i /< V romp. of Edwa rd Mkinsan THE RETRO-ACTIVE INFLUENCE OF DUTIES UPON IMPORTS TREATISE UPON THE “REPERCUSSION DES DROITS DE DOUANE” PREPARED BY EDWARD ATKINSON, LL.D., Ph.D. Member of a Committee appointed to Treat this Subject by the International Statistical Institute Boston, Mass., U.S.A., August, 1902 BOSTON Old Corner Bookstore, Inc. 283 Washington Street 1903 $0tkfoell ant> C^nrc^ill j^rcss BOSTON /fc*A INTRODUCTION. At the last meeting of the Societe International de Statis- tique, a committee, consisting of Messrs. Yves Guyot and Delatour, of France, Von Mayr, of Germany, Mandello, of Hungary, and Atkinson, of the United States, was ap¬ pointed to prepare reports upon the "Repercussion des Droits de Douane.” In pursuance of this request, the following treatise was sent by myself to the chairman to be presented at the meeting of the Institute in Berlin in September, 1903. EDWARD ATKINSON. “REPERCUSSION DES DROITS DE DOUANE.” Haying been appointed a member of a committee of the Institut Internationale de Statistique to write a treatise upon the retro-active effect of duties upon imports in the United States, I beg to submit the following essay : In dealing with the effect of duties upon foreign imports, it becomes necessary to give an exact definition of the words which must be used. Free Trade. — This phrase stands for a principle or rule of action based upon human nature. As mankind has risen above savagery, trade or commerce has become estab¬ lished. Men have exchanged products or services with each other, first by barter, then by the measure of money. As time has elapsed, banks and banking, bills of exchange, and all the other media of exchange have been developed. Protection. — This word has been given to a policy. There is no principle or rule of action underlying protective tariffs or bounties. They are mere expedients, good or bad in the estimation of parties ;• protective tariffs are temporary, variable, and subject to change with changes in party control. The policy of protection is put into action only for the purpose of limiting the working of the principle of free trade. Protection rests upon force, while free trade rests upon liberty. Protection therefore attains its purpose only by depriving men and nations of their liberty to supply their wants by free trade. It creates legal crimes where there is no infringement of a moral law or of an ethical principle. 6 DUTIES UPON IMPORTS. It creates a privileged class endowed with the power to pervert public taxation to purposes of private gain. If it were possible under the rules of practice in the courts of the United States to bring a case before the Su¬ preme Court, the principle of law would apply which was laid down by Justice Miller in Loan Association v. Topeka. The town of Topeka in the State of Kansas undertook to issue bonds in order to lend the proceeds of the loan to persons who proposed to establish a large factory, which it was assumed would be for the general welfare. A suit was brought to forbid the act; the ruling of the Supreme Court was given through Justice Miller in the following decision: " To lay with one hand the power of the government on the property of the citizen and with the other bestow it on private individuals to aid private enterprises and build up private fortunes is none the less robbery because it is done under the forms of law, and is called taxation. This is not legislation: it is a decree under legislative forms.” The principle of free trade is therefore based upon an ex¬ change of products or services which at the time, or in the series of the four seasons which make a year, yields to both parties in the exchange a more abundant supply of the food, fuel, clothing, and shelter upon which material welfare depends. Money is the standard or medium by means of which the exchanges arc measured, and in which the balances of trade, so called, are settled. It may be here remarked that by a process of natural selection a fixed quantity of oold, some¬ times coined, sometimes in the form of certified ingots or lumps, has become the single standard of all international trade, in and to which no acts of legal tender are or can be applied. Protection by means of a tariff is a policy which is applied by different states or nations according to the supposed benefit to specific branches of industry which may be se¬ cured by the state or nation. The form and method varies DUTIES UPON IMPORTS. 7 with the estimate of legislators as to what is the interest of one state, without regard to the influence of its own specific policy upon the other states with whom its citizens might exchange product for product were it not that a protective tariff barred the way. Having thus defined the words or phrases which must be used in dealing with the effect or repercussion of tariffs, we may now classify tariffs. First. A tariff or tax upon foreign imports may be for revenue only. Second. A tariff may be for revenue with incidental protection. Third. A tariff may be for protection with incidental revenue. The tariff of Great Britain is an example of the first type. The tariff of Germany may be taken as an example of the second. * The tariff of the United States of the third. The British policy has had the longest duration, but changes have lately been made under the stress of war which have brought back duties for revenue on grain, which duties will also bring in an element of protection to British land owners. Strenuous efforts are now being made to increase the protection of the German tariff, even at the cost of the revenue. Urgent efforts are also being made in the United States to get relief from the existing tariff restrictions upon trade, either by way of treaties of reciprocity, or by a complete revision of the whole tariff. There is but one section of the world, the United States of America, in which absolute free trade has existed on a continental scale. For over a century free trade, embodied in the Constitution of the United States, has existed among a greater number of civilized people than Avere ever before permitted to work without restriction for mutual benefit. It 8 DUTIES UPON IMPORTS. is therefore in the United States that the repercussion of a tariff policy can best be studied. The potential of a state or nation rests upon three fac¬ tors : food, fuel, and iron. Whether a state shall become mainly agricultural depends upon land, —mainly manufact¬ uring upon coal and ores. The error which was made by the so-called Manchester school grew out of the idea that the productive power of the United States rested mainly upon land and agriculture. Great Britain had attained her paramount position in manufactures and commerce from taking precedence in coal, iron, and mechanism. The iron of Germany had relatively an unimportant place until modern science rendered her ores containing phosphorus better than the British ores for mak¬ ing steel. Before that invention of the Gilchrist-Thomas process these ores had been almost useless. If regard be given to the dates at which the machine¬ using nations have changed in relative position in the export of manfactured goods of every kind, it will prove this change to rest upon iron and coal. Great Britain held the para¬ mount position in manufactures and commerce for about a century after the inventions of Watt in the application of steam power and the invention of the hot blast in smelting iron ore, or from about 1775 to 1875. Every effort had been made to suppress manufactures in the colonies, yet the production of iron could not be suppressed in the colonies or States of America. Within twenty years from the land¬ ing of the Pilgrims in Massachusetts in 1620, iron was made from the bog-iron ores of Plymouth County, and within twenty years after the settlement of each colony or territory over the three million (3,000,000) square miles of the coun- tiy (omitting Alaska), the making of iron was begun wher¬ ever ores and fuel could be found. Great Britain attempted to suppress the conversion of crude iron into forms fitted for use in 1750, yet during the war of the Revolution from 1775 to 1783, the patriot armies were in part supplied with DUTIES UPON IMPORTS. shot and shell made from the ores of the Cornwall iron mountain in Central Pennsylvania, where the accounts current of the owners can now be read, in which the Govern¬ ment is charged with so many tons of metal, and is cred¬ ited with so many Hessian prisoners of war whose services were bought at thirty pounds sterling per head. Many of these prisoners refused to be returned at the end of the war, and their descendants now form a part of a distinct ele¬ ment in the population of that State known as the "Penn¬ sylvania Dutch.” Had the effort been to suppress the pro¬ duction of iron and to prevent its introduction in the United States after the war of independence, no power would have prevented the working of iron ores and the conver¬ sion of iron into tools and machinery. It was not, how¬ ever, until about 1880 that such improvements had been made in the conversion of the ores into iron, and presently into steel, that the supremacy of this country began to assert itself. We were even then the consumers of one-third of the commercial product of iron of the world, and were still large importers. The price had rapidly fallen as the cost of pro¬ duction lessened both in the United States and in Europe, but a duty of nine dollars per ton on pig-iron and much higher rates on steel enabled the iron masters of this coun¬ try to maintain a disparity of seven dollars per ton on iron and much more on steel, as compared to the prices charged to the consumers of iron in Europe for ten years, from 1879 to 1889. The tariff became partially or wholly inoperative in 1890. The sum of this disparity for ten years to 1890 has been variously estimated from five hun¬ dred and sixty to seven hundred million dollars ($560,000,- 000 to $700,000,000). In either case the repercussion of the duties on imports was such that the railway companies, the iron founders, machinists, and other consumers of iron in the United States paid for iron in excess of the prices paid by their competitors in Europe in ten years, a sum 10 DUTIES UPON IMPORTS. greater than the capital value of all the iron and steel works, furnaces, and rolling mills existing in 1890 in the whole country. This sum stands for the cost of protection to iron and steel for ten years of largest consumption to that date. . The demand of the consumers of the United States of one- third of the entire product of the world who were thus cut off wholly or in part from British, Belgian, and German sup¬ plies of crude iron and steel thus left to their competitors the supply of other countries. Great Britain, Belgium, and Ger¬ many were protected upon the finished products of these metals by our tariff in their production of machinery and in ship-building, which constantly increased, to the exclusion of the United States from any considerable share in the for¬ eign trade in railway bars, tools, and machinery, or in con¬ structing steel ships for ocean traffic, the higher price of crude iron and steel in the United States crippling our exports. Had there had been no duties on the import of iron in the United States after the end of the Civil War, one may ask, how much sooner would the Spanish deposits of Bessemer ore have been near exhaustion, on which the steel product of Great Britain rested? IIow much sooner would the Northumberland deposits of coking coal have reached a prohibitive cost? Plow much greater would have been the rise in wages in Europe and how much sooner and larger would have been the export of machinery and all other articles made of iron from the United States? Either by means of protection even at a cost to the nation of the entire capital in the works in 1890, or in spite of protection, it now matters not which, the vast advantage of the United States over every other country in the supply of ores and coal workable at the highest rates of wages, but at the lowest cost of labor, asserted itself in 1890. As soon as the prices of crude iron and steel had become reduced and had become about the same to consumers in the United States and to consumers in Great Britain, Belgium, Germany, and France, our exports of everything into which iron and steel DUTIES UPON IMPORTS. 11 can he converted gained by leaps and bounds until we reached our present paramount position. At the present time the home demand is so great that existing works cannot supply it. But very powerful corporations, wholly inde¬ pendent of the " Steel Trust,” are now opening enormous deposits of coking coal, and of high grade ores of iron in Kentucky, Tennessee, Virginia, and North Carolina, within a short distance from the present centre of population of the country. Railway lines are being pushed to completion, by which this section will have every access to the Great Lakes to the Northwest and to the Atlantic coast on the East. Within two or three years the capacity of the furnaces of the United States will exceed 20,000,000 tons a year, and if that quantity does not suffice for the home demand and for a resumption of exports, the production of iron will be ex¬ tended until the world’s demand is satisfied. At this date the consumption of iron in the United States exceeds 500 pounds per head of the population of over 80,000,000. The production of iron and steel and their conversion belonged, in the nature of things, to the continent of North America. Its course has been altered by attempts to re¬ press it in the colonies and to protect it in the States. As it has been with iron, so has it been in other arts commonly listed under the title of "Manufactures.” So far from the United States being especially adapted to the production of food and fibres to the exclusion of manufactures, which seems to have been the theory of the Manchester School, the vaster proportion of our manufactures have been undertaken in the nature of things. They exist from necessity and not from choice, nor as the result or consequent of a tax or duty on a foreign import of like kind. In fact, the repercussion of the duties on imports has increased the cost of materials used in domestic manufactures in a much greater number of arts than have received any protection from the duties on finished goods. 12 DUTIES UPON IMPORTS. Under the system of compulsory free trade within the National domain, the arts of each State have adjusted them¬ selves to the soil, climate, and conditions of each section. Foreign readers may be reminded that within the limits of the United States there exist all the variations of climate, soil, and condition, or even more, than are found on the con¬ tinent of Europe, from the Arctic forests and mines of Alaska to the semi-tropics of Florida, — Porto Rico now adding tropical conditions. There are also greater variations in race, color, and condition among the inhabitants of the United States, now numbering 80,000,000, than are to be found in Europe. But under the bond of compulsory free trade and of the common English speech, taught in the free common schools, all these variations in race, language, and condition are being welded together by mutual interest and the free exchange of their products into a homogeneous nation. Under these conditions, since slavery destroyed itself in the Civil War, the pursuits of the people have adjusted them¬ selves upon certain lines in certain proportions leading to uniformity in the nation, but subject to variation from the average in some sections, notably in New England mainly devoted to manufactures, and in the Southern States long mainly devoted to agriculture, but now rapidly developing mining, metallurgy, and manufactures. The centre of popu¬ lation of the United States is in the great agricultural section of the Mississippi Valley, and immediately around that centre very nearly the same proportionate division of occupations in mining, manufacturing, and the mechanic arts has become established that exists in the nation as a whole. llie tendency of the working force to become adjusted to changing conditions is disclosed by the proportions occupied for gain in 1880 and 1900. It will be borne in mind that the price of iron and steel in their crude forms had become about the same in the United States, Great Britain, and Ger¬ many about the year 1890, at which date the rapid expan- DUTIES UPON IMPORTS. 13 sion began of our exports of manufactured goods, especially of metal. 1880 . Population.SO,155,783 Occupied for gain.17,392,099 1 in each 2.90 of the population. 1900 . 76,303,387 29,285,922 1 in each 2.61 of the population. Occupied in agriculture.. ..7,713,875 44.3% 10,438,219 35.7% Professional services. ... 603,202 3.5 1,264,737 4.3 Personal service. ..3,423,815 19.7 5,691,746 19.4 Trade and transportation ..1,866,481 Manufacture, mechanic arts 10.7 4,778,233 16.3 and mining. -.3,784,726 21.8 7,112,987 24.3 17,392,099 100 . 29,285,922 100. At each period a part of those listed under the title of "Personal Service” as laborers doubtless worked upon farms at the harvest season, when the demand for labor is excessive and wages are very high. The tendencies disclosed by the census returns from 1880 to 1900 indicate a lessening of the number in agriculture, as farm machinery displaces manual labor, an increasing proportion in manufactures, mechanic arts, and mining, and an increasing proportion in trade and transportation. A false impression has been made by the growth of the huge factories, workshops, and department stores for distribution, that they are displacing small establishments. Such is not the fact; the large works and shops merely serve for the conversion or distribution of the increasing product. The census of 1900 proves that there are now more small work¬ shops and more small shops for the sale of goods managed by individual owners, in proportion to the population, than ever before. Individualism is gaining rapidly on collectivism. The great factories and workshops, and the huge city depart¬ ment stores impose upon the imagination. The propor- 14 DUTIES UPON IMPORTS. tion of persons occupied in these great establishments is very small in comparison with the numbers engaged in the lesser arts, which are scattered in towns and villages all over the country. These bio- works, trusts, and combinations in the manu¬ facturing and mechanic arts are only doing the additional work required in dealing with the increasing product of the nation. Such is not the common belief; but a close analysis of the arts and occupations proves that such are the facts. The same tendency affects agriculture. The great farms and plantations are in process of division. The farms of moderate area, better cultivated, and worked by men trained under the influence of the agricul¬ tural experiment stations, yield increasing abundance at a lessening cost of labor. Giving regard to these general divisions of the occupa¬ tions of the people, it will be observed that the repercussion duties upon foreign imports upon the classes occupied in trade and transportation, and in professional and personal service, can onty be to increase the cost of their subsistence when the duties raise prices. These two classes, numbering forty per cent, of all who are occupied for gain, cannot be protected by duties upon imports, but are taxed. In respect to agriculture, there are but a few relatively insignificant products of which one of like kind can be imported; these are wool, hides, hemp, flax, sugar, tobacco, and a few other articles, the domestic product amounting in aggregate value to less than $200,000,000, not one-half of which could possibly be displaced by free imports, leav¬ ing two per cent, of the valuation of all agricultural products at the farms, which amounted in the census year to $5,000,000,000, subject to foreign competition. On the other hand, the export of 'the products of agricul¬ ture, cotton, grain, meats, dairy products, and the like, was valued in the last fiscal year to $900,000,000 worth, DUTIES UPON IMPORTS . 15 and is, as a rule, from fifteen to twenty per cent, of the total valuation. The repercussion of a tariff upon agriculture therefore is to increase the cost of the domestic goods which the farmer buys, so far as prices are raised through the effect of duties ; and further, to lessen the price of farm products so far as the obstruction of duties upon imports lessens the power of foreign buyers of our exports to pay for them by an exchange of their own products for them. This repercussion of our tariff is becoming very plain to the farmers of the United States, and is leading to an im¬ perative demand for the ratification of pending treaties of reciprocity with several countries. Reciprocity is but a back way to the open door to commerce, and will soon be followed by a demand for a complete revision of the whole tariff and its adjustment to a system of duties imposed for revenue only, without perversion of the power of public taxation to purposes of private gain. As yet, in dealing with agriculture, professional and per¬ sonal service, and trade and transportation, but an insignifi¬ cant fraction has been disclosed with whom there can be any competition in a foreign country through imports therefrom. Mining may be dealt with in a few words. The United States now hold the dominant position in iron, copper, lead, and many of the minor metals. The , only important metal not yet found is tin, which is free of duty. The tariff only obstructs the import of coal and iron from the maritime provinces of Canada into New England, wdiile the tariff of Canada puts a worse obstruction to the import of coal and iron in the central provinces of the Dominion. The duties on Canadian timber oppress the Western farmer. Reci¬ procity in trade with Canada is now demanded without refer¬ ence to sections or parties, and cannot be long delayed. This brings us to the fourth class of persons occupied for gain in the manufacturing and mechanic arts, among whom there is a very broad distinction marking a great difference 16 DUTIES UPON IMPORTS. in their function and also in the influence or repercussion of a protective tariff upon their respective interests In a broad and general way this distinction would call tor a division into two sub-classes, the individual and collective. The mechanic is the individualist who must combine the skill developed by mental energy with the manual dexterity called for in using the tools of his trade. The factory opera¬ tive watches the working of the machinery, which as time goes on is becoming more and more automatic, requiiing loss and less mental energy in its supervision. The so-called manufactures of the United States are listed under over three hundred and sixty (360) separate titles, including all the building trades, railway repair shops and the like, under that title. When classified, the strictly mechanic arts comprise by far the larger number of working people, the highest relative rates of wages, the lesser amount of capital in proportion to product, and the largest product. The collective or factory class comprises much the lesser proportion of workers who are classed as operatives, the lower relative wages, the larger amount of capital, and the lesser relative product. The repercussion of the duties on imports is felt by the mechanics and artisans in the increased cost of the tools which they use, and of the partly manufactured materials which they convert. The repercussion of the duties on im¬ ports effects the collective or'factory class in the increased cost of crude materials, such as wool, hides, coal, and the like, and of partly manufactured materials of foreign origin which are necessary in their branches of industry, such as chemicals, drugs, dye-stuffs. On the other hand, the number of arts and manufactures which could now be subjected to competition through the import of a foreign product of like kind has been rapidly diminished in recent years, and is now limited to a very small proportion even of products of factories conducted on DUTIES UPON IMPORTS. 17 the collective system. As these“facts become known, the policy of protection is being steadily weakened, and must soon give way. The representatives of many branches of the collective or factory system of manufacturing, especially in the West, are now combining to secure the removal of obstructive duties and the ratification of pending treaties of reciprocity. Step by step, since the classification of imports according to their use was established in 1884, 1 articles in a crude or partly manufactured condition which are necessary in the processes of domestic industry have been relieved from duties and placed in the free list, until the revenue now derived from these two classes is but thirty million dollars ($30,000,000), of which more than one-half is derived from raw wool, hides, chemicals, drugs, and dye-stuffs. The repercussion of these duties on wool, hides, and chemicals burdens the domestic manufacturers of woolen and worsted fabrics, of boots, shoes, and leather goods, and of printed and dyed fabrics, preventing our attaining any considerable place in exports, while protecting our competi¬ tors in European countries who are not subjected to these heavy taxes. But these duties are now doomed, and will very soon be removed. We shall then take a place in the exports of woolen textiles, of leather, and the like, corre¬ sponding to the place which we have taken in medium cotton fabrics, in metal works, in agricultural machinery, and the like, since the duties on crude metal became inoper¬ ative. The remaining duties, aside from those on materials, do not oppress manufacturers to any considerable extent. They merely obstruct the export of goods which might be taken in exchange for articles now heavily taxed by us. These excessive duties will soon be reduced to a revenue basis. 1 The writer called the attention of Seeretarj’ McCulloch to the confusion clue to listing imports alphabetically, and was requested by him to plan the present forms, which were then adopted. The writer followed substantially the lines of Hume’s classification of British Imports of 1842. 18 DUTIES UPON IMPORTS. It may lie observed that the repercussion of taxes upon imports is not to be computed by the relation which the tax bears to the gross product of any domestic manufacture into which these taxed articles of foreign origin enter as a component material. The burden of a duty is to be meas¬ ured by the ratio which the lax bears to the margin of profit that unglit be made if they were free of duty. A tax of seven million ($7,000,000) or eight million ($8,000,000) dollars derived from foreign wool may not be any consider¬ able burden upon the consumers of woolen goods in this country; but in its ratio to the margin of profit that might be attained if wool were free of duty, this tax may deprive the nation of an export of woolen and worsted fabrics of ten to twenty times the amount of revenue now derived by the Government. A tew words more may now be given to the probable effect or repercussion of duties which European nations or states are now proposing to put upon the imports of food, fuel, and fabrics of various kinds from the United States, being alarmed by the low cost of our high-priced labor, and de¬ siring to protect land owners and laborers from the cheap l.,I„„, + U,. TT.-J._1 O j j rn, . hll,or of tllc States. This effort marks a revolution m common thought. High duties upon imports have been advocated in the United States, and have been maintained, upon the ground that our high-priced labor could not com- DUTIES UPON IMPORTS. 19 each unit of product, — not an antecedent of high cost. The factors that make prices are : First. Abundant natural resources. Second. The free application of mechanism. Third. The skill and aptitude of those by whom the machinery is directed, whether on the field, in the furnace, or in the factory. There is not a single article exported from this country from which the rates of wages or earnings derived from the sale and enjoyed by those who do the manual or mechanical work are not twenty-five per cent, to ten-fold higher than the rates of wages or earnings in the countries to which these goods are sent. In the face of these facts no effort can be made to maintain protective duties upon the pretext that the labor of other countries is cheaper than ours. It is becom¬ ing a part of the common knowledge that low wages, or what used to be called " pauper labor,” stand for a high cost of production, and not for a low cost of labor. It therefore follows that the world will not attain the full benefit of the vast abundance of goods of every kind with which the United States can supply all nations, until our tariff obstructions are so far removed as no longer to augment the cost of manufacturing, as a few of these taxes now do. What then must be the repercussion of the duties which the continental states of Europe propose to unite in putting upon the products of the United States? These protective taxes must be put mainly upon food, fibres, tools, and ma¬ chinery. Who will pay these taxes? No one can assume for a moment that the producers of the United states will pay them. They must be paid by the consumers of each country by which these taxes are imposed. What then will be the result? Will it not be an enhanced cost of the manu¬ factures which are now exported from European states to the great continents of Asia, Africa, Australasia, South and Central America? On the other hand, the immediate effect for a short time in the United States may be to restrict their 20 DUTIES UPON IMPORTS. present market. For a short time the prices in the United States of food, fibres, and metals may be reduced by the lessening of exports. During this short period the pro¬ ducers of crude materials may for a time gain less than before, but the manufacturers of the United States will get the benefit of lower prices and will be enabled to compete more effectually with European states in exports of finished goods to Asia, Africa, Australasia, South and Central America. When that occurs, the increased home demand for crude products will take up the excess now exported. The protection which we have extended by the tariff of the United States to the manufacturers of Europe for many years, giving them the paramount position in exports to other continents, would then be reversed. The European states that impose these taxes will then protect the manu¬ facturers of the United States, and will yield to them the paramount position in the supply of the thousand million of people who dwell outside the continent of Europe. It follows that even if the Zollverein or union of conti¬ nental states could be organized for the purpose of meeting the competition of the United States by a war of tariffs, the effort would fail as a matter of defence, and would only enable the people of the United States to take an increasing share in the great commerce of the world. One other point may be referred to, although not strictly germane to the subject of this treatise, namely, the relative burden of national or imperial taxation upon the manufact¬ uring states of Europe and America. The countries which compete with the United States in the commerce of the world are Great Britain, France, Germany, Belgium and the Netherlands. Other states of Europe which have not reaped the full advantage of coal, iron, and modern mechan¬ ism may be left out. Great Britain, France, Germany, and the low countries are also our largest customers, their power of purchase having been developed by their ability to con vert food, fibres, and other crude materials into manufactured DUTIES UPON IMPORTS. 21 goods, and thereby to recover from their exports the means of payment for the imports derived from the United States. It will be observed that the exports of the United States consist mainly of an excess of products not required for subsistence. On the other hand, the imports of our Euro¬ pean competitors are necessary to their existence, con¬ sisting of fibres, food, and other necessaries of life. These manufacturing states of Europe are unfortunately subject to the enormous burden and cost of militarism from which the United States are substantially free. It follows that the normal cost of sustaining the national government of the United States in time of peace has been for a very long period less than half the charge upon Great Britain, Germany, and the low countries, and about a third the charge upon France. For the last five jmars the burden upon the United States has been increased in small measure by warfare, but is now diminishing. The military burden upon European countries has been increased in yet greater measure, so that at the present time the sum of the national taxes per capita imposed upon the people of the United States is less than six dollars ($6.00), or about twenty-four (24) shillings, twenty-four (24) marks or thirty (30) francs. On the other hand, the present burden upon Great Britain is about three times that sum; upon France nearly three times ; upon Germany and the low countries about double, without any apparent hope of the burden being lessened. Such, however, is only the measure in terms of money. The relative product per capita is by far greater in the United States than it is in either of the countries named; probably double the per capita product of Germany. Hence the burden of national taxation and of militarism in the competing countries of Europe, all of which must come out of the annual product, is so much greater that by comparison the United States can make a net profit of about five per cent, on the entire annual product before the cost of mili- DUTIES UPON IMPORTS. 22 tarism and the heavy taxes of the European competitors have been defrayed. A greater burden yet is the withdrawal of the youth of each land to waste their time for a longer or shorter period in the destructive pursuits of preparation for war. In the United States there is but one soldier to each twelve hundred inhabitants. Neither the military or naval service in time of peace attract many young men of ability in this country. The naval service has become a dangerous branch of mechanical engineering much underpaid. Officers of the army and navy are always well bred, yet they have no special stand¬ ing in society, and are seldom met, being usually off in remote stations, or doing the work of a national police in the sparsely settled sections of the country. In the great cities regular soldiers are seldom seen, and never in most of the smaller towns, unless a call to arms is made. The repercussion of the tariff taxes of the United States is relatively very small in point of money. Under normal conditions of peace more than one-half the revenue of the United States, two dollars and a half ($2.50) a head, is derived from liquors and tobacco, domestic and foreign. The remainder of the revenue at the rate of two dollars and a half ($2.50) a head, now devoted to the lessening charge for pensions and interest, is mainly derived from duties on imports, of which the larger part is even now rather in the nature of revenue duties than of protective duties. A reform of our tariff, coupled with the abatement of duties on crude and partly manufactured materials, now yielding about forty cents per head, would remove the main burden now imposed by our tariff on domestic manufactures ; while the remainder of the tariff, when reduced in rates, will un¬ questionably yield a larger revenue in amount than is now derived from it. The effort of European countries to make a war of tariffs upon the United States, in order to defend their industries DUTIES UPON IMPORTS. 23 from the low cost of our high-priced labor, has attracted much attention in this country. It is causing a more thor¬ ough study of this question on the part of our own people, rapidly leading them to the conclusion that if it is for the interest of our manufacturing competitors in Europe to increase their duties in order to prevent the import of our goods in competition with their own, it must, on the other hand, be greatly for our interest to throw down our own tariff barriers and to open the door to free commerce with the world. If objection is taken by any critic to this dealing with the national or imperial taxation only, it may be added that the average advantage in the per capita taxation of the people of the United States for national purposes, and that which is imposed upon the manufacturing competitors in Great Britain, France, Germany, and the' low countries for the same purposes, mostly military, is equal to the entire local taxation in the United States for the support of State, county, city, and town government; for which the revenue is derived mainly from a direct tax on real estate at its site value, upon franchises and licenses. In other words, the total amount of taxation in the United States per head of population for the support of every form of government, national, State, city, and town, is less than the amount of taxation imposed upon our European competitors for im¬ perial or national purposes only, which is mostly expended for military purposes and for interest on war debts. Such is the burden of militarism, which, must be removed before there can be any competition on even terms between Euro¬ pean manufacturers and those of the United States in sup¬ plying other continents and in sharing in the great com¬ merce of the world. I have thus tried to report on the "Repercussion des Droits de Duane ” in the United States. I wish this inquiry could be extended so as to cover the whole field of relative 24 DUTIES UPON IMPORTS. taxation for all purposes in the principal manufacturing countries of the world. It seems to me that the disclosures of such an inquiry would tend to hasten disarmament, and to the promotion of peace, order, industry, and freedom of commerce. EDWARD ATKINSON. Boston, Mass.,' U.S.A., August, 1902.