CHAPTER IX. POSSIBILITY OF A SCIENTIFIC TARIFF.

In the framing of a tariff by a country hitherto Free Trade, certain broad principles would be accepted, but each presents its own difficulties, (1) Exotic goods allowed in free would not, indeed, compete with home industries, but they are the favourite objects of revenue taxation. (2) Free food conflicts with the interest of the home agriculturist. (3) Free raw materials conflict, not only with agricultural and mining industries, but with those who use home-produced raw material. But the attempt to define “raw” material presents endless difficulties. And the importance of cheap raw materials, as compared with the importance of cheap manufactured materials, if these should happen to be the basis of national industries, is not obvious. (4) Taxed manufactures encounter the latter objection, and, besides, include tools. One begins to see why it is that a country which once adopts Protection ends by taxing everything.

BUT even if one is convinced of the impossibility of revising a tariff on anything like economic principles, when once vested interests have tightened their hold, there may remain a belief that a scientific tariff could be drawn up by a country which had hitherto been Free Trade.

Without attempting to define the adjective “scientific,” which would, perhaps, prejudge the case, let us look at certain deductions of experience as to the taxing of imports.

I. Common sense dictates the free admission of things a country cannot grow or make. Dear goods, as dear goods, are bad. If, then, a government, in order to protect certain industries, is going to make many things dear, there is all the more reason that it should let in non-competing things cheap.

But here steps in the Chancellor of the Exchequer. He must have a revenue, and he cannot raise all that revenue by direct taxes. He knows that, in proportion as the protective tariff is successful, there will be little revenue; if it be completely successful, none. Such luxuries, then, as Tea, Tobacco, and Spirits are the things on which he can most easily raise an assured revenue, with a minimum expense of collection. So, under a protective tariff like that of Canada, heavy import duties, amounting to an average of 170 per cent., are put on such goods.

II. Common sense seems to dictate the free admission of Food. The prosperity of a community surely depends, fundamentally, on getting the animal basis of life as cheap as possible. The human worker is, after all, the great Tool. The argument is strengthened, in our case, by the consideration that many of the countries with which we compete do not require to protect their agriculture. Nature has done it for them. For us to put on such a duty, seems like deliberately handicapping ourselves in the international race by raising the cost of production of Man. Hence, up till the present, it was thought that, if there be a form of Protection which would be totally indefensible in this country, it is the taxation of food.

But here steps in the agriculturist, and asks, with some heat, if the manufacturing classes are to be favoured, while the oldest industry in the world, and still the largest, is to be left to merciless competition with cheap food from every country under heaven? Indeed, in our case, if there is an argument for the protection of any class of producers, it almost seems as if it should be protection for the producers of food, seeing that we are actually at a natural disadvantage, as compared with many other countries, by reason of our climate and the narrow area of land suitable for each crop. And if there is an industry in the country which has some reason to think meanly of Free Trade, it is Agriculture—remembering, always, that the agricultural interest which can and does make itself heard most, is the interest of the landowner. In fact, it was made a special claim for Ireland—in a Royal Commission—that its agriculture was destroyed by Free Trade, and that it never had the manufacturing industries on which to make up the loss.

III. If a country has sunk most of its capital and specialised most of its energies in manufacturing, the free import of raw materials seems almost necessary. This has generally been recognised by the most protectionist countries.

There is scarcely room for difference of opinion as to the admission of materials a country cannot produce for itself. But, beyond such imports, the free admission of raw materials encounters the opposition of those who raise similar or competing raw materials at home, and naturally object to the competition of countries which can raise them more cheaply. At this point arise the most serious conflicts of interest. Wool, for instance, is a raw material of many manufactures. But if, to suit the woollen manufacturer, it is admitted free, this comes into rough collision with the interests of the farmer—one of his staple products being sheep. Say, however, that wool is not admitted free, then, in many countries, the silk, cotton, and linen manufacturers are favoured; as using foreign raw material, they get the basis of their industries presumably more cheaply. For it should not be forgotten that woollens do compete in use with cotton and linen and silk. Everyone knows the position which flannelette—a cotton fabric—has taken in the clothing of the poor. In certain shop windows, one sees a strenuous attempt—backed by expert evidence—to prove that linen is a healthier underwear than wool, while Dr. Jaeger brings his own evidence to prove the contrary. Silk, of course, is an active competitor with wool in the same line, except that it is so expensive. In socks and stockings, again, there is competition between Lisle thread, silk, worsted, and mixtures. So in carpets, hangings, table covers, and the like, with the addition here of jute as a serious competitor.¹

The endeavour to secure cheap raw material for the manufacturer who employs imported material as his base, and yet to give equal treatment to the manufacturer who uses home raw material, becomes almost hopeless where the protected country not only produces the raw material, but works it up. Here the grower clamours for protection and the manufacturer for free admission. One would think that, if there is a raw material which should be admitted free into France, it is silk fibre, silks being, of course, the traditional export of France. Yet, in 1892, the Communes could scarcely resist the agitation for the protection of the home cultivated cocoon, and only escaped it by offering a bribe to the home producers, in the form of a grant of over 3,000,000 francs for primary and technical education in agriculture.²

Here is another case, difficult to put under a category. It is where two raw materials are necessary for one fabric, and the one material comes from abroad, while the other is produced at home. Farrer gives an example which might be paralleled, in all probability, from other industries. Everyone knows those mixed cotton and silk fabrics, made in the factories of Lyons. Here cotton yarn is woven along with silk yarn. But cotton yarn is an import heavily taxed in order to protect the cotton spinners of Lille. The Lyons weavers, then, complained that many of their yarns could not be obtained except from England, and, moreover, that they were suffering competition from Switzerland, where cotton yarns were admitted free. The Lille spinners, on the other hand, urged that “the distress among the Lyons weavers was nothing to that prevailing among the Lille spinners.” Here it is French spinners against French weavers.¹

The fact is, that any particular raw material may be the sole base of one manufacturing industry, or one of the bases, or only a trifling auxiliary; while it may, at the same time, occupy a different position, as basis or auxiliary, in several competing industries. It is impossible to reconcile all these interests.

But what is a “Raw Material”? The term is not a scientific one. No definition of it appears in the Dictionary of Political Economy. It is not even a Board of Trade or Custom-house category. Generally, we are left to infer that what does not appear under the category “manufactured,” is raw material—so long as it is not “food and drink.” According to our official trade accounts, Sawn Timber is not a raw material, which would seem to show that only tree trunks are “raw”; in which case a thing remains raw if an axe is laid upon it, and is manufactured when passed through a saw mill. In the German and French tariffs, Pig-iron is a raw material, excluded from the category of “manufactured”; with us, and with the United States, it is included. Even Slates and Stones with us are manufactures.

In highly protective countries, one has to infer what is counted raw material from the fact of its paying the lowest rate of duty. With us wool, dirty or clean, is considered raw material. But there is a refinement in the American tariff which is very suggestive.

Unwashed wools are wools shorn from the sheep’s back without any cleansing. Washed wools are wools washed with water only, on the sheep’s back or on the skin. Wools washed in any other manner are “scoured.” The importance of the subtle distinction comes out in the provision that washed wools pay double the duty of unwashed wools, and that scoured wools pay three times the duty. So that, if a bottle of sheep-dip is put into the water at the washing, it would seem that treble duty is payable, while leaving sheep altogether unwashed allows the wool to get in at the lowest figure—a premium on dirt and disease which, I imagine, would not be without its effects. So far as this goes, it seems to indicate that the difference between “raw material” and “partly manufactured” material is a question of soap and water. Those people, then, who speak so glibly about letting in raw material free, have evidently some work before them when they try to determine at what stage any material is “raw,” and at what stage it should be taxed.

But this is not a mere difficulty of classification. Even if we could define a raw material with absolute accuracy, the proposal to admit it free, while taxing all other “material,” is exceedingly serious. What affects the home producer is not in the least whether the material he buys is really “raw” or something very far from being raw. The thing that affects him, and his trade, is that the material with which he starts should be cheap. Why is it that the non-taxation of raw material appeals to everybody as reasonable? Is it not that it is the interest of the producer, of the consumer, and of the exporter, that goods should cost as little as possible? If the raw material accounts for a large part of the selling price of the manufacture, and we tax that material, we make the finished article proportionally dear. But if our national manufactures happen to begin with a material which is not “raw,” but has already passed through some processes of preparation before it comes here, is not the hurt of import duties to these industries—their producers, consumers, and exporters—exactly the same as if we taxed the raw material? Can anyone say why our manufacturers should begin with the so-called raw material, or be penalised because they do not? Is it not as profitable perhaps to begin with material already partly manufactured?

It is quite clear that, in home trade, the manufactured product of one industry becomes the material and substance of another. Our weavers do not spin; they buy yarn from the spinners and weave it. The tailor begins with the cloth. The watchmaker begins with a whole complex of ready-made components. Why should it be made a misfortune that the first—and, presumably, less skilled—process of manufacture should not be done in this country? Is it a misfortune that our silk manufacturers begin with silk that has already passed through several stages; that our cycle makers begin with a few components bought from America; that our joiners do not begin with tree trunks, but with sawn timber, or even with ready-made doors and window sashes? Is not the taxation of partly manufactured materials in flat contradiction to all we have been taught, since Adam Smith, of the advantages of the division of labour?¹

The only ground I can find for the belief that raw material should be admitted free, as compared with everything which has passed through a process, is the ineradicable belief of some people that we ought to do everything ourselves; and that, if an article passes through six stages before it comes out a finished good for consumption, we are somehow defrauded if we do not secure more than five of them. It seems to me almost as absurd as insisting that we teachers should read nothing but English books, or, perhaps, should write our own books.

One would think these are difficulties enough, but I should like to note one more. It is that of distinguishing between Food and raw material. For, as it happens, imported food is the raw material of much of our new agriculture. It is said, indeed, that the salvation of modern farming has come from the possibility of getting cheap feeding for cattle. Mr. Balfour put this strongly, in May of 1903, when defending the abolition of the tax on grain. “Let me ask farmers,” he said, “if they really think that, from the point of view of feeding stuffs, the tax is really to their advantage? . . . I maintain that the tax has operated as a burden on the raw material used by farmers.”

Flour, again, is a Food. But is it not also the raw material of several things we undoubtedly call manufactures? Maize is the substance of corn-flour, and corn-flour is a food; but the spoiled corn-flour goes into starch, and starch is a manufacture. If, again, meat is taxed as food, is this not a tax on leather, the raw material of many industries?

IV. The only class of goods remaining for consideration, after foreign products that we cannot make, food, and raw materials, is what we call Manufactures. And generally, ever since the days of Colbert, the opinion of rising countries is that the import of manufactures should be prohibited or handicapped wherever they interfere with or threaten similar home manufactures. Manufactured commodities, it is assumed, are the goal of industry. It is in order to manufacture them cheaply that we admit food and raw material free. If we allow free entry to the manufactures of other countries, we give away the case for free entry of food and raw materials.

The inadequacy of this argument appears the moment we notice our own classification of manufactures, as “manufactured and partly manufactured.” Suppose that we could put the “manufactured” into a category of their own called Consumption Goods, meaning by that, goods ready for being consumed in the support of human life and not requiring any further process of labour, the difficulty would at least remain as regards all the others. For all “partly manufactured” goods are simply the substance and base—the “material”—of further home industries. To tax them, as I say, has exactly the same effect as to tax raw materials.

But, again, among “manufactures”—one would say, among “finished manufactures”—appear tools of all descriptions. But tools surely stand on the same line as raw materials; they also are necessaries and foundations of all industry. To agricultural countries, the taxing of agricultural implements is a recognised and serious evil. To judge of its effect, one has only to take a walk anywhere in rural France, and witness the peasant working with ploughs only fit for a museum—such ploughs as might be seen on a Roman frieze, but never in English fields.

So it comes that, if a country adopt this protection against manufactures, it is driven to make such a complex and detailed tariff, that it is very expensive, very difficult to work, very vexatious, and, at the same time, very open to evasion of all kinds. The contents of any shop window, with its huge variety of articles which must be called “manufactures,” show how impossible it is to group them into intelligible classes. And thus one finds in tariffs such absurdities as that of certain house furnishings being taxed, not as single goods, but as complexes of wood, steel, copper, brass, etc., on each item of which is levied a different duty. It reminds one of the old railway casuistry whereby a bicycle was charged for under the classification of “a perambulator with two wheels.”¹

From all these considerations, one begins to see why it is that, when a government once adopts the protectionist faith, it is driven by force of circumstances, not to select and categorise, but to tax everything; and when it tries to let in some things free, or at a reduced rate, is met with a storm of opposition from hundreds of vested interests.¹

¹ In 1902, the Agrarian Party in Austria asked for a duty against raw cotton, with the avowed object of protecting wool and flax. The argument used was: If raw cotton from abroad is admitted free, cotton goods are produced more cheaply than woollen and linen goods, whose raw material is grown at home, and a blow is struck at the farmer and flax grower.

²Economic Journal, September, 1896.

¹ The remedy suggested by the President of the Lille Chamber of Commerce shows the ridiculous impasse in which attempts to reconcile warring interests often land. It was to raise the duty on agricultural products, in order that French agriculturists might grow rich and become better purchasers of French manufactures!—Farrer, Free Trade versus Fair Trade, p. 167.

¹ As regards the Brewing trade, it has been pointed out that staves come from Norway, hoops from Holland, capsules from Germany, casks from Sweden, hops and grain from various countries: that, as a matter of fact, all this country contributes in the way of raw material is the water used in the manufacture, and the straw for packing. But brewing is one of our staple British industries.

¹ Cf. a recent decision affecting an American fruit dealer who imported from Italy, along with a shipment of lemons, a bushel of snails intended for his own table. The authorities decided that a duty on the snails was necessary, but were for a long time at a loss under what category to place them. Finally, they paid duty as “wild animals”!

¹ The kind of problems presented may be illustrated by the treatment of colza oil in France. It is manufactured from the seeds of a kind of turnip, which is also a valuable feeding stuff. To protect the growers, in 1890-2 the Commission of Customs proposed that colza should be protected by a 6 per cent. duty. But the oil is burned in lamps, and the consumers rebelled. To protect their interests, it was proposed that other illuminating oils should be admitted free. Again, colza is largely used in the making of certain soaps, and these soap makers rose in arms. To propitiate them, it was proposed that oleaginous substitutes used in the making of other soaps should also be taxed, and all soap makers put on an equal footing of disadvantage. Thus, to favour the farmer, colza was taxed and lamp oil made dear; oleaginous substitutes were taxed and all soap made dear. The later development, I believe, is that, in 1903, the home colza growers asked for the taxation of all oil-producing grains as well. To propitiate the French Colonies on the West Coast of Africa, it was proposed to admit their colza free. The Colonies refused the offer, knowing that they “would have to pay for it” in other ways! One may judge if Sumner exaggerated when he said: “Tax A to favour B. If A complains, tax C to make it up to A. If C complains, tax B to favour C. If any of them still complain, begin all over again.”—Protectionism., p. 78.