, laces, and trimmings, on which a lowering of the rates would have been of real effect, there was, as we have seen, no decrease, but an increase. The duty on pig-iron was reduced from $7.00 to $6.72 a ton. This change was insignificant, hardly two per cent, on the foreign price of iron. A greater Iron. could have been made without danger of any disturbance of the iron trade. The same was the case with the reduction on bar-iron, which, on the ordinary grade, lowered the duty from one cent a pound to eight tenths of a cent. The reduction still left the duty high enough to prevent any lowering of prices and any effect on trade. The duties on the various forms of manufac- tured iron — hoop, band, sheet, plate iron — went down in much the same way. The reductions were slight in all cases, and often merely nominal. In general, the new rates on iron and its manufactures were such as to have no appreciable effect on the trade and welfare of the country. The duty on steel rails showed a considerable reduction. The old rate had been $28 a ton ; the new one was $17. If this change had been made four or five years earlier, it would have been of much practical importance ; but when made, it had no effect whatever. It has already been said that, after the enormous profits made by the steel-rail makers in 1879-1881, the production in this country was greatli' increased. At the same time THE TARIFF ACT OF 1 883. 245 the demand from the railroads fell off, and the huge quan- titles which the mills were able to turn out, could be disposed of, if at all, only at prices greatly reduced. The consequence was that the price of rails, which in 1880 was higher than the English price by the full extent of the duty of $28, fell rapidly after 1881, and brought the American price in 1885 to a point but Httle above the EngHsh. The new duty of 1883 was under these circum- stances still prohibitory. In 1887, when a revival of railway building set in, the price of rails again went up. It is probable that at this time, when there was an active demand for rails, the decline of the duty to $17 was of real effect, preventing the American price from rising as high as it would have gone if the old duty had been retained. But the demand fell off quickly after 1887; the American price fell correspondingly, and soon became lower than the English price by an amount much less than the duty of $17. With the possible exception of the year 1887, the duty of $17 was as much a prohibitory one as the old duty of $28 had been, and the reduction on the whole was as much nominal as those in other parts of the iron schedule." Analogous in its effects to the reduction on steel rails was that on copper. The duty on this article went down from five cents, the rate imposed in 1869, to four cents a pound. The duty on copper had enured to the benefit of the owners of the copper mines of Lake Superior, ' For figures as to the production and prices of steel rails, see Ap- pendix VI, 246 HISTORY OF THE EXISTING TARIFF. aiding them to combine and fix the price of copper without fear of competition from abroad. The great profits of their mines caused them steadily to increase their product ; and although much of their surplus was disposed of abroad, at prices lower than those demanded at home, the growing supply caused the domestic price slowly to fall. The discovery of large deposits of copper, in latter years, in Montana and Arizona, and the ship- ment to market of a great deal of copper from these sources, broke for a while the monopoly of the Lake Superior combination, and caused the price to go down still farther. Importation of copper in any considerable quantities ceased many years ago. The steady increase in the domestic supply brought the price to a point but little above the foreign price. The maintenance of the duty still enabled the combined copper producers at times to secure a higher price than they could have got without the duty ; but under ordinary conditions the enormous quantities of copper yielded by the mines compelled a price to be accepted virtually as low as the foreign price. The cases of copper and steel rails are sometimes re- ferred to as successful applications of protection to young industries. On the surface, the object of such protection seems here to have been obtained. That the price of these articles fell after the duty was imposed, indeed proves nothing ; for their prices fell the world over. But their prices fell faster than in foreign countries, and fell nearly, if not quite, to the foreign level ; and a price as THE TARIFF ACT OF 1 883. 247 low as the foreign price, or lower, is the object sought by protection to young industries. This result, however, was not the consequence, in the case of copper certainly, of any stimulus given by the duty to improved methods of production. It was the result of the extraordinary richness of the copper mines, whose discovery and use was not affected by the duty, and would have brought the price down even sooner had it not been for the duty. The duty, so far from stimulating the fall in price, checked it. Much the same is true of steel rails. To be sure, here there seems to have been some stimulus to invention, and some advance by American works over the processes in use abroad ; but in the main the decline in the price of rails has been due to improvements common to all coun- tries, to the discovery of rich beds of iron ore on Lake Superior, and not least to the decline in the cost of trans- porting and bringing together the coal and ore for making the Bessemer iron, — factors not perceptibly affected by the duty. Other reductions in the act of 1883 may be briefly noted. The duty on marble was fixed at sixty-five cents per cubic foot on rough marble, and at $1.10 per cubic foot on marble sawed, dressed, and in ^.^^^ slabs. This was a slight decrease from the com- pound duties discussed in the preceding chapter.' The duty on nickel was put at fifteen cents a pound, in place of the previous duty of twenty and thirty cents a pound. Practically all the nickel imported had come in at the duty ' See p. 224. 248 HISTORY OF THE EXISTING TARIFF. of twenty cents ; consequently the reduction was less considerable than it appeared at first sight to be. A change of greater importance was the reduction of the duty on silks from sixty to fifty per cent. In part, it is true, this was again a merely nominal change, many silk goods being as effectually kept out by a duty of fifty per cent, as by one of sixty. But a large quantity of silks were steadily imported ; on these, and on goods of the same sort made in the country, the lowering of the duty meant a real decline in the burden of taxation. The situa- tion as to silk goods is more fully discussed in later parts of this volume, and need not now further engage our attention. The reduction of 1883 was as great as could have been expected, and was in marked contrast with the advances made in the duties on finer cotton and woollen goods. The same contrast appears in the reduction of the duty on finer linens from forty to thirty-five per cent. On a considerable number of other articles also reductions were made ; the reductions being usually slight, yet sufficient in number to indicate a disposition to concede something to those who called for a curtailment of the protective duties. The duties on a number of agricultural or mainly agricultural products, such as beef and pork, hams and bacon, lard, cheese, butter, wheat, corn, etc. corn, and oats were left unchanged in the act of 1883. The duty on barley was somewhat lowered at the request of the brewers of beer ; and that on rice also was slightly reduced. But almost all of these products were THE TARIFF ACT OF 1883. 249 charged with the same rates as in previous years. It is needless to say that the duties on them have no effect whatever, except to an insignificant extent on the local trade across the Canadian border. The duties were left unchanged in order to maintain the fiction that the agri- cultural population secured through them a share of the benefits of protection. The reductions in this schedule, on barley and on rice, affected almost the only products on which the duties in fact were of any advantage to the agricultural producer or of any disadvantage to the con- sumer. In this regard, as in others, there was a sharp contrast between the legislation of 1883 and that which followed it in 1890 and 1897. Enough has been said of the details of the act of 1883. Its general character cannot be easily described ; in truth, it can hardly be said to have any general character. On the whole, it may be fairly described as a half-hearted attempt on the part of those wishing to maintain a system of high protection, to make some concession to a public demand for a more moderate tariff system.' Some duties were increased, some lowered ; nor was any consistent policy followed. Some raw materials, like ' Mr. John L. Hayes, the President of the Tariff Commission, writing more particularly of the new duties on wool and woollens, said, shortly after the passage of the act : " Reduction in itself was by no means desirable to us ; it was a concession to public sentiment, a bending of the top and branches to the wind of public opinion to save the trunk of the protective system. In a word, the object was protection through reduction. We were willing to concede only to save the essentials both of the wool and woollens tariff. * * * We wanted the tariff to be made by our friends. " — Bui letin Wool Mf., xiii., 94 2SO HISTORY OF THE EXISTING TARIFF. wool and pig-iron, were admitted at slightly lower rates ; others, like iron ore, were charged with higher rates. The same incongruities appear in the duties on more finished goods ; though as to these it may be said that the reductions were generally nominal, rarely of real effect. Looking at the tariff system as a whole, it retained, sub- stantially unchanged, the high level of duties reached during and after the Civil War. No new line of policy was entered on, in one direction or the other ; and it remained for the act of 1890, the next step in our tariff history, to begin a sharp and unmistakable movement in the direction of still higher protection. That measure will be the subject of the next chapter. CHAPTER V. THE TARIFF ACT OF 189O. After the passage of the tariff act of 1883 f^w P^r- sons would have expected, for a long series of years, a further extension of the protective system. Neverthe- less, a marked increase of duties was made, within a few years, in the act of 1890, familiarly known as the McKin- ley tariff act : a measure which marks a new phase in our tariff history and in the protective controversy. In the years immediately succeeding the passage of the act of 1883, several unsuccessful attempts were made to amend it.' In 1884, Mr. Morrison, of Illinois, introduced a bill by which a general reduction of twenty per cent., and the entire remission of duties on iron ore, coal, lum- ber, and other articles, were proposed. Mr. Morrison may have been moved to advocate the plan of a " horizontal " reduction by the example which had been set in 1872 ; and doubtless he was also influenced by the circumstance that the protectionists themselves had arranged the details of the act of 1883, and could not complain of dispro- portionate reductions, or of a disturbance of relative rates, ' An account of these attempts is given by Mr. O. H. Perry in the Quar- ierly yournal of Economics for October, 1887, vol. ii., pp. 69-79. 251 252 HISTORY OF THE EXISTING TARIFF. under a plan which affected all articles equally. Never- theless, the proposal met with vehement opposition not only from the Republicans, but from a strong minority in Mr. Morrison's own party. It was disposed of on May 6, 1884, by a vote (156 to 151) striking out its enacting clause. Two years later, in the Forty-ninth Congress, a similar disposition was made of another bill introduced by Morrison. The proposal of 1886, however, was differ- ent from that of 1884, in that it made detailed changes in the duties. Lumber, salt, wool, hemp, flax, and other articles were put on the free list ; the duty on woollens was made thirty-five per cent., the specific duties on wool- lens being removed with the duties on wool ; and reduc- tions were proposed on cottons and on sugar. The bill never was discussed in Congress, for Mr. Morrison's motion to proceed to its consideration was defeated by a vote of 157 to 140, and during the rest of the session no further attempt was made to take it up. Early in the next session, in December, 1886, a motion was again made to proceed to the consideration of revenue bills, and again was defeated.' With the session of 1887-88, however, the tariff con- troversy entered on a new phase. President Cleveland's ' Some other measures of less significance were also introduced in these years, such as a bill of 1884, to restore the duties of 1867 on wool, which was defeated by a close vote of 126 to iig, and bills introduced by Messrs. Randall and Hiscock in 1886. Mr. Randall's bill proposed the removal of internal taxes on tobacco, fruit brandies, and spirits used in the arts, entire remission of duties on lumber, jute butts, and a few minor articles, and a slight reduction of some other duties. Mr. Hiscock's bill proposed similar changes in the internal taxes, and a large reduction of the duty on sugar, THE TARIFF ACT OF 189O. 253 annual message to Congress, in December, 1887, was de- voted entirely to the tariff, and urged vigorously a general reduction of duties, and more especially the removal of duties on raw materials. Mr. Cleveland's decided and outspoken attitude had the effect of committing his party unreservedly to a policy of opposition to the existing protective system, and so of making this question more distinctly a party matter than it had been at any time since the Civil War. It is true that in the campaign of 1884 the Republicans had put forward the tariff question as the main issue on which they wished to stand before the country ; but in that year the personal qualifications of Mr. Blaine for the Presidency played an important part in the election, which therefore could not be said to turn simply on the tariff issue. Moreover, within the Demo- cratic party there was then an active minority opposed to the policy of tariff reduction favored by most of the Democrats. This minority had been strong enough to defeat Mr. Morrison's tariff bill of 1884. On the measure of that year, while 151 Democrats voted in the affirma- tive, 41 voted in the negative, and, with the aid of a compact Republican vote in the negative, put an end to the bill. The strength of this element in the Democratic party had declined somewhat in later years ; but in De- cember, 1886, at the opening of the short session 1886-87, with a bounty to American sugar-makers. Both of these bills, which indi- cated the manner in which the protectionists tried to grapple with the problem of reducing the revenue, were referred to the Committee of Ways and Means, and, not being reported from that body, never came to a vote in the House. 254 HISTORY OF THE EXISTING TARIFF. 26 Democrats out of 169 voting were still recorded in opposition to the tariff reform measure then under con- sideration.' In the new Congress, whose first session opened with Mr. Cleveland's message on the tariff, the situation was changed. The Mills bill, so-called, prepared during that session, was passed by the Democrats in the House distinctly as a party measure ; out of 169 Demo- 1 crats voting all but four voted for it. The Republicans \ were as unanimous in voting against it, and, by way of counter manifesto, prepared in the Senate, where they had a majority, a bill for changing the tariff system in the direction of further protection. The position of both par- ties was in this way sharply defined, and in the campaign of 1888 the tariff question was the issue squarely presented. Neither the Senate bill prepared by the Republicans, nor the Mills bill prepared in the House by the Demo- crats, was expected to reach the stage of enactment. Both served simply to give concrete expression to the principles of the two parties. The Mills bill reduced the duty on pig-iron to $6.00 a ton, fixed the duties on cottons at 35 or 40 per cent, (all specific duties on cottons being abolished), and made reductions of a similar sort, not often great in themselves, but significant in principle, on other manufactures. The incisive changes were on raw materials. Hemp, flax, lumber were to be admitted free. Most important of all, wool was put on the free ' Tables on the votes, by States, on the bills considered between 1883 and 1887 will be found in Mr. Perry's article in the Quarterly jfournal of EcO' nomics, just referred to. THE TARIFF ACT OF 1890. 255 list ; a change naturally accompanied by the proposal to abolish the specific or compensating duties on woollen goods. The Senate bill, on the other hand, proposed distinctly a further extension of the protective system. A considerable number of duties were raised, especially on manufactures of which imports continued in large volume, like finer cottons and woollens. On a few articles concessions were made, as in the free admission of jute, and a small reduction of the duty on steel rails. In the crucial case of wool, the Senate bill provided for a slight increase above the rates of 1883, both on clothing and carpet wools, and for a corresponding advance in the specific duties on woollens ; these changes being accom- panied in some cases by an increase in the ad-valorem duties on these goods. The victory of the Republicans in 1888, and the election of President Harrison, were the results of the issue thus placed before the voters. The election was won by a narrow margin, and was affected by certain factors which stood apart from the main issue. The independent voters had been disappointed with some phases of Presi- dent Cleveland's administration of the civil service, and many who had voted for him in 1884, did not do so in 1888. In New York, whose vote was practically decisive, political intrigues helped to turn the scale. On the whole, however, the Republicans held their own, and even made gains, throughout the country, on the tariff issue ; and they might fairly consider the result a popular verdict in favor of the system of protection. But their opposition 256 HISTORY OF THE EXISTING TARIFF. to the policy of lower duties, emphasized by President Cleveland, had led them not only to champion the exist- ing system, but to advocate its further extension, by an increase of duties in various directions. This they had proposed in the Senate bill of 1888, and had pledged themselves to effect in the debates of the campaign. Ac- cordingly when the Congress then elected met for the session of 1889-90, the RepubHcan majority in the House proceeded to pass a measure which finally became the tariff act of 1890. This measure may fairly be said to be the direct result of Mr. Cleveland's tariff message of 1887. The Republicans, in resisting the doctrine of that message, were led by logical necessity to the opposite doctrine of higher duties, and felt compelled, for the sake of party consistency and political prestige, to pass a tariff measure of some sort. Notwithstanding grave misgivings on the part of some of their leaders, especially those from the northwest, the act known popularly as the McKinley bill was pushed through after long and wearisome debates, and finally became law in October, 1890. To some of the details of this important measure we may now turn." The wool and woollens schedule had become the most important and most sharply debated part of the tariff system, and the changes made in it by the act of 1890 deserve careful attention. On wool, the division into three classes, clothing, combing, and carpet wool, was ' An excellent account of the legislative history of the act of l8go, and also of the acts of 1894 and i8q7, is eiven in Stanwood's American Tariff Controvtrsy, vol. ii. , chapters 16, 17, 18. THE TARIFF ACT OF 189O. 257 retained, and the changes in duty were in the main signifi- cant from their direction rather than from their amount. The duties on clothing and combing wool, it will be remembered, had been slightly lowered in 1883 ; they were slightly raised in 1 890. That on clothing wool went up from ten to eleven cents per pound ; on combing wool from ten to twelve cents. The change was meant to put the . wool duties where they had been before 1883, and to' placate certain malcontents who ascribed a fall in the price of wool to the reduction of duty of that year. The decline in price was undoubtedly due to other causes, and indeed was much greater than could have been accounted for by the slight reduction of 1883; while the change in duty in 1890 was too small to have any serious effect beyond emphasizing the determination of the Republi- cans to yield nothing on this part of the protective system. So far as the difference in rate between clothing and combing wool goes (eleven cents on the one, twelve on the other), it is difficult to see what was gained.' The distinction between the two classes is largely nominal, many kinds of wool being available either for carding or for combing, and the difference in the duties was in any case too slight to have any appreciable effect. Appar- ently, it served simply to cause needless complication in administering the collection of duties. On carpet wools, a more radical change was adopted, more radical at least in form. As has been observed elsewhere, the conditions in regard to carpet wool are peculiar. Practically no wool of this grade is grown in 2S8 HISTORY OF THE EXISTING TARIFF. the United States. It is of a coarse quality grown mainly in countries like Asia Minor, India, Russia, and the Ar- gentine Republic, from which it is imported into the United States in large quantities. The reason why it is not grown in advanced communities like the United States, Australia, England, France, Germany, is very simple. With the same labor and attention required for carpet wool, the grower in civilized communities, by care and intelligence in the breeding and management of sheep, can secure a better quality of wool, commanding a higher price ; accordingly he confines himself to the more profit- able sorts. The demand for an increase in the duty on carpet wool was based on a suspicion that wool, properly belonging to the clothing or combing class, had been en- tered as carpet woo2, and so had escaped the higher duty. Probably some part of the imported carpet wool is in fact used in making cloths ; but the fraction is small, and can have no appreciable effect on the price of domestic clothing wool. The endeavor to increase the duty natu- rally was opposed by the carpet manufacturers, and led to an acrimonious discussion in the committee-rooms be- tween them and the advocates of the supposed interests of the farmers. The result in the McKinley act was a compromise. The carpet-wool duty was made ad valo- rem instead of specific, varying from thirty-two per cent, to fifty per cent.; the change to the ad-valorem method being intended to make the duty adjust itself automati- cally to the quality and value of the wool.' Obviously ' The change in duty is most easily explained by putting together iho rates under the acts of 1883 and i8gO|, THE TARIFF ACT OF I890. 259 the cnange in one respect was objectionable : it brought with it the temptations to fraud and undervaluation which are inevitable under ad-valorem duties. With it there went some other provisions which made the new duties more rigorous than they seem to be on their face. Thus, if any carpet wool should be improved at all by an ad- mixture of merino or English blood, it became dutiable as clothing or combing wool. If any bale stated by the importer to be dutiable under one class, contained any wool of another class, the whole bale was dutiable at the highest rate. If any wool had been sorted or increased in value by the rejection of any part of the original fleece, it was subject to double duty. Some of these provisions were framed in ambiguous language, giving occasion for troublesome litigation and uncertainty as to the real effect of the legislation. But all were objectionable to those who imported and used carpet wool, and emphasized the policy of keeping that article within the protective sys- tem. Yet if there is any article as to which that system does not attain its object, it is carpet wool. None is grown in the country, and none is likely to be ; it is a raw material for an important manufacture ; its free ad- mission would harm no vested interest. Turning now to the duties on manufactures of wool, In 1883 carpet wool, if worth 12 cents or less per pound, paid 7,yi cents. " more than 12 cents, " 5 " In 1890 carpet wool, if worth 13 cents or less per pound, paid 33 per cent, ad valorem, " more than 13 cents, " 50 " " " Most carpet wool is worth ten cents a pound or more ; consequently tb? rjsw ad-valorem rates meant, in almost ^. cases, an increase on the duty. 26o HISTORY OF THE EXISTING TARIFF. we find a further development in the direction taken in 1883 ; namely, a development toward greater complica- tions in the already complicated scheme of duties built up in the act of 1867. It will be remembered that in 1883 the duty on woollen cloths proper, the central point in the wool and woollens schedule, had been changed from the uniform rate fixed in 1867 to rates varying with the value of the goods. In the act of 1890 the policy of vaiying rates was advanced still further. The mode in which these duties developed cannot be better exhibited than in tabular form, thus : DUTIES ON WOOLLEN CLOTHS. IN 1867, 50 cents per lb., plus 35 per cent. IN 1883, (i) If worth 80 cents or less per lb., 35 cents per lb., plus 35 per cent. (2) If worth more than 80 cents per lb., 35 cents per lb. , plus 40 per cent. IN i8go. (i) If worth 30 cents or less per pound, 33 cents per lb. plus 40 per cent. (2) If worth between 30 and 40 cents per lb., 38I cents per lb., plus 40 per cent. (3) If worth more than 40 cents per lb., 44 cents per lb., plus 50 per cent. It will be seen that the act of 1890 reduced slightly the specific duty on the cheapest woollens, those costing 30 cents or less per pound. This is another tacit admission, similar to that made in the act of 1883, that on cheap goods the old compensating duty had been excessive. The ad-valorem rate on these goods was raised to forty per cent. No pretence was now made of limiting the net protection supposed to be given by the ad-valorem dwty, to that mod- THE TARIFF ACT OF 189O. 261 erate rate of twenty-five per cent, which had been the nom- inal object of the original compound scheme of 1867. On the second class of goods, costing between 30 and 40 cents a pound, there was an increase over the rates of 1883 both in the specific and in the ad-valorem duties. Finally, on the third class under the new act, woollens costing over 40 cents, the increase in duties was marked : the specific duty was 44 cents a pound, and the ad-valorem duty went up to fifty per cent. On ready-made clothing the duties were higher still, being fixed at 49^ cents a pound, plus sixty per cent. There are two features in this rearrangement of the duties on woollens which call for comment. In the first place, the compensating duty on the cheaper goods was on the face of it made excessive. Thus, on goods valued at between 30 and 40 cents a pound the compensating duty was fixed at 38J cents. The compensation was sim- ply for the rise in the price of wool used by the American manufacturers, due to our duty on imported wool. This extra expense to the domestic manufacturer, in the higher price of wool, was assumed, by the terms of the act, to be as great as the total cost of making the same woollen goods for the foreign manufacturer, — wool, wages, and everything else. But the foreign goods were valued at between 30 and 40 cents a pound, which means that they cost about so much ; while the duty which compensated the American producer was 38^ cents a pound. As will be presently explained, this extraordinary compensating duty was more nominal than real, since no classes of 262 HISTORY OF THE EXISTrNG TARIFF. goods to which it would apply are likely to be imported. But it was none the less an anomaly. The second feature to be noted is connected with the first. It is the new dividing point in the valuation and classification of woollen cloths : the maximum duty being no longer on goods worth over 80 cents per pound, but on goods worth over 40 cents. The change obviously served to increase the duties more than would appear at first sight ; since goods worth between 40 and 80 cents now paid not the lowest, but the highest duty. The ef- fect of the new classification in fact was that all cloths imported must pay the highest rate. The imports of woollens are chiefly of the finer qualities. When the act of 1883 was passed, it was probably expected that few woollens of the lower class then provided for (namely, those worth less than 80 cents per pound) would be im- ported. In the first years after 1883, this was the case. But as time went on, a growing proportion of woollens came in at the lower value and the correspondingly lower duty ; until in 1889 a good part of the cloths imported were classified at the lower rate. This unexpected devel- opment was due partly to a decline in the price of wool after 1883 ; partly to improvements in manufacturing which made it possible to produce goods more cheaply ; and partly, no doubt, to the temptation to make goods, and perhaps also undervalue them at the custom-house, in such manner as to bring them in at the lower rate of duty. At all events, the act of 1890 was so arranged as to put an end to this importation of woollens at the lower end of the schedule. To all intents and purposes it has made THE TARIFF ACT OF 1S90. 263 all woollen goods likely to be imported at all, subject to the maximum rate of duty.' Next we may consider the duties on women's and children's dress goods. The duties on these had already been raised in 1883 above the rates of 1867; in 1890 they' were further raised. As in the case of cloths for men's wear, the increase took place partly by direct advance in the rates, partly by a shifting of the classification. The compensating duty on these goods, it will be remembered, had been from the first arranged by the yard, and not by the pound. The changes in duty can again be best pre- sented in tabular form. DUTIES ON DRESS GOODS. IN 1883. (i) Worth 20 cents a yard or less : duty, 5 cents a yard, plus 35 per cent. (2) Worth over 20 cents a yard : duty, 7 cents a yard, plus 40 per cent. (3) Made wholly of wool : duty, g cents a yard, plus 40 per cent. IN 1890. (i) Cotton warp, worth 15 cents a yard or less : duty, 7 cents a yard, plus 40 per cent. (2) Cotton warp, worth over 15 cents a yard : duty, 8 cents a yard, plus 50 per cent. (3) If the warp contains any wool : duty, 12 cents a yard, plus 50 per cent. ' The imports of woollen cloths during the period in which the act of 1883 was in force were as follows (the figures denote thousands of dollars) : Fiscal Year 1884, 1885, 1886, 1887, 1888, 1889, Worth 80 cents or less. $243,000 213,000 314,000 713,000 1,073,000 1,125,000 Worth over 80 cents. pI2, 974,000 9,867,000 9,151,000 9,309,000 9,778,000 8,133,000 During that part of the fiscal year 1890-gi, when the duties of the act of 1890 were in force, the imiports of w.aollea cloths were, 264 HISTORY OF THE EXISTING TARIFF. The specific duty on the lowest class went from 5 cents to 7 ; the ad-valorem duty from 35 to 40 per cent. In the middle class the rates advanced from 7 to 8 cents, and from 40 to 50 per cent. The line of division by value went down from 20 to 15 cents, so that a larger proportion of the goods come in under the middle duty of 8 cents plus 50 per cent. On the third class, the rates went up in similar proportions, — from 9 to 12 cents, and from 40 to 50 per cent. One other effective change was made, indicated in the tabular statement, but deserving more detailed description. In 1883 the third class, in which the duties were highest, included goods made wholly of wool, and these only. In 1890, certain goods of mixed materials were transferred to it. The first two classes included, in 1890, fabrics " of which the warp consists wholly of cotton or other vegetable material." Conse- quently the third class included such as have a warp containing any fraction of wool ; and these mixed goods, as well as goods made entirely of wool, become subject to the new maximum duty of 12 cents per yard, plus 50 per cent. The changes on dress goods were undoubtedly those of greatest practical effect in the wool and woollens schedule. (i) valued at 30 cents or less per pound .... $1,248 (2) valued at between 30 and 40 cents ..... 49i925 (3) valued at over 40 cents . . ..... 6,303,500 Practically all were valued at over 40 cents, and so paid the maximum rate of 44 cents per pound, plus 50 per cent. Reduced to an ad-valorem equivalent, this was a duty of about 92 per cent. On the few goods of the second class imported (worth between 30 and 40 cents) the duty was 143 per cent. THE TARIFF ACT OF 1890. 265 The importation of these goods into the United States was enormous : having ranged between fifteen and twenty millions of dollars' worth annually in the years since the act of 1883. It was natural that those who held to the principle of protection should endeavor to check them. There had been a tendency, similar to that noted in the case of woollen cloths, though not so marked, for a grow- ing importation of the cheaper goods (valued at less than 20 cents a yard under the act of 1883); and this con- tributed to the change in valuation and description in the new act. By the act of 1890, these fabrics were subjected in almost all cases to the maximum duty, equivalent to over one hundred per cent, on their foreign value.' It was surprising that imports continued in face of a duty so very high ; yet continue they did, indicating that not only the imported fabrics, but the domestic fabrics of the same sorts, were raised in price for the consumer by the full extent of the duty. The explanation of the steady inflow of these goods, and the inability of the American manu- ' In that part of the fiscal year 1890-91 in which the new duties were in force, the imports of the three classes of dress goods were : (i) valued at 15 cents or less (duty 7 cents plus 40 per cent.) $768,000 (2) valued at more than 15 cents (duty 8 cents plus 50 per cent.) 845,000 (3) if the warp contains any wool (duty 12 cents plus 50 per cent.) $5,281,000 On goods of the third class, the duties collected were 15,423,000, making i03 per cent, of their value. It should be noted that dress goods exceeding a certain weight (four ounces a square yard) are treated like men's woollens and are subjected to the maximum duty on these, — 44 cents a pound plus 50 per cent. For a statement of the grounds from the protectionist point of view, for these very high duties, see an article by Mr. William Whitman, in the Bulletin of the Wool Manufacturers,^ vol. xx. , pp. 283-304. 266 HISTORY OF THE EXISTING TARIFF. facturers to supplant them, is probably to be found largely in the peculiarities of their manufacture, and the difficulty of adapting it to American conditions. Of course, with duties high enough, anything can be made in the United States; and the higher duties of 1890, increased still fur- ther as they were in 1897, served to stimulate effectively the manufacture of fine woollens and dress goods. In other parts of the wool and woollens schedule there were similar changes. Some of the higher duties were merely nominal. Thus the duty on ingrain carpets, which had been 12 cents a yard plus 30 per cent, in 1883, went up to 19 cents plus 40 per cent. ; that on Brussels carpets, from 30 cents plus 30 per cent, to 44 cents plus 40 per cent. The duty on these had been prohibitory before ; the changes served simply to make them more prohibitory, and were of no practical effect whatsoever. Other changes were, like the higher duties on dress goods, of real im- portance, such as the increase in the duties on knit goods and underwear. Of these the imports also were consider- able, and a change in duties consequently had a material effect on industry and prices. The patience of the reader would be needlessly taxed by a further consideration of these details. Enough has been said to indicate the character of the wool and woollens schedule of the act of 1890 ; we may pass to other parts of the measure. Among textiles cotton goods come next in importance to woollens in our tariff system. On the cheaper grades of cotton cloths, the duties, which had already been reduced in 1883, were still further lowered. Thus, on THE TARIFF ACT OF 189O. 267 the cheapest grade of unbleached cottons, the duty decreased from 2j to 2 cents a yard. These, however, are goods which are manufactured in the United States as cheaply as in foreign countries, and which we are more likely to export than import. The duties were and are nominal, and the change went no further than a revision of certain unimportant figures in the statutes. On goods whose importation had continued under the act of 1883, and on which the duties had been of real importance,- the changes were in the other direction. On the highest grade of cotton prints, the duty went up from 6 to 6|- cents a yard ; with the further proviso that goods valued at over 15 cents a yard, on which the duty had before been 40 per cent., now became subject to one of 45 per cent. In the drag-net clause, fixing the duty on cotton manufactures not elsewhere provided for, the old rate of 35 per cent, was replaced with one of 50 per cent. Some duties were changed from ad-valorem to specific with the effect of raising them materially. Thus, on cotton cords and braids, the former rate of 35 per cent, became one of 35 cents per pound, equivalent to about 60 per cent. The most striking change, however, was in the case of knit goods and stockings. On cotton stockings, the act of 1883 had collected a uniform rate of 40 per cent. This was replaced in 1890 by a com- plicated system of graded duties, partly specific and partly ad-valorem, and varying with the assessed value of the goods. The new rates can again be best described by a statement in tabular form : 268 HISTORY OF THE EXISTING TARIFF. If the value is 6oc. or less a dozen, the duty is 20c. a dozen, plus 20 per -t " " betw. 60c. &$2.oo " " " 50c. " " 30 " " " betw. $2.00" $4.00 75c. " " 40" " " over $4.00 $1.00 " " 40 '• " Knit goods of cotton, and more particularly cotton stockings, are imported in large amounts, the annual value of the imports having been hitherto between six and eight millions. Most of these were of the second class in the schedule just given, dutiable at 50 cents a dozen plus 30 per cent., — equivalent, on the average, to about 70 per cent, on the value. The raw material here is cheaper in the United States than abroad, and it is sur- prising that so heavy a duty should have been considered necessary to encourage the domestic manufacture. The explanation of the continued large imports is apparently to be found in part in a great advance in foreign methods of production, due to the newly invented or newly im- proved machinery, the use of which has not yet been in- troduced into this country. In part the explanation lies doubtless in the fact that the finer cotton stockings are made on knitting frames with a large use of hand labor. At all events, the changes just noted present as extreme a case of the application of protection as is to be found in our legislation. On linen goods, of which only the coarsest qualities have been made in the country, the finer being all obtained by importation, the duty went up from 35 to 50 per cent. Linen laces and embroideries were ad- vanced from 30 to 60 per cent. On silks the general duty remained as before, at 50 per cent. ; on silk laces THE TARIFF ACT OF 189O. 269 and embroideries it went up to 60 per cent. Plush goods of all sorts, whether made of silk, cotton, or wool, were subjected to very high rates. A complicated scheme of duties was adopted, partly specific and partly ad-va- lorem, and varying with the value of the goods ; the system being similar in its construction to that already described as to cotton hose, and bringing about duties of 60 and 70 per cent, on the value. The imports of velvets, plushes, and similar goods, were heavy, and the domestic production was inconsiderable ; the rates stood for another determined effort to establish a new manufacture under the shelter of very high duties.' One general characteristic of the McKinley act may here be discussed. It was the great development of the method of minimum valuations and minimum duties substantially similar to that adopted in the tariff act of 1828. This mode of grading the duties was adopted not only in the cases described in the preceding pages— woollen cloths, dress goods, cotton stockings, velvets and plushes — but in other cases also, such as blankets and flannels, boiler and plate iron, penknives and table-knives, shotguns, and pistols." On some of these articles the minimum system had already been adopted in earlier acts ; on others it was newly adopted in 1890. The object apparently was to avoid an ad-valorem duty, and yet to secure an adaptation of the rate of duty to the value of the article. But, in doing this ' The provisions as to velvets and similar fabrics are in sections 350 and 411 of the act. ' See sections 138, 165, 167, 170, 393. 270 HISTORY OF TBE EXISTING TARIFF. the fundamental difficulty of ad-valorem duties — the temptation to undervaluation — is met, as was pointed out in the discussion of the act of 1828, in aggravated form.' The foreign manufacturer is tempted to make goods so as to bring their value near the minimum points, and the importer is tempted to undervalue them. No doubt another object sought in the minimum system, in 1890 as in 1828, was to conceal the real extent and weight of the duties imposed : a result the more likely to be at- tained where the duties are not only graded by valuation, but are also mixed specific and ad-valorem duties. The duties on iron and steel would have been thought, in 1870, and even in 1880, the most important parts of the protective system. But in recent years the enormous de- velopment of the iron industry in the heart of the country has materially changed the situation. The bulk of the iron in the country is now made of ore mined on the shore of Lake Superior, smelted with bituminous coal mined west of the Appalachian chain. Pennsylvania also contributes its ore, and there has been a striking development of iron- making in the South. Iron smelted with anthracite coal, which played so important a part in our industrial history in the period from 1850 to 1870, has wellnigh disappeared. " Most of the production now takes place far from the sea- board, and the greater part of the producers of pig-iron can disregard foreign competition. A lowering of the duty ' See pp. 93, 103, above. ^ Compare what is said below, at pp. 299-302, and the references there given, as to the recent history of the iron manufacture. THE TARIFF ACT OF 1 890. 271 on pig-iron to $6.00, the rate which was proposed in the Mills bill of 1888, would have had no appreciable effect in any quarter. The effect of a complete abolition of the duty would be confined mainly to the sea-board districts. These are for all practical purposes nearer to England than they are to the central States, which are now the seat of the greatest domestic production of iron. In the McKin- ley act, no change in the duty on pig-iron was proposed, and it remained at the old rate, $6.72 a ton. The situation is much the same in regard to iron ore. The duty on ore is significant only in regard to those grades which contain little phosphorus, and are therefore available for the niaking of steel by the Bessemer process. The great rich beds of Bessemer ore on the shore of Lake Superior, having easy water communication with the heart of the country, can supply the larger part of the smelters more cheaply than foreign ore could. This ore has made its way far to the eastward, and has been used by establishments very near the sea-board, which, but for the duty, would be likely to use more or less of foreign ore. The eastern establishments which make steel must get their Bessemer ore either by long railway haul from the West, or by importing it subject to duty. Large works have already been established on the Atlantic coast, using ore from rich deposits in Cuba, and therefore desirous of getting ore free.' Notwithstanding a strong endeavor from these producers to secure a remission of the duty, it ' In later years, not only Bessemer ores, but others also, have become important among the Cuban deposits. 272 HISTORY OF THE EXISTING TARIFF, remained in the McKinley act at the old rate, seventy-five cents a ton. On steel rails the duty was reduced to six-tenths of a cent a pound, or $13.44 a gross ton. This reduction was of the same sort as that made in 1883 : it left the duty still at a prohibitory rate. The steady advance in the iron and steel manufacture in the United States, the growth of the West, the discovery of rich sources of iron and coal, above all, the enormous decline in the cost of bringing these materials together, due to the cheapening of rail- way rates, reduced the price of steel rails as well as of other manufactures of iron. As the figures given in the Appendix show, the price still remained higher in the United States than in England. But cost of transportation from the sea-board to the interior is such that even in the absence of the duty, steel rails would be imported only to supply railways near tide-water. In the main, the steel- rail duty has done its work, for good or ill : it is no longer of great economic importance. The same remark may be made of the duty on copper, which went down in the act of 1890 to i^ cents a pound. Copper would not be imported in any event ; its price at ordinary times is not higher in this country than it is abroad ; a duty serves only to make it possible for the combination of copper producers, in occasional times of exceptional demand, to keep up the price above the foreign price. A different aspect of the tariff of 1890 appeared in the rise in the duty on tin-plates. This article had never been produced in this country, and had never been sub- THE TARIFF ACT OF 189O. 273 jected to duties comparable to those on other manufac- tures of iron. In 1862 a duty of twenty-five per cent, had been imposed, and had been retained until 1872, when, at the time of the general reduction of that year, it was lowered to fifteen per cent." In 1875, when the general reduction of 1872 was repealed, the rate was changed to a specific duty of iy\- cents a pound, equiva. lent to about twenty per cent, at the prices then ruling. But this change did not have any effect in stimu- lating domestic production, and in 1883 the duty was reduced to one cent a pound, equivalent, at the prices of 1883, to an ad-valorem rate of about thirty per cent. At that rate the importations had been very large, twenty millions of dollars and more a year, and the domestic production had been nil. The question presented itself squarely whether a further and great extension of the protective system should be made. Those who believed that system to be wise, naturally maintained that this article had been unfairly singled out for a specially low rate of duty ; and in the act of 1890 a duty of 2-^^ cents a pound, equivalent to about seventy per cent., was im- posed. The continuance of this duty, however, was made subject to a curious condition, unprecedented in our tariff legislation : that after the year 1 896, tin-plates should be ' See pages 182-185 above. The language of the acts of 1862 and 1875 was not entirely clear, and in 1878 an attempt was made to have tin-plates classified under another head in the tariff schedules, and so subjected to a higher duty. But Secretary Sherman maintained the interpretation of the statutes which had been followed since 1862, and the duties were collected as stated in the text. See a letter of Secretary Sherman's in the " Tarifi Commission Report " of 1882, p. 208. 274 HISTORY OF THE EXISTING TARIFF. admitted free of duty, unless the domestic productioft for some one year before that date should have equalled one third of the importations during any one of the years between 1890 and 1896. In other words, the permanent maintenance of the duty was made conditional on a sul> stantial increase of the domestic production. Obviously, so long as there was no domestic production, the duty had been merely a revenue duty, — an indirect tax of the simplest type, not of the best sort doubtless, but sub- stantially similar in its effects to duties on tea or coffee. The alternative now presented was that it should either become a protective duty, with the peculiar effects flow- ing from such, or that it should cease to be a tax at all.' As to agricultural products, there were some innocuous changes, and some of real importance. The duty on wheat went up from twenty to twenty-five cents a bushel, and that on Indian corn from ten to fifteen cents ; changes which obviously could be of no consequence whatever. Equally insignificant in their general effects were the higher duties on potatoes and eggs, which might possibly have some slight effect in checking the border trade between Canada and the Northern States, but in the main must be of petty character. Among changes of greater importance was an increase of the duty on barley ' The duty remained in force ; the increase in domestic production did take place. But this was due chiefly to the greater cheapness of the steel sheets which, when coated with tin, are known as tin-plates. On the causes of this change, see the article in the Quarterly Journal of Economics referred to below (p. 302), at p. 502 of vol. xiv. TTIE TARIFF ACT OF I89O. 275 from ten to thirty cents a bushel ; a change meant to pro- tect the farmers of some Northern States against Canadian barley. Oddly enough, the duty on rice, which, like bar- ley, is imported in considerable quantities, was slightly reduced. On another set of agricultural products there were some changes in the direction of higher duties ; namely, on textile materials like hemp and flax. On flax the duty was increased from $20 to $22.40 a ton ; on dressed flax, from $40 to $67.20 a ton. On undressed hemp the duty remained unchanged ; on dressed hemp it went up from $25 to $50 a ton.' Notwithstanding some attempts to get encouragement for the production of jute in the Southern States, that tropical commodity, which we import largely, was relieved from the former duty and admitted free. We may now turn to another phase of the act of 1890, the remission of the duty on sugar, which was important in its effects on the financial situation, and in its connec- tion with the reciprocity provisions of the act. The duty on sugar had been in the main a revenue duty ; for nine tenths of the consumption was still supplied by impor- tation. Only one tenth of the sugar was made at home, almost exclusively in the sugar-cane district of Louisiana ; on this alone could the distinctive effects of a protective duty be felt. Substantially, therefore, the sugar duty presented the same questions as were presented by the ' The duties on hemp and flax, reduced in 1894, and raised again in 1897 and 1909, have been of no great industrial effect. For some discussions of them, see the Quarterly Journal of Economics, vol. iii., p. 260. Sisal grass from Yucatan has displaced coarse hemp as a fiber for making twine, and fine hemp has never been produced in the United States. 276 HISTORY OF THE EXISTING TARIFF. tea and coffee duties in 1872.' At the same time, the receipts from sugar were very large. They formed the most important single item in the revenue from customs, and in the period immediately preceding 1890 were on the average about fifty-five millions a year. In that period the United States were embarrassed by a large surplus in the revenue, the situation in this respect being again similar to that in 1870-72. At the same time the duty on sugar, averaging about two cents a pound on the grades chiefly imported, was high, considered simply as a tax and without regard to its connection with the general financial and economic situation. The Mills bill of 1888 had proposed a reduction of about fifteen per cent. ; the Senate bill of the same year proposed to cut the rate to about one half that then in force. There was general agreement that some reduction should be made. The McKinley act went further : it admitted all raw sugar free. On refined sugar a duty of one half cent per pound was retained, by way of protecting the domestic sugar refiners. This duty was open to the objection of playing into the hands of the Sugar Trust, which had just reached the stage of controlling practically the entire sugar refining of the country. Undoubtedly it did ; but the previous tariff system, by making the duty on refined sugar higher than that on raw sugar, had done the same ; and the act of 1890 left the situation as it was, simply maintaining for good or ill a policy as to the sugar refiners which had been followed for a generation or more. ' See above, pp. i86-i8o- THE TARIFF ACT OF 189O. 277 With the free admission of raw sugar came a bounty to the domestic sugar producers at the rate of the former duty, two cents a pound. There would have been an obvious inconsistency in leaving the sugar producers to their fate, at a time when other domestic producers were receiving increased protection. Moreover, there was a disposition to assist and stimulate the production of sugar in other ways, especially from beets. The bounty was accordingly given, at the rate of two cents a pound, on all domestic sugar, for the period from July i, 1891, to July i, 1905. Such a change in one sense is immaterial to the domestic sugar producer. He must sell his sugar at a lower price, but gets a bounty which makes up the loss. But so far as ease of collection goes, the bounty clearly is less ad- vantageous than the duty was. The benefit of the duty came to him without trouble, in the shape of a higher price. The benefit of the bounty he can secure only by a process, somewhat troublesome and not unattended with expense, of filing descriptions and statements at govern- ment offices, securing licenses, and submitting to the regulations which the government must of necessity pre- scribe to prevent fraudulent use of the bounty provisions. So far as the financial object in view was concerned, the sections on sugar accomplished their object. Indeed, perhaps they more than accomplished it. The remis- sion of the duty cut off fifty or sixty millions of revenue ; the bounty called for an extra expenditure of six or eight millions. The act also reduced the internal tax on tobacco from eight cents to six cents a pound ; and the same Con- 278 HISTORY OF THE EXISTING TARIFF. gress that passed it increased the appropriations in several directions, especially for more liberal pension payments. It would certainly have been wiser financial policy to be content with a reduction of the sugar duty such as was proposed in the Senate bill of 1888-89. Those who op- posed the protective system on principle naturally objected to the financial effects of the sugar remission on still an- other ground — it left the hands of Congress less free to deal with the more distinctly protective duties. Such duties as those on wool and woollens, lumber, iron ore, and similar materials, are more burdensome in character than was the sugar duty; but the remission of these taxes is much more difficult in the face of a deficit than of a surplus. The complete remission of the duty on sugar was un- doubtedly determined on as a means of gaining popularity for the new tariff act in the West, where the higher duties on manufactured articles might be difficult to present in an attractive light. The same object was had in view in another set of provisions, closely connected with the new sugar schedule, — the reciprocity provisions. The trend of public opinion on the tariiT bill, while it was under dis- cussion in the House, made some of the Republican leaders uneasy as to its effects on the party prospects in the West ; and this feeling was strong with Mr. Blaine, not the least shrewd of the Republican leaders. The bill had passed the House of Representatives without the reciprocity provisions ; they were inserted at the last moment in the Senate, almost under pressure from Mr. THE TARIFF ACT OF 189O. 279 Blaine and those who shared his views. The effect of these provisions was to give the President power to impose by proclamation certain duties on sugar, molasses, tea, coffee, and hides, if he considered that any country export- ing these commodities to the United States " imposes duties or other exactions on the agricultural or other products of the United States, which, in view of the free introduction of sugar, molasses, tea, coffee, and hides into the United States, he may deem to be reciprocally unjust or unreasonable." ' This particular mode of reciprocal engagement has a distinct economic advantage over the ordinary form of reciprocity. The ordinary form consists in the simple remission of duties to a favored country, duties remaining on goods coming from countries not favored. Such a remission is likely not to redound to the advantage of the domestic consumer. Unless the favored country can easily supply the whole market, or other countries are quickly admitted to the lower duties, prices are not affected, and the foreign producer reaps the whole benefit of the remission. The United States has had one con- spicuous illustration of the workings of reciprocity of this sort, in the treaty of 1876 with the Hawaiian Islands. Under that treaty, sugar was admitted free from the islands ; but they were far from being able to supply all the sugar consumed ; other sugar was imported, paying duty ; the ' The duties authorized under these conditions were : on coffee, three cents a pound ; on tea, ten cents a pound ; on hides, one and a half cents a pound ; on the grades of raw sugar chiefly imported, a trifle over one cent per pound, — about one half the duty which was in force before 1890. 280 HISTORY OF THE EXISTING TARIFF. price remained as high as before, and the Hawaiian planters reaped the benefit of the remission.' But the re-imposition of duties on articles coming from a particular country, if it leaves enough of other countries in the field, not paying duty, to supply the domestic consumption, brings a press- ure to bear on the enemy without injuring the consumers at home. It is true that if one of the countries on whose goods duties were re-imposed, should supply a very large part of our consumption, the result would not be so in- nocuous. If, for example, the duty of three cents a pound were imposed on coffee from Brazil, all coffee would go up in price, not only that from Brazil, but that from other countries ; and the producers from other countries would gain three cents a pound on their coffee, which the con- sumers in the United States would pay. But it was not probable that the power given by the reciprocity provisions would ever be exercised in a case of this sort. The simple threat of re-imposing duties would usually be relied on as a means of securing concessions from other countries. Concessions so obtained may or may not be advanta- geous to the countries making them ; and they may or may not be of real importance and advantage to the United States. The countries from which concessions were asked were chiefly the South American countries. So far as agricultural commodities imported into them from the United States were concerned, a lowering of duties meant lower prices to the South American consumers, and ' Compare what is said below, at p. 398, and the references there given, on the Hawaiian treaty and the general sugar situation. THE TARIFF ACT OF 189O. 281 very probably an enlarged demand for such conamodities sent from the United States. Grain, flour, provisions, are sent to these countries by the United States alone, and a remission of duties on them operates as a remission of the duty on English tin-plate would operate in the United States : it is practically a complete remission. Such changes bring about a real reduction of the burdens of taxation, and a real enlargement of the international division of labor. But if the South American countries lower their duties on manufactured goods from the United States, the result may be different. Many of these goods are not made as cheaply in the United States as in European countries ; as to others, the United States might not be able to supply the whole consumption of the country which gave it favors. Under such conditions, the lower duties would not mean lower prices to the South American consumer. The United States would then be in much the same rela- tion to them, as the Hawaiian Islands were to the United States under the reciprocity treaty of 1876. Concessions of this sort, however, which do not redound to the ultimate advantage of the communities giving them, are not likely long to remain preferential. Sooner or later, they are likely to be granted to all comers. The experience of European countries under commercial treaties, espe- cially under the net-work of treaties which spread over Europe after the conclusion of the treaty of i860 between England and France, shows that a remission of duty in favor of one country soon is extended to others, and 282 HISTORY OF THE EXISTING TARIFF. becomes practically equivalent to a general lowering of the customs scale. This was likely to be the outcome of any concessions secured to the United States from South American countries under the reciprocity provi- sions; a result no doubt advantageous to all concerned, but less peculiarly advantageous to the United States than more limited concessions would have been.' As a whole, the tariff act of 1890 presented to the American people without disguise the question whether ' In the course of i8g2, treaties were concluded with the following coun- tries : Great Britain, for Jamaica, Trinidad, Barbadoes, and British Guiana ; Spain, for Cuba and Porto Rico ; Salvador ; the Dominican Republic ; Nicaragua ; Honduras ; Guatemala ; and Brazil. The remissions or reduc- tions of duty secured by these treaties were chiefly on agricultural articles and others produced abundantly and cheaply in the United States. Duties were imposed under the authority conferred by the reciprocity section, on sugar, tea, coffee, hides, coming from Venezuela, Colombia, and Hayti. The only country of considerable importance among these was Venezuela, which usually sends to this country about one tenth of the coffee imported. With Germany, an arrangement was made by which the United States got the benefit of the slightly lower rates of duty conceded by Germany to Austria and Hungary by the treaties of i8g2 with these countries. With France, a similar arrangement was made, by which American commodities were admitted at the minimum tariff of the French legislation of 1892. All these arrangements came to an end with the tariff of 1894. The act of that year, it is true, contained a saving clause by which the reciprocity treaties were to remain in force "except where inconsistent with the pro- visions of this act." But as the act admitted tea and coffee free uncondi- tionally, and imposed a duty of forty per cent, on all sugar, its provisions were necessarily inconsistent. The duty reimposed on sugar deprived the United States of the chief quid pro quo which had been available under the act of i8go, — the maintenance of the free admission of sugar. An account of the whole episode is given in Laughlin and Willis's " Reciprocity," chs. VI., VII., VIII. ; and an analysis of the working of the treaty with Brazil, the largest of the South American countries, in an article by L, Hutchinson, Political Science Quarterly, vol. XVIII., June, 1903. THE TARIFF ACT OF 189O. 283 they wished a large extension of the protective system beyond the point to which it had developed by the legis- lation of the war period. The act of 1883, as we have seen, did indeed raise not a few of the protective duties ; but other duties it lowered, and the advances were neither so great nor so conspicuously put forward as in the act of 1890. A retention of the existing state of things, such as on the whole the act of 1883 amounted to, might be urged on the ground that vested interests should not be dis- turbed, and that the inevitable disadvantages of any far- reaching change would outweigh any ultimate gain. The act of 1890 boldly proposed something more : a radical extension of the protective system. The question of principle never was so squarely presented. CHAPTER VI. THE TARIFF ACT OF 1 894. The question of principle which was presented to the American people by the tariff act of 1890 was answered with remarkable promptness, and, to all appearances, in unmistakable terms. Immediately after the passage of the act, the party which had thus espoused the extreme protective policy suffered a crushing defeat ; and, after two years of discussion and deliberation, the verdict at the polls was again overwhelmingly against it. The McKinley tariff had become law in October of 1890. In November, the Congressional elections were held, and the Republicans were defeated as they had never been defeated before. In the new Congress which was to suc- ceed that which had passed the act of 1890, they secured only one quarter of the Representatives ; their opponents outnumbered them three to one. Even States like Massa- chusetts, Ohio, Illinois, Michigan, long supposed to be stanchly Republican, returned Democratic majorities. The tariff question, which had been uppermost in public debate at this election, was again uppermost, two years later, in the election o-f 1892. President Cleveland, who had made the tariff question the political issue of the day, 284 THE TARIFF ACT OF 1 894. 285 was once more nominated by the Democrats ; and Presi- dent Harrison was renominated by the RepubHcans. Again the result was a triumph for the Democrats, whose candidate received nearly twice as many electoral votes as his opponent. Again a row of Western States joined the ranks of the Democrats, — Indiana, Illinois, Wisconsin ; while Ohio was retained on the Republican side by a slender majority of a bare thousand votes. The Congres- sional elections, while less dramatically one-sided than those of 1890, told substantially the same story. The Democrats had an overwhelming majority in the House ; and in the Senate, as the elections in the various State legislatures were gradually held, they secured a working majority. The result was to assure them of full control of all branches of the federal legislature in the Fifty-third Congress, for the term of 1893-95.' The Democrats, twice victorious, might fairly claim an emphatic declaration of the people in favor of their policy. How clear the popular verdict may really have been, is as ' For convenience of reference, the strength of the two parties in Congress in 1889-95 is here summarily stated : House. Senate. Republicans. Democrats. Republicans. Democrats. 51st Congress, 1889-91, 166 159 39 37 52d Congress, 1891-93, 88 236 47 39 53d Congress, 1893-95, 126 320 38 44 In addition to the 44 Democrats and 38 Republicans in the Senate of the 53d Congress, there were three Populists. These might be expected ordi- narily to vote with the Democrats on tariii Questions ; but their support could not be implicitly relied on. 286 HISTORY OF THE EXISTING TARIFF, difficult to say as it must always be to interpret the mean- ing of a general election. The demoralization of the civil service, the scandals which that demoralization is sure to bring on every administration, the usual reaction of public favor, defections to the Populist Party — all these played their part. On the tariff itself, there was little in public discussion to indicate that the true questions at issue were fairly before the popular mind. A vague uneasiness about trusts and monopolies, which the protective duties were supposed to promote, clearly had much effect in strengthening the hands both of Democrats and of Popu- lists; and the comparatively simple questions which at bottom are involved in the protective controversy were obscured by a cloud of talk about pauper wages and monopolist manufacturers, British free trade and Ameri- can patriotism. Yet the tariff certainly had been squarely presented as the issue in these compaigns, and the Demo- crats were justified in acting on the theory that the popular will had declared itself against the policy of high protection. But the enthusiasm which the victory at first aroused among the Democrats was dampened almost at once by the events of the extra session of the summer of 1893. The silver question had not been at issue between the parties in 1892. President Cleveland had repeatedly de- clared himself to be opposed to the policy of enlarging the silver currency. The Republicans also, even though they had tried to placate the silver element by passing the silver purchase act of 1890, had none the less declared THE TARIFF ACT OF 1 894. 287 themselves in favor of keeping the silver issues at par with gold. But the silver question, pushed aside by the tariff question in 1890-92, came suddenly to the front in 1893, when the commercial crisis, ascribed (with sufficient reason) to the excessive issues of silver currency, com- pelled action on the financial situation. President Cleve- land called an extra session, for the one purpose of repealing the silver purchase act and discontinuing silver coinage and silver issues. The strong element in his party which was in favor of the free coinage of silver fought this proposal, vigorously in the House, desperately in the Senate. The administration succeeded ; its policy was carried out ; the silver purchases were brought to an end. But the bitter struggle within the ranks of the Democrats did much to shatter their cohesion, and to deprive them of that spirit of determination in their own ranks, and that respect and prestige in the community, which are secured by a united and single-minded party. Another factor that weakened the effect of the victories of 1890 and 1892 was the narrow Democratic majority in the Senate. The slowness with which, under our political system, the composition of the Senate responds to changes in the popular vote, is shown by the precarious hold which the dominant party had in that body. In the House, with a majority of nearly two to one, it could pro- ceed without regard to discontent or dissent on the part of a fraction of its own members. But in the Senate the defection of a very few among the majority would des- troy its control of legislatio.n. As it happened, for one 288 HISTORY OF THE EXISTING TARIFF. reason or another there was danger of such defections. Some Democratic Senators were half-hearted on the gen- eral question of tariff reduction ; others came from States which had strong interest in particular duties, — especially the Louisiana Senators. Old quarrels and bickerings, dating back to President Cleveland's first administration, and due chiefly to petty squabbles over appointments to ofiSce, caused still others to take a spiteful pleasure in blocking the movement for tariff reform which the Presi- dent had so much at heart. The administration made some endeavor, both during the extra session of 1893 and during this regular session, to restore unity and discipline, and to bring all the Senators to the support of the party policy, by putting offices at the disposal of the sulky few. But this move availed little. It threw back for the time being the all-important cause of reform in the machinery of the government ; and yet did little or nothing to remove the difficulties that arose from the narrow and uncertain majority in the Senate. Thus, for one cause and another, there was danger of defection in that body, and a need, based on m,ore or less serious grounds, of con- ciliation and of careful management ; a need which, as it turned out, had a great and unexpected effect on the final shape of the tariff act. Such were the political conditions under which the regular session of 1893-94 began. At the extra session of 1893, no attempt had been made to deal with the tariff ; but the committees had been arranged, and among them the Committee of Ways and Means, which had thus THE TARIFF ACT OF 1894. 289 been able to begin its preparations at an early date. Progress with the tariff bill was accordingly easy in the House. The committee reported its bill as early as December 19. That bill proposed some important remis- sions of duty, and in all directions made considerable reductions ; not enough, indeed, to make it a revolution- ary measure, yet enough to bring about, if enacted, a real and unmistakable change in the general tariff policy of the United States. Its specific provisions will be more conveniently discussed as we follow one by one the dif- ferent phases of the proposed legislation, and the final outcome of the whole. The House acted with reason- able promptness: the bill was passed on February i, sub- stantially in the shape given it by the party leaders on the Ways and Means Committee. Matters went more slowly in the Senate. There the finance committee did not report the bill until March 20, and then with many and important amendments. The changes were all in the same direction, — toward moder- ating the reductions, and taking the edge off the meas- ure as passed by the House. When the bill came from the committee to the Senate, still further amendments of the same sort were added. Hence when, after long delays, it was finally passed by the Senate, on July 3, it was a very different measure, in spirit and in details, from that which had been passed by th& House. The House and Senate disagreeing, the bill went to a conference committee. Almost without exception, dur- ing the last thirty-five years, the details of tariff bills have 290 HISTORY OF THE EXISTING TARIFF. been finally adjusted in such committees ; and it was to be expected that in this case, as in others, the act as passed would be half-way between the House bill and the Senate bill. This expectation was disappointed. In the Senate the bill there had been passed by a vote of thirty- nine to thirty-four, and among the thirty-nine were two or three Populist Senators who owed no allegiance to the Democratic Party. The votes of all the Democratic Sena- tors were felt to be necessary for its final passage. Sev- eral among them insisted on amendments admitted to be distasteful to the mass of their party associates ; and the close balance of parties in the Senate enabled them to command the situation. President Cleveland's letter to Mr. Wilson, the chairman of the House Committee of Ways and Means, urging resistance to the Senate amend- ments, had no effect beyond that of making clear to the country what were his own views. Whether better man- agement in the Senate would have secured a result more in consonance with the party pledges and principles is not easy to say : beyond question, the leadership of the Demo- crats in the upper branch was lamentably unskilful. In the end, the House accepted all the amendments of the upper body, and the bill as shaped in the Senate became the act of 1894. President Cleveland signified his justi- fiable discontent with its provisions by permitting it to become law without his signature. It finally went into effect on August 28. So much as to the immediate history of the act. We may proceed now to consider its main provisions. THE TARIFF ACT OF 1 894. 29 1 First and foremost was the removal of the duty on wool, and with it an entire change in the duties on woollen goods. Wool and woollens had been for years the central part in the protective system. The change here was an important — almost revolutionary one ; and it may be remarked at once that in the whole act no other articles of large importance were thus incisively dealt with. Free wool was important in its political and in its eco- 1 nomic aspects. The duty on wool had been the most significant feature in the policy of all-inclusive protection which the Republicans had emphasized in the McKinley act of 1890. It had been almost the only article through which protection could be promised and given to agricul- tural voters. There were duties, to be sure, on wheat, corn, and meats — articles which were continuously ex- ported and obviously could not be affected by an import duty. But wool was imported, and was really affected by the duty ; and it could be fairly maintained that here the farmers got some share of the benefits of the protective system. Moreover, some of the central States of the country, like Ohio, where there was much wool-growing, were closely divided in politics. Here the wool duty played a prominent part ; and it required some courage among the Democrats to present themselves squarely on the platform of free wool. In its economic aspects the removal of the duty on wool was important as a crucial application of the prin- ciple of free raw materials. In that advocacy of protec- tion which has gained the most respectable hearing from ^92 HISTORY OP THE EXISTING TARIFF. serious students of economics, — the advocacy, namely, of what goes by the names of developing protection, educa- tional protection, protection to young industries, — it has usually been explained that crude materials are beyond the scope of the protective policy. Even in the political arguments which we often hear from German writers of the present time, and in which national dependence and self-sufificiency play a large part, the line has usually been drawn against the inclusion of articles of this sort in the protective regime. The desire to encourage the manu- facture of woollens has probably been quite as effective as these more theoretical considerations in preventing the extension of the protective policy to wool, even in the countries which in late years have gone so far in the direction of protection. At all events, no country of advanced civilization has maintained any duty on this material, and the retention of such a duty in the United States was perhaps the most characteristic feature of our protective system. President Cleveland had specifically advocated the free admission of wool in his message of 1887; the Democrats had put it on the free list in the Mills Bill, in which they outlined their policy in 1888; the Republicans had emphasized their adherence to the opposite policy by increasing the duty on wool in the McKinley act. Now, at last, it went on the free list. Equally great, at least in form, was the change in the duties on woollen goods. Here the curious system of compound duties was completely swept away. Its his- tory and development, from the first germs in 1861 to the THE TARIFF ACT OF 1 894. 293 elaborate rates in the tariff act of 1890, have been suffi- ciently detailed in the preceding chapters. No part of the tariff was more intricate ; in none was it more difficult to ascertain the real degree of net protection finally given the manufacturers ; in none were the duties higher. In place of these old complex rates a simple system of ad- valorem duties was established. In the bill as passed by the House the rate (on the important classes of woollen goods) was made forty per cent, in the first year, with a reduction of one per cent, each year for five years, until eventually a definitive rate of thirty-five per cent, should be reached. But among the many changes made by the Senate was the adoption of a much more conservative policy as to woollens, and a considerable advance beyond the House rates. The rate was fixed at fifty per cent., once for all, on the more important classes of goods. Certain cheaper sorts of blankets and flannels, it is true, were subject to no more than twenty-five per cent. ; and the cheapest kinds of fabrics for men's and women's wear were to pay but forty per cent. But, as in former tariff acts, these lower rates were applicable only to goods which had not been imported in the past, and would not be imported under the new rates. On all men's clothes and women's dress-goods which were valued at more than 50 cents a pound, — that is, on practically the whole mass of such articles really subject to foreign competition, — and on all manufactures of wool not specially provided for, the ad-valorem duty was that of the McKinley act, — fifty per cent. Similarly, on the important classes of Zg4 HISTORY OF THE EXISTING TARIFF. carpets, while the old specific or compensating duty dis- appeared, the ad-valorem duty was left at forty per cent. In general, the higher ad-valorem rates established by the tariff act of 1890 remained untouched: the change on woollen goods was limited to a simplification of the sys- tem of duties by the abolition of those specific rates which had previously been levied as an offset to the duties on the raw material. Theoretically, therefore, the manufacturers of woollen goods lost nothing by the change. They were treated, in the act as finally passed, with marked tenderness: a ten- derness further emphasized by the fact that, while wool was admitted free at once, the new duties on woollens did not go into effect until January i, 1895. For a sea- son they thus got their material free, yet had the benefit of the old duties on their goods. Practically, however, even with this aid toward adjusting themselves to the new conditions, the manufacturers had to face a trying period of transition. We have seen, in the preceding chapters, that the specific duties on woollens, thought, nominally a simple offset for the increased price of wool due to the duty on that material, contained in many cases a large amount of disguised protection. This was lost under the new system. Even where the case was different, and where the specific duties had done no more than to compensate, the gain from the abolition of the duties on wool did not inure to the manufacturers by any automatic process. They had to learn to take advantage of the lower price at which they could buy the imported THE TARIFF ACT OF 1 894. 295 wool, now free ; and only by taking full advantage of it could they be in a position to meet the competition of the foreign makers, whose products were coming in at the simple ad-valorem duty on woollens. To do this, the domestic manufacturers, long confined to the use of do- mestic wool and of a very small range of foreign wool, had to learn to adjust or improve their machinery, to use new qualities of wool, and to make new kinds of cloths. The advocates of the remission of the duty on the raw materials had always maintained that the change would vivify the woollen manufacture, widen its range, and in- crease its prosperity. On the other hand, among the manufacturers and their representatives, there had been a natural aversion to the abandonment of a system, how- ever complicated and confused, to which the industry had been compelled to accommodate itself by a quarter-cen- tury of legislation. What the final outcome would be, could appear only after a considerable trial of the new system, continued over some years at least. But the general public had not been trained by either side in the controversy to await the results with any patience. The protectionists had predicted immediate disaster; their opponents immediate prosperity. This mode of dealing with controverted questions is perhaps inevitable in popu- lar discussion : certainly \^& post hoc, propter hoc argument has been applied to the protective controversy, both in its larger aspects and in its relation to particular indus- tries, with astonishing readiness. No critical observer could expect the change in the duties on wool and wooL 296 HISTORY OF THE EXISTING TARIFF. lens to show its real effects in one season, or in several seasons, or to work out its results without more or less uneasiness and embarrassment for the domestic producers. That its ultimate result — considering how tenderly the manufacturers were dealt with in the act of 1894— would be harmful to the woollen industry as a whole, seems highly improbable. So far as the general question of protection was concerned, the wool and woollen schedule in the act of 1894, while it made a sharp break with the past, in putting on the free list at least one important raw material, evidently left the principle of protection, as applied to manufacturers, absolutely untouched, and affected the operations of the woollen manufacturers no more than was inevitable in view of the radical policy fol- lowed with regard to wool.' On other textile materials and products the changes in duties were by comparison unimportant. On most manu- factures of cotton there was some change, but in few cases an effective change. On some of the cheaper grades there was on the surface a considerable reduction. Thus the cheapest class of unbleached and unprinted cotton goods became subject to a duty of one cent per yard, in place of the old duty of two and one-half cents. But these ' For some consideration in detail of the effects of the old system on wool and woollens, see an article by the present writer in Quarterly jfournal of Econcmics for October, 1893 ; a criticism of this article by Mr. S. N. D. North in the Bulletin of the Wool Manufacturers, for December, 1893 ; and a pamphlet by Mr. E. D. Page, on The Woollen Tariff (New York, 1893). Compare also what is said of the act of 1897, infra, pp. 328-335. THE TARIFF ACT OF 1 894. 297 goods are made as cheaply in the United States as in foreign countries, if not more cheaply ; they would not be imported in any event ; and the change in duties was merely nominal. On finer cotton goods, more than likely to be imported, the changes in rates were not great. Where the duty had been fifty per cent, in 1890, it became forty per cent, in 1894; where it had been forty per cent., it became thirty-five per cent. On knit goods there was a more considerable reduction, at least as compared with the rates of 1890. These goods, as we have seen, had been subject in 1890 to a complicated series of mixed specific and ad-valorem duties. They were now subject to a simple duty of fifty per cent. This, while a reduc- tion from the rates established in 1890, was higher than the duty in force before that date. Here, as in not a few other cases, the reform movement of 1894, as checked and pruned in the Senate, did not even succeed in wiping out all the efTects of the extreme protective movement that preceded it. Silk manufactures, on which the protective duties of the last generation had very important effects, were hardly touched. The duties on some silks went down from sixty to fifty per cent., on others from fifty to forty-five per cent. The changes were hardly worth mentioning. Much the same was the case with linens. Dressed flax was admitted at i^ cents per pound, just half the duty of 1890. Manufactures of flax were admitted at reduc- tions of duty very similar to those just noted as to silks. Since virtually no linens of finer quality were (or 298 HISTORY OF THE EXISTING TARIFF. are) produced in this country, and those of coarser quality were as effectually shielded by the new duty as by the old, matters remained very much as they had been. One change was an exception. Bagging of jute, flax, or hemp, for grain or cotton, was admitted free of duty — a direct concession to the farmers and planters. Next we may turn to the duties on minerals and min- eral products. Here the articles to which public attention was chiefly given were coal and iron ore. These are by no means the most important articles in the tariff schedule relating to minerals and metallic products ; but they are em- phatically raw materials, the question of principle in deal- ing with such was hotly raised as to them. The two houses of Congress here disagreed sharply : the House put both articles on the free list, while the Senate insisted on the re- tention of duties, even though reduced duties. The dispute drew to this part of the tariff system a share of public at- tention disproportionate to the real industrial significance of the duties, and brought into full relief the failure of the act as finally passed to carry out with steady consistency the Democratic Party policy. Free coal would be of some consequence on the north Atlantic coast and on the Pacific coast. Both districts happen to be far from the domestic sources of supply, and comparatively near to mines across the border. The Pacific coast got coal from British Columbia and from Australia, and felt the duty on coal as an undesirable bur- den. But with few manufactures, and a mild climate, the burden was not a serious one. In New England, essen- THE TARIFF ACT OF 1 894. 299 tially a manufacturing community, the case might be dif- ferent. Some Canadian mines are geographically a bit nearer than the mines of West Virginia and Virginia which feel their competition. It was a question, to be sure, how serious that competition would be, how good the quality of the Canadian coal would prove, how effectively the transportation of this coal could be organized. But it was diiiiicult to give any good reason for not allowing New England every opportunity for cheapening its supply of coal. The opposition to the repeal of the duty was a clear and simple case of an attempt of certain producers to make a levy on consumers. Coal had been made free by the House ; the act left it subject to a duty of forty cents per ton. The old rate had been seventy-five cents. The amendment made by the Senate was felt in all quar- ters to mean a conspicuous failure to carry out consistently the program of the Democratic Party. The result was similar with the duty on iron ore. The essential facts as to the working of this duty have already been stated. ' Here too the question of duty or no duty was immaterial so far as the great bulk of domestic pro- duction and consumption was concerned. The question was simply whether certain iron and steel establishments near the seaboard should get their iron ore free, or should be induced by a duty to buy domestic ore produced at a distance. Directly, the issue was between the great cor- porations which mined the ore in the West, and the other great corporations which had iron and steel plants on or ' See above, p. 271 300 HISTORY OF THE EXISTING TARIFF. near the Atlantic seaboard. It might be argued, indeed, that this was the only issue. In view of the long series of producers and middlemen whose operations must inter- vene before the finished product of industry can reach the consumer, still more in view of the hindrances to unfet- tered competition among the middlemen, it might be plau- sibly maintained that not only the immediate question, but the ultimate question, was between two sets of producers, not between the producers and the public. But here, as on many other questions, it is safe to proceed on the general ground that the wider the sources of supply and the cheaper the raw materials of production, the greater the chances that the benefits will filter through the layers of middle- men, and that the public as consumers will eventually gain. Hence, so far as any question of principle was concerned, everything was in favor of free ore. Arguments as to the development of struggling industries or the fostering of na- tional independence could not be to the point ; since the great bulk of our iron ore, and the great bulk of our iron and steel, were sure to be produced within the country under any circumstances. The fate of the iron-ore duty was the same as that of the coal duty. The House repealed it; the Senate restored the duty, but at forty cents instead yof seventy-five cents per ton. Again the principle of free raw materials was set aside. The duty on pig iron was brought down in the act from $6.72 to $4 a ton. In the House of Representatives the duty had been made twenty per cent., which would have meant a much more considerable reduction on most quali- THE TARIFF ACT OF 1 894. 30I ties of iron. Twenty years earlier, even ten years earlier, such a change as was proposed by the House would have been of great importance : even that enacted would have been of moment. As matters stand in the closing years of the century, the reduction did not signify much. The production of crude iron advanced at an enormous rate after 1880. With the discovery of new sources of supply, with improvements in production and transportation, the great bulk of the iron would be produced at home, even if there were no duties at all. Some parts of the Atlantic and Pacific seaboards, which are distant from the domestic centres of production, would import iron, if free of duty, rather than buy it at home. But in the main, the days in which the duty on pig iron could exercise very wide reaching effects, were gone by. The change made in 1894 encountered little opposition, because it could be no longer of great effect. The duty on steel rails, that old bone of contention, was lowered from $13.44 to $7.84 a ton. From 1883 to 1 894, each tariff act had taken a slice from this duty : each time in such manner that no direct effect was felt on prices, the decline in the duty following and not preced- ing the decline in prices. The steady fall in the prices of iron and steel products during the past generation has been due to a variety of causes. Partly they have been of world-wide operation, bringing about a tendency to lower iron prices in all countries ; partly they have been of spe- cial effect in this country, in the discovery of new sources of supply, and their utilization through great improve- 302 HISTORY OF THE EXISTING TARIFF. ments in transportation. No small factor has been the remarkable application of American enterprise, invention, and engineering skill to the production on a vast scale of Bessemer ore, Bessemer iron, and Bessemer steel. Through it all, the prices of steel and of steel rails have been steadily higher than they would have been without a duty ; and the tariff system has contributed to the maintenance of monopoly profits. The lowering of the duty on steel rails in 1894, like the earlier reductions, had no immediate results, the duty being still left at the prohibitory point. But, as in the case of previous reduction, the lower rate set a limit to possible future advance in prices. Nothing could have been lost, and something would probably have been gained, by a more incisive change.' On one other much disputed article a change was made, of greater practical importance than in the case of steel rails, but again of less extent than might have been ex- pected. The duty on tin-plate was reduced to exactly one-half that which had been levied in the act of 1890: it had been 2\ cents per pound, and it was made i^ cents. The reduced duty is still higher than that in force before 1890; so that here again the legislation of that year was allowed to leave its mark on the statute-book. In most of these cases specific duties were retained by the Senate, in place of the ad-valorem duties which had been adopted by the House. In some cases, it is true, ' I have given an extended description of the grovirth of the iron industry since 1870, and an analysis of the vi^orking of protection, in two articles in the Quarterly Journal of Economics, February and August, 1900. THE TARIFF ACT OF 1894. 303 the Senate simply raised the ad-valorem rates which the House proposed ; and here the outcome was usually a substantial reduction from the old specific rates. Thus the duties on chains, guns, and some sorts of cutlery re- mained in ad-valorem form, and were considerably lowered. The general retention of specific duties by the Senate was among the changes which most disappointed the advo- cates of lower duties ; and this for the simple reason that it was made the occasion for higher rates than had been proposed in the other form. So far as the direct question of administrative advantage goes, everything speaks in favor of specific duties; and our tariff reformers have usually been curiously blind to the difficulties inevitable in the collection of ad-valorem duties. But these latter have the unquestionable advantage of telling their own tale. What the meaning and effect of a specific duty is, can often be known only to a few persons familiar with the details of some minute branch of trade. In fixing them, the legislator necessarily seeks the advice of ex- perts, who are likely enough to have wishes and interests opposed to those of the public. Wittingly and unwit- tingly, these duties have often been arranged in a manner to promote the interests of particular enterprises, and so to justify the charge that they tax the many for the bene- fit of the few. Hence the natural repugnance of those who are opposed to the principle of protection ; hence their disappointment when the comparatively simple scheme of ad-valorem duties adopted in the House was transformed by the Senate into a system of specific 304 HISTORY OF THE EXISTING TARIFF. duties intricate, bewildering, and not unfairly open to suspicion. Among other manufactured articles, earthen-ware and china-ware were dealt with least tenderly. Here it is some- what surprising to find a real and effective change in the duty. Finer qualities of china-ware went down from sixty to thirty-five per cent., the cheaper qualities from fifty to thirty per cent. The finer qualities had always been imported in very considerable quantities ; it was very possible that under the reduced duty large quantities of the cheaper grades might also be imported.' On what principle these articles should have been selected for special reduction, it is difficult to say ; but certainly there was here a substantial change. Glassware of all sorts remained very much as it was. Questions in many ways different from those which arose with regard to manufactures and raw materials, were presented by the duty on sugar. That article came into sudden and surprising prominence in the debates of 1894. It is true that it had played an important part in 1890, when the remission of duty on raw sugar had been an essential part of the general policy of the McKinley tariff act. But attention had then been given mainly to the burden which the tax on raw sugar imposed on con- sumers, and to the benefits which its remission would bring to them. In 1894, however, the tax on refined sugar, and its effect on the sugar-refining industry, ' See what is said of earthen- ware and china-ware in my paper in the Quarterly Journal of Economics, vol. iii., p. 286. THE TARIFF ACT OF 1 894. 30S received the greater share of attention. This change in the point of view was due to the fact that between the two dates the monopoly conditions in the refining of sugar had become a matter of common knowledge. Hence the question of protection as fostering monopoly was brought home to the public, uneasy at best at the de- velopment apparently on all sides of combinations and trusts. The sugar duty, in its various forms, involved a great variety of economic and social questions. That on raw sugar involved both fiscal questions and questions as to the social effects of taxation. That on refined sugar pre- sented at once a phase of the protective controversy and a phase of the new and portentous problem of monopoly combinations. It will be advantageous to consider sepa- artely the very different questions presented by the two parts of the sugar tax. The reasons for and against a duty on raw sugar in 1894 may be summarized thus. In favor of the duty it was to be said that it would yield at once a large, certain, steady reve- nue. Some increase in the revenue was agreed on all hands to be necessary. No one change in the McKinley act had done so much to upset the federal budget as the removal of the duty on sugar, and no one change was so certain to bring an additional revenue as the re-imposition of this tax. In view of the position of the federal Treas- ury as the holder of the metallic reserve for virtually all the paper money outstanding, it was of prime importance to put it in a secure financial position. 306 HISTORY OF THE EXISTING TARIFF. Next, while the sugar duty is a tax, it was in 1894 (set- ting aside the comparatively small domestic production of sugar) a simple tax, bringing none of the diversion of domestic industry and none of the ulterior consequences which flow from protective duties. It is commonly as- serted by Protectionists that a remission of revenue duties, like those on tea, coffee, and sugar, is in a peculiar sense a remission of taxation ; the implication being that protective duties on commodities made at home are not really taxes, but in some roundabout way are pure gain. It would be the part of courage and honesty for those op- posed to protection to act on the ground that, while both alike are taxes, the revenue duties are the less burden- some and the less harmful of the two. They should, therefore, where opportunity arises, maintain revenue duties boldly and remit protective duties freely. As between duties on raw wool, coal, and iron ore on the one hand, and a duty on sugar on the other, the party opposed to the principle of protection should unhesitat- ingly have chosen the latter. Thirdly, the Louisiana sugar producers were fairly en- titled to some consideration. Unlike wool-growing, their industry involved a considerable plant ; and it offered no easy opportunity for a change to something else. An im- mediate abolition of the duty, or of the equivalent bounty, which had been granted in 1890, would unquestionably work hardship to them. In view of the tenderness with which most of the protected industries were treated, they might reasonably complain of any sudden and uncondi- THE TARIFF ACT OF 1 894. 307 tional withdrawal of the aid which they had had for gen- erations. The strong argument against the duty on raw sugar is that which bears against almost all indirect taxes produc- tive of a large revenue. To be productive, such taxes must be imposed on articles of wide consumption ; and articles of wide consumption are always of the sort con- sumed proportionately more by the poor than by the rich. The tax is socially unjust. The full weight of this objec- tion can be fairly judged, to be sure, only on a considera- tion of the incidence of an entire system of taxation, — in the present case, not only of the federal taxes, but of the State and local taxes as well. It might conceivably be maintained that the State and local taxes, which are chiefly direct, serve to offset the injustice of an indirect tax like the sugar duty. They are levied in the first in- stance chiefly on the well-to-do ; and though their ultimate incidence is in the highest degree complex, it is at least doubtful whether they bear with proportional weight on those classes in the population which would be most aflected by a duty on sugar. It is probable, too, that other parts of the tariff schedule, notably the duties on textiles, bear most heavily on commodities consumed by the richer classes. But a comprehensive inquiry of this sort would almost certainly fail of a satisfactory conclu- sion; and it is inevitable that Congress should have an eye solely to the federal taxes which are under its control. Here there is the clear social injustice of a sugar duty, considered per se. Add to this its visible and unmistak- 308 HISTORY OF THE EXISTING TARIFF. able payment by consumers, and the pressure against it in a democratic community becomes formidable. The conflict between sober counsels in favor of the pro- ductive revenue duty, and popular suspicion of its effects in aggravating inequalities in taxation and so in the dis- tribution of wealth, was emphasized by the income tax proposal. Obviously the income tax, which was made a part of the tariff act of 1894, was precisely what the sugar duty was not. The revenue from it was uncertain in amount, and in any case would come in but slowly, afford- ing no prompt relief to the Treasury. Moreover, levied as it was only on incomes exceeding $4000 a year, it was a tax on the rich alone, and thus precisely the opposite in social effect from the sugar tax. The income tax was popular in the South and West, where it was most strongly felt that the bui'den of taxation did not bear sufficiently on the rich, and where the strength of the Treasury was a matter of indifference, not to say hos- tility ; while the sugar tax (barring the exceptional case of Louisiana) was strongly opposed in those regions. Curiously enough, the outcome of the action of Con- gress was that both of these taxes were put into opera- tion. In the bill as passed by the House, sugar had been made free, and the bounty abolished. But in the Senate the two Louisiana Senators were among those whose votes were needed if the tariff bill was to pass that branch, and they insisted on some concession to their constituency. The Administration, anxious for a sub- stantial balance in the right direction at the Treasury, THE TARIFF ACT OF 1894. 309 also brought its influence to bear in favor of the sugar duty. Consequently it was inserted by the Senate ; while the income tax, which in the House had been in a manner a substitute for it, was also retained in the Senate. Later, the decision of the Supreme Court as to the un- constitutionality of the income tax as levied by the act, wiped out that part of the measure, and left the duty on raw sugar without an offset, to the bitter disappointment of those who had opposed both this tax in itself and the tax on refined sugar which it brought in its train. As it became law, the act imposed a duty on raw sugar of forty per cent, ad valorem. The bounty of 1890 was abolished. The new duty was equivalent roughly to one cent a pound, or about one-half the duty in force before 1890, and one-half the bounty granted in that year. Its ad-valorem form was peculiar. Never before, except under the general policy of ad-valorem rates in the acts of 1846 and 1857, had sugar been subjected to any other than a specific duty. The form now adopted served to cut a Gordian knot : it was a short cut out of the difficul- ties which were met in the endeavor to arrange varying rates on different grades of raw sugar in such manner as to satisfy both the Treasury officials, the sugar producers, and the refiners. It connects itself with the discussion of the extra rate on refined sugar : to which we may now turn. The saHent facts as to the sugar refiners and their rela- tions to the tariff system were simple and familiar. Sugar refining had been, almost as a matter of course, within 3IO HISTORY OF THE EXISTING TARIFF. the protective pale, and had been aided by a duty on re- fined higher than that on raw sugar. The policy of dis- criniinating in this way in favor of the domestic refiners would probably not have been questioned, except in the matter of degree, had it not been for the development of monopoly conditions in the industry by the formation of the Sugar Trust, which later grew to be the American Sugar Refining Company, still popularly known as the Trust. This put a new phase on the matter in the public eye, the more so as the sugar combination had been one of the first among the trusts, and had been more prominently before the community than any other. The more ardent free-traders have always contended that protective duties are the chief cause of combinations and monopolies, or trusts. It needs no great acquaintance with economic history, and no great skill in general reasoning, to show that the tendency to combination has deeper causes than protective legislation, and presents problems more com- plicated, and in their social importance more weighty, than those involved in the tariff controversy. But it is undoubtedly true that in some cases the drift toward monopoly conditions has been promoted by favoring duties. Sugar refining happened to be a case of mo- nopoly familiar to all the world ; the monopoly in this case had in fact been both easier to bring about and a source of greater profit, because of the protective duty; while the nature of the article made a tax in favor of the mono- poly producer particularly odious. With all sugar free, whether raw or refined, the Ameri- THE TARIFF ACT OF 1 894. 3II can refiner would be at some slight disadvantage, since freights would amount to a trifle more on raw sugar than on the less bulky refined sugar which might have been imported from foreign quarters. But this disadvantage would be insignificant. Hence when the House passed the tariff bill with both raw and refined sugar free of duty, it practically left the refining monopoly to stand on its own legs, neither helped nor substantially hindered by the tariff. When, however, a duty on sugar was resolved on in the Senate, the difficult question at once was raised how to adjust the rate on refined sugar to that on the crude form. A level duty, at the same rate on raw and on refined, would put the refiners to some real disadvan- tage. From 100 pounds of raw sugar something less (95 to 98) of refined sugar is obtained, and a level duty would operate distinctly to the advantage of the foreign refiner. Hence, if a revenue duty were imposed on raw sugar, and if it were desired to treat the refiners with absolute indif- ference, a slight additional duty should be put on refined. Exactly how great this additional duty should fairly be, it was not easy to calculate. The data for the calculation must come chiefly from the refiners ; and any figures fur- nished by them must be received with caution. But a very small difference would suffice to prevent refiners from having any ground for complaint. If a duty of one cent a pound were put upon raw sugar, an additional duty of one-twentieth of a cent would be ample to offset the loss in weight on refined sugar made from the dutiable raw sugar. 312 HISTORY OF THE EXISTING TARIFF. Naturally, the sugar refiners wanted something more than bare equality. They wanted a continuance of the favors which the legislature had granted them for genera- tions in the past. In 1890, when raw sugar had been admitted free, refined sugar had been subjected to a duty of one-half a cent per pound. It is probable that the processes of refining are carried on at least as cheaply in the United States as in any foreign country, and that even without any protection at all the sugar-refining in- dustry could maintain itself, and the sugar monopoly make handsome profits. With a barrier against foreign competitors such as the tariff of 1890 gave, the profits were enormous. It was inevitable that great efforts should be made to preserve them. Briefly, the changes which the sugar schedule under- went during the session were as follows. In the tariff bill as first reported to the House by the Committee of Ways and Means, raw sugar was left free, and a duty of one-quarter of a cent per pound was put on refined sugar. In other words, the largess given to the monopoly by the act of 1890 was to be reduced one-half. In the House, however, the feeling was in favor of a more radical change. The provision for a duty on refined sugar was struck out ; and all sugar, raw and refined, was put on the free list, so depriving the trust of all legislative favors. In the Senate, the finance committee amended the sugar schedule by imposing specific duties on raw sugar, roughly at the rate of one cent per pound, with an additional duty of one- eighth of one cent per pound on refined sugar. The duty THE TARIFF ACT OF 1 894. 313 on raw sugar was inserted partly to gain revenue, partly to secure the votes of the Louisiana Senators for the bill. But when final action came to be taken in the Senate, still another change was made. The duty on raw sugar was changed from specifice to ad valorem, and was made forty per cent. Over and above this, the duty of one-eighth of one cent on refined sugar was retained. Still further, a provision which had been introduced into the tariff act of 1890 was also retained, by which an extra duty of one- tenth of a cent per pound was imposed on refined sugar coming from countries that gave an export bounty. In this form the sugar schedule was passed by the Senate, had finally to be accepted by the House, and so became law. The final outcome was more than satisfactory to the Sugar Trust. There was the duty of one-eighth of a cent on refined sugar ; and there was an extra one-tenth of a cent on refined sugar coming from those continental countries, especially Germany, which give an export bounty, and whose competition was alone to be seriously dreaded. The ad-valorem form of the duty was also advantageous, bearing as it did less heavily on lower grades of sugar than on higher.' On the whole, the re- ' Ad-valorem duties are assessed on the value of the imported commodities at the time and place of purchase. Raw sugar comes largely from distant countries, or from countries with which transportation is not highly organ- ized, as from Cuba, Java, Brazil, and the Hawaiian Islands. The value at the place of purchase is comparatively low, and freight is comparatively high. On the other hand, refined sugar would be imported, if at all, only from the more advanced European countries. Freight charges from these are low, and the value at the time and place of purchase does not differ very greatly from the value at the American ports. Virtually, therefore, the ad' 314 HISTORY OF THE EXISTING TARIFF. fining monopoly, while it lost something, came out of the struggle victorious, and was left in little less secure con- trol over the trade under the act of 1894 than under the act of 1890. Much was said during the session and after the session of influences brought to bear by the trust on certain Senators. An investigation held during the course of the session brought out some facts freely suspected before, and not creditable to our political life. It was admitted that the trust had made contributions to the chests of both political parties, although nominally to the State organizations only. No bargains are ever made in these too familiar cases, but it is expected and understood that what is called " fair consideration " will be given to the interests of the obliging donor. It was proved also that some Senators had speculated in sugar stock. No pro- test as to the absence of connection between such dealings and the legislator's vote can save them from the taint of dishonor. It would appear also that the success of the trust was promoted by the position of the Louisiana Senators, who were anxious to secure a duty on raw sugar, and who seem to have entered into some sort of bargain for supporting the higher duty on refined sugar in exchange for aid to their own efforts. In any case it is clear that the sort of manipulation by which the refiners succeeded in retaining their favors from valorem duty is less heavy on raw sugar than on the refined, and so yields to the refining monopoly an advantage, not easy to calculate, yet probably sub- stantial. It is certain that this form of duty was advocated by the represen- tatives of the trust — in itself a reasonable ground for suspicion. THE TARIFF ACT OF 1 894. 315 the tariff was possible only because of the narrow majority which the Democrats had in the Senate. Where one or two votes would have sufficed to block the whole measure, the opportunity for dishonest or selfish pressure on legis- lation was easy. It is possible to bribe or convince or entangle a few legislators, and so bring them to throw to the winds party consistency and public justice ; but for- tunately our conditions are not so corrupt as to make it possible to bribe a whole party or overturn a strong majority. In the House, where the Democratic majority was greater, the manipulation of sugar duties was impos- sible. It was in the Senate, where a change of one or two votes meant failure to the whole measure, that the un- savory result was achieved. No part of the tariff legislation of 1894 was more dis- appointing to those who were earnest in their advocacy of tariff reform than the outcome of the sugar imbroglio. None, too, did more to damage the prestige of the Democrats. They had posed as the champions of the public against the monopoly ; yet the trust had conquered. It is true that the extra duty on refined sugar — the part of the schedule which alone was of real advantage to the trust — was less than it had been in 1890, and that the pub- lic in reality was better off than it had been before. But the intricacies of the case were too complicated to be readily understood by the average voter. The imposition of any duty at all on sugar was probably thought to be a surren- der to the trust. The revenue tax on raw sugar, fairly open to objection on grounds of social injustice, was sup- 3l6 HISTORY OF THE EXISTING TARIFF. posed in many quarters to be much more objectionable, — to be levied in toto for the benefit of the monopolists. The effect of a simple sweeping away of all duties on sugar, whether raw or refined, would have been transpar- ent to the popular mind ; but the impression left by the long and unsuccessful struggle, and the complicated out- come, was mainly that the promises of the Democrats had not been kept. No doubt the strong feeling which the surrender to the sugar monopoly aroused rested largely on a blind opposi- tion to combinations in general, and to the corporations which are supposed, rightly or wrongly, to have a monop- oly position. Whether the tendency to combination is to be welcomed or regretted, has not often been soberly con- sidered by the American public. The usual assumption is that it is an unquestionable evil, to be fought in every way by legislation. That disposition which shows itself, both among the welcomers of socialism and among many critical economists, to accept combinations and consolida- tions and to use them as instruments of social reform, finds hardly an echo in the United States. Doubtless the popular instinct here is right. The drift to consolidation and monopoly presents problems with which a democratic community can deal only under great disadvantages. To regulate it, to use it, to secure from it the possible bene- fits, requires a degree of nicety and consistency in legisla- tion which our American communities could reach only by slow and arduous steps. Legislation to check consoli- dation may be unwise, and probably is futile ; but legis- THE TARIFF ACT OF 1 894. 317 lation directed to encourage it, still more legislation to augment the profits of a monopoly, is surely of the worst. The revulsion against the extreme protective system which showed itself in the elections of 1890 and 1892 was probably in a large degree a consequence of the popular feeling just described. While the essential question as to protective duties is comparatively simple, the intricate reasoning which is needed to follow the effects of such duties into all the ramifications of international and domes- tic trade can have but little influence on the average citizen. He reasons from few premises, and is affected by simple catch-words. The outcry against trusts and monopolies, though in fact it describes an exception rather than the normal working of protective duties, was proba- bly the most effective argument in bringing about the public verdict against the McKinley act. It is expressive of the general feeling of unrest as to the power of great corporations, the growth of plutocracy, the gulf between the few very rich and the masses of comparatively poor, which is becoming a stronger and stronger political force, and is destined in the future to have larger and larger effect on legislation. It is clear that the new tariff act made no deep-reach- ing change in the character of our tariff legislation. The one exception was the removal of the duty on wool. Barring this, there was simply a moderation of the pro- tective duties. A slice was taken off here, a shaving there ; but the essentially protective character remained. 3l8 HISTORY OF THE EXISTING TARIFF. This would have been the case even had the Wilson Bill, as originally proposed to the House or as passed by that body, become law. That less anxiously conservative measure was of course alleged by its opponents to por- tend ruin to American manufacturers and prostration to American labor. In fact, while it might have affected some industries, it would have caused no considerable disturbance of industry and no considerable rearrange- ment of the productive forces of the nation. The act as finally passed was even less potent for good or for evil. In not a few cases, the duties, while lower than those enacted in the McKinley act of 1890, were still higher than under the tariff act of 1883. As far as it went, it began a policy of lower duties ; but most of the steps in this direction were feeble and faltering. Whether such a measure be good or bad, must be decided in the main on general principles. To follow out its influence on the prosperity of the community requires time for the observation of effects, and great skill and caution in the interpretation of industrial phenomena. Even had the new legislation been much more drastic, its final effects on general welfare could have shown them- selves only after the lapse of a considerable period, and then might easily have been concealed or obscured by the operation of other causes. To judge a very moderate measure like that of 1894 by its visible fruits is so difficult as to touch the bounds of the impossible. The effects on any particular industry, — which are but a fragmentary bit of evidence as to the promotion of general prosperity, — THE TARIFF ACT OF 1894. 319 are sufficiently difficult to trace. We have seen how the one radical change made by the act, in abolishing the duty on wool, required time to show how it might affect the wool and woollen industry. Even after the lapse of time, there could hardly be such an unmistakable result one way or the other as to prevent doubt and dispute. When all the evidence on this point was in, it could still be of little avail toward answering the fundamental question, — whether the productive forces of the com- munity were applied to better effect with a low tariff than without it. But the general public has been taught to expect immediate, almost magical effects. Both parties in the protective controversy have preached the same gospel, and made the same promises. For high duties and for low duties alike it has been claimed that they would convert depression into prosperity. This has been the case, in more or less degree, throughout our tariff history ; and the inevitable disappointment with the expectations so raised has had its effect in bringing about the vacillations in public feeling and the frequent changes in policy. The act of 1894 was defended and attacked on the same superficial grounds; and it happened to suffer from the contingencies of the moment. It went into effect shortly after an acute commercial crisis, and in the worst stage of a period of severe depression. The crisis and the de- pression, were due, in this case as in all others, to a long and complex set of causes, some of them still obscure even to the best informed and most skilled observers. 320 HISTORY OF THE EXISTING TARIFF. That the tariff act played any serious part in bringing them about, would not be maintained by any cool and competent critic. But the great mass of the public judged otherwise. The act had been followed by hard times ; at best, it had done nothing to remedy them. Half-hearted in its provisions, unlucky in the time of its enactment, it could make no warm friends, and earn no general approval. Thus, whether in its effects on legislation or on public opinion, the movement for tariff reform from 1887 to 1894 was in its outcome disappointing. The decisive victories in the elections of 1890 and 1892 had led the free-traders to form high hopes : the real beginning of the long de- ferred reform seemed at last at hand. But the victorious party was soon split by internal dissensions. With the acute crisis of 1893 and the growing accentuation of differing opinions on the currency, that issue forced itself forward. The session of 1893-94, as it progressed, wit- nessed slackened enthusiasm, inept leadership, and an inglorious result. President Cleveland's action in per- mitting the new tariff act to become law without his signature, put the final stamp of indifference and dis- appointment on the measure. CHAPTER VIL THE TARIFF ACT OF 1 897. At the time of the passage of the tariff act of 1894" nothing seemed more improbable than an early return to the policy of high and all-embracing protection. That policy, as embodied in the act of 1890, had met with ap- parently unquestionable rebukes at the polls in 1890 and 1892. Nor was there anything in the legislation of 1894 to invite a reaction. As we have seen, the act of that year, so far from being radical, had been, with the single exception of the free admission of wool, anxiously con- servative. Once it was passed, the community heaved a sigh of relief and dared to hope that from this quarter at least there would be for a space no further cause of in- dustrial uncertainty and disturbance. If this reasonable expectation was disappointed, the ex- planation is to be found, not in any demonstrable change in public feeling, but in the complete overturn in the gen- eral political situation. Suddenly and unexpectedly, the! tariff was shoved aside as the party issue, and the cur- \ rency took its place. The stormy session of 1893, in which the silver-purchase act of 1890 had been repealed, foreshadowed the coming change; the commercial crisis of 1893, and the years of depression which followed, 3JU, 322 HISTORY OF THE EXISTING TARIFF. completed !t with surprising quickness. Ever since the demoralizing days of the excessive paper issues of the civil war, periods of depression have favored the growth of the party oj cheap money. The free-silver party, now the party of cheap money, found its hold strengthening in the South and West, and finally captured the Demo- cratic organization. In the South, always the main seat of the political strength of the Democrats, the tariff question had for some time been holding its dominant place largely as a matter of tradition. The opposition to protection had been inherited from the political tenets of ante-bellum days, and the tariff issue was easily dis- placed by the new and burning question. The majority of the Democrats of the new generation were won to the free-silver side ; the old leaders were contemptuously dis- carded ; the political centre of gravity suddenly shiftec' The Democrats being pledged defiantly to one side, the Republicans had no choice but to take the other. Thus the election of 1896 turned directly on the question of the free coinage of silver. The popular verdict was clear on that question, and on that only. It was not to be expected, however, that the Republi- can party would desert its old faith, or turn suddenly with whole and single heart to the new issue forced upon it. For years — almost for generations — the Republicans had been fencing and compromising on the various phases which the currency question from time to time assumed. Moreover, the depression which set in after the crisis of 1893 made an opportunity for the apostles of high pro- THE TARIFF ACT OF 1897. S^S tection as well as for those of free silver. Both parties in the newspaper tariff controversy of 1890-94 had pre- dicted a general rush of prosperity, the one from high duties, the other from low duties. As the years succeed- ing 1893 grew blacker and blacker, the stanch protection- ists had the opportunity to cry : " We told you so ; let us return to the policy of prosperity." In the early part of 1896, before the silver question had forced itself to the front, the Republicans had resolved to stake the issue once more on protection ; and it had accordingly been settled that Mr. McKinley was to be the party candidate for the Presidency. What might have been the outcome of a campaign in which the tariff was the single issue cannot be said; though the general conditions at the moment certainly were favorable to the party not in power. Fate willed it that the campaign centred on silver. But here, after all, the Republicans were on the defensive. As to the currency, they undertook only to maintain the status quo ; while on the tariff, though it might be in the back- ground during the campaign, they had resolved to take the offensive, and had engaged to legislate afresh at the first opportunity. This difference in disposition as to the two problems became more pronounced when the smoke of battle cleared away, and the next move was in order. While the popular and electoral votes had been clearly for the Republicans, the complexion of the national legislature was not so altered as to give them a free hand on the currency. In the Senate they had no controlling major- 324 HISTORY OF THE EXISTING TARIFF. ity without the aid of silver votes. On the currency question the party, as such, could do nothing, — certainly nothing without dissension and recrimination. But on the tariff question something could be done at once. The occasion for action was the more urgent because of the state of the finances. For several years there had been a deficit in the current operations of the Treasury, The first fiscal year in which the balance had been on the wrong side was 1893-94; and then followed several years similarly unfortunate.' The very circumstance that the deficit appeared, and indeed had been most serious, while the tariff act of 1890 was still in force, indicated that it was due, not to the particular provisions of the act of 1890 or of its successor of 1894, but to the general industrial con- ditions of the period after 1893. The great crisis of 1893, itself the result of a complexity of causes, among which reckless monetary legislation was the chief, had been fol- lowed, as such revulsions must be, by a sharp falling-off in the imports and a consequent heavy decline in the customs revenue. The deficit which resulted was often alleged to be due to specially inadequate legislation in 1894. The ' Fiscal Year. Ordinary Revenue. Expendi- tures. I8g2-g3 461.7 459-4 2.3 Surplus 1893-94 372.8 442.6 6g.8 Deficit. 1894-95 390-4 433-2 42.8 " 1895-96 409.5 434-7 25.2 " 1896-97 430.4 448.4 18.0 " The figures indicate millions of dollars. The deficit really began to ap. pear in the second half-year of the fiscal year 1892-93 ; but the receipts in the first half-year had been large, so that this fiscal year as a whole showed a small surplus. THE TARIFF ACT OF 1897. 325 act of 1894 had indeed failed to make rigorously careful provision for the needed revenue; but the same had been the case with the act of 1890, and was again the case, as we shall presently see, with that of 1 897. The looseness of our federal legislation, so far as careful cal- culation of income and outgo is concerned, is an old and familiar phen©men9n, the result partly sf general peliti- cal conditions and partly of the reliance on so variable a source of revenue as protective customs duties. But in partisan discussion, much was made of the failure of the act of 1894 to yield the revenue needed at the time; and at all events some measure of relief for the Treasury was called for. Hence President McKinley, in calling the extra session of 1897, asked Congress to deal solely with the import duties and the revenue. The two questions of industrial policy and of legislation for revenue ought, indeed, to be considered separately. But in the history of tariff legis- lation in the United States, as in that of most other countries, they have been constantly interwoven ; and so they were in this case. What with the undeniable need of revenue, the comparative ease with which party strength could be consohdated on the question of pro- tection, the old predilection of all the leading spirits among the Republicans for that issue, and the clearly expressed wish of the President, the tariff at the extra session received exclusive consideration. Thus the first fruits of the election of 1896 were legislation, not on the question which had been uppermost in the campaign, but 326 HISTORY OF THE EXISTING TARIFF. on the tariff question, on which no clear and unequivocal evidence of popular feeling had been secured. The legislative history of the measure was instructive, and in some respects showed striking contrasts with that of its predecessor of 1894. In the House the bill was reported by the Committee on Ways and Means as early as March i8th, within three days after the session began. This extraordinary promptness was made possible by methods that paid scant respect to the letter of the law. Strictly, so long as the new Congress had not met, no one was authorized to take any steps towards legislation at its hands. But, long before this, it was settled that Mr. Reed was to be once more Speaker, and he was able to intimate that the existing Committee on Ways and Means was to remain substantially unchanged in the next Congress; and, during the hold-over session of 1896-97, that committee accordingly was at work on the tariff bill, and was able to present it to the new Congress immediately on its assembling. Mr. Dingley, already chairman of the committee in the Fifty-fourth Congress (1895-97), was again to be chairman for the next; and his name was attached in popular discussion to the new measure which he was able to present with such celerity. The action of the House was as prompt as that of its committee. Within less than two weeks, on March 31st, the bill was passed. Only a comparatively small part of it had been considered in the House: no more than twenty-two of the one hundred and sixty-three pages were taken up for discussion. In the main, the com- THE TARIFF ACT OF 1 897. 327 mittee scheme was adopted as it stood, being accepted once for all as the party measure and passed under the pressure of rigid party discipline. The whole procedure was doubtless not in accord with the theory of legislation after debate and discussion. But it was not without its good side also. It served to concentrate responsibility, to prevent haphazard amendment, to check in some measure the log-rolling and the give-and-take which beset all legislation involving a great variety of interests. Under the iron rule of Speaker Reed, the House gav? the session to the enactment of a deliberately planned tariff bill, and to that only. In the Senate progress was slower, and the course of events showed greater vacillation. The bill, referred at once to the Senate Committee on Finance, was reported after a month, on May 8th, with important amendments. There was an attempt to impose some purely revenue duties; and, as to the protective duties, the tendency was towards lower rates than in the House bill, though on certain articles, such as wool of low grade, hides, and others (of which more will be said presently), the drift was the other way. The Senate, however, paid much less respect than the House to the recommendations of the committee in charge. In the course of two months, from May 4th to July 7th, it went over the tariff bill item by item, amending without restraint, often in a per- functory manner, and not infrequently with the outcome settled by the accident of attendance on the particular day ; oil the whole, with a tendency to ret:ain the higher 328 HISTORY OF THE EXISTING TARIFF. rates of the House bill. As passed finally by the Senate on July 7th, the bill, though it contained some 872 amendments, followed the plan of the House Com. mittee rather than that of the Senate Committee. As usual, it went to a Conference Committee. In the various compromises and adjustments in the Senate and in the Conference Committee there was little sign of the deliberate plan and method which the House had shown, and the details of the act were settled in no less haphaz- ard fashion than has been the case with other tariff meas- ures. As patched up by the Conference Committee, the bill was promptly passed by both branches of Congress, and became law on July 24th. In what manner these political conditions affected the character of the act will appear from a consideration of the more important specific changes. First and foremost was the re-imposition of the duties on wool. As the repeal of these duties had been the one important change made by the act of 1894, so iheir res- toration was the salient feature in the act of 1897. On clothing and combing wool the precise rates which had been imposed in the tariff act of 1890 were restored. Clothing wool was subjected once more to a duty of eleven cents a pound, combing wool to one of twelve cents. On carpet wool there were new graded duties, heavier than any ever before levied. If its value was twelve cents a pound or less, the duty was four cents; if over twelve cents, the duty was seven cents. In 1894, when the duties on wool were removed, the THE TARIFF ACT OF 1 897. 329 general expectation alike of the advocates and opponents of protection was that this change had come to stay. The political and economic probabilities in 1894 were such as to justify the expectation. The astonishing growth of all manufactures, uninterrupted before and after that date, made it certain that the United States under any tariff conditions would be a great manufactur- ing country, and seemed to warrant the belief that the desire for freedom in the use of materials would become stronger, the prospect of an expanding foreign trade more tempting, the demand for protection to domestic industries less insistent. The need of foreign wool for clothing the people of the United States and the inade- quacy of the domestic supply were clear then, and in- deed became more clear in the intervening years. In the woollen manufacturing industry itself it was to be ex- pected with confidence that, once the transition to free wool accomplished, the manufacturers would oppose a return to the old regime. And, as it proved, the manu- facturers expressed themselves in terms surprisingly strong on the disadvantages, from their point of view, of a return to the wool duties.' If, nevertheless, the change was made, the explanation is to be found mainly in the unexpected turn of the political wheel. ' " Never until he had experience under free wool did the manufacturer realize the full extent of the disadvantages he suffers by reason of the wool duty, and the impossibility, by any compensating duty, of fully offsetting these disadvantages." So much was said in the statement made before the Ways and Means Committee by the secretary of the Wool-Manufacturers' Association. Bulletin of the Wool Maf'ufocturers, March, 1897, p. 84. 330 HISTORY OF THE EXISTING TARIFj: Wool is the article as to which it can be said with greatest truth and greatest plausibility that the farmer gets his share of the largesses of protection. It is true that in 1892 the farmers of Ohio and of other central States seemed to show that they were indifferent to the attraction ; for in that year a whole row of central States had voted against the party of protection, and in Ohio itself the victory of that party had been so narrow as to be equivalent to a defeat. It is true also that the main effects of the duty on wool would certainly be to stimu- late the activity and increase the profits of the large wool-growers in the thinly settled trans-Missouri region, rather than to benefit substantially the farmers proper.' But the determination to give evidence of fostering care for the farming interest was too strong to be affected ' In a forma] communication to the Ways and Means Committee the Wool-Manufacturers' Association used the following language : " The real explanation of these extraordinary demands lies in the fact that the wool- growers of the Middle West find themselves in need of protection against their American competitors west of the Mississippi River. It was not the imports under the McKinley law, but the cheaper-grown wools of the Far West, which made wool-growing relatively unprofitable on the high-priced lands of Ohio, Michigan, Pennsylvania. Every further expansion of the ranch industry must increase the effects of this competition. An enormous tariff on wool, such as is proposed, would overstimulate this ranch industry, by its promise of excessive profits, and would thus still farther increase the difficulties of the Middle-West farmer.'' Bulletin of the Wool-Manufac- turers, June, 1897, p. 133. The wool-growers had at first asked a duty of fifteen cents a pound on clothing and combing wool, and finally had pro- posed, as an "ultimatum," twelve cents. The manufacturers had offered to join in recommending duties of eight and ten cents (graded by value) on clothing wool, and of nine and eleven cents on combing wool. In the act the growers got substantially their ultimatum, — eleven cents on clothing WQol, twelve cents on combing wool. THE TARIFF ACT OF 1897. 33 1 by such considerations. The silver party had posed ostentatiously as the special friend of the debtor and the farmer. The Republicans, having pushed forward the tariff as their first strong card, must needs do something for the farmer; and heavy duties on wool were the natural result, consistent at once with the established party policy and with the long-continued and earnest contention of President McKinley himself. One other part of the wool duties served to show how the general political complications affected the terms of the tariff act. The duties on carpet wool, as has already been noted, were made higher than ever before. In the House the rates of the act of 1890 had been retained; but in the Senate new and higher rates were inserted, and, though somewhat pruned down in the Conference Committee, were retained in the act. They were de- manded by the Senators from some States in the far West, especially from Idaho and Montana. These Senators, though Republican, were on the silver side in the mone- tary controversy, and so by no means in complete accord with their associates. They needed to be placated ; and they succeeded in getting higher duties on the cheap carpet wools, on the plea of encouragement for the com- paratively coarse clothing wool of their ranches. It had been shown time and again, on the very principles of protection, that carpet wools were not grown in the country, and that those imported did not affect to any appreciable extent the market for domestic wool. But the Western Senators, who held the balance of power, 332 HISTORY OF THE EXISTING TARIFF. were able none the less to secure this concession to their demands. It deserves to be noted, on the other hand, that the Senate had been disposed to lower the duties on cloth- ing and combing wool. The Finance Committee had pro- posed rates of eight and nine cents a pound, and the Senate itself had voted rates of ten and eleven cents ; the reduction being due to the influence of the manufacturers, who were opposed to the high duties not only because of the price ad- ded on the raw material, but also because of the still higher duties on their own products which would be entailed.' But in the Conference Committee the House rates of eleven cents on clothing wool and twelve cents on combing wool were restored, and so appeared on the statute book. The same complications that led to the high duty on carpet wool brought about a duty on hides. This rawest of raw materials had been on the free list for just a quarter of a century, since 1872, when the duty of the war days had been repealed. It would have remained free of tax if the Republicans had been able to carry out the policy favored by the great majority of their own number. But here, again, the Senators from the ranch- ' " It is not pleasant for the American wool manufacturer to be told that the average ad-valorem rate upon woollen goods, under the tariff of i8go, was 98 per cent. It does not particularly help the case from the consumer's point of view to reply that the actual protective duty accorded him under that law did not exceed 45 per cent. The public looks at the fact — 98 per cent.'' So spoke the Secretary of the Wool-Manufacturers' Association to the House Committee. Bulletin of the Wool Manufacturers, March, 1897, p. 83. None the less, the manufacturers in 1897 secured, and pre- sumably asked for, an increase of the protective (i. c, ad-valorem) duty on woollens to 55 per cent., — a rate higher than any imposed before. THE TARIFF ACT OF 1 897. 333 ing States were able to dictate terms. In the House bill, hides had still remained on the free list. In the Senate a duty of 20 per cent, was tacked on. The rate was reduced to 15 per cent, in the Conference Committee, and so remained in the act. The restored duties on wool necessarily brought in their train the old system of high compensating duties on woollens. Once more we find the bewildering com- bination of ad-valorem duties for protection and specific duties to compensate for the charges on the raw material. In the main, the result was a restoration of the rates of the act of 1890.' There was some upward movement almost all along the line ; and the ad-valorem duty alone, on the classes of fabrics which are most largely imported, crept up to 55 per cent. Just thirty years before, in 1867, when the system of compound duties on woollens was first carefully worked out, it rested on the assumption that a " net " protection of 25 per cent, was to be secured. But the ad-valorem rate, designed to give this net protection, had advanced steadily in the acts of 1883 and 1890, and in the act of 1897 reached 55 per cent. ! ' The drift of the changes from the rates of 1890 is shown by the follow- ing figures as to the two classes of goods most largely imported : DUTIES ON WOOLLEN CLOTHS. 1890. (i) If worth 30 cents or less per pound, 33 cents per pound plus 40 per cent. (2) If worth between 30 and 40 cents per pound, 38J cents per pound plus 40 per cent. 1897. (1) If worth 40 cents or less per pound, 33 cents per pound plus 50 per cent. 334 HISTORY OF THE EXISTING TARIFF. The experiment of free wool and of moderated (though but slightly moderated) duties on woollens, was thus tried under the act of 1894 for three short years, and these, moreover, years of great general depression. As has been already said, even under normal business con- ditions the transition from the system of high duties must have been for a while disturbing and trying, and the full effects of the change, alike for consumers and producers, could not have worked themselves out for several years.' (3) If worth more than 40 cents per pound, 44 cents per pound plus 50 per cent. (2) If worth between 40 and 70 cents per pound, 44 cents per pound plus 50 per cent. (3) If worth over 70 cents per pound, 44 cents per pound plus 55 per cent. DUTIES ON DRESS GOODS. 1890. (1) Cotton warp, worth 15 cents a yard or less, 7 cents a yard plus 40 per cent. (2) Cotton warp worth more than 15 cents a yard, 8 cents a yard plus 50 per cent. (3) If the warp has any wool, 12 cents a yard plus 50 per cent. 1897. (i) and (2) the same ; but with the proviso that the ad-valorem duty shall be 55 per cent, if the value is over 70 cents per pound. (3) If the warp has any wool, 1 1 cents per yard plus 50 per cent. ; but with the proviso that the ad-va- Im'em duty shall be 55 per cent. if the value exceeds 70 cents per pound. It will be observed that, under the act of 1897, on dress goods (of which some $20,000,000 worth was imported in 1896), the customs officers must ascertain, first, whether the warp consists ' ' wholly of cotton or other vege- table material " ; if so, whether the goods are worth more or less than 7 cents a yard ; if not, whether they are worth more or less than 70 cents a pound. All these circumstances affect the rate of duty, and obviously in- crease the difficulties of administration and the opportunities for evasion. ' See above, pp. 294-296. THE TARIFF ACT OF 1 897. 335 While the manufacturers had cheaper wool and unlimited choice in the use of it, they had to learn to avail them- selves of this advantage. The wool-growers, especially in the central districts, had to face a fall in the price of wool, and had hardly time to make the change (more or less inevitable under any conditions) of raising sheep for mutton rather than for wool. As it happened, all this distressing transition was made the more trying because it took place in a period when all industry was de- pressed. Just as the general revulsion of the years 1893- 97 was ascribed by the protectionists to the tariff act of 1894, so the special difficulties of the wool manufacturers and wool-growers were ascribed to that measure, and here with some show of reason. Given a reasonable time, with general economical conditions of a normal sort, and it is more than probable that the new regime in the wool in- dustry would have won its way to general acceptance. But the experiment of free wool and of simple duties on woollens was tried for too short a time to prove the wisdom of the change.' On cotton goods the general tendency was to impose duties lower than those of 1890. This was indicated by the drag-net rate, on manufactures of cottr^n not other- wise provided for, which had been fifty pet £ent. in 1890, and was 45 per cent, in 1897. There was, again, as in ' On the episode of 1894-97, and indeed on the whole history of wool- growing from the earliest times to 1908, by far the best investigation is that of Professor C. \V. Wright, Wool-growing and the Tariff, published in the Harvard Economic Studies (1910). 33^ HISTORY OF THE EXISTING TARIFF. 1890, a rigorously elaborate system of combined specific and ad-valorem duties on certain sorts of goods selected for especially heavy rates, such as cotton stockings and hose, and plushes, velvets, corduroys.' In the main, the cotton manufacturers held aloof from the new measure. The rates of the act of 1894 had been not unsatisfactory to them ; and they may have feared some such policy in regard to their material as befell the wool manufacturers. In fact, the Senate, in the course of its tortuous amend- ments, inserted in the bill (apparently somewhat to its own surprise) a duty on raw cotton, designed to check the importation of certain kinds of Egyptian cotton whose fibre fits it for some special uses. But here no po- litical complication within the Republican party bolstered up the change; and this proviso, absurd enough, but no more absurd than those relating to carpet wool and to hides, disappeared in the Conference Committee. On two large classes of textile goods new and distinctly higher duties were imposed, — on silks and linens. The duties on silks present a remarkable case of the unexpected extension of the protective system. From the time of the ' Compare pp. 267-269 above, where the duties on these articles under the act of 1890 are referred to. The same objectionable method of specific duties, graded by value, was applied in the act of 1897, and in general with higher rates ; thus by paragraphs 315, 318, 319, 386 of the act of 1897. On cotton hose, to give a single example, the lowest classes («'. e., the cheapest goods) and the rates on them were : Class. Duty. In 1890 — Value 60c. or less per dozen 20c. a dozen plus 2C^ In 1897 — Value $i or less per dozen 50c. a dozen plus \^% Clearly, the duty of 1897 was very much higher than that of 1890 had been. THE TARIFF ACT OF 1 897. 337 civil war, silks had been subject to heavy ad-valorem duties — 60 per cent, from 1864 to 1883, ^^id 50 per cent, from 1883 to 1897. These duties had caused a great silk-manufacturing industry to grow up, with results that were in some respects surprising, and might perhaps be cited as showing the possibility of successful applica- tion of protection to young industries. But the measure of apparent success thus attained, and the degree of pro- ' tection thus afforded, did not satisfy the manufacturers or the dominant protectionists. An increasing compe- tition from silk goods produced in Japan was feared, the spectre of " cheap labor " being invoked once more. Moreover, the fraud and undervaluation inevitable under any high ad-valorem duty had long suggested the de- sirability of arranging some schedule of specific duties on silks. Unquestionably the administration of the ad- valorem duty had been unsatisfactory, and the rates of 50 and 60 per cent, had been less effective in checking imports than they would have been without the almost systematic undervaluations by consignees and agents. On the other hand, the difficulties of framing a schedule of specific duties were great, and indeed had hitherto been thought insuperable. In view of the greatly vary- ing qualities of the goods, and the difficulty of grading them by any external marks, duties by the pound or yard would be too high on the cheaper goods, disproportion- ately low on the dearer. The act of 1897 boldly at- tempted to grapple with the difficulties of the case, and for the first time imposed specific duties on silks. The 338 HISTORY OF THE EXISTING TARIFF. mode of gradation was to levy the duties according to the amount of pure silk contained in the goods. The duties were fixed by the pound, being lowest on goods containing a small proportion of pure silk, and rising as that proportion became larger; with the proviso that in no case should the duty be less than 50 per cent. This plan brought about an unquestionable increase in the rates, especially on the cheaper silks. How great the in- crease was, could be judged only by a person minutely conversant with the trade, and might be difficult to cal- culate in advance even by such a person. On the other hand, it was doubtful v/hether the administrative difficul- ties encountered under the high ad-valorem duties of previous acts would not appear in full force under this one. The exact determination of the percentage in weight of pure silk in any given piece of so-called silk goods could hardly be an easy matter. Yet this had to be precisely ascertained for the satisfactory administra- tion of the duties of 1897. Thus, the duty on certain kinds of silks was $1.30 per pound, if they contained 45 per cent, in weight of silk; but advanced suddenly to $2.25, if they contained more than 45 per cent. The same sort of gradation, bringing sudden great changes in duty as an obscure dividing line was crossed, ran through the whole schedule ; and the temptation to false statement at the hands of the importer would seem to be as great as the difficulty of detection at the hands of the customs examiner. Both in the high range of rates and in the attempt at rigorous enforcement the new act here THE TARIFF ACT OF 1 897. 339 went far beyond the act of 1890, making a new and im- portant advance in the application of extreme protection.' On linens another step of the same kind was taken, specific duties being substituted here also for ad-valorem. In 1890, the ad-valorem rate on linens had been raised to 50 per cent., to be reduced in 1894 to 35 per cent. In 1897, a compound system was adopted: specific duties imposed with ad-valorem supplements, such as had already been tried on cotton hose, velvets, and other fabrics. Linens were graded somewhat as cottons had been graded since 1861, according to the fineness of the goods as indicated by the number of threads to the square inch. If the number of threads was sixty or less per square inch, the duty was one and three fourths ' The important part of the silk schedule in the act of 1897 is paragraph 387, which fixed the duties on "woven silk fabrics in the piece, not specially provided for." The same rates are applicable, under section 388, to silk handkerchiefs. The method of grading is exemplified by the following summary statement of some of the rates first enumerated. Duties on silk piece goods : (i) containing 20^ or less in weight of silk, if in the gum $0. 50 per lb. if dyed in the piece .60 " (2) containing 20 to 30^ in weight of silk, if in the gum 65 " if dyed in the piece .80 " (3) containing 30 to 45^ in weight of silk, if in the gum 90 " if dyed in the piece i.io " (4) containing y>% or less in weight of silk, if dyed in the thread or yarn, black 75 " other color 90 " (5) containing 30 to 45^ in weight of silk, if dyed in the thread or yarn, black i.io " other color 1.30 " So the schedule goes on, the duties advancing by stages as the per cent, in weight of silk becomes greater, as the goods are dyed in the thread or yam. 340 HISTORY OF THE EXISTING TARIFF. cents a square yard ; if the threads were between sixty and one hundred and twenty, the duty was two and three fourths cents; and so on, — plus 30 per cent, ad- valorem duty in all cases. But finer linen goods, unless otherwise specially provided for, were treated leniently. If the weight was small (less than four and one half ounces per yard), the duty was but 35 per cent. On the other hand, linen laces, or articles trimmed with lace or embroidery, were dutiable at 60 per cent., — an advance at 10 per cent, over the rate of 1890. The new specific duties on linens were expected to induce some cotton mills to turn to cheaper grades of linens, such as towel cloth ; but the general conditions of the manufacture of finer linens made it doubtful here, as in the case of finer silks and woollens, whether the imported fabrics would be supplanted. as the goods are ' ' weighted in dyeing so as to exceed the oiiginal weight of the raw silk,'' and so on. Goods of lighter weight (less than i^ ounces per yard) are subject to still higher duties ; those of lightest weight (|^ ounce per yard or less), to the highest duty of all, the maximum being $4.50 per pound. It deserves to be noticed that the woollen manufacturers, confronted with the undervaluation problem under the ad-valorem duties on woollens, found it impossible to frame a scheme of specific duties. A special committee from their number, which attempted to devise such a scheme, found that ' ' a wholly specific schedule is impossible, because of the thousands of varia- tions — in weave, in texture, in materials, in finish — which distinguish wool- len goods from those of all other textile manufactures." See Sulletitt of the Wool Manufacturers, March, 1897, p. 72. In the tariff bill as passed by the House the duties on woollens (over and above the compensating duty) had been made partly ad valorem and partly specific with gradations by value. But this additional complication in the woollens schedule was struck out in the Senate. THE TARIFF ACT OF 1897. 341 It was inevitable, under the political conditions of the session, that in this schedule something should again be attempted for the farmer; and, accordingly, we find a substantial duty on flax. The rate of the act of 1890 was restored, — three cents a pound on prepared flax, in place of the rate of one and one half cents imposed by the act of 1894. Here, too, no appreciable economic change was likely to result. Bagging for cotton, which had been admitted free under the act of 1894, was sub- jected to a duty, but a lower duty than that of 1890: the rate being -^-^ cent per square yard in 1897, as compared with IyV cents in 1890. This compromise may also be regarded as making some concession to the planter of the South. On chinaware the rates of 1890 were restored. The duty on the finer qualities which are chiefly imported had been lowered to 35 per cent, in 1894, and was now once more put at 60 per cent. On glassware, also, the general ad-valorem rate, which had been reduced to 35 per cent, in 1894, was again fixed at 45 per cent., as in 1890. Similarly the specific duties on the cheaper grades of window-glass and plate-glass, which had been lowered in 1894, were raised to the figures of 1890; though on some of the more expensive kinds of plate-glass the lower rates of 1894, being still sufficient to prevent importation, were left substantially unchanged. The metal schedules in the act of 1897 showed in the main a striking contrast with the textile schedules. Im- portant advances of duty were made on many textiles, 342 HISTORY OF THE EXISTING TARIFF. and in some cases rates went considerably higher even than those of 1890. But on most metals, and especially on iron and steel, duties were left very much as they had been in 1894. Indeed, Mr. Dingley, in introducing the bill in the House, said that, " the iron and steel schedule, except as to some advanced products, had not been changed from the present law, because this schedule seemed to be one of the two of the present law [the other being the cottons schedule] which are differentiated from most of the others, and made in the main pro- tective." Hence we find, as in the act of 1894, iron ore subject to duty at forty cents a ton, and pig iron at four dollars a ton. On steel rails also there was no change from the comparatively moderate rate of 1894; it remained $7.84 per ton. On coal there was a compromise rate. The duty had been seventy-five cents a ton in 1890, and forty cents in 1894; it was now fixed at sixty- seven cents. On the other hand, as to certain manufactures of iron and steel farther advanced beyond the crude stage, there was a return to rates very similar to those of 1890. Thus, on pocket cutlery, razors, guns, we find once more the system of combined ad-valorem and specific duties, graded according to the value of the article. It is not easy to unravel the meaning and probable effects of the complicated duties imposed in these cases ; but it is clear that they were framed with a view to imposing a very high barrier to imports, and yet were arranged on the system, vicious from the administrative point of view, of THE TARIFF ACT OF 1 897. 343 bringing sudden changes in duty as a given point in ap- praised value is passed." Some other items in the metal schedule deserve notice. Copper remained on the free list, where it had been put in 1894. Already in 1890 the duty had been reduced to one and one fourths cents per pound. As the copper mines, almost alone among the great enterprises of the country, had been enjoying uninterrupted prosperity, even during the period of depression, and had been ex- porting their product on a great scale, no one cared a straw for the duty. For good or ill the copper duty had worked out all its effects years before. On the other hand, the duties on lead and on lead ore went up to the point at which they stood in i8go. Here we have once more the signs of concession to the silver Republicans ' Pocket cutlery supplies a good example of the methods applied in the acts of i8go and 1897 to the articles here mentioned. The rates of duty were : 1890. Class. Duty. (1) Value (per dozen) 50 cents or less. 12 cents (per dozen) plus 50 per cent. (2) Value 50 cents % I1.50. 50 cents plus 50 per cent. (3) Value $1.50 @ $3.00. $1.00 plus 50 per cent. (4) Value over $3.00. $2.00 plus 50 per cent. 1897. Class. Duty. (a) Value (per dozen) 40 cents or less. 40 per cent, (i) Value 40 @ 50 cents. 12 cents plus 40 per cent. (2) Value 50 cents @ $1.25. 60 cents plus 40 per cent. (3) Value $1.25 @ $3.00 per dozen. $1.20 plus 40 per cent. (4) Value over $3.00. $2.40 plus 40 per cent. It will be seen that on the cheapest knives there was a reduction in duty as compared with 1890 ; while on the higher classes, and especially on the sec- 344 HISTORY OF THE EXISTING TARIFF. of the far West. A considerable importation from Mexico of ores bearing both lead and silver had brought some competition with American mines yielding the same metals — competition which could not well be helped as to the silver, since that would find its way to the international market in any case, but which could be impeded so far as the domestic market for lead was con- cerned. Accordingly there was a substantial duty on lead, and on lead-bearing ore in proportion to the lead contained.' In general, the duties in the metal schedule ceased to excite controversy, and even to arouse attention. Whether or no as a result of the application of the pro- tective system, the iron and steel industry had in fact ond, there was an increase. The most effective change was that by which the line of classification by value was shifted from $1.50 to $1.25, — a shift which caused many goods to come under class 3 in 1897 which were in class 2 in i8go, and so caused a great advance in the duty chargeable. It may be noted inciden-tally that the figure of $1.50, to mark the dividing line be- tween classes i and 2, had been retained both in the House bill and in the Senate bill : the change to |r.25 was made at the last moment in the Con- ference Committee. It needs only a glance at the duties under these classes in 1897 to show how great will be the temptation to manufacture knives, and to juggle with their value, in such manner as to bring them below the divid- ing line of $1.25. The same vicious method of grading the duties on pocket- knives had been followed in the act of 1894, though with somewhat lower rates. In i8go and 1897 (not in 1894) the method was also applied to razors, table-knives, and guns, and in 1897 to shears and scissors. The pertinent paragraphs of the act of 1897 are numbers 153 to 158. 'The duties from 1890 to 1897 were : Lead ore, per pound Lead per pound, of lead contained. '^ '^ 1890 \\ cents. 2 cents. 1894 f cent. I cent. 1897 \\ cents. 2j cents. THE TARIFF ACT OF 1 897. 345 passed the period of tutelage, and had become not only independent of aid, but a formidable competitor in the markets of the world. The extraordinary development of this industry during the period between 1870 and 189S is one of the most remarkable chapters in the remarkable economic history of our century. The discovery of the wonderful beds of iron ore on Lake Superior; the fever- ish development of the coal deposits of the middle West ; the amazing cheapening of transportation by water and rail ; the bold prosecution of mining, transportation, manu- facturing, not only on a great scale, but on a scale fairly to be called gigantic — all these revolutionized the con- ditions of production. They called for resource and genius in the captains of industry; enabled the bold, capable, and perhaps unscrupulous to accumulate fortunes that rouse the uneasy wonder of the world ; and gave rise to new social conditions and grave social problems. Some- thing of the same sort happened in the growth of copper mining; though here the richness of the natural resources counted far more, and the situation in general was more simple. Among the forces which were at work in these industries, protective duties probably counted for much less than is often supposed. An eagle eye in divining possibilities, boldness and resource in developing them, skill and invention in designing the most effective mechani- cal appliances, — these forces of character and of brains, developed by the pressure of competition in a strenuous community, and applied under highly favoring natural conditions, explain the prodigious advance, 346 HISTORY OF THE EXISTING TARIFF. The forces which so completely changed the situation of the iron and steel industry were most actively at work through the decade from 1880 to 1890. By 1890 they had worked out their effects on such a scale as to com- mand general attention. In that year, for the first time, the production of pig iron in the United States exceeded that of Great Britain. The enormous output, and the cheapened cost, must soon have brought a sharp fall in prices. The crisis of 1893, and the depression which followed, precipitated the fall, and soon, as is the com- mon effect of such revulsions, intensified it. Prices of all the crude forms of iron and steel went down to the foreign level and even below it. After a long period of gradual but rapid change, the results of the new condi- tions in the industry now suddenly worked themselves out. Not only was the domestic market fully supplied, but the beginnings of an export movement appeared. Imports of the cruder forms of iron and steel ceased en- tirely, and the more highly manufactured forms which continued to be brought in were mainly " specialties," made by unusual processes or affected by exceptional conditions. Perhaps the most striking consequence of these changed conditions was the new situation as to steel rails. With the aid of cheaper pig iron, and by means of improved methods, rails were made as cheaply as in Great Britain, if not more cheaply. The combination which had succeeded for so many years in keeping the price of rails above the normal point, was still able tq THE TARIFF ACT OF 1 897. 347 hold together for some years after 1893. But the stress of continued depression, slackened demand, and sharper rivalry, finally caused it to give way in 1897, and the price of rails dropped abruptly. The duty imposed in the act of 1897 ($6.72 per ton) was nominal ; for domestic prices were as low as foreign. Doubtless, in the future, such a duty, like those of former acts, might facilitate another combination and another period of inflated prices. But for the time, steel rails were exported, not imported, and at all events the period when protection could be said in any sense to be needed had clearly passed.' Another consequence of the changed conditions in the iron and steel industry was that the duty on tin plate, a bone of contention under the act of 1890, was dis- posed of, with little debate, by the imposition of a com- paratively moderate duty. The higher duty on that article in the act of 1890 {2\ cents per pound) had been advocated by protectionists and attacked by their oppo- nents with equal bitterness. Yet the reduction in 1894 (to i-J- cents) had aroused little comment; while in 1897, with the protectionists in full command, it was raised to no more than \\ cents, again with little comment. In the intervening period the prices of the steel sheets from which tin plates are made (tin plates being simply sheets of steel coated with tin) had fallen in the United States in sympathy with the prices of all forms of iron and steel ; and this not only absolutely, but as compared ■ See the figures in Appendix V. 348 HISTORY OF THE EXISTING TARIFF. with the prices of similar articles in Great Britain. Hence even the duty of 1894 was as effective for the purposes of promoting the manufacture of this particular article, as had been the higher duty of 1890; while that of 1897, which was a trifle higher than that of 1894, was more than sufficient to maintain the protectionist sup- port for the industry. The episode was certainly a curious one. The much-contested duty of 1890 went into effect just at a time when the general development of the iron and steel industry was preparing the way for the immediate effectiveness of the duty in stimulating do- mestic production ; while the rapid fall in iron and steel prices after 1890, and especially after 1893, enabled the tin plate manufacture to hold its own, after a brief space, with a much lower duty than it had so insistently de- manded in 1890. A part of the act which aroused much public attention and which had an important bearing on its financial yield was the sugar schedule — the duties on sugar, raw and refined. It will be remembered that the act of 1890 had admitted raw sugar free, while that of 1894 had imposed a duty of 40 per cent, ad valorem. This ad-valorem rate had produced a revenue much smaller thari had been ex- pected, and, indeed, smaller than might reasonably have been expected. Notwithstanding the insurrection in Cuba and the curtailment of supplies from that source, the price of raw sugar had maintained its downward ten- dency ; and the duty of 40 per cent, had been equivalent in 1896 to less than one cent a pound. In the act of THE TARIFF ACT OF 1 897. 349 1897 the duty was made specific, and was practically doubled. Beginning with a rate of one cent a pound on sugar tested to contain 75 per cent., it advanced by stages until on sugar testing 95 per cent, (the usual con- tent of commercial raw sugar) it reached 1.65 cents per pound. The higher rate thus imposed was certain to yield a considerable increase of revenue. Much was said also of the protection now afforded to the beet sugar industry of the West. That industry, however, was still of small dimensions and uncertain future. The pro- tection now extended to it, moreover, was no greater than had been given by the sugar duty, even higher than that of 1897, which had existed from the close of the civil war to 1890. No doubt the changed conditions of agriculture and of the methods of beet sugar manufacture might cause the same duty to have a greater effect at the close of the century than during the earlier period. But this efTect could come but slowly, and for many years the sugar duty would not fail to yield a handsome revenue to the Treasury ; while at the same time it en- abled the protectionist party to pose once more as the faithful friend of the farmer. On refined sugar, the duty was made 1.95 cents per pound, which, as compared with raw sugar testing 100 per cent., left a protection for the domestic refiner, — i. e., for the Sugar " Trust," — of one eighth of one cent a pound. Some intricate calculation would be necessary to make out whether this " differential" for the refining in- terest was more or less than in the act of 1 894 ; but, having 350 HISTORY OF THE EXISTING TARIFF. regard to the effect of the substitution of specific for ad- valorevt duties, the Trust was no more favored by the act of 1897 than by its predecessor, and even somewhat less favored.' The changes which this part of the tariff act underwent in the two Houses are not without signifi- cance. In the bill as reported to the House of Repre- sentatives by its committee, and as passed by the House, the initial rate on the crudest sugar (up to 75 degrees) was the same as that finally enacted, one cent ; but the rate of progression was slower (.03 cent for each de- gree instead of .035), and the final duty on the important classes of raw sugar in consequence somewhat less. The so-called differential, or protection to the refiners, was one eighth of a cent per pound. In the Senate there was an attempt at serious amendment. The influence of the Sugar Trust in the Senate had long been great. How secured, whether through party contributions, entangling ' The rates of 1897 were : On raw sugar testing up to 75 degrees i cent per lb. For each additional degree T^^ " " Hence raw sugar testing 95 degrees pays 1.65 " And raw sugar testing 100 degrees pays 1.825 " " Re6ned sugar pays 1.95 " " Leaving a difference between the refined sugar rate and that on raw sugar at the 100 degree rate of 125 " " In regard to sugar coming from countries paying an export bounty, the act of 1897 made a change from the methods of 1890 and 1894, when a fixed additional duty of ^5 cent per pound had been imposed on bounty-fed sugar. It was now provided in general terms (in section 5 of the act of 1897) that on any article on which a foreign country paid an export bounty, an additional duty should be imposed " equal to the net amount of such bounty or grant " ; the Secretary of the Treasury being required to ascertain this amount in each case. THE TARIFF ACT OF 1 897. 35 I alliance, or coarse bribery, the public could not know ; but certainly great, as the course of legislation in that body demonstrated. The Senate Finance Committee reported an entirely new scheme of sugar duties, partly specific and partly ad valorem, complicated in its effects, and difificult to explain except as a means of making conces- sions under disguise to the refiners. But here, as on other points, the Senate treated its committee with scant respect, threw over the whole new scheme, and re-inserted the rates of the House bill on raw sugar, but with an in- creased differential, amounting to one fifth of a cent, on refined sugar. So the bill went to the Conference Com- mittee, with the differential alone in doubt. What de- bates and discussions went on in that committee is not publicly known. It is one of the curious results of our legislative methods that the decisive steps are often taken in star chamber fashion. But it was credibly re- ported that the sugar schedule was the sticking-point, — that on this schedule, and this only, each branch was obstinate for its own figures. Finally, the Senate gave way. By slightly increasing the duty on raw sugar, and leaving that on refined at the point fixed by the Senate, the House secured virtually the retention of the status quo as to the differential in favor of the Sugar Trust. The result certainly was in striking contrast to that of 1894. Then, too, there was a struggle between the House and the Senate on the protection of the Trust, — not indeed on that alone, but on that conspicuously. Then the House had proposed to wipe out all duties, 352 HISTORY OF TBE EXISTING TARIFF. and so all protection ; while the Senate had proposed a substantial largess to the Trust. After a struggle much longer than that of 1897, the House had given way, and its leaders had been compelled to make a mortifying concession to an unpopular policy. The outcome in 1897 was, it is true, in substance not different. The differential was the same under the act of 1897 as it had been under that of 1894; and the increase in the duty on raw sugar once more enabled the refining monopoly, as the one large importer, to make an extra profit, tem- porary but handsome, by heavy imports hurried in before the new act went into force. But the moral effect was very different. The House in 1897 had adopted the plan of leaving things as they were, and had successfully resisted the effort of the refining monopoly to secure more. The result was due mainly to greater party co- hesion and more rigid party discipline, enforced by the genial despotism of the autocratic Speaker of the House. The tariff act of 1894 had repealed the provisions as to reciprocity in the act of 1890, and had rendered nugatory such parts of the treaties made under the earlier act as were inconsistent with the provisions of its successor.' The act of 1897 now revived the policy of reciprocity, and in some ways even endeavored to enlarge the scope of the reciprocity provisions." One of its sections recited, in almost the exact phraseology of the act of 1890, that the ' Section 71 of the act of 1894. ' Sections 3 and 4 of the act of 1897. THE TARIFF ACT OF 1 897. 353 President, if satisfied that other countries imposed duties that were ' ' reciprocally unequal and unreasonable, "might suspend the free admission of certain specified articles — tea, coffee, tonka beans, and vanilla beans — and that these articles should thereupon be subject to duty, coffee at three cents a pound, tea at ten cents, and so on. The act of 1890 had held out the threat of duties as to some other important articles — sugar and hides. But these could not now be easily used for the reciprocity clauses, being dutiable in any case. Tonka beans and vanilla beans, even though imported mainly from the tropical parts of South America, were hardly weighty substitutes. Quite different in purpose, and' designed to reach countries of the same rank in power and civilization as the United States, were some provisions which contem- plated not fresh duties, but a reduction of those imposed by the new act. In the first place the President was authorized, " after securing reciprocal and reasonable concessions," to suspend certain duties, and to replace them by duties somewhat lower. The articles on which reductions could thus be made were argol (crude tartar), brandies, champagne, wines, paintings, and statuary. The country aimed at was France. The higher duties on silks in the new act would especially affect this countiy, and might tempt her to reprisals. Her system of maximum and minimum duties, adopted in 1892, was expressly devised as a means of securing concessions in commercial negotiations. Now the United States fol- lowed suit, and arranged her own system of duties in 354 HISTORY OF THE EXISTING TARIFF. such manner that concessions were provided for in advance. More important in its scope, but so limited as regards time and conditions as to promise little practical result, was the next section, which contemplated commercial treaties for general reductions of duties. The President was authorized to conclude treaties providing for reduc- tions of duty, up to 20 per cent., on any and every article. But the treaties must be made within two years after the passage of the act; the reductions could be arranged only through a period not exceeding five years ; and the treaties must be ratified by the Senate, and further " approved by Congress," that is, by the House as well as by the Senate. The other reciprocity arrange- ments, described in the preceding paragraphs, did not need the consent even of the Senate. The arrangement for a possible general reduction of duties by 20 per cent, was not contained in the House bill, but was inserted by the Senate in the course of its amendments. Restricted as it was, the chance of its leading to any change in the rates of duty was of the slightest.' An important aspect of the new act, and one much dis- cussed, was its fiscal yield. Designed to give protection to domestic industries, it was expected also to bring to the Treasury a much-needed increase of revenue. This combination of industrial and fiscal policy is too common ' Under the first described of these reciprocity plans, commercial agree- ments were soon reached with France, Germany, Italy, and Portugal. No treaties of the second sort were ever made. THE TARIFF ACT OF 1 897. 355 in the history of the United States, as indeed in that of other countries, to have aroused much comment. Yet it was certainly unfortunate that so little attention was given to the simple question of revenue, without regard to protection or free trade. Additional taxes on beer or on tobacco (not to mention duties on tea and coffee), even though so moderate in rate as to have been little noticed and easily born by consumers, would have yielded a large, steady, and easily collected revenue. Proposals for taxes of this sort were indeed made by the Senate Finance Committee; but most of them were struck out by the Senate itself, and hardly a trace re- mained in the act as passed. A slight increase in the tax on cigarettes and a modification of certain rebates in the taxes on beer alone remained as simply fiscal measures. Barring these minor changes, protective duties, and these only, were relied on to convert the deficit into a surplus. There was much heated discussion immediately after the passage of the act as to its effect on the public finan- ces; it being predicted with equal confidence that it would fail to secure the desired revenue, and that it would convert the deficit into a surplus. It was cer- tainly to be expected that, — once the heavy imports rushed in just before the passage of the act were out of the way, — the increased duties on sugar, on wool and woollens, and on other articles, would swell the revenue considerably. But how much ? On this subject the only thing certain was that the financial effect was en- tirely uncertain. All calculations as to the fiscal results of 356 HISTORY OF THE EXISTING TARIFF. such customs legislation as the United States undertook in 1883, in 1890, in 1894, and in 1897, rest simply on guesswork. Supposing the imports to remain the same as in some previous year, it is possible to state what a given rate of duty will yield ; but no one can foretell with any approach to accuracy what the imports will be. This is more particularly the case with imports of pro- tected articles, and so with the revenue derived from them. Such an article as sugar, indeed, once the rate of duty is fixed, yields a fairly regular amount. Barring sugar, we have in the main dutiable imports that fluctuate greatly and unexpectedly from year to year. Even with rates unchanged, it is impossible to know in advance with any degree of certainty what the revenue will be. In times of activity imports tend to rise, and the revenue swells; in times of depression they tend to fall, and the revenue shrinks. He who could foretell the oscillation of the industrial tides would have something on which to base an estimate of the direction at least, if not of the rate, in the movement of the national revenues. But even for the most experienced observer and under stable rates of duty, there must always be a large margin of un- certainty in estimates of the future tariff revenue. With rates much changed, no estimate can be more than a guess. The discussions as to the revenue to be expected from the act of 1897 served to bring into vivid relief not only the haphazard character of our fiscal methods, but the need of reform in the general financial and monetary THE TARIFF ACT OF 1 897. 357 * system. One of the arguments urged in favor of its passage was that an increase of revenue was necessary in order to enable the Treasury to fufill its obh'gations for the maintenance of gold payments ; and it was even maintained that a surplus was the one thing needful to bring about a sound and stable monetary situation. No doubt, as things had stood ever since the resumption of specie payments in 1879, 't was not only desirable on grounds of every-day prudence that the revenue should at least equal the expenditure, but this was important for the monetary responsibilities which had been imposed on the Treasury of the United States. It was clear, how- ever, that a continuing surplus, and the unfailing avoid- ance of a deficit, were not to be expected. A large accumulated surplus tempts to reckless expenditure, as it did in 1890; while the inevitable periods of depression recurrently cut down the revenue, and make occasional years of deficit more than probable. It was unfortunate that the questions of protection to domestic industries and of revenue for the government should be interwined. This source of difficulty, which had so much affected tariff legislation in 1894 as well as in 1897, was removed in 1900, when the gold standard act reorganized the Treasury and set aside the reserve fund of 150 millions for the security of the paper money. Thereby the monetary system was made independent of fluctuations in the general revenue. The question of protection and free trade still remained complicated with the revenue prob- lem of the government ; and this was inevitable, as 358 HISTORY OF THE EXISTING TARIFF. long as customs duties were so largely relied on for meeting the national expenses. But the monetary problem at least was finally separated from the fiscal problem. The tariff of 1897, like that of 1890, was the outcome of an aggressive spirit of protection. As in 1890, much was said of the " verdict of the people " in favor of the protective policy. Yet the election of 1896 turned on the silver question; and the Democrats in 1894 certainly had much more solid ground for maintaining that the popular verdict had been against high-handed protection than the Republicans in 1897 that it had been in favor of such a policy. Given the political complications of 1896- 97, it was no doubt inevitable that a measure imposing higher duties should come. But the act of 1897 pushed protection in several directions farther than ever before, and farther than the political situation fairly justified. It disheartened many who had supported the Republi- cans on the money issue in 1896; and even good party members, loyal to the general policy of protection, doubted whether that policy had not now been carried ' too far. The new and unexpected turn thus given the tariff history of the United States was the more regrettable because the general trend of the country's develop- ment made a liberal policy at once easier and more inviting. The closing years of the century found new economic conditions, which must become of greater and greater consequence for our customs policy as the next THE TARIFF ACT OF 1 897. 359 century is seen to open a new era. The United States is a great manufacturing country ; not only this, but one in which the bulk of the manufacturing industries is no longer seriously dependent on protection. The changes in the metal industries, to which reference was made in the preceding pages, are not only important in them- selves, but are of far-reaching consequence for the gen- eral industrial future of the United States. Iron and steel, on which the material civilization of the modern world rests, are produced more abundantly than any- where else, and at least as cheaply, — soon, if not yet, will be produced more cheaply. With the wide diffusion of a high degree of mechanical ingenuity, of enterprise, of intelligence and education, it is certain that the United States will be, and will remain, a great manu- facturing country. The protective system will be of less and less consequence. The deep-working causes which underlie the international division of labor will indeed still operate, the United States will still find her advan- tages greater in some directions than in others, and the ingenuity of legislators will still find opportunity to direct manufacturing industry into channels which would not otherwise be sought. But the absolute effect, still more the proportional effect, of such legislation on the industrial development of the country will diminish. The division of labor within the country will become more and more important, while international trade will be confined more and more to what may be called specialties in manufac- tured commodities, and articles whose site of production is 360 HISTORY OF THE EXISTING TARIFF. determined mainly by climate. Not only sugar (for the present), tea, coffee, and the like, but wool also belong in the class last mentioned, as to which climatic causes domi- nate ; and the duties on wool, with those on woollens in their train, are thus the most potent in bringing a substan- tial interference with the course of international trade. But, on the whole, protective duties, however important they may be in this detail or that, cannot seriously affect the general course of industrial growth, and will affect it less and less as time goes on. In any case, the question for the future will be, even more than it has been in the past, not whether the United States shall be a manufac- turing country, but in what directions her manufactures shall grow, — whether in those where aid and protection against foreign competition are constantly sought, or in those where natural resources and mechanical skill enable foreign competition not only to be met, but to be over- come on its own ground. CHAPTER VIII. THE TARIFF ACT OF I909. The tariff act of 1897 proved the longest-lived of the general tariff acts of the United States. Its nearest rival was the act of 1846, which remained undisturbed for eleven years. That of 1897 remained in force for twelve years. This comparative stability was the result of various causes. The fact that the Republican party, which passed the Dingley act, was in power continuously during the twelve years from 1897 to 1909, naturally made changes less likely. But the tariff act of 1846 also remained unchanged, notwithstanding a great political shift, for a period nearly as long ; for, as will be remembered, the pro- tectionist whigs came into power in 1849, ^^^ remained in control till 1853. Political stability hence would not seem to be essential to tariff stability. More important, doubtless, was widespread prosperity. This followed the enactment of the Dingley act, and was ascribed to it by the protectionists. Prosperity as widespread had followed the act of 1846. In the earlier case, as in the later, the country was naturally content with matters as they stood, not being prompted by industrial or financial troubles to the tral of a remedy through changed import duties, t 361 362 HISTORY OF THE EXISTING TARIFF. But most important was the fact that at both periods other great problems pressed for solution. After 1846, the slavery question came more and more to the fore, and prevented the tariff from being a commanding public issue. After 1897, the questions of industrial combination — trusts, railways, monopolies — served to divert attention from the tariff. At both times, the public (or the politicians) were right, in concentrating discussion on the matters most important. Slavery signified much more than the tariff, during the generation preceding the Civil War. Industrial combination signified much more in the open- ing years of the twentieth century ; for here was and is the great problem for the future. It was this very attention to a different subject, how- ever, which at the later date compelled action on the tariff once more. The tariff was felt to need overhauling because it was believed, rightly or wrongly, to promote combinations, or at all events to increase the profits in great protected industries. The huge fortunes acquired in some protected industries, the Carnegie fortune most conspicuously of all, brought the feeling against monopo- lies and trusts to bear against the high duties. As has already bten said,* the trend toward combination is essen- tially a consequence of increasing large-scale production. But it has been intensified in some cases by protection, and the profits of some " trusts " have been greatly swelled. The two things — trusts and the tariff — are much associ- ated in the public mind, and hostility to the combinations ' See pages 310, 316. THE TARIFF ACT OF I909. 363 has bred hostility to extreme protection. Hence the Republican party in its campaign platform of 1908 gave a promise of revising the tariff ; and its candidate, soon to become President Taft, pledged his efforts to secure a revision— " revision " being understood on all hands to mean primarily reduction. The Republican platform contained a new version of the principle on which protection was to proceed : paraded, to be sure, as the "true" or "long-established " Repub- lican doctrine, but, nevertheless, in its precision of state- ment, substantially new. The doctrine was laid down as follows : " In all protective legislation the true principle of protection 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 reason- able profit to American industries." This notion, very little heard of before,' played a surpris- ingly large part in the discussions of 1908-09, and was hailed in many quarters as the definitive solution of the tariff question. It has an engaging appearance of mod- eration ; yet it leads logically to the most extreme results. It seems to say, — no favors, no undue protection, nothing but equalization of conditions. Yet little acumen is needed to see that, carried out consistently, it means simple prohi- bition and complete stoppage of foreign trade. Anything in the world can be made within a country ' The Republican platform of 1904 had a similar phrase : " The measure of protection should always at least equal the difference in cost of production at home and abroad." This seems to be the first platform statement of the " true principle " ; but very little attention was given it in 1904. 364 HISTORY OF THE EXISTING TARIFF. if the producer is assured of "cost of production together with reasonable profits." In a familiar passage of the Wealth of Nations, Adam Smith remarked that " by means of glasses, hotbeds, and hot walls, very good grapes can be raised in Scotland, and very good wine can be made of them at about thirty times the expence for which at least equally good can be brought from foreign countries." ' In the same vein, it may be said that very good pineapples can be grown in Maine, if only a duty be imposed sufificient to equalize cost of production between the growers in Maine and those in more favored climes. Tea, coffee, cocoa, raw silk, and hemp, — any quantity of things that are now imported can be grown in the United States pro- vided only that a duty high enough be imposed. No doubt it will be said that these things are not " fitted " for our natural conditions, and that duties should not be " unreasonably " high. But the difference is simply one of degree. Sometimes a moderate duty may be called for in order to "equalize cost of production," sometimes a very high duty. Consistently and thoroughly applied, the " true principle "■ means that duties shall be high enough to cause anything and everything to be made within the country, and international trade to cease.' ' Wealth of Nations, book iv., ch. ii.; vol. i., p. 423, Cannan edition. ' Unflinching application of " the true principle " was not often advocated, but the following extract from the Congressional Record (May 17, 1909, p. 2182) indicates that the foremost protectionist leader was willing to go all lengths. Mr. Aldrich. Assuming that the price fixed by the reports is the correct one, if it costs 10 cents to produce a razor in Germany and 20 cents in the United States, it will require 100 per cent, duty to equalize th? conditions THE TARIFF ACT OF 1909. 365 On the other hand, the " true principle," consistently analyzed, means simply that the more disadvantageous it is for a country to carry on an industry, the more des- perate should be the effort to cause the industry to be established. Of course the term " cost of production " is used, in these discussions, in the sense of the money advances that must be made by the employing capitalists. The more labor that must be employed at current wages to get a given article to market, the larger these money advances become. In other words, they are large because (for whatever reason) much labor is required per unit of produce ; that is, because the efficiency of labor is low. One of the most familiar facts of industry, though one most commonly forgotten in the protective controversy, is that high money wages do not necessarily mean high prices of the things produced. When labor is effective, high wages and low prices go together. Obviously the community is prosperous precisely in proportion as this combination exists, — high wages and low prices. But where labor is ineffective, there, if money wages be high, high prices will ensue. The more of high-priced labor that must be em- ployed in order to produce a given article, the higher will in the two countries. . . . And so far as I am concerned, I shall have no hesitancy in voting for a duty which will equalize the conditions. Mr. Bailey. The Senator from Rhode Island would vote unhesitatingly for a duty of 300 per cent. Mr. Aldrich. If it was necessary Mr. Bailey. If he thought it was necessary. Mr. Aldrich. Certainly. If it was necessary to equalize the conditions, and to give the American producer a fair chance for competition, other things being equal, of course, I would vote for 300 per cent, as cheerfully as I would for 50." 366 HISTORY OF THE EXISTING TARIFF. be its " cost of production," and the higher must be the duties in order to " equalize cost of production at home and abroad." All the current notions on this topic among the staunch protectionists rest on the belief that high wages (high money wages, that is, — few go beyond this phase of the problem) cannot be maintained in our American com- munity unless there be protection against the commodities made by cheaper labor abroad. And this belief rests on the notion that high wages necessarily mean high prices.' The truth is that a high general level of real wages is the outcome of high general efficiency of labor. Given such efficiency, it would continue, tariff or no tariff. But this seems to the protectionists an incredible proposition. The verdict of the economists, though practically unanimous against the protectionist belief, has no visible effect in overthrowing it. That high wages are due to the tariff, and cannot be kept high without high duties, has been dinned in the ears of the public so persistently that it has become for the average man an article of faith. To con- nect high wages with the effectiveness and productiveness of labor ; to consider whether it is worth while to direct labor into industries where it is not effective ; to reflect what it really means to "equalize " a high domestic cost of production with a lower foreign cost ; in fact, to reason carefully and consistently on the tariff question, — all this, ' On the general subject of the connection between money wages, prices, and international trade, I have stated my conclusions in a paper on " Wages and Prices in Relation to International Trade," Quarterly Journal of Eco- nomics, August, 1906 (vol. XX., p. 497). THE TARIFF ACT OF I9O9. 367 unfortunately, is almost unknown. The average employer and the average laborer alike accept the familiar catch- words and fallacies : let us stimulate employment, make demand for labor, create the home market, equalize cost of production, preserve American industries and the American standard of living. None the less, the attention given to this " true prin- ciple " was significant of some concession to those who believed that protection had been carried too far. There was an uneasy feeling that duties had been more than suf- ficient to "equalize," and that they brought -more than " a reasonable profit " to American producers. As every one conversant with our tariff system knows, they have often been excessive in this sense. They have been higher than was necessary to enable the domestic producers to hold their own. A vast number of the duties are simply prohibitory. Many are innocuous as well as prohibitory^ — mere nominal imposts, on articles produced as cheaply within the country as without, and not importable under any conditions. Such are the duties on wheat, corn, cattle and meat, and other agricultural products,— dust in the farmer's eyes. Such too are the duties on cheaper cotton goods, on boots and shoes, and many other manu- factured articles. On still others the rates, while so high as to prohibit importation, are not nominal: cost of pro- duction may be higher in the United States than abroad, yet only a little higher, so that the duties go beyond the point of mere " equalizing." Such seems to be the case with certain grades of woollens and silks. In the absence 368 HISTORY OF THE EXISTING TARIfF. of any importation of competing goods (the woollens and silks that continue to be imported are mainly special articles, different from the domestic textiles) it is difficult to calculate just how far an equalizing duty at all may be needed, on the basis of "the true principle." But it is certain that existing rates are much more than equalizing.' A disposition to scan duties critically according to their conformity to the " true principle " was shown by the Ways and Means Committee of the House, in which the consideration of the tariff measure began. The chairman of that committee, Mr. Payne, though a staunch protectionist, was not a fanatical one. On sundry schedules the inquiries of the Committee, under his leadership, were directed toward a comparison of domestic and foreign cost, and a comparison again of the difference in cost with the rates of duty." It is true that inquiries of this sort, conducted in ' Senator Aldrich, on introducing the Conference Report which settled the details of the tariff act of igog (see below, p. 376), said ■ " If there are any prohibitive duties in this bill, if there are any duties that are excessive along the lines I have laid down [the true principle], I do not know it. I do not believe there are any duties levied in this bill that are excessive or are prohibitory." Congr. Record, vol. 44, p. 5305. This can be nothing but bravado. ' Mr. Payne's attitude is indicated in the following passage from his speech introducing the bill; " Some gentlemen think in order to be protectionists that after they have found out the difference between the cost of production here and the cost abroad they ought to put on double that difference by way of a tariff rate, and they are willing to vote for such a provision in the bill, and if crowded they will go to three times that amount. I do not believe that such a man is a good friend of protection. I believe we should fix these duties as nearly as we can at the difference between the cost here and the cost abroad, and not after we have decided what that difference is, double it, add 100 per cent, to it. . . . He is the better friend to protection who tries to keep THE TARIFF ACT OF I909. 369 hearings before Congressional Committees, can lead to no accurate results. The persons who appear as witnesses are almost invariably interested producers, and the figures and statistics presented by them are of very doubtful value. Any one who looks over the reports of these hearings must observe how vague and obviously exag- gerated are the recurring statements about wages and cost of production. If accurate information on these matters were desired, the effective method would be to engage agents or " experts," say from the Bureau of the Census or the Bureau of Corporations, and give them a year or two in which to make careful investigation. Even so, in view of the variations of cost of production in dif- ferent establishments, and the difficulty of selecting the representative firms, it may be questioned how far usable results could be got. At all events, no such systematic procedure was thought of. The usual array of indiscrimi- nate figures was presented and printed, with a natural tendency on the part of the protectionists to accept with- out question statements indicating that their " true prin- ciple " could be maintained only by keeping duties very high.' the rates reasonably protective to the people engaged in the industry." Congr. Record, p. 7. It should be noted, to Mr. Payne's credit, that his speech introducing the tariff bill was a very careful one, explaining with much detail the changes proposed. In this fullness of detail it was in marked contrast with the flam- boyant and empty speeches with which Messrs. McKinley and Dingley introduced in the House the tariff bills of i8go and 1897. ' The hearings of 1908—09 before the Ways and Means Committee were prolonged, and contained, in addition to the usual mass of irrelevant and 34 3/0 HISTORY OF THE EXISTING TARIFF. The hearings before the House Committee led to a curious and instructive episode. It is significant of the trend of international competition that the rivals most frequently held up as menacing by the petitioners for higher duties were the Germans, not, as in the hearings of earlier periods, the English. The statements in regard to wages in Germany were so loose and exaggerated that the Germans were led, both by pride and by a hope of affect- ing the course of legislation here, to take notice of them. Their government referred the printed hearings to various firms in Germany. A whole sheaf of comments and memoranda from such sources was transmitted by the German Foreign Office to our Department of State, and by this to the Senate. They reached the Senate Com- mittee on Finance early in April, and slumbered there for a month. In May some of the so-called " insurgent " Senators asked for them, and they were ordered to be printed. But they were not printed or published until August, after the adjournment of Congress. It was said, in explanation of the delay, that the government printing- office was so busy as to be unable to bring them out earlier. But this was a flimsy pretext. Anything that Congress useless matter, much material valuable for the student of economics. They were printed, too, with more care than has been shown on previous occasions, in eight volumes, arranged by topics, and well indexed. There were no hearings before the Senate, though there were unreported "conferences" between the members of the Senate Finance Committee and persons interested in the duties. Senator Aldrich, in discussing various details, referred to figures as to cost of production presented to his Committee by domestic producers ; but such figures, not subject even to the test of pub- licity, had still less weight than those presented to the House Committee. THE TARIFF ACT OF I909. 371 really wanted was supplied with exemplary promptness. The truth is that the ruling spirits in the Senate did not wish the information to be put at the disposal of opponents. For this they had good ground. The figures given by American producers as to wages in Germany, and other figures supposed to prove differences in cost of production, were shown to be virtually worthless, and not a little instructive information was given on the general aspects of tariff rivalry. But probed and sifted information was not desired by the Republican leaders, or at least by those who guided the course of action in the Senate. Any sort of vague and exaggerated statement as to wages and cost was readily accepted, and made the occasion for a drastic application of the sanctified "true principle."' Two sets of reductions in duties engaged the special attention of the House Committee : as to iron and steel, and as to certain raw materials. The conspicuous position of the Steel Corporation compelled attention to the former. To the point of removal of the iron and steel duties the Committee would not go ; but some reductions were proposed. The raw materials most discussed were coal, lumber, iron ore, hides. These the Committee proposed to admit free of duty. As to the fate of these proposals more will be said presently. On the other hand, some advances in duty were frankly proposed, usually on the ground that the " true principle " called for them. The duties on mercerized cottons — fab- ' The German reports were finally printed as Senate Document No. 68, Part 2, 6 1st Congress, ist session. 372 HISTORY OF THE EXISTING TARIFF. rics treated by a process which gives them a silk-like sheen — were advanced, because of " the additional labor and the difference in the cost of labor." The duties on wo- men's gloves and on certain sorts of hosiery were similarly increased. Other advances could be less easily defended on grounds of this sort, and were the obvious result of pressure from some geographical district, or from some legislator who had to be placated. Zinc ore, previously free, was subjected to duty because the people of the Missouri zinc mining district insisted on their share in the benefits of protection. The duty on split peas was increased, — a petty matter, worth noting only because of the explana- tion of the change, — on "the personal knowledge and evidence of a member of the House who knows all about the business." ' The duties on some fruits — figs, prunes, lemons — were raised, as a sop to the California members. There were other instances of this sort — advances of rates proposed because some member of the Committee had a constituent who was interested in a particular article, or because the Committee felt it necessary to make sure of the vote of a given region. None the less, the House bill made significant reductions: none of revolutionary char- acter, or likely to have serious economic effects, yet indica- tive of a disposition to bring about some " real " revision. No great changes from the Committee's rates were made in the House itself. Notwithstanding active debate, and a vigorous attempt by interested representatives to retain ' I quote from Mr. Payne's speech introducing the bill, Congr. Record, vol. 44, p. 9. THE TARIFF ACT OF I909. 373 duties as against the proposed extension of the free h'st, the bill passed by the House was substantially that pre- pared by the Committee. On the hotly debated items of coal, hides, iron ore, the Committee was sustained : they were left on the free list. On lumber, the leaders could not hold the House ; a duty was retained, but at half the existing rate. In the Senate the course of events was different. In most of the tariff acts of the last generation, the influence of the Senate on legislation has been greater than that of the House, and has been exercised in favor of higher duties. The greater influence of the Senate is the natural result of its smaller size, its compactness, and the longer term of its members. That this influence should be exercised so often in the direction of higher duties, has been ascribed to the greater subservience of Senators to large monied interests. There is truth in the charge. In legislation on other subjects also, especially during the contest over rail- way legislation, it has appeared that the Senate is, if not the stronghold, at least the stronger hold of those corpora- tions and industries whose money-making may be affected by legislation. But so far as the tariff is concerned, an- other circumstance is at least equally important in explain- ing the ultra-protectionism of the Senate. Each State is equally represented. Montana and West Virginia have as many votes as New York and Iowa. The Senators from a thinly populated State have disproportionate power in fighting for duties that are for the interest of their constituents, or are supposed to be. Geographical 374 HISTORY OF THE EXISTING TARIFF. representation in the Senate, as well as the relation be- tween the individual members resulting from senatorial courtesy in confirming appointments,' is thus peculiarly favorable to log-rolling. The votes of small dissatisfied States cannot be ignored, as they can in the House. Washington, Idaho, Montana, Wyoming, West Virginia, will easily combine in favor of duties on coal and on hides, and together constitute a formidable phalanx. The strictly manufacturing States, such as Massachusetts and Pennsylvania, feel it necessary to conciliate such a group, and to let them have duties on their local products, in order to secure their adhesion to the general protec- tionist scheme. The log-rolling process, as has been said by President Lowell, is the great evil of democratic government; and that evil nowhere appears more con- spicuously than in the dealings of a body like the American Senate with tariff legislation. Nevertheless, there was a vigorous protest from within the ranks of the Republican party. The Senators from some of the great agricultural States of the Middle West — Wisconsin, Iowa, Nebraska, Minnesota — stood staunchly for reductions in duties. Their constituencies, more strong- ly than any other part of the country, felt hostility to real and supposed monopolies. They represented the healthy uprising against monied domination, the resolution to grapple with the great social and industrial problems of the twentieth century. No doubt the tariff was less ' Compare the extract given below (p. 379, note), from Mr. Payne's remarks as to the duty on hides in 1897. THE TARIFF ACT OF I909. 37$ closely connected with those problems than they and their representatives supposed. A combination and monopoly were smelled behind every high duty, even though (as in the case of the cotton manufacture) the conditions clearly were not those of monopoly. No doubt, too, there was the usual half-heartedness and inconsistency in their attitude on the general question. They were taunted with being unfaithful to their party and even (after the common question-begging way of the fanatical protectionists) with being enemies to their country and allies of designing for- eigners. To this they replied that they were the true and faithful and reasonable protectionists. Even these critics never planted themselves on any ground of clear-cut principle. They simply represented a strong feeling of unrest and discontent, which the leaders in the Senate disregarded on the tariff as on other questions. The combination of local interests in the Senate was made the more effective by the leadership of Senator Aldrich. Senator Aldrich, unlike the House leader, was a protectionist of the most unflinching type. At the same time he had had long experience and was exceptionally well informed on tariff details. His influence goes far to account for the amendments made in the Senate. These were no less than 847 in number; many of them, to be sure, merely on matters of form and phraseology, but over half of substantial importance. Their drift was up- wards. The much debated raw materials, iron ore, hides, coal, were again made subject to duties; the duty on lumber was raised above the rate fixed in the House. 376 HISTORY OF THE EXISTING TARIFF. The duties on cotton goods, hosiery, and other manufac- tures were advanced. Many of the changes substituted specific for ad valorem duties, or shifted the dividing h'ne in the progression of specific duties. Just what such changes mean is often difficult for even the most expert to ascertain.' It is tolerably certain that, made under such auspices, they would tend in general to tighten the extreme protective system, and were likely to embody "jokers," — new rates of real importance, advantageous to particular producers, and concealed in the endless details. So the bill went to a Conference Committee, and there, as usual, its details were finally settled. The Conference Committee consisted of eight members from each house, five Republicans and three Democrats. The Democrats were put on the Committee only pro forma. The ten Republicans from the two houses got together by them- selves, and came to an agreement, against which the six Democrats simply registered the stock partisan protest. Such has been the procedure with all the tariff legislation of the last generation. What passed in the Conference Committee can only be guessed, but guessed with some certainty : weary sessions, hurried procedure, give and take, insistence by this or that member among the ten on some duty in which he is particularly inter- ' "Some of these amendments I have studied diligently, and I am not able to say to-day whether they raise or lower the rates, and have not been able to determine yet with the aid of gentlemen who are experts on this subject." — Mr. Payne, in the brief House debate on the Senate amendments, Congr. Record, p. 4468. THE TARIFF ACT OF 1 909. 377 ested. Irresponsibility in legislation reaches its acme.' In one respect a new influence was brought to bear on the Conference Committee, and a new responsibility was assumed. The administration suddenly brought pressure to bear in favor of the House rates, or rather in favor of lower rates all around. President Taft had pledged his party, during the campaign, to undertake a revision of the tariff downward ; and it had been given out, apparently on good authority, that he would veto a bill that failed to carry out the pledge. During the long debates in both houses, he had abstained from any serious effort to in- fluence the course of legislation. But at the very last stage — it is not certain whether from a sudden change of tactics, or in pursuance of a policy kept till then deliber- ately in the background — he took the position of titular head of the party, and urged reductions in duties. His outspoken attitude strengthened the moderate element, and finally brought about a measure less stultifying in view of his own pledges than had seemed possible when the bill first went to the Conference Committee. ' The following episode will serve as illustration. The duty on shingles had been 30 cents per thousand in 1897. The Senate proposed to raise it to 50 cents a thousand, and this higher rate was finally enacted. Mr. Payne gave the following account of what took place in the Conference Committee: " This 20 cents a thousand on shingles * * * was most strenuously insisted on. Any of you gentlemen who have been on Committees of Con- ference know how those things are. Senator So-and-So wants something and must have something. Finally I told them I vi^as willing, in this great trade on the lumber schedule, involving millions of dollars, to throw in a jack- knife like shingles, and gave them the rate of 50 cents. * * * They claimed it was absolutely essential to the business. I never could see it in that light, but was in favor of the rate of the Dingley bill." — Congr. Record, p. 4698. 378 HISTORY OF THE EXISTING TARIFF. The most hotly disputed single item was the duty on hides. These had been free of duty from 1872 to 1897. In 1897 they had been subjected to a duty of fifteen per cent., on the insistent demand of the representatives of the grazing States, especially Montana.' The House passed the bill of 1909 with hides free ; the Senate, again at the insistence of the grazing States, proposed to restore the duty of fifteen per cent. Instead of a compromise, in the shape of a reduced rate, such as might have been expected to result from this disagreement, complete abolition of the duty was finally secured. This victory of good sense was clearly due to President Taft, and con- stituted the one conspicuous fulfilment of his pledge to bring about really lowered duties. On any but the most extreme protectionist principles, there is no excuse for a duty on hides. There can be nothing in the nature of protection to young industries — no prospect of ultimate cheapening through a stimulus to improved domestic production. Even the " true " principle of equalized cost of production could not be applied to a by-product of a flourishing export industry. Nor were any arguments of this sort presented in favor of the duty. The case was put frankly on the ground of give and take ; if everything is to be protected, why not hides ? " And on this ground, the ranching representatives ' The duty of 1897 applied only to cattle hides. Calf-skins, goat-skins, sheep-skins, horse-hides, and the like continued throughout to be free of duty. '^ Mr. Payne gave the following account of the way in which the duty on hides came to be imposed in 1897 ; THE TARIFF ACT OF I909. 379 had a case. If imports are hadper se, and domestic supply is good/^r se, why should hides be free when wool, hemp, flax, lumber, ore, remain dutiable ? It happened, too, that the duty on hides had not been, like so many on crude products, of limited effect. The imports were a considerable portion of the total supply, and the imported and domestic hides came in competition in the same market.' The case was one where the pro- tective duty had its full effect: the price of the whole domestic supply, as well as of that imported, was raised by the amount of the duty. It is striking that a country in which cattle-raising is so largely carried on, and from which meat-products are so largely exported, should yet import great quantities of hides. The demand for this joint product, or " by-product," is relatively great in the "When the Dingley bill came before the House, reported by the Com- mittee, it was reported with free hides, and I saw a number of gentlemen on this [the Republican] side of the House, and a number of gentlemen on the other side of the House, led by Jerry Simpson of Kansas, voting for a duty on hides. He was a little more frank than some of these modern-day tariff-for-revenue people. He said he wanted to get his share. He did not believe in a duty on hides, but he wanted to get his share. * * * It went over into the Senate. We did not have a Republican majority in the Senate in those days, but we did have a majority of those who claimed to be pro- tectionists, and one of these protectionists of populistic tendencies would not vote for the bill unless it carried a duty on hides, and the Senate accom- modated him. T/iat is one of the courtesies of the Senate when any member ■wants something done." — Congr. Record, p. 21. ' In an elaborate statement compiled by the Census Bureau, on " Imports, Exports, and Domestic Manufactures," the following figures were given as to cattle hides : Pounds Values Imports (1904-5) III mill. 14.5 mill, dollars. Domestic Product (1904) 456 mill, 44.2 mill, dollars. 380 HISTORY OF THE EXISTING TARIFF, United States. No satisfactory substitute has been found for leather, whether for footwear, harness, belting, or the other manifold uses ; and our prosperous and well-equipped population calls for great quantities of it. Other raw materials were treated in more gingerly fashion, and the original proposal for admitting them free was not carried out. Coal, which the House had proposed to admit free, was finally subjected in the act to a duty of 45 cents a ton, in place of the 1897 rate of tj cents. Iron ore, which also the House had proposed to make free, was made dutiable at 15 cents, in place of 40 cents. It has already been noted that the proposal for free admission of lumber, made by the Ways and Means Committee, could not be carried even through the House. The duty there was set, on the lowest grade, at $1.00 (per thousand feet); the Senate proposed $1.50; the act finally made the rate $1.25, in place of the 1897 rate of $2.00. On wood-pulp and printing paper a long struggle led finally to no change as regards pulp, and on printing paper to but a sHght reduction. The situation was complicated by bickering with Canada, from which came a considerable part of the supply of the raw material, pulp-wood (the round logs). Pulp-wood had always been admitted free ; nor was any change on this score contemplated or made. The Canadians wished to manufacture their own raw material ; hence one of their provinces (Ontario) prohibited the export of the logs, and another (Quebec) established what was virtually an export duty." Both in the United ' The Quebec legislation consisted in reducing the royalty for wood cut on THE TARIFF ACT OF 19O9. 38 1 States and in Canada, more particularly in the former, there was protest against the wastage of the spruce forests ; and in the United States there were also charges of trust manipulation of the price of paper. A special Congressional Committee, appointed at an earlier date, had recommended, after elaborate investigation, that the duties on paper be lowered and that pulp be admitted free; both changes to be conditional on the repeal by- Canada of her restrictive legislation. In the tariff act as passed these recommendations were followed, though the reduction in the paper duty was made less by the Senate than had been provided by the House. Both the House and Senate bills, and the act as passed, provided for additional duties on pulp, and on paper also, if the Cana- dian regulations should stand. The expectation seems to have been that the Canadians would yield, especially as they were to be threatened also by a general increase of duties under the maximum and minimum clause of the tariff act.' But our legislators had reckoned wrong. Canada refused to budge. She had sought for two decades after the termination (in 1866) of the old recipro- city treaty to reestablish friendly commercial relations with the United States. Her offers had been steadily and almost ostentatiously repulsed.'' The "National Policy" of protection, adopted in Canada at the outset largely by crown lands, ordinarily 65 cents a cord, to 40 cents a cord if the wood were manufactured within the province. Both in Quebec and Ontario wood cut on crown lands alone was affected. ' See below, p. 40J. ' See Mr. Edward Porritt's Sixty Years of Protection in Canada, ch. iii. 382 HISTORY OF THS EXISTING TARIFF. way of retaliation, had been gradually made stronger and more sweeping. By 1909 it had such a firm hold that there was no thought of submitting to what seemed a bullying attitude on the part of the United States. No change in the restrictions on pulp-wood was offered. Consequently the conditional relaxations of our own duties on pulp and paper never went into effect.' As to all the changes on materials, there is a question how far reductions or remissions will redound merely to the advantage of the manufacturer or middleman, how far to that of the "ultimate consumer." Free hides, it was said, would benefit only the tanners or the shoemakers, but the price of shoes would not be affected. The answer obviously is that the case is the same with every cause lessening the price of materials, — improved processes, better transportation, and what not. The final result in ' The duty on wood-pulp remained, as it had been in 1897, ^ cent a pound, plus an additional duty equal to the Canadian export charge. The duties on printing paper in 1897 and 1909 were (on the lowest class, — they were graded) as follows : Duty of 1897 Duty of 1909 $6.00 per net ton, ordinary duty $3.75 per net ton, ordinary duty . 50 additional duty because 2.00 " " retaliatory duty of Quebec export charge .35 " " additional duty because of Quebec export tax $6.50 total duty $6.10 total duty The retaliatory and additional duties were levied only on pulp and paper made from timber cut on the crown lands of the restricting Provinces ; not on all imports coming from Canada. The Congressional Committee, referred to in the text, printed an enor- mous mass of testimony on the pulp and paper situation, and prefaced it vnth an excellent summary repdrt. THE TARIFF ACT OF 190$. 383 cheapening consumers' goods may come slowly and halt- ingly ; but so long as there is effective competition among the several series of producers and middlemen, and so long as there is a cheapening of the materials for all those engaged in supplying a given market, the legislator may feel safe in providing for free materials. No doubt the cheapening of materials sometimes affects only a part of the market. Lower duties on coal and lumber, or their free admission, have but a limited range of influence. Free coal, as has already been said,' would be to some advantage for coal-users in New England and the extreme Northwest ; though in both districts the pos- sible consequences are much exaggerated both by advo- cates and opponents. Free lumber would lead to slightly larger importation from Canada along the eastern frontier, but probably to none of any moment in the Northwest. It would check a bit, even if only a bit, the wastage of our own forests, and in so far is clearly sound policy. Not a few Southern representatives voted for the retention of the duty on lumber, and their votes turned the scale in its favor. Yet, both because of geographical limitation of competition and because of the different quality of Southern lumber, the duty is of no real consequence for their constituents. The attitude both of constituents and representatives illustrates the state of veritable funk con- cerning lower duties (not to mention free trade) which has been induced by the constant shouting about safeguarding American industries against pauper labor. Iron ore (on ' See p. 298. 384 HISTORY OF THE EXISTING TARIFF. which the duty was reduced from 40 to 15 cents a ton) presents a case where the effect of lowered duties is even more limited.' All that can be said is that in some degree competition would be promoted, and some better op- portunity given for the development of the iron-making industry of the Eastern region. On iron and steel the process, begun in 1890,' of re- ducing duties no longer of any effect, was carried a step further. The rates were lowered along the whole range, as will be seen from the following typical figures : Duty of 1897 Duty of 1909 Pig iron $4.00 ton $2.50 ton Scrap iron and steel 4.00 " I.OO " Steel Ingots (lowest class) 6.72 " 3.92 " Steel Rails 7.84 " 3.92 " Tin Plate i^ c. a pound i^ c. a pound Nobody supposed that these changes were of any con- sequence. The time had gone by when the duties on crude iron and steel had any considerable effect. The " true principle," if rigorously applied to the vast inte- grated enterprises which now constitute the representative firm in iron-making, would have led to the complete repeal of all these duties. A word may be said with regard to steel rails, which had played so important a part in the tariff history of earlier years. As the figures in the Appendix show,' ' Seep. 271. ' See pp. 272, 300, 342. Compare also what is said below, at p. 402, note, of the increase in 1909 of the duty on structural steel. ' See Appendix V. THE TARIFF ACT OF 1909. 385 prices in the United States were, after 1897, on the whole lower than prices in England. Imports virtually ceased, being limited to sporadic cases of special shapes or out-of- the-way shipments. The duty might have been the occa- sion for a rise in American prices during years of active demand, such as were those from 1900 to 1906. Yet in fact the price was singularly constant, — it was $28.00 a ton uniformly from 1902 on. This steady price was the result of a combination between the various rail-makers. The general policy of the great Steel Corporation, which pro- duced more than half of the rails, and was dominant in the " gentlemen's agreement " that settled the price, was to mitigate fluctuations in iron and steel, and keep the industry on a more even keel than in previous times. The situation may be fairly adduced as illustrating the possible benefits of combination in making the course of trade less haphazard. In the case of steel rails this policy was more successful than with other iron products, because the railways themselves had largely passed the stage of speculative and fluctuating construction, and consequently called for more regular supplies of rails. At all events, the price of rails remained steady for a long series of years. It must be said, too, that the price was not only steady, but moderate. Very likely, even at this moderate price, profits were good ; but at all events, the price was not usually higher than the price abroad, and in most years even lower ; and profits were not made higher by protection. To repeat what was said before, the iron and steel duties, for good or ill, had done their work. They 35 386 HISTORY OF THE EXISTING TARIFF. no longer played an important part in the tariff contro- versy, and were no longer of any considerable economic consequence.' With the free admission of hides came reductions in duties on corresponding manufactures, — on leather from 20 per cent, to 5 per cent., on shoes from 25 per cent, to 10, on harness and saddlery from 35 per cent, to 20. These reductions were insisted on by the ranching representatives, with a touch of vindictiveness, as the counterpart of free hides, and were somewhat grudgingly accepted by the representatives of the leather and shoe districts. Here again no one supposed that any real changes would ensue from the lowered duties. Tanning and shoemaking are among the industries in which American labor is applied with resource and advantage, in which high wages and low prices are made possible by efficiency and ingenuity, and in which there are exports, not imports. The hesita- tion in acceding to the reduced duties arose chiefly from that pusillanimity about foreign competition which per- vades almost the whole manufacturing community. In the case of shoes, of which the exports are consider- able, it was said that not only American shoes were being exported, but American shoe-machinery also, and that after a time, when foreigners had learned to use this machinery, their lower wages would enable them to send cheaper shoes back to the United States. Of course it is ' The steel-rail situation should be considered in connection with the general development of the iron manufacture. See what is said above, pp. 301, 344, and the Quarterly Journal of Economici August, 1900, vol. xiv., p. 500. THE TARIFF ACT OF 1909. 387 true that, for any American manufacturing industry subject to possible foreign competition, the price of in- dependence is unceasing progress. To hold its own, and to pay current high wages, it must not only have the lead, but keep the lead. It must continue to advance steadily, with new ways and better processes, as fast as competitors adopt its established improvements. The history of in- dustry, and especially that of English industry in its long contest with foreign rivals, indicates that probably it can keep the lead. Imitative competitors usually remain in the rear. They are constantly left behind by those whose ways they copy. Certainly there is nothing to indicate that a different result has appeared or is impending as to those American manufactures which had long reached the stage of independence and of export, such as sewing- machines, tools and hardware, agricultural implements, electrical apparatus, and these very boots and shoes. As has been the case with all the tariff acts since the Civil War, that of 1909 brought advances in the duties as well as reductions. Some of these advances were made in good faith for the purpose of getting more revenue; some were for the purpose of rectifying real or supposed errors or inconsistencies in previous acts ; and some were intended, openly or with subterfuges, to give additional protection. On cotton goods advances were made both for rectifica- tion of old duties and for the imposition of new. In some cases unexpected interpretations by the courts of the language of the act of 1897 had caused very low duties 388 HISTORY OF THE EXISTING TARIFF. on certain cotton textiles. A few changes, prepared for the purpose of making these rates about the same in range as those on other goods, were not unreasonable, and indeed, from the point of view even of a moderate protec- tionist, were imperative." Other changes were made, however, with the avowed purpose of promoting some domestic industry and adding to the sweep of the pro- tective system." The duty on mercerized cottons, already referred to, was advanced by imposing an extra cent per yard on goods treated by this process. The duties on certain grades of cotton hosiery — seamless or fashioned hose — were advanced, chiefly on the cheaper grades.' A minor item, but one which caused some discussion, was the duty on razors, in which a very considerable increase was made.' By far the most important and systematic advance was that in the silk schedule. It will ' These changes were explained by Senator Aldrich, Congr. Record, p. 2847 seq. Analogous changes were made, for examDle, on pocket knives ; parts of knives (unassembled) being made dutiable at the same rates as completed knives. ° For a careful analysis of the changes on cottons, see a brief article by Mr. M. T. Copeland in the Quarterly yournal of Economics, Feb., 1910, p. 422. * The rates on seamless — fashioned or shaped — cotton hose stand thus in the acts of 1897 and 1909. Classification Duty of ] c8g7 Duty ot : [Qog Value up to $1.00 a dozen $ .50 c. a dozen. , plus 15% s .70 c. a dozen. , plus 15% "■ $1.00 ® 1.50 " " .60 " " " ■^5 ;; ;; " " $1.50 @ 2.00 '* " '7° " " " •9° *' " I2.00 @ 3-00 " " 1.20 '* 1.20 " $3.00 @ 5.00 a.oo " " \^ 2.00 ** " '■ " over $5.00 " ■* 55% 55% It will be seen that the increase is solely in the specific duties on the lower classes, and has most effect on the cheaper goods within each class. * The changes on razors were as follows. The specific duties throughout are, per dozen : THE TARIFF ACT OF 1 909. 389 be remembered that in 1897 an elaborate system of specific duties on silks had been substituted for the previous ad valorem rates.' In 1909 the House left unchanged the specific duties as fixed in 1897; but the Senate com- pletely overhauled them. The silk schedule, intricate before, became more intricate than ever, and only a person well versed in the trade could make out the meaning and probable effect of the changes. But it was clear on the face of it that the specific duties were advanced through- out and that they replaced more and more the ad valorem duties, — a change no doubt of probable administrative advantage, but made the pretext here, as so often before, for a substantial increase in the effective rates. It is note- worthy that neither in 1897 nor in 1909 was there any but the slightest explanation of the new silk duties. In 1897, when Mr. Dingley introduced the House bill containing them, he did not refer to this schedule.' In 1909 they appeared for the first time in the Senate bill. There were no public hearings before the Senate Committee, and the new silk duties, like the new cotton duties, were the result of private conferences with the domestic producers, perhaps also with customs officials. They were not mentioned, or barely mentioned, when the Senate's bill Act of 1897 Act of 1909 Value up to S1.50, duty 50 c. plus 15% Value up to $1.00, duty 35% " $1.00 to I 50, .72 plus 35% " li.so to 3.00, " %t.oa plus 15% " $1.50 to 2.00, " |i-2o plus 35% " $2 00 to 3.00, $1.44 plus 35% " over $3.00, " $1.73 plus 20% over $3.00, " $1.80 plus 35% ' See p. 337- ' There was, however, much debate in 1897 on the silk duties, by the Senate. 390 HISTORY OF THE EXISTING TARIFF. was reported. Nor was much said about them in the debates. The intricacy of the schedule, and the difficulty of making out its meaning, may account for this lack of discussion. It is certain that a systematic increase was made in a series of duties already very high.' Both as to cottons and silks, the advances in duty were defended on the ground that the articles were luxuries, and therefore properly subject to high rates for revenue purposes. It is true that the changes affected chiefly the finer grades of both textiles. But the avowed object of those who secured the new rates was to check the imports and promote domestic production, not to secure a revenue from the imports. The defence of the new rates on this ground was an afterthought. It is not improbable that ' One illustration will indicate the nature of the changes in the silk duties. In i8g7 the duties on silk piece goods weighing i^ to 8 ounces square yard, had been arranged in classes, the duty being so much on goods con- taining 20% and less of silk, more on goods containing zo^ to 30^ silk, still more if containing 30 to 45% of silk ; then further differentiated according as they were or were not dyed or printed. In 1909 a new classification is made. Light-weight goods, i^ to 2^ ounces per square yard, are set apart, and subject to higher duties ; those weighing more (2^ to 8 ounces) are also subjected to higher duties, though not in the same degree as the light-weight goods. The following are the changes on the cheapest goods containing the least percentage of silk : 1897 igog Contaming up to 20% of silk. Containing up to 20% silk, weighing I3 to 8 oz. per yard, weighing \\ to 25 oz. per yard, in the gum duty 50 c. lb. in the gum 70 c. lb. dyed or printed etc. ..." 60 c. lb. ^^^ °'' printed etc. . . .85 c. lb. The same, weighing 2J to 8 oz. per yard in the gum 573 c. lb. dyed or printed etc. . . .8a c. lb. Similar advances are made on all the classes, the duties rising as the percentage of silk becomes greater, and being throughout higher than the duties of 1897. THE TARIFF ACT OF I909. 39 1 on the first imposition of higher duties, the revenue will increase, imports continuing. But as domestic products take the place of the imports, the revenue dwindles. Protection and revenue are inconsistent objects ; the more effective the protection (and the main object of the changes on cottons and silks was to make it more effective) the more certain the loss of revenue. All these are cases where duties already very high are put up still another notch. The question arises, Why should imports have continued to pour in notwithstanding the previous heavy duties, and why should such extreme rates be demanded by the domestic producers? I suspect that the answer is much the same in all these cases. It is that the commodities are made by methods not adapted to American ways of efificiency. In this country manufac- turing efficiency comes by the use of highly-developed machinery, continuous operation, standardized processes, and interchangeable parts. Where methods of this kind can be employed, the American employer can pay hi^h wages and yet sell at low prices ; very likely he can export. Where he uses much direct labor and few labor-saving appliances, where he tries to make few goods of any pat- tern, he cannot compete with the countries of low wages and handicraft efificiency. Just why the American ma- chine-using ways should be applied with success in some directions and should fail in others, is often difificult to explain, and indeed constitutes one of the most intricate problems in industrial history. The young-industries argument may sometimes apply. The very introduction 392 HISTORY OF THE EXISTING TARIFF. of the new branch into the country may turn invention in that direction and bring about the development of labor-saving processes. But the fact that extremely high duties are demanded \i, prima facie an indication that the field is not a promising one for this sort of development. At all events, in all these cases of duties shoved higher and higher, great cost of direct labor was urged, — of course with the usual exaggeration and the usual jeremiads about the cheap labor of foreign countries. The seamless stock- ings on which duties were raised were of the kind not knitted complete by the marvellous self-acting machinery of the modern knitting frame. They must be finished and shaped by hand ; and this fact probably explains why they continued to be imported. Mercerized cottons, as one of the advocates of the duty said with emphasis,' called for an unusual amount of labor, and therefore — on the "true principle" — for an unusually high duty. On silks, the duties were highest, and the importations at the same time most likely to continue, in case of the very cheap and the very dear classes of goods. The same was the case with many articles of hardware, such as pocket- knives. In both the cases it was the medium-grade goods, used and made in large quantities, that gave scope for machinery and standardized processes. It hardly need be said that no one explanation can fit all the complications of industry. The continuance of importations in the face of high duties sometimes is due ' See the speech of Senator Lodge, June i; pp. I2, 13 of the separate pamphlet reprint of this speech. THE TARIFF ACT OF I9O9. 393 to the simple fact that foreign producers are technically in advance, and the demand for still higher duties is made because the domestic producers have failed to keep abreast of them. While protection in the United States has not usually caused slackening of progress, it has in some cases done so. This is one of the most important questions of fact in regard to the increase or retention of a particular duty, but one which received no attention in the talk about cost of production and the "true principle." Razors, for example, seemed to be made by more effective methods in Germany than in this country; although, as to the modern safety razor, the reverse was the case. In chemical products and dyes the Germans certainly had the lead, and higher duties seemed to be simply props for the industrially inefificient.' On two of the most important schedules in the tariiT virtually no changes at all were made. The wool and woollen duties were left intact, except for a reduction in the duty on wool tops, and a slight reduction on yarns and dress goods." Of these minor changes, only that af- ' The House proposed to raise the duty on coal-tar colors from 30 to 35 per cent., but in the act it was finally left at 30 per cent. Mr. Payne, in advocating the House rate, was compelled to admit: " I am sorry to have to confess it, but the truth is that the chemists in Germany beat the world. . . . Some enterprising men here wanted to go into the business. . . . But the Germans came in here and dumped colors in the market, and as often as our people succeeded in making the color and putting it on the market, the Germans came in and sold cheaper colors, or an equal color at a less price.'' ' The ad valorem duty on the cheaper grade of yarns was reduced from 40^ to 35^, and the ad valorem duties on cotton-warp dress goods were also lowered by 5 per cent. The specific duties on these articles remained unchanged. The reductions bore in both cases on grades of goods not 394 HISTORY OF THE EXISTING TARIFF. fecting tops caused discussion. Wool tops are fibre in a stage toward yarn, intermediate between combing and spinning. They had been subjected to very high duties in previous acts under an omnibus clause (as wool "partly advanced in manufacture "), and attention had been di- rected to them by some published correspondence of 1897 between Mr. Whitman, the President of the Wool Manu- facturers' Association, and the then Secretary of the Asso- ciation, Mr. North." Mr. Whitman, who was the head of the one great mill making tops for other spinners, desired in 1897 the retention of the duty on this product as well as the increase of duties on other products of the mill. He was aided in securing them by the fact that the Asso- ciation Secretary, Mr. North, served also as confidential clerk of the Senate Finance Committee. The whole situ- ation was one too familiar in our tariff history : the details of legislation had been virtually arranged by persons having a direct pecuniary interest in the outcome, and having also the closest relations with the legislators controlling the outcome. Even though there be no corruption — and there is no ground for suspecting anything more than generous contributions to party chests — the outcome is much the same as if there had been corruption. It illus- trates once more how radically bad is the method by which the details of our tariff legislation are settled. imported because the duties had been prohibitory ; the changes signiBed nothing. On tops, which had before come in under a high drag-net rate, a considerable reduction was made both in the specific and ad valorem duties; but the rate still remained high enough to be prohibitory. ' This correspondence can be found in the Hearings before the Committee on Ways and Means, vol. v., p. 5492. THE TARIFF ACT OF 1909. 395 No one ventured a word in criticism of the principle of a duty on raw wool. Some woollen manufacturers asked for a change in the method of assessing it, advocating an ad valorem duty, or one based on the varying shrinkage of the wool. They made out a strong case in favor of such a change. But the leading spirits in Congress were afraid to touch the complicated wool and woollens schedule. The duties on wool had enormous political strength. They were supposed to give the farmer a share of the benefits of protection, though in fact the beneficiaries were the ranchers of the Far West. To tamper with them would have endangered the allegiance to the wonder-working protective system in a section always disposed to be res- tive under it. So the duties on wool, and with them the huge structure of compensating and protecting duties on woollens, remained untouched. Similarly the duties on sugar were left virtually un- touched. A slight concession was made on one point where, as in the case of tops, unfavorable comment happened to be made at the time of the tariff debate. That point was the "differential," or extra duty on refined sugar, which operates as protection to the sugar refiners. Here there was a reduction from 12^ cents per hundred pounds to 7J cents per hundred pounds. The American Sugar Re- fining Company, or " trust," happened to be in the public eye for other reasons, and this change in duty was among the consequences. As the situation stood in 1909, it was of no effect. The trust was in a less commanding position than it had been in previous years, and competition had 396 HISTORY OF THE EXISTING TARIFF. cut down the margin between the price of raw sugar and refined. The differential of 7J cents per hundred weight now quite satisfied the refiners. Moreover, new managers had- assumed control of the trust, and nothing was heard of any attempt at influence on legislation. The duty on raw sugar — by far the most important part of the sugar schedule — remained in every detail as it had been fjxed in 1897.' Here the champions of the farmers were once more in evidence. The domestic production of beet-sugar had made great strides since 1897, and had become important among the sources of supply. Most of this beet-sugar came from the arid and semi-arid States, like Colorado, Utah, California; but, among the strictly agricultural States, Michigan also was a considerable pro- ducer. The domestic beet-sugar growers were the vehe- ment opponents of any reduction in the rate of duty, and made much of high cost of production, as regards beets for the farmers and sugar for the manufacturers. The truth seemed to be that in a State like Michigan beet- sugar making could not be carried on without a tariff prop ; while farther west, especially in a State like Colo- rado, it needed none. The Michigan sugar people had embarked in the business under the direct encouragement of the government. The Department of Agriculture had been preaching beet-sugar, in season and out of season, for appropriate regions and for inappropriate : not unnatur- ally the growers were almost ferocious in their opposition to the proposal for reducing the duty on sugar. In face ' See pp. 349—350 for a statement of the duty of 1897. THE TARIFF ACT OF 19O9. 397 of their opposition, and with a belief that the revenue from sugar was needed, things were left in statu quo. One change of some importance was made in the sugar schedule. It was provided that raw sugar, not exceeding 300,000 tons, might be admitted free of duty from the Philippine Islands. The imports from the islands had never reached this amount ; the limitation was due to a fear on the part of the domestic sugar producers that there might be at some future time much greater imports. For the time being, — and probably for a long time in the future — the proviso meant that all Philippine sugar was to come in free. Some such concession to this dependency has long been urged by President Taft. . The feeling in favor of it rested in good part on a confused notion, fos- tered by much of the ultra-protectionist talk, that a duty brings a burden on the foreign producer, not on the domestic consumer. It was urged that we should not treat the Philippine producers as foreigners, by maintain- ing what was supposed to be a burden on them. In fact, the situation was a peculiar one. The duty on sugar, which until 1890, and indeed until 1897, had been chiefly a revenue duty,' had become a protective duty of wide effect, and moreover in some ways of unusual effect. ' See the discussion of it from this point of view, p. 305. The beet-sugar question is an interesting and important one, closely connected with ques- tions of agricultural development. See articles by H. C. Taylor in the Annals of the American Academy of Social and Political Science, vol. xxii. (1903), p. 179, and by G. W. Shaw in the yournal of Political Economy, June, 1903, p. 334. Compare Quarterly Journal of Economics, vol. iii., p. 264. Much information is contained in the Tariff Elearings of 1909, vol. iii. ; see, among others, the statements of Messrs. Oxnard and Hath- 398 HISTORY OF THE EXISTING TARlfP. As has already been said with regard to the remission of duty on Hawaiian sugar," a partial remission redounds to the advantage of the favored producer, not of the domestic consumer. Ordinarily a duty brings a burden on the domestic consumer, and its remission therefore ordinarily brings relief to him. But a partial remission means a loss of revenue for the Treasury, no relief for the consumer, and a virtual bounty to the exempted producer. This consequence had not been unforeseen when the Hawaiian treaty was made, in 1876; but it had been sup- posed that but a small amount of sugar would be produced In the islands. In fact, the product, und«r the stimulus of the bounty, increased by leaps and bounds and became an important part of our total supply. This sort of favor- itism, already important as to Hawaii, was made perma- nent after the Spanish War and was greatly extended. The Hawaiian remission, which formerly rested on the treaty with the islands, became definitive after their an- nexation to the United States in 1898. Imports from Porto Rico, of which sugar is the most important, were made free of duty in igor. The same treatment was now extended by the tariff act of 1909 to Philippine sugar. It is only a matter of phraseology whether we say that the protective system was extended by this process to Hawaii, Porto Rico, and the Philippines, or that a bounty was given to the producers in these regions. The away, at pp. 3266, 3286. The American Sugar Refining Co. (the trust) had made large purchases of stock in the various beet-sugar factories, and hence was quite content that the duty on raw sugar should stand. ' See p. 279. THE TARIFF ACT OF igOQ. 399 substantial fact is that the American consumer continued to pay the full tax on sugar, in the form of a higher price, and that the benefit of the remission went to the various favored producers. With those various remissions, and the growth of the domestic beet-sugar industry, the sugar duty came to be distinctly a protective duty. In 1890, it had been still in the main a revenue duty. By 1909, only one half of the sugar consumed continued to be dutiable, the other half being free of tax ; but the price of the whole was raised by the full amount of the tax. Such is the characteristic situation with a^jrotective duty. Still another complication in the sugar situation arose from the treaty of 1903 with Cuba, by which Cuban sugar was admitted at a reduced duty, — at twenty per cent, off, or four-fifths of the full duty. That arrangement, as well as the rate of the duty, was left unchanged by the tariff act of 1909. So long as other foreign countries send in sugar, and pay the whole duty on it, the price of the total supply is raised by that full amount. Cuban sugar pro- ducers then get the benefit of the twenty per cent, off, precisely as those in Porto Rico and Hawaii get the benefit of entire remission. Until 1909, it may be remarked, the Philippine sugar producers had been in the same situation as the Cubans ; their product till then had come in with twenty-five per cent, off, or at three-fourths of the full duty. The Cuban sugar crop has been for many years the largest single item in the sugar supply of the United States. With a favoring climate, ready access to mar- 400 HISTORY OF THE EXISTING TARIFF. ket, the stimulus of lowered duty, and peaceful con- ditions in the island, it grew rapidly. Foreign full-duty sugar had been almost crowded out by the time of the passage of the act of 1909, and, barring accidents, will certainly be crowded out by the opening of the next decade. When this stage is reached, the effective duty will be that on Cuban sugar, — four-fifths of the full rate. The special advantages to Cuban sugar will then disappear and the bounty or protection to the various favored pro- ducers — in Hawaii, Porto Rico, Philippines, Louisiana, the beet-sugar States — will be at four-fifths of the nominal tariff rate." To return now to the provisions of the act of 1909. Here, as in previous tariffs, there were so-called "jokers," — obscure changes, working to the advantage of particu- lar individuals, and concealed amid the endless details. ' For a more detailed discussion of this aspect of the sugar question, I refer the reader to my article, on " Sugar : A Lesson on Reciprocity and the Tariff," in the Atlantic Monthly, March, igo8, and to a supplementary note in the Quarterly Journal of Econotnics , May, 1909. The great changes which took place between 1890 and 1908 in the sources of sugar supply, and consequently in the effects of the duty, are shown by the following figures : Sugar Supply and Revenue from Sugar Duty, 1890 and 1908 Fiscal Year , i88g-go Supply {million Ids.) Free oE tax: Domestic Cane 301 Domestic Beet 8 Hawaiian 243 Total free of tax. Duty-paying Total supply 652 2,607 Revenue {million dollars) Total revenue. 54 -o (For the figures of 1908, see p. 40X, note.) THE TARIFF ACT OF I909. 4OI The process is a familiar one. A constituent, or friend, or contributor to the party campaign expenses, gets the ear of an influential Congressman or Senator, and proposes an increase in the duty on an article which he produces or wishes to produce. If his sponsor is high in the party councils — above all, if a member of the House Committee on Ways and Means or the Senate Committee on Finance, — the log-rolling method almost ensures enactment of the increased duty. Where such changes concern important articles, like cottons, woollens, silks, hosiery, there is usually some public discussion and at least pro forma justification. But where minor articles are to be affected, Fiscal Year, igoy-oS Supply {tnillion lbs.') Free of tax : Domestic Cane 773 Domestic Beet 927 Hawaiian 1^078 Porto Rico 469 Total free of tax 3,247 Taxed at reduced rate : Philippine (75% of full duty) 29 Cuban (80% of full duty) 2,462 Total at reduced tax 2,491 Paying full duty 1.045 Total supply 6,783 Revenue {million dollars) •3 32.2 32.5 17.4 Total revenue. It will be seen that in l8go one-sixth only of the sugar was free and five- sixths paid the full duty. In 1908, on the other hand, one-half the sugar was not taxed at all, one-third paid partial duty, one-sixth only paid full duty. Consequently, though the consumption was doubled by 19.08, the revenue remained (very nearly) the same as in 1890. Yet the consumers in 1908 paid virtually as high a tax per pound as in 1890, and paid twice as much in the aggregate ; since all sugar, whether free, or partially dutiable, or dutiable at the full rate, was raised in price by the amount of that full 402 HISTORY OF THE EXISTING TARIFF. the new rates are quietly put through without check or scrutiny. In the act of 1909, this was particularly the case in the Senate, since the Finance Committee of that body gave no public hearings and, among its own mem- bers, naturally carried senatorial courtesy to the limit. Thus the duty on some nippers and pliers was quietly advanced, for the benefit of a single manufacturer in New York, — in this case under the sponsorship of the Vice- President. The duty on cheap cotton gloves, such as are used by policemen, the militia, and the army for parade occasions, was virtually doubled, there being a projector who succeeded in getting the ear of a New England Senator.' The duty on horn combs was raised from thirty to fifty per cent. The duty on woven fabrics of asbestos was raised in similar degree. Although, as already stated, the duties on iron and steel in most of their crude forms were reduced, the rate on structui^al steel was advanced, by the quiet insertion, in the Senate, of a clause whose effect was not at all apparent on first inspection." Every ' This duty (paragraph 328 in the tariff schedule of 1909) was a topical case of the "joker." The previous rate had been fifty per cent. The new rate is, when valued under $6.00 per dozen, 50 cents per dozen, plus 40 per cent. ; valued over $6. 00 per dozen, 50 per cent. This does not seem on the face of it a marked increase. But the gloves which it is designed to reach are the cheap sort, worth abroad about $1.00 per dozen; on these the duty is practicaUy doubled. The device was a familiar one in the tariff legislation of the period after 1S83; compare p. 269, above. ' Paragraph 121 of the act reads thus: "Beams, girders, . . . together with all other structural shapes of iron or steel, not assembled or manufac- tured, or advanced beyond hammering, rolling, or ■ casting, valued at -j"^ cent per pound or less, [duty] y\j cent per pound ; valued above ^ cent per pound, -j*^ cent per pound." The duty in 1897 had been Y^ijCent per pound; hence there was apparently a decrease in duty. But the language of this THE TARIFF ACT OF 1909. 403 one conversant with our tariff history knows that such items have been too common. But it was hardly to be expected that they should appear in a tariff act supposed to be in fulfilment of a pledge for downward revision. A new set of provisions appeared in the maximum and minimum arrangement. It was very simple. The stated tariff rates were declared to constitute the minimum tariff of the United States. To these rates 25 per cent, was to be added, — 25 per cent, not of the rates, but 25 per cent. of the value of the articles imported, — on goods coming from countries which " unduly discriminate " against the United States. This undue discrimination might be either " in the way of tariff rates or provisions, trade or other regulations, charges, exactions, or in any other manner," or by export bounty or export duty' or prohibition upon paragraph (otherwise identical with that of the corresponding paragraph of 1897) was amended by the insertion of the words in italics. There was no mention, in any other part of the act, of structural steel that is " assembled or manufactured or advanced " ; hence this became dutiable, under the dragnet clause, as a manufacture of iron and steel not specially provided for, — namely, at 45% ad valorem. This meant a marked increase. Like other sorts of iron and steel, structural steel is not likely to be im- ported in ordinary times. But on an unusual press of demand, there have been imports in New York and at other places easily reached by ocean steamers. In lgo6, for example, there were considerable imports, which were now virtually shut out by the amended clause. There is evidence of an international compact, as to steel rails, structural steel, and other pro- ducts, for dividing the field and not poaching on each other's preserves, between the American steel makers (primarily the Steel Corporation) and their foreign rivals, especially the German Stahlwerksverband. The in- creased duty on structural steel clinches the compact as to that article, by keeping the foreigners out of the American market. ' The provision in regard to export duties, by which they might become the ground for levying the maximum tariil, was neither in the House bill nor in the Senate bill. "The words 'or imposes no export duty' were 404 HISTORY OF THE EXISTING TARIFF. export. The minimum tariff plus this 25 per cent, con- stituted the maximum tariff. After March 31, 1910, the maximum tariff was to be applied unless the President had been satisfied that there was " no undue discrimi- nation " against the United States. If so satisfied, he might by proclamation admit goods from a given country at the minimum tariff rates. The administration of the maximum and minimum system was thus put entirely in the hands of the President. Fortunately, every endeavor was made by President Taft, and in the end with success, to prevent an applica- tion of the maximum tariff. By April i, 1910, he was able to declare himself satisfied that there was no " undue " discrimination against the United States by any country whatever, and the " minimum " rates, that is, the tariff duties really meant to be in force, were universally ap- plied. Negotiations with Germany and France led to some relaxations of their duties and regulations as to American products ; and, in true mercantilist spirit, these were held forth as great gains to American industry, and inferentially as causes of detriment to the foreign countries concerned. Negotiations with Canada led to but the slightest con- cessions. That country refused, as already stated,' to modify her regulations as to wood pulp, or to make any inserted in conference, and I believe were inserted at the suggestion of a few paper manufacturers in order to impose the maximum tariff on paper coming from the Province of Quebec." Mr. Mann, Congr. Record, p. 4732. I do not knovif what grounds there may be for this suspicion. Compare note to p. 3S2, note, above. ' See p. 382. THE TARIFF ACT OF I909. 405 changes of moment in her general tariff system. Some minor changes were secured, which enabled the Adminis- tration to make a respectable show of having gained some- thing in the way of lower duties ; and a tariff war, which ; at one time seemed probable, was averted. In view of the unmistakably critical temper of the country as to the general Republican policy and not least as to the tariff, it would have been politically almost suicidal to increase duties against any important country by the 25% rate of the maximum tariff. Add to this the sincere wish of President Taft and his associates to prevent any such increase, and the application of the minimum rates was almost a foregone conclusion. The section providing for the maximum and minimum arrangement contained at the end a curious clause,' which seems, strictly construed, to relate solely to that arrange- ment, but has been construed to have a wider bearing. During the session there was talk, especially among the advocates of downward revision, of the desirability of a Tariff Commission. Some persons went so far as to sug- gest a Commission which should be entrusted by Congress with the power of fixing the tariff rates, and readjusting them from time to time " according to conditions " ; a scheme obviously impracticable. But there was much to be said in favor of creating a body with powers of inves- tigation. Hearings before Congressional Committees, as ' It reads thus : " To secure information to assist the President in the discharge of the duties imposed upon him by this section, and the officers of the government in the administration of the customs laws, the President is hereby authorized to employ such persons as may be required." 4o6 HISTORY OF THE EXISTING TARIFF. has been said," are most unsatisfactory sources of infor- mation. And there is need of information. The endeavor to apply the "true principle" (of equalizing costs of pro- duction), while far from being a solution of the real prob- lems underlying the tariff controversy, is of importance in reference to vested interests and the disturbance of existing adjustments. It is important, too, toward ascer- taining how far monopolies are getting excessive profits under the shelter of "unduly " high duties. On all such topics sifted and accurate information is called for. A permanent body of competent persons can do much toward clarifying public opinion and promoting careful legis- lation. The proposal for a tariff board having functions of this sort was welcome to the Administration, but very unwelcome to the extreme protectionists. The clause inserted in the maximum and minimum section was one of those ambiguous compromises, so common in our legis- lation, whose outcome depends on the spirit in which they are construed. Its language seems to refer only to the matter of foreign discrimination. But the board ap- pointed under this authority was directed, while giving attention first of all to the administration of the maximum and minimum rates, to gather information on the tariff generally, with reference to the domestic situation as well as the foreign. The declared policy of the Administration was to use the board as a sort of Tariff Commission : an indication that the act of 1909 was not regarded in this ' See p. 369 . THE TARIFF ACT OF 1 909. 407 quarter, as it was among the extreme protectionists, as "settling" the tariff question.' The reciprocity arrangements provided for by the act of 1897 disappeared entirely. The sections relating to reciprocity in that act were expressly repealed, and the President was given authority to terminate all agreements made under them. As these reciprocity agreements never had been of any substantial importance, their repeal was of little significance, except as indicative of the disappear- ance of any intention to deal with tariff questions in this way. In sum, the act of 1909 brought no essential change in our tariff system. It still left an extremely high scheme of rates, and still showed an extremely intolerant attitude on foreign trade. The one change of appreciable importance was the abolition of the duty on hides. As an offset to this were the increased duties on cottons and silks, and on a number of minor articles. Most disappointing was the mode in which the subject was dealt with. There was the same pressure from persons engaged in industries subject to foreign competition, the same willingness to accede to their demands without critical scanning. In the House, under the leadership of Mr. Payne, there was an endeavor both to maintain publicity and to prevent such concealed items. In the Senate, things went in star- ' President Taft's declaration in regard to the tariff board was made in his speech at Winona, Minn,, in October, igog, Profesbor II C. Emery was made chairman of the board. The urgency appropriation act of igog ap- propriated money for its expenses, for one year only, A further and enlarged appropriation (of $250,000 a year) was secured for its work in 1910, 408 HISTORY OF THE EXISTING TARIFF. chamber fashion, and the familiar process of log-rolling and manipulation was once again to be seen. The act as finally passed brought no real breach in the tariff wall, and no downward revision of any serious consequence. None the less, a somewhat different spirit from that of 1890 or of 1897 was shown in 1909. Though the act as a whole brought no considerable downward revision, it was less aggressively protectionist than the previous Repub- lican measures. The increases of duty were more furtive, the reductions were more loudly proclaimed. The extreme advocates of protection were on the defensive. There was unmistakable evidence in Congress and in the com- munity of opposition to a further upward movement. High-water mark apparently had been reached, and there was reason to expect that the tide, no longer moving upward, might thereafter begin to recede. . APPENDIX. TABLE I. Imports, Duties, and Ratio of Duties to Imports, 1860-1907. (From the " Statistical Abstract.") (00,000 omitted.) Imports. Fiscal Year Ending June 30. Free. Dutiable. Total. Duties Collected. Per cent, of Duties to Dutiable Im- Percent. o£ Duties to Total Im- ports. ports. i860 68.4 267.9 336.3 52.7 1967 15.67 I 67.4 207.2 274.6 39.0 18.84 14.21 2 49.8 128.5 178-3 46.5 36.19 26.09 3 30.0 195.3 225.4 63.7 32.62 28.28 4 38.2 262.9 301. 1 96-5 36.69 32.03 5 40.1 169.6 209.6 80.6 47-56 38.46 6 57.1 366.3 423.5 177.0 48-93 41.81 7 17.0 361.1 378.2 168.5 46.67 44-56 8 15.I 329-7 344-8 160.5 48.63 46.49 9 21.7 372.7 394-4 176.5 47.22 44-65 1870 20.2 406.1 426.3 I9I-5 47-08 42.23 I 40.6 459-6 500.2 202.4 43-95 38.94 2 47-7 512.7 560.4 212.6 41-35 37-00 3 178.4 484.7 663.1 184.9 38.07 26,95 4 151.7 415-7 567-4 160.5 38.53 26.88 5 146.5 379-.8 526.3 154-5 40.62 28,20 6 140.6 324.6 464.6 145-2 44-74 30.19 7 140.8 299.0 439-8 128.4 42.89 26.68 8 • 141-3 297.1 438-4 127.2 42-75 27.13 9 142.5 296.7 439-3 133.4 44-87 28.97 1S80 208.0 419-5 627-5 182.7 43-48 29.07 I 202.5 448.1 650.6 193-8 43-20 29-75 2 210.7 505-5 716.2 216.I 42.66 30- II 3 206.9 493-9 700.8 210.6 42.45 29.92 4 211. 3 456.3 667.6 190.3 41.61 28.44 5 192.9 386.7 579-6 178.1 45.86 30.59 6 211. 5 413-8 625.3 189.4 45-55 30.13 7 233.1 450.3 683.4 214.2 47.ro 31.02 8 244.1 468.1 712.2 216.0 45-63 29.99 9 256.6 484.8 741-4 220.6 45.13 29.50 l8go 266.1 507.6 773-7 226.5 44.41 29.12 I 388.1 466.4 854.5 216.9 46.28 25.25 2 458.1 355-5 813.6 174. 1 48.71 21.26 3 444.2 400.3 844.4 199. 1 49-58 23-49 4 379.0 257-6 636.6 129.6 50.06 20.25 5 376.9 354.3 731.2 149.4 41.75 20.23 6 368.9 390.8 759-7 157.0 40.18 20.67 7 381.9 407-3 789.2 172.7 42.41 21.89 4IO APPENDIX. TABLE 1— Continued. Imports. Per cent. Per. cent. Ending June 3u. Free. Dutiable. Total. Duties Collected. of Duties to Dutiable Imports. of Duties to Total Imports, I8g8 291-5 295.6 587.1 145-4 48.80 24.77 9 299.7 385.8 685.4 202.0 52.07 29.48 1900 366.8 463.8 830.5 229.4 49-24 27.62 I 339-1 468.7 807.8 233.6 49.64 28.91 2 396-5 503.2 899.8 251-5 49.78 27-95 3 437.3 570.7 1,008.0 280.7 49-03 27-85 4 454-1 527.7 981.8 258.2 48. 78 26,30 5 517-I 570.0 1,087.1 258.4 45-24 23-77 6 548-7 664.7 1. 213-4 293-9 44.16 24.22 7 641,9 773-4 1,4154 329-5 42.55 23.28 This table is taken from the " Statistical Abstract of the United States." The figures given in different edi- tions of the "Statistical Abstract" have not always been consistent. Those given in the table are from the edition of 1891 for the earlier years (1860-68), and from the edi- tions of 189S and 1907 for the later years. They indicate " net imports," i.e., imports less re-exports, for 1860-66; from 1867 on, they indicate "imports for consumption." Substantially, these two forms of statement come to nearly the same thing. The significant changes will be easily noted. The sharp rise in the average rate (per cent, of duties to imports) between 1861 and 1865 shows the extent to which the legislation of the war affected the general character of the tariff system. The average rate on dutiable articles, after reaching its war maximum in 1866, declines somewhat for a few years thereafter. Froni APPENDIX. 411 1872 to 1875, there is a further fall, in consequence of the ten per cent, reduction of 1872 ; after 1875 the rate goes up again, and then remains fairly steady until 1883. The act of 1883 brings a distinct rise in the average rate on dutiable articles ; the act of i8go a still further rise, bring- , ing in 1894 the maximum for the whole period (50,06 per cent.). The abrupt increase in the free imports in 1873 is the result of the abolition of the tea and coffee duties in 1872, which causes also the fall in the average per cent, of the duties collected as compared -with the total imports. The abolition of the sugar duty in 1890 brings a similar abrupt increase of the free imports in 1891 and 1892, and a similar fall in the ratio of duties collected to total imports. The act of 1894 brings a distinct lowering of the average rate of duty ; that of 1897 raises the average to the figures that had prevailed under the acts of 1883 and 1890. 412 APPENDIX. TABLE II. Duties on Some Important Articles, Raised during the War, and Retained without Reduction till 1883. Articles. Duty under the Morrill Duty of 1864, in Force in Tariff of 1861. 1883. Books 15^ 25^ Chinaware, plain . . 30^ 45^ Cotton goods, not other- wise provided for . 30^ 35^ Cottons, coarse, un- bleached .... I ct. per yard. 5 cts. per yard. Cotton spool-thread . 30^ 6 cts. per dozen, plus 30 % (= 60 to 70 f). Cottons, fine printed . 4-J- cts. per square yard 5f cts. per square yard plus 10 % plus 20 % Manufactures of flax, jute, or hemp, not otherwise provided for 30 i 40!? Glass, common window I to ij cts. per square 1 to 4 cts. per square foot. foot. Gloves, of kid or leather 30^ 50^ Bar-iron ' |ct. per ton |i2 per ton I to \\ cts. per lb. Iron rails .... $14 per ton Steel, in ingots, bars. etc. ...... \\ to 2 cts. per lb. 7\ to 3j cts. per lb. Pig lead I ct. per lb. 2 cts. per lb. Paper 30% 35^ Silks 30^ 60^ ' On all forms of bar-iron, band-, hoop-, and boiler-iron, on chains, anchors, nails and spikes, pipes, etc., etc., the duties of 1864 were in force till 1883. APPENDIX. 413 TABLE III. Revenue from Customs Duties and Internal Revetiue, 1861-1907. {00,000 omitted.) Year. Internal Revenue. Customs Revenue. 1861 None. 39-6 2 11 49.1 3 37.6 69.1 4 109.7 102.3 5 20y.5 84.9 6 309.2 179.0 7 266.0 176.4 8 igi.i 164.5 9 158.4 180.0 1870 184.9 1945 I 143. 1 206.3 2 130.6 216.4 3 113.7 188.I 4 102.4 163.1 5 IIO.O 157.2 6 116.7 148. 1 7 118.6 131.0 8 110.6 130.2 9 113-6 137.2 1880 124.0 186.5 I 135-3 198 2 2 146.5 220.4 3 144.7 214.7 4 121. 6 195-1 5 112.5 181.5 6 116.8 192.9 7 118.8 217-3 8 124.3 219.1 9 130.9 223.8 1890 142.6 229.7 I 145-7 219.5 2 154-0 177.5 3 116.0 203.4 4 147.1 131-8 5 143-4 152.2 6 146.8 160.0 7 146.7 176.6 8 170.9 149.6 9 273-4 206.1 1900 295.3 233.2 I 307.2 238.6 2 271.9 254-4 3 230.8 284.5 4 232.9 261.3 5 234-1 261.8 6 249 I 300.2 7 26().7 332.2 414 APPENDIX. TABLE IV. Proc^uetion, Imports, and Exports of Copper, and Foreign and Domestic Prices. (Quantities in gross tons.) Imports. Price per lb, in cents. | Domestic Product'n. Ex- ports. Year. Copper in Pigs. Copper New Yorlc London 1 in i*rice. Ore. LakeCop'r. Ctiili Bars.l 1875 18,000 415 2,300 2,280 23 18 5 6 19,000 777 910 6,430 21.5 16.5 5 7 2I,OCO 750 15 6,050 19 14.6 4-4 S 21,500 165 399 5,040 16.5 13-5 3 9 23,000 70 100 7,680 17-5 12.2 5-3 1880 27,000 2,350 2,000 1,880 20 13-5 6.5 I 32,000 320 4,420 2,160 18,5 13-3 5.2 2 41,000 334 8,190 1,490 18.7 14.4 4-3 3 52,000 148 500' 3,890 16. 1 13-7 2.4 4 63,500 65 980 7,610 13.7 II. 8 1-9 5 74,000 35 1,630 19,900 II 9-5 1.5 6 70,000 18 1,840 10,850 II 8.8 2.2 Figures are from " Mineral Resources of the United States," pp. 214, et scq. The production is for the calen- dar year, the imports and exports for the fiscal year (end- ing June 30th). The annual average prices are from the monthly prices given in " Mineral Resources." The fig- ures given in " Mineral Resources" seem to contain con- siderable undei'statements, so far as exports are con- cerned. See Eng. and M in. Journal, Jan. 26, 1884, p. 59- These tables show the price in New York to have been higher than that in London by from i-^ to 5|- cents. In recent years the great increase in domestic production ' Beginning with 1883, this column states the quantity of copper con- tained in imported ore, not the gross amount of ore. The 8,i90tons o£ ore imported in I082 contained about 600 tons of copper. APPENDIX. 4rS has forced down the price here, and the difference in price is not more than i^ cents. The better quality of domestic Lake copper would cause it to bring i^ cents more than Chili bars under any circumstances. Cost of transporta- tion (from London to New York) is insignificant. It is safe to say that any difference in price over and above \\ cents per pound could not exist if it were not for the duty on copper. TABLE V. Production, Imports, and Foreign and Domestic Prices of Steel Mails. Product in U. S,, Gross Tons. Imports, Average Average Average "Pyppcc of Year. Gross Tons. Price in U. S. Price in England. £,xcessoi jj American ' Price. 1871 34,100 505,500 $91.70 $57.70 $34.00 $28.00 2 84,000 474,000 99.70 67.30 32.40 21.50 27.20 $25.20 3 115,200 231,000 95.90 74-40 Aug., '72, to 4 129,400 96,700 84.70 57-50 March, '75. 5 259,700 17,400 59-70 44.10 15-60 6 368,300 385,900 499,800 618,800 53.10 43-50 41.70 48.20 37.70 15.40 7 8 31.90 27.20 11.60 $28.00, 14.50 9 39,400 24-70 23.50 ► Mar., '75, to July. '83. 1880 864,300 259,500 67.50 36.00 31-50 I 1,210.300 344,900 61.10 31.20 29.90 2 1,304,400 200,000 48.50 30.00 18.50. 3 1,156,900 34,800 37-75 25.40 12-35" 4 999,400 2,800 30-75 22.90 7.85 5 963,700 2,200 28.50 23.65 4.85 $17.00, 6 1,579.400 41,600 34-50 20.65 13-85 •July, '83, to 7 2,119,000 137,800 37.10 20.65 1645 Oct., '90. 8 1,391.000 63,000 29.80 19.20 10.60 9 1,531,000 6,200 29.25 24-15 5.10 iSqo 1,871,400 31-75 27-30 4-45 $13.44, J 1.298,900 30.00 22.00 8.00 ■Oct., 'go, to Aug., '94. 2 1,541,400 30.00 20.00 10.00 3 1,130,400 2,900 28.00 18.50 9.50. 4 1,017,100 24.00 17-50 6.50 S 1,300,300 1,400 24.00 20.00 4.00 ^$7.84, from 6 1,117,600 7,800 28.00 21.00 7.00 Aug., '94. 7 1,630,000 19.60 21.00 -1.40 4i6 APPENDIX. TABLE '^.—Continued. Product in U. S., Imports, Average Average Average Excess of Year. Gross Tons. Gross Tons. Price in U. S. Price in England American Price. Duty. 1898 9 1,977,900 2,271,100 $17.60 28 10 $23.50 26.80 $5.90' 2,000 1.30 1900 2,385,000 1,500 32.30 36.00 —3.70 I 2,872,900 1,900 27.30 29.50 — 2.20 $7. 84 from 2 2,941,300 63,500 28.00 27.40 .60 July, 1897 to August, 1909 3 2,991,800 95,500 28.00 28.00 .00 4 2,283,800 37,700 28 00 22.50 5.50 S 3.375,600 17,300 28.00 28.80 —.80 6 3,977,800 5,000 28.00 31.20 — 3.20 7 3,632,700 4,000 28.00 32.00 — 4 00 8 1,921,500 1,700 28.00 29.10 — 1. 10 The figures for production and importation are from the Reports of the American Iron and Steel Association. The American prices are from the same source, but have been reduced to a gold basis for the years 1871-78. The English prices have been secured partly from occasional tables given in the Iron and Steel Association reports, partly from English sources. The American prices are those for rails at the mills, in Pennsylvania; the English are for rails free on board. Prices by yearly averages can indicate only the general fluctuations ; but they suffice for purposes of comparison. Where the imports are less than 1000 tons in any one year, they have been omitted. Since 1888 the imports have been sporadic, and signify little. Cost of transportation from England to the United States has been usually somewhere between two and four dollars a ton. But sometimes it has been considerably APPENDIX. 417 less than two dollars ; and carriage by water from Eng- land to places on the seashore in the United States has not infrequently been cheaper than carriage by land from the American rail-mills to such places. It will be observed that there were three periods of active railway building and of heavy imports of rails: 1871-74, 1879-82, 1886-88. During these years or parts of them, prices of rails in the United States were higher than those in England by the full amount of the duty for the time being. In most other years they were higher, but by an amount less than the duty, and imports ceased, except for sporadic shipments of special sizes or kinds. In the later years, the American prices came nearer and nearer the English prices. In 1897, prices fell abruptly in the first two months of the year, in consequence of a " steel-rail war," marking the breaking up of the com- bination which had so long kept prices up. After that year, prices were no higher in the United States than in England. Exports were considerable, much exceeding the imports. INDEX Adam Smith quoted, 364 Ad-valorem duties, 159, 303 Ad-valorem duty on woollens, 207, 293. 333. 340, 393 Agricultural products, duty of 1883, 248; of 1890, 274; in 1909, 367 Aldrich on tariff of 1909, 375 B Bar-iron, duty of 1883, 244; in 1864-83, 413 Beet-sugar and protection, 396 Blankets, duty of 1867, 205, 214; of 1883, 242 Canada's tariff relation to U. S. in 1909, 402 Carpets, duty of 1867, 214; of 1890, 266 Carpet wool, duty of 1867, 201 ; of 1883, 239; of 1890, 257; of 1897. 331 Charcoal iron, 54, 131 Clay and the tariff, 74. 85. 96 Cleveland, on the tariff, 253, 256; does not sign act of 1894, 290, 320 . „ Coal, duty in 1872, 185; m 1894, 298; in 1897, 342; in 1909, 380 Coffee, free in 1846, 114; duty re- duced, 179; repealed, 183; ex- pediency of, 186 Colonies, industrial state of, 8 Compensating system on wool and woollens, 196; abolished 1894, 292; reestablished 1897, 333. Compromise tariff of 1833, 110 Conference committee on tariff in 1883, 233; in 1890, 289; in 1897, 328; in 1909, 376 Copper,duty of 1869, 219; of 1883, 245; of 1890-97,272,343 Cotton gloves, duty of 1909, 402 Cotton goods, duty of 1816, 30; of 1864, 193; of 1883, 236, 243; of 1890, 266; of 1897, 335; of 1909. 371, 387 Cotton manufacture, 1789-1824, 25; under tariff of 1833, 134; in 1846-60, 139 Cotton stockings, duty of 1890, 267; of 1909, 388 Crisis, of 1818, 20, 69, 74; of 1837, 116; of 1857, 118; of 1893, 322, 324 Cuban sugar at reduced duty, 309 Cutlery, duty and manufacture, 343 D Dawes on tariff of 1872, 182, 185 Democratic party, on tariff in 1883-90, 253; victorious in 1890-92, 284; divided in 1896, 321 Dress goods for women, duty of 1883, 234; of 1890, 263 E Earthenware, duties in 1890-97, 341 4'9 420 INDEX Finkelburg introduces bill of 1872, 182 Flannels, duty of 1867, 205, 214; of 1883, 242 Flax, duty of 1828, 90, 105; of 1870, 227; of 1890, 275; of 1894, 297; of 1897, 341 Foreign trade, in 1792-1815, 11; after 1816, 20, 23; under tariff of 1846, 121 Frelinghuysen on copper act of 1869, 220 Fruits, duty of 1909, 372 Garfield on tariff in 1870, 178 German protests on tariff of 1909, 370 Glass, duties in 1890-97, 341 Gloves, duty of 1909, 372 H Hardware, 405 Harris, E., on woollen duties, 199 Harrisburg convention of 1827, 83 Harrison, elected in 1888, 255; de- feated in 1892, 285 Hawaiian sugar free, and effects, 279. 398 Hayes, J. L., on act of 1872, 183, 189; President of Tariff Com- mission of 1882, 231; on tariff of 1883, 243, 249 Hemp, protected in 1789, 15; duty of 1828, 90, 105; character of culture, 90 Hides admitted free in 1872, 185; subject to duty in 1897, 332, 379, note; free again in 1909, 378 Home -market argument after 1818, 67, 70 Horizontal reduction, in 1833, in; in 1872, 189; proposed in 1884, 251 Hosiery manufacture before i860, 148. See also Cotton Stock- ings and Knit Goods Imports, 1860-1907, 409 Imports affected by duties? 120, 185 Imports and exports, 1791-1814, 12,23 Internal-revenue acts of 1862 and 1864, 161, 165 Internal taxes repealed, 172 Iron, duties of 1816, 50; of 1818, 51; of 1824, 52; of 1828, 52, 89; of 1846, 124; of 1870, 179, of 1883, 244; of 1890, 271; of 1894, 300; of 1897, 342; of 1909, 384 Iron manufacture, in the colonies, 47; in 1789-1838, 49; under acts of 1842 and 1846, 129; since 1870,270,301, 344 Iron-ore, duty in 1861-83, 236; in 1890, 271; in 1894, 299; in 1897, 342; in 1909,380 Iron rails free in 1833, 56 Jackson party and tariff of 1828, 85 Jefferson on protection, 14 "Jokers" in tariff of 1909, 376, 402 Jute free in 1890, 275 K Knit-goods, duty in 1890, 267; in 1909, 388 Labor cost and duties, relation between, 364, 391 Lead, duty in 1890-97, 343 Leather duty reduced in 1^09, 386 Linens, duty in 1890, 268; in 1894, 297; in 1897,339 Lowell founded, 32 M Madison on protection, 14 Mallory and the tariff of 1828, 83, 87 Marble, duty of 1864-70, 224; of 1883, 247J INDEX 421 Maximum and minimum rates in 1909. 403 Michigan and beet sugar in 1909, 396 Mills bill of 1888, 254 Minimum duties of 1816, 30, 76; proposed in 1820 and 1824, 77; in 1827, 80, 83; in 1828, 93, 103; in 1890, 269; discussed, 81, 104, 270; similar system in 1890, 269 Molasses, duty of 1828, 93, 100 Morrill, J. S., on tariff of 1861, 160; of 1864, 65, 173; on marble duties, 225 Morrison, bill of 1876, 191; of 1884-86, 251; on act of 1883, 233 N Nickel duty, 227, 247 Nippers and pliers, duty raised in 1909, 402 North, S. N. D., 394 Payne on tariff of 1909, 368 Philippine sugar free in 1909, 397 Pig-iron, see Iron Plate-glass duties, 341 Politics and the tariff of 1828, 84 Porto Rico sugar free, 398 Power loom introduced, 31, 42 Printing paper, duty of 1897 and 1909, 392 Prosperity affected by tariff? 286, 318. 361 * Protection feeling, in 1789, 14, 68; after i8o8, 17; in 1816, 18, 68; strong after 1818, 23, 69; decline after 1832, 64, 106; after the Civil War, 173, 190; in 1909, 408 Protection to young industries, argument for, i; applicable to steel rails and copper? 246 R Raw materials, effect of remitting duties, 382 Razors, duty of 1909, 388, 393 Reciprocity provisions, of 1890, 278; of 1897, 352; abolished in 1909, 407 Reed rule of 1883, 232 Remissions of duty, effect of partial, 279, 398 Revenue duties abolished, 189,275 Revenue from customs and in- ternal taxes, 414 Revenue from tariff uncertain, 355 Rice, A. H., on tariff of 1851, 150 Rolled bar-iron, duty on, 59, 62, 126; first made in U. S., 132 S Salt duty reduced, 185 Seward on tariff of 1857, 115 Sherman, on tariff of 1861, 160; on tea and coffee in 1875, 190 Shingles, duty raised in 1909, 377 note Shoes, duty reduced in 1909, 386 Silks, duty in 1883, 248; in 1890, 268; in 1894, 297; in 1897, 336; in 1909, 388 Silver question and the tariff, in 1896, 322 Sinking fund in 1875, 190 South, against protection after 1820, 73; on lumber duties in 1909. 383 Specific duties, under act of 1833, III; in 1861, 159; in 1894, 304 Steel duty in 1883, 237 Steel rails, duty of 1870, 221; of 1883, 244; of 1890, 272; of 1894, 301; of 1897, 342; of 1909, 384; growth of manufacture, 346, 385; statistics, 416 Sugar, duty repealed in 1890, 275; bounty on, in 1890, 277; on raw sugar restored in 1894, 309; in 1897, 348; in 1909, 396; reasons for and against, 305; new con- ditions in 1908, 397; on refined sugar, and the Sugar Trust, 310, 350, 395 Sugar, figures as to, for 1890 and 1908, 400 note 422 INDEX Structural steel, duty raised in 1909, 402 T Taft, President, attitude on tariff in 1909, 363, 377 Tariff act, of 1789, 14; of 1816, 18, 68; of 1824, 74; of 1828, 89; of 1832, 103, no; of 1833, III; of 1842, 113; of 1846, 114, 156; of 1857, 115, 157; of 1861, 158; of 1862, 162; of 1864, 164; of 1870, 178; of 1874, 185; of 1875, 190; of 1883, 233, 249; of 1890, 256, 282; of 1894, 284, 317; of 1897, 321, 328; of 1909, 361, 407 Tariff bill, of 1820, 70, 72; of 1827 (woollens), 80; of 1867, 175; of 1872, 182; of 1878, 1879, 191; of 1882, 266; of 1884, 1886, 251; of 1888, 254 Tariff board or commission of 1909, 405 Tariff commission of 1882, 231 Tea, free in 1846, 114; duty re- duced, 179; repealed 1872, 183; policy of, 186 Ten per cent, reduction of 1872, 183, 190 Tin plates, duty in 1861-90, 272; in 1894, 302; in 1897, 347 "True principle" of protection as proclaimed in 1909, 363 Trusts and the tariff, 311, 362 V Van Buren and tariff of 1828, 96, 100, lOI W Wages argument, appears about 1840, 65; its position in 1909, 366 Walker, R. J., and tariff of 1846, 114 War finances, 161, 177 Webster and tariff of 1828, 100, loi Wells, D. A., on internal taxes, 164; prepares bills of 1867, 176; on copper veto of 1869, 220 Wharton, J., on nickel duty, 227 Wheat, exports of, 1803-20, 23 Whitman, Wm., 394 Wood, F., introduces bill of 1878, 191 Wood pulp duty in 1909, 380 Wool and woollens, duties of 1816, 40, 75; of 1824, 40, 75; of 1828, 91, 93; of 1832, 103, 105; of 1846, 114; of 1857, 150; of 1861, 195; of 1864, 197, 198; of 1867, 201, 203; of 1883, 235, 239, 241 ; of 1890, 256, 259; of 1894, 291; of 1897, 328, 333; unchanged in „ 1909, 393 Wool, cheap, admitted at low rates, 91 Wool duty, economic aspects of, in United States, 239, 258, 291, 329 Wool, duty in England repealed 1824, 79 Wool tops duty, 394 Woollen dress-goods, duty of 1883, 234; of 1890, 264; of 1897, „324 Worsted manufacture, 148 Wright, Silas, on tariff of 1828, 96 Young-industries argument, i, 64 Z Zinc ore, duty raised in 1909, 372 Jt Selection from the Catalogue of G. P. PUTNAM'S SONS Complete Catalogue sent on application By CHARLES A. CONANT A History of Modern Banks of Issue With an Account of the Economic Crises of the Nine- teenth Century, and the Crisis of 1907 Fourth Edition. Revised and Enlarged. Svo. Net, Ss-S" " No better volume can be recommended to the general reader who wishes to familiarize himself not only with the theory of bank- ing, but with the history and actual experience of this great agency of industrial progress." — Chicago Evening Post. " We can only express our hearty appreciation of the book as a whole. It is extremely interesting. It cannot but be useful, and to us it is very cheering. Mr. Conant's book, from beginning to end, is a proof that sound currency is evolved necessarily from the pn*- gress of an industrial and commercial people." — N. Y. Times. Wall Street and the Country A Study of Recent Financial Tendencies. 8*. Net, $1.25. (By mail, $1.35.) "The author shows a comprehensive grasp of economic and financial problems, and the capacity for a clearness of statement. . . . His book should be in the hands of all who are interested in the important subjects discussed." — Wall Street Journal. " Charles A. Conant is an able apologist for the functions and the Methods of Wall Street. The book is most intelligent and full of pertinent information." — Indianapolis News. Q. P. PUTNAM'S SONS New York London By James Albert Woodburn (Professor of American History and Politics, Indiana University) The American Republic and Its Government. An Analysis of the Government of the United States, with a Consideration of its Funda- mental Principles and of its Relations to the States and Territories. Octavo (by mail, $2 20) net, %2 00 "A sounder or more useful conxmentary has never before seen the light. Even Mr. James Bryce's study of the 'Ameri- can Commonvfealth ' must on the vifhole be deemed less fruit- ful. Not a single page should be overlooked." — M, W. Hazeltine in the N. Y. Sun. " Every citizen that wishes to obtain a clear and compre- hensive knowledge of the government under vfhich he lives can hardly forego acquaintance with this work, and its orderly arrangement and lucid style will make the acquaintance a pleasure as well as a profit." — Indianapolis News. Political Parties and Party Problems in the United States. A Sketch of American Party History a id of the Development and Operations of Pa "ty Machinery, together with a Consideration o ' Certain Party Problems in their Relations to .I'olitical Morality. Octavo (by mail, $2 20) . , . net, %2 00 "An exceptionally clear, interesting, and impartial history of American political parties, a lucid explanation of the work- ings of party machinery, and a strong statement of the moral evils now debasing our political life, and the remedies which an awakened public conscience may apply. A thoroughly good book for the school and for the study. " — Outlook. Sand for Descriptive Circular G. P. PUTNAM'S SONS NSW YORK LONDON " The best summary at present available ot the political history of the United States." Frank H. Hodder, Professor of American History in the Jniversity of Kansas. American Political History 1763=1876 By Alexander Johnston Edited and Supplemented by James Albert Woodburn Professor of History and Political Science, Indiana Dnt versity; Autlior of " The American Republic," " Political Parties and Party Problems in the United States," etc. In two farts, each complete in itself and indexed, Ocatvt. Each, net $2.00 X. The Revolution, the Constitution, and the Growth of Nationality. 1763-1832. 3, The Slavery Controversy, Secession, Civil War, and Reconstruction. 1 820-1 876. These volumes present the principal features in the political history of the United States from the opening of the American Revolution to the close of the era of the Reconstruction. They give in more con- venient form the series of articles on "American Political History " con- tributed to Lalor's "Cyclopedia of Political Science, Political Economy, and Political History,", hy the late Professor Alexander Johnston. _ " These essays, covering the whole field of the political history of the United States, have a continuity and unity of purpose ; iri-troduced, urranged and supplemented as they have been by Professor Woodburn (who contributes a very necessary chapter on the Monroe Doctrine) they p>-esent a complete and well-balanced history of the politics of the United Suxts."—Hart/(trd Caurant, G. P. PUTNAM'S SONS New York Londoo "A wotk indispensable to students of American History," The Journal of the Debates in the Convention Which Framed The Constitution of the United States May-September, 1787 As Recorded by JAMES MADISON Edited with Introduction and Notes by QAILLARD HUNT S Volumes, Svo, $4.^0 net per set. Uniform with Lodgers Edition of ** The J^ederaiist.^* These two volumes comprise Madison's complete record of the proceed- ings of the Constitutional Convention and give in the notes comparative comments based upon that journal and the less complete chronicles of the convention made by Yates, King, and Pierce. James Madison's contemporaries generally conceded that he was the ieading statesman in the convention which framed the Constitution of the United States ; but in addition to this he kept a record of the proceedings of the convention which outranks in importance all the other writings of the founders of the American Republic, He is thus identified, as no other man is^ with the making of the Constitution and the correct interpretation of the intentions of the makers. His is the only continuous record of the proceedings of the convention. He took a seat immediately in front of the presiding officer, facing the members, and took down every speech or motion as it was made, using abbreviations of his own and immediately afterwards transcribing his notes when he returned to his lodgings. A few motions only escaped him. and of important speeches he omitted none. The pro- ceedings were ordered to be kept secret, but his self-imposed task of reporter had the ofiacial sancdon of the convention. Q. P. PUTNAM'S SONS New York London