Chapter VIII. The Tariff Act of 1909

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 protectionist whigs came into power in 1849, and 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 trial of a remedy through changed import duties. 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 opening 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, however, 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 monopolies and trusts to bear against the high duties. As has already been said,¹ the trend toward combination is essentially 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 associated in the public mind, and hostility to the combinations 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” Republican doctrine, but, nevertheless, in its precision of statement, 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 reasonable profit to American industries.”

This notion, very little heard of before,² played a surprisingly 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 moderation; 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 prohibition and complete stoppage of foreign trade.

Anything in the world can be made within a country 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.”³ In the same vein, it may be said that very good pineapples can be grown in Maine, if only a duty be imposed sufficient 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 provided 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.⁴

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 desperate 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 employed in order to produce a given article, the higher will 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 community 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.⁵ 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 connect 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, unfortunately, is almost unknown. The average employer and the average laborer alike accept the familiar catchwords 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.

Nonetheless, the attention given to this “true principle” 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 sufficient 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 manufactured articles. On still others the rates, while so high as to prohibit importation, are not nominal: cost of production 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 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.⁶

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.⁷ It is true that inquiries of this sort, conducted in 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 exaggerated 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 different 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 indiscriminate figures was presented and printed, with a natural tendency on the part of the protectionists to accept without question statements indicating that their “true principle” could be maintained only by keeping duties very high.⁸

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 affecting 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 Committee 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 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.”⁹

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—fabrics 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 women’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 explanation of the change,—on “the personal knowledge and evidence of a member of the House who knows all about the business.”¹⁰ 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. Nonetheless, the House bill made significant reductions: none of revolutionary character, or likely to have serious economic effects, yet indicative 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 duties as against the proposed extension of the free list, the bill passed by the House was substantially that prepared 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 railway legislation, it has appeared that the Senate is, if not the stronghold, at least the stronger hold of those corporations and industries whose money-making may be affected by legislation. But so far as the tariff is concerned, another circumstance is at least equally important in explaining 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 representation in the Senate, as well as the relation between the individual members resulting from senatorial courtesy in confirming appointments,¹¹ is thus peculiarly favorable to logrolling. 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 protectionist 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 conspicuously 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 strongly 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 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 foreigners. 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 upwards. 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. The duties on cotton goods, hosiery, and other manufactures were advanced. Many of the changes substituted specific for ad valorem duties, or shifted the dividing line in the progression of specific duties. Just what such changes mean is often difficult for even the most expert to ascertain.¹² 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 themselves, 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 interested. Irresponsibility in legislation reaches its acme.¹³

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 influence 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 deliberately 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 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.¹⁴ 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 constituted 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?¹⁵ And on this ground, the ranching representatives had a case. If imports are bad per se, and domestic supply is good per 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.¹⁶ The case was one where the protective 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 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 67 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 slight 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.¹⁷ Both in the United 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 Canadian 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.¹⁸ But our legislators had reckoned wrong. Canada refused to budge. She had sought for two decades after the termination (in 1866) of the old reciprocity treaty to reestablish friendly commercial relations with the United States. Her offers had been steadily and almost ostentatiously repulsed.¹⁹ The “National Policy” of protection, adopted in Canada at the outset largely by 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 pulpwood was offered. Consequently the conditional relaxations of our own duties on pulp and paper never went into effect.²⁰

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 cheapening consumers’ goods may come slowly and haltingly; 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,²¹ would be to some advantage for coal-users in New England and the extreme Northwest; though in both districts the possible consequences are much exaggerated both by advocates 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 concerning 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 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.²² All that can be said is that in some degree competition would be promoted, and some better opportunity given for the development of the iron-making industry of the Eastern region.

On iron and steel the process, begun in 1890,²³ of reducing 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 ton	1.00 ton
Steel Ingots (lowest class)	6.72 ton	3.92 ton
Steel Rails	7.84 ton	3.92 ton
Tin Plate	1½ c.a pound	1 c.a pound

Nobody supposed that these changes were of any consequence. 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 integrated 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,²⁴ 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 occasion 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 produced 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 no longer played an important part in the tariff controversy, and were no longer of any considerable economic consequence.²⁵

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 hesitation in acceding to the reduced duties arose chiefly from that pusillanimity about foreign competition which pervades almost the whole manufacturing community.

In the case of shoes, of which the exports are considerable, 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 true that, for any American manufacturing industry subject to possible foreign competition, the price of independence 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 industry, 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 rectification 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 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 protectionist, were imperative.²⁶ Other changes were made, however, with the avowed purpose of promoting some domestic industry and adding to the sweep of the protective system.²⁷ 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.²⁸ A minor item, but one which caused some discussion, was the duty on razors, in which a very considerable increase was made.²⁹ By far the most important and systematic advance was that in the silk schedule. It will be remembered that in 1897 an elaborate system of specific duties on silks had been substituted for the previous ad valorem rates.³⁰ In 1909 the House left unchanged the specific duties as fixed in 1897; but the Senate completely 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 throughout and that they replaced more and more the ad valorem dutics,—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 noteworthy 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.³¹ 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 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.³²

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 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 efficiency. In this country manufacturing 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 high wages and yet sell at low prices; very likely he can export. Where he uses much direct labor and few laborsaving appliances, where he tries to make few goods of any pattern, he cannot compete with the countries of low wages and handicraft efficiency. Just why the American machine-using ways should be applied with success in some directions and should fail in others, is often difficult to explain, and indeed constitutes one of the most intricate problems in industrial history. The young-industries argument may sometimes apply. The very introduction of the new branch into the country may turn invention in that direction and bring about the development of laborsaving processes. But the fact that extremely high duties are demanded is 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 stockings 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,³³ 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 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 inefficient.³⁴

On two of the most important schedules in the tariff 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.³⁵ Of these minor changes, only that affecting 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 directed to them by some published correspondence of 1897 between Mr. Whitman, the President of the Wool Manufacturers’ Association, and the then Secretary of the Association, Mr. North.³⁶ 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 Association Secretary, Mr. North, served also as confidential clerk of the Senate Finance Committee. The whole situation 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 illustrates once more how radically bad is the method by which the details of our tariff legislation are settled.

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 woolens 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 restive 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 untouched. 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 12½ cents per hundred pounds to 7½ cents per hundred pounds. The American Sugar Refining 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 cut down the margin between the price of raw sugar and refined. The differential of 7½ 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 fixed in 1897.³⁷ 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 producer. The domestic beet-sugar growers were the vehement 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 Colorado, 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 unnaturally the growers were almost ferocious in their opposition to the proposal for reducing the duty on sugar. In face 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, fostered 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 maintaining 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,³⁸ had become a protective duty of wide effect, and moreover in some ways of unusual effect.

As has already been said with regard to the remission of duty on Hawaiian sugar,³⁹ 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 supposed that but a small amount of sugar would be produced in the islands. In fact, the product, under the stimulus of the bounty, increased by leaps and bounds and became an important part of our total supply. This sort of favoritism, already important as to Hawaii, was made permanent after the Spanish War and was greatly extended. The Hawaiian remission, which formerly rested on the treaty with the islands, became definitive after their annexation to the United States in 1898. Imports from Porto Rico, of which sugar is the most important, were made free of duty in 1901. 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 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 protective 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 producers 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 market, the stimulus of lowered duty, and peaceful conditions 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 producers—in Hawaii, Porto Rico, Philippines, Louisiana, the beet-sugar States—will be at four-fifths of the nominal tariff rate.⁴⁰

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 particular individuals, and concealed amid the endless details. 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, 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 members, 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.⁴¹ 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 structural steel was advanced, by the quiet insertion, in the Senate, of a clause whose effect was not at all apparent on first inspection.⁴² Every 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 duty⁴³ or prohibition upon export. The minimum tariff plus this 25 per cent. constituted 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 discrimination” 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 application of the maximum tariff. By April 1, 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 applied. 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 concessions. That country refused, as already stated,⁴⁴ to modify her regulations as to wood pulp, or to make any changes of moment in her general tariff system. Some minor changes were secured, which enabled the Administration to make a respectable show of having gained something 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,⁴⁵ which seems, strictly construed, to relate solely to that arrangement, 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 suggest 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 investigation. Hearings before Congressional Committees, as has been said,⁴⁶ are most unsatisfactory sources of information. And there is need of information. The endeavor to apply the “true principle” (of equalizing costs of production), while far from being a solution of the real problems underlying the tariff controversy, is of importance in reference to vested interests and the disturbance of existing adjustments. It is important, too, toward ascertaining 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 legislation. 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 legislation, 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 appointed 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 quarter, as it was among the extreme protectionists, as “settling” the tariff question.⁴⁷

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 disappearance 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-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.

Nonetheless, 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 Republican 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 community 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.

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¹ See pages 264, 269.

² 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.

³Wealth of Nations, book iv., ch. ii.; vol. i., p. 423, Cannan edition.

⁴ 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 percent. duty to equalize the conditions 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.”

⁵ 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 Economics, August, 1906 (vol. xx., p. 497).

⁶ Senator Aldrich, on introducing the Conference Report which settled the details of the tariff act of 1909 (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.

⁷ 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 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 flamboyant and empty speeches with which Messrs. Mckinley and Dingley introduced in the House the tariff bills of 1890 and 1897.

⁸ The hearings of 1908–09 before the Ways and Means Committee were prolonged, and contained, in addition to the usual mass of irrelevant and 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 publicity, had still less weight than those presented to the House Committee.

⁹ The German reports were finally printed as Senate Document No. 68, Part 2, 61st Congress, 1st session.

¹⁰ I quote from Mr. Payne’s speech introducing the bill, Congr. Record, vol. 44, p. 9.

¹¹ Compare the extract given below (p. 319, note), from Mr. Payne’s remarks as to the duty on hides in 1897.

¹² “Some of these amendments I have studied diligently, and I am not able to say today 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.

¹³ 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 Conference know how those things are. Senator So-and-So wants something and must have something. Finally I told them I was willing, in this great trade on the lumber schedule, involving millions of dollars, to throw in a jackknife 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.

¹⁴ 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.

¹⁵ Mr. Payne gave the following account of the way in which the duty on hides came to be imposed in 1897: “When the Dingley bill came before the House, reported by the Committee, 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, hut we did have a majority of those who claimed to be protectionists, and one of these protectionists of populistic tendencies would not vote for the bill unless it carried a duty on hides, and the Senate accommodated him. That is one of the courtesies of the Senate when any member wants something done.’—Congr. Record, p. 21.

¹⁶ 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 (1904–05)	111 mill	14.5 mill. Dollars.
Domestic Product (1904)	456 mill	44.2 mill Dollars.

¹⁷ The Quebec legislation consisted in reducing the royalty for wood cut on 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.

¹⁸ See below, p. 340.

¹⁹ See Mr. Edward Porritt’s Sixty Years of Protection in Canada, ch. iii.

²⁰ 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 .50 additional duty because of Quebec export charge	$3.75 per net ton, ordinary duty 2.00 per net ton, retaliatory duty .35 per net ton, additional duty
$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 enormous mass of testimony on the pulp and paper situation, and prefaced it with an excellent summary report.

²¹ See p. 255.

²² See p. 231.

²³ See pp. 232, 256, 290. Compare also what is said below at p. 402, note, of the increase in 1909 of the duty on structural steel.

²⁴ See Appendix 5.

²⁵ The steel-rail situation should be considered in connection with the general development of the iron manufacture. See what is said above. pp. 257, 292, and the Quarterly Journal of Economics, August, 1900, vol. xiv., p. 500.

²⁶ These changes were explained by Senator Aldrich, Congr. Record, p. 2847 seq. Analogous changes were made, for example, on pocket knives; parts of knives (unassembled) being made dutiable at the same rates as completed knives.

²⁷ For a careful analysis of the changes on cottons, see a brief article by Mr. M.T. Copeland in the Quarterly Journal of Economics, Feb., 1910, p. 422.

²⁸ The rates on seamless—fashioned or shaped—cotton hose stand thus in the acts of 1897 and 1909.

Classification	Duty of 1897	Duty of 1909
Value up to $1.00 a dozen	$ .50 c. a dozen, plus 15%	$ .70 c. a dozen, plus 15%
Value $1.00 @ 1.50 a dozen	.60 c. a dozen, plus 15%	.85 c. a dozen, plus 15%
Value $1.50 @ 2.00 a dozen	.70 c. a dozen, plus 15%	.90 c. a dozen, plus 15%
Value $2.00 @ 3.00 a dozen	1.20 c. a dozen, plus 15%	1.20 c. a dozen, plus 15%
Value $3.00 @ 5.00 a dozen	2.00 c. a dozen, plus 15%	2.00 c. a dozen, plus 15%
Value over $5.00 a dozen	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.

²⁹ The changes on razors were as follows. The specific duties throughout are, per dozen:

Act of 1897	Act of 1909
Value up to $1.50, duty 50 c. plus 15%	Value up to $1.00, duty 35%
Value $1.50 to 3.00, duty 1.00 plus 15%	Value $1.00 to 1.50, duty .72 plus 35%
Value over $3.00, duty $1.75 plus 20%	Value $1.50 to 2.00, duty $1.20 plus 35%
	Value $2.00 to 3.00, duty $1.44 plus 35%
	Value over $3.00, duty $1.80 plus 35%

³⁰ See p. 285.

³¹ There was, however, much debate in 1897 on the silk duties, by the Senate.

³² One illustration will indicate the nature of the changes in the silk duties. In 1897 the duties on silk piece goods weighing 1⅓ to 8 ounces square yard, had been arranged in classes, the duty being so much on goods containing 20% and less of silk, more on goods containing 20% 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, 1⅓ to 2½ ounces per square yard, are set apart, and subject to higher duties; those weighing more (2½ 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	1909
Containing up to 20% of silk,	Containing up to 20% silk,
Weighing 1⅓ to 8 oz. per yard,	Weighing 1⅓ to 2½ oz. per yard,
In the gum duty 50 c. lb.	in the gum 70 c. lb.
dyed or printed etc duty 60 c. lb.	dyed or printed etc 5 c. lb.
	The same, weighing 2½ to 8 oz. per yard
	in the gum 57½ c. lb.
	dyed or printed etc 80 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.

³³ See the speech of Senator Lodge, June 1; pp. 12, 13 of the separate pamphlet reprint of this speech.

³⁴ 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.”

³⁵ 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 imported because the duties had been prohibitory; the changes signified 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.

³⁶ This correspondence can be found in the Hearings before the Committee on Ways and Means, vol. v., p. 5492.

³⁷ See pp. 282–83 for a statement of the duty of 1897.

³⁸ See the discussion of it from this point of view, p. 260. The beet-sugar question is an interesting and important one, closely connected with questions 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 Journal of Political Economy, June, 1903, p. 334. Compare Quarterly Journal of Economics, vol. iii., p. 264. Much information is contained in the Tariff Hearings of 1909, vol. iii.; see, among others, the statements of Messrs. Oxnard and Hathaway, 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.

³⁹ See p. 238.

⁴⁰ 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, 1908, and to a supplementary note in the Quarterly Journal of Economics, 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, 1889–90
Supply (million lbs.)			Revenue (million dollars)
Free of tax:
Domestic Cane	301
Domestic Beet	8
Hawaiian	243
Total free of tax	652
Duty-paying	2,607		Total revenue	54.0
Total supply	3,259			54.0
(For the figures of 1908, see p.338, note.)

Fiscal Year, 1907–08
Supply (million lbs.)			Revenue (million dollars)
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			3
Cuban (80% of full duty)	2,462			32.2
Total at reduced tax	2,491			32.5
Paying full duty	1,045			17.4
Total supply	6,783		Total revenue	49.9

It will be seen that in 1890 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 1908, the revenue remained (very nearly) the same as an 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 rate.

⁴¹ This duty (paragraph 328 in the tariff schedule of 1909) was a typical 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 practically doubled. The device was a familiar one in the tariff legislation of the period after 1883; compare p. 269, above.

⁴² Paragraph 121 of the act reads thus: “Beams, girders, … together with all other structural shapes of iron or steel, not assembled or manufactured, or advanced beyond hammering, , rolling, or casting, valued at cent per pound or less, [duty] cent per pound; valued above cent per pound, cent per pound.” The duty in 1897 had been cent per pound; hence there was apparently a decrease in duty. But the language of this 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 imported 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 1906, 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 products, 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 increased duty on structural steel clinches the compact as to that article, by keeping the foreigners out of the American market.

⁴³ The provision in regard to export duties, by which they might become the ground for levying the maximum tariff, was neither in the House bill nor in the Senate bill. “The words ‘or imposes no export duty’ were 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 know what grounds there may be for this suspicion. Compare note to p. 337, note, above.

⁴⁴ See p. 337.

⁴⁵ 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.”

⁴⁶ See p. 311.

⁴⁷ President Taft’s declaration in regard to the tariff board was made in his speech at Winona, Minn., in October, 1909. Professor H.C. Emery was made chairman of the board. The urgency appropriation act of 1909 appropriated 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.