Part 995

Both New South Wales and Victoria "are young countries, and are inhabited by men of the same race, speech, and training: capital and labour oscillate freely between them: both use substantially the same methods and forms of government: while against the larger territory of New South Wales may be set the superior climate and easier development of its southern neighbour. Whatever may be the balance of the natural advantages, whether of climate or population, is on the side of Victoria, whose compact, fertile, and well watered territory gained for it, on its first discovery, the well-deserved title of Australia Felix. The striking and ultimate point of difference between the two countries is their fiscal policy. Since 1866 Victoria has lived under a system of gradually increasing Protection, while the policy of New South Wales has been, in the main, one of Free Trade. According to all Protectionist theory Victoria should be prosperous and New South Wales distressed; there should be variety and growth in the one country, stagnation in the other. At least the progress of Victoria ought to have been more rapid than that of New South Wales, because she has added to the natural advantages which she already enjoyed, the artificial benefits which are claimed for a Protective tariff. If, in fact, neither of these conclusions is correct, and, while both countries have been phenomenally prosperous, New South Wales has prospered the most, one of two conclusions is inevitable—namely, either that certain special influences have caused the more rapid progress of New South Wales which were not felt in Victoria, or that Protection has retarded instead of assisted the development of Victoria's natural superiority. Writers of all schools admit that activity in certain departments of national life is a fair indication of prosperity and progress. It is, for instance, generally allowed that an increase in population, a development of agricultural and manufacturing industry, a growth of foreign commerce, an increase in shipping, or an improvement in the public revenue, are all signs of health and well-being; and that a concurrence of such symptoms over a lengthened period indicates an increase in material wealth. Accepting these tests of progress, our comparison proceeds thus: first, we examine the position of the two Colonies as regards population, foreign commerce, shipping, agriculture, manufactures, and revenue, at the time when both of them adhered to Free Trade; from which we find that, according to all these indications of prosperity, Victoria was then very much the better off: In 1866 she outnumbered New South Wales in population by 200,000 souls: her foreign commerce was larger by £8,300,000: she had a greater area of land under cultivation: her manufactures were well established, while those of New South Wales were few and insignificant: she was ahead in shipping, and her revenue was greater by one-third. Passing next to the years which follow 1866, we observe that New South Wales gradually bettered her position in every province of national activity, and that, as the fetters of Protection became tighter, Victoria receded in the race. {3082} She gave way first in the department of foreign commerce, next in population, shipping, and revenue, until, in 1887, she maintained her old superiority in agriculture alone. From this accumulation of facts—and not from any one of them we infer that the rate of progress in New South Wales under Free Trade has been greater than that of Victoria under Protection."

_B. R. Wise, Industrial Freedom, appendix 3._

TARIFF: (Europe): A. D. 1871-1892. Protectionist reaction on the Continent. High Tariff in France.

"The Franco-German War (1870-1) and the overthrow of Napoleon III. at once arrested the free-trade policy, which had little support in the national mind, and was hardly understood outside the small circle of French economists. The need of fresh revenue was imperative, and M. Thiers, the most prominent of French statesmen, was notoriously protectionist in his leanings. Pure revenue duties on colonial and Eastern commodities were first tried; the sugar duty was increased 30%; that on coffee was trebled; tea, cocoa, wines and spirits, were all subjected to greatly increased charges. As the yield thus obtained did not suffice, proposals for the taxation of raw materials were brought forward but rejected by the legislature in 1871, when M. Thiers tendered his resignation. To avoid this result the measure was passed, not however to come into operation until compensating productive duties had been placed on imported manufactures. The existing commercial treaties were a further obstacle to changes in policy, and accordingly negotiations were opened with England and Belgium, in order that the new duties might be applied to their products. As was justifiable under the circumstances, the former country required that if imported raw products were to be taxed, the like articles produced in France should pay an equivalent tax, and therefore, as the shortest way of escape, the French Government gave notice for the termination of the treaties (in the technical language of international law 'denounced' them), and new conventions were agreed on; but as this arrangement was just as unsatisfactory in the opinion of the French Chambers, the old treaties were in 1873 restored to force until 1877, and thus the larger part of the raw materials escaped the new taxation. The protectionist tendency was, too, manifested in the departure from the open system introduced in 1866 in respect to shipping. A law of 1872 imposed differential duties on goods imported in foreign vessels. … The advance of the sentiment in favour of a return to the restrictive system was even more decidedly indicated in 1881. Bounties were then granted for the encouragement of French shipping, and extra taxes imposed on indirect imports of non-European and some European goods. In 1889 the carrying trade between France and Algiers was reserved for native ships. The revision of the general tariff was a more serious task, undertaken with a view to influencing the new treaties that the termination of the old engagements made necessary. The tariff of 1881 (to come into force in 1882) made several increases and substituted many specific for ad valorem duties. Raw materials escaped taxation; half-manufactured articles were placed under moderate duties. The nominal corn duties were diminished by a fraction, but the duties on live stock and fresh meat were considerably increased. … A new 'conventional tariff' speedily followed in a series of fresh treaties with European countries. … The duties on whole or partially-manufactured goods remained substantially unchanged by the new treaties, which do not, in fact, vary so much from the general tariff as was previously the case. The number of articles included in the conventions had been reduced, and all countries outside Europe came under the general code. The reaction against the liberal policy of 1860 was thus as yet very slight, and did not seriously affect manufactures. The agricultural depression was the primary cause of the legislation of 1885, which placed a duty of 3 francs per quintal on wheat, 7 francs on flour, 2 francs on rye and barley, and one franc on oats, with additional duties on indirect importation. Cattle, sheep, and pigs came under increases of from 50% to 100%. … Not satisfied with their partial success, the advocates of high duties have made further efforts. Maize, hitherto free, as being chiefly used by farmers for feeding purposes, is now liable to duty, and the tariff proposed in the present year (1891) raises the rates on most articles from an average of 10% to 15% to one of 30% and 40%. … Germany did not quite as speedily come under the influence of the economic reaction as France. … Italian commercial policy also altered for the worse. From the formation of the kingdom till 1875, as the various commercial treaties and the general tariff of 1861 show, it was liberal and tending towards freedom. About the latter date the forces that we have indicated above as operating generally throughout Europe, commenced to affect Italy. The public expenditure had largely increased, and additional revenue was urgently required. Agriculture was so depressed that, though the country is pre-eminently agricultural, alarm was excited by the supposed danger of foreign competition. The result was that on the general revision of duties in 1877 much higher rates were imposed on the principal imports. … Depression both in agriculture and elaborative industries continued and strengthened the protectionist party, who succeeded in securing the abandonment of all the commercial treaties, and the enactment of a new tariff in 1887. … The first effect of the new system of high taxation with no conventional privileges was to lead to a war of tariffs between France and Italy. … Austria may be added to the list of countries in which the protectionist reaction has been effectively shown. … In Russia the revival (or perhaps it would be more correct to say continued existence), of protection is decisively marked. … Spain and Portugal had long been strongholds of protectionist ideas. … Holland and Belgium have as yet [1891] adhered to the system of moderate duties."

_C. F. Bastable, The Commerce of Nations, chapter 9._

A new tariff system was elaborated by the French Chambers, with infinite labor and discussion, during the year 1891, and adopted early in the following year, being known as the "Loi du 11 .Janvier, 1892." This tariff makes a great advance in duties on most imports, with a concession of lower rates to nations according reciprocal favors to French productions. Raw materials in general are admitted free of duties. The commercial treaties of France are undergoing modification.

{3083}

TARIFF: (United States): A. D. 1883. Revision of the Tariff.

In 1882, "Congress appointed a Tariff Commission 'to take into consideration, and to thoroughly investigate, all the various questions relating to the agricultural, commercial, mercantile, manufacturing, mining, and industrial interests of the United States, so far as the same may be necessary to the establishment of a judicious tariff, or a revision of the existing tariff upon a scale of justice to all interests.' Several things it was expected would be accomplished by revising the tariff, and the measure received the assent of nearly all the members of Congress. The free-traders expected to get lower duties, the protectionists expected to concede them in some cases, and in others to get such modifications as would remove existing ambiguities and strengthen themselves against foreign competition. The protective force of the existing tariff had been weakened in several important manufactures by rulings of the treasury department. … The composition of the commission was as satisfactory to the manufacturing class as displeasing to free-traders. … Early in their deliberations, the commission became convinced that a substantial reduction of the tariff duties was demanded, not by a mere indiscriminate popular clamor, but by the best conservative opinion of the country, including that which had in former times been most strenuous for the preservation of the national industrial defences. Such a reduction of the existing tariff the commission regarded not only as a due recognition of public sentiment, and a measure of justice to consumers, but one conducive to the general industrial prosperity, and which, though it might be temporarily inconvenient, would be ultimately beneficial to the special interests affected by such reduction. No rates of defensive duties, except for establishing new industries, which more than equalized the conditions of labor and capital with those of foreign competitors, could be justified. Excessive duties, or those above such standard of equalization, were positively injurious to the interest which they were supposed to benefit. They encouraged the investment of capital in manufacturing enterprise by rash and unskilled speculators, to be followed by disaster to the adventurers and their employees, and a plethora of commodities which deranged the operations of skilled and prudent enterprise. … 'It would seem that the rates of duties under the existing tariff—fixed, for the most part, during the war under the evident necessity at that time of stimulating to its utmost extent all domestic production—might be adapted, through reduction, to the present condition of peace requiring no such extraordinary stimulus. And in the mechanical and manufacturing industries, especially those which have been long established, it would seem that the improvements in machinery and processes made within the last twenty years, and the high scale of productiveness which had become a characteristic of their establishments, would permit our manufacturers to compete with their foreign rivals under a substantial reduction of existing duties.' Entertaining these views, the commission sought to present a scheme of tariff duties in which substantial reduction was the distinguishing feature. … The attempt to modify the tariff brought into bold relief the numerous conflicting interests, and the difficulty and delicacy of the undertaking. As our industries become more heterogeneous, the tariff also grows more complex, and the difficulty of doing justice to all is increased. For example, the wool manufacturers to succeed best must have free wool and dye-stuffs; on the other hand, both these interests desired protection. The manufacturers of the higher forms of iron must have free materials to succeed best; on the other hand, the ore producers, the pig-iron manufacturers, and every succeeding class desired a tariff on their products. It was not easy for these interests to agree, and some of them did not. The iron-ore producers desired a tariff of 85 cents a ton on ore; the steel-rail makers were opposed to the granting of more than 50; the manufacturers of fence wire were opposed to an increase of duty on wire rods used for making wire, and favored a reduction; the manufacturers of rods in this country were desirous of getting an increase; the manufacturers of floor oil-cloths desired a reduction or abolition of the duty on the articles used by them; the soap manufacturers desired the putting of caustic soda on the free list, which the American manufacturers of it opposed; some of the woolen manufacturers were desirous that protection should be granted to the manufacturers of dye-stuffs, and some were not; the manufacturers of tanned foreign goat and sheep skins desired the removal of the tariff on such skins; those who tanned them, and who were much less numerous, were equally tenacious in maintaining the tariff on the raw skins, and the same conflict arose between other interests. The method of determining how much protection their several interests needed, and of adjusting differences between them, has always been of the crudest kind. … Although not all of the recommendations of the commission were adopted, most of them were. Those which pertained to the simplification of the law were adopted with only slight changes. The bill reported by the commission contained, not including the free list, 631 articles and classifications. … Less than 25 articles, mainly in the cotton, woolen goods, and the iron and steel schedules, were matters of contention. The rates on 409 of the 631 articles mentioned in the tariff recommended by the commission were adopted, and between 50 and 60 more articles have substantially the same rates, though levied under different clauses. Of the 170 changes, 98 were fixed at lower rates than those proposed by the commission, 46 at higher, and 26 have been classed as doubtful."

_A. S. Bolles, Financial History of the United States, 1861-1885, book 2, chapter 7._

TARIFF: (United States): A. D. 1884-1888. Attempts at Tariff Reform. The Morrison Bills and the Hewett Bill. President Cleveland's Message. The Mills Bill and its defeat.

The slight concessions made in the protectionist tariff-revision of 1883 did not at all satisfy the opinion in the country demanding greater industrial freedom, and the question of tariff-reform became more important than before in American politics. The Democratic Party, identified by all its early traditions, with the opposition to a policy of "protection," won the election of 1884, placing Mr. Cleveland in the Presidency and gaining control of the House of Representatives in the 49th Congress. But it had drifted from its old anchorage on the tariff question, and was slow in pulling back. A large minority in the party had accepted and become supporters of the doctrine which was hateful to their fathers as an economic heresy. {3084} The majority of the Democrats in the House, however, made strenuous efforts to accomplish something in the way of reducing duties most complained of. Their first undertaking was led by Mr. Morrison of Illinois, who introduced a bill which "proposed an average reduction of 20 per cent., but with so many exceptions that it was estimated the average reduction on dutiable articles would be about 17 per cent. The rates under the Morrill Act of 1861 were to form the minimum limit. An extensive addition to the free list was proposed, including the following articles: ores of iron, copper, lead, and nickel, coal, lumber, wood, hay, bristles, lime, sponges, indigo, coal tar and dyewoods." In the Committee of Ways and Means the bill underwent considerable changes, the articles in the free list being reduced to salt, coal, lumber and wood. It was reported to the House March 11, and remained under debate until May 6, when it was killed by a motion to strike out the enacting clause, on which 118 Republicans and 41 Democrats voted aye, against 4 Republicans and 151 Democrats voting nay. The 4 Republicans supporting the bill were all from Minnesota; of the 41 Democrats opposing it 12 were from Pennsylvania, 10 from Ohio, 6 from New York, 4 from California and 3 from New Jersey. "The Morrison 'horizontal bill' having been thus killed, Mr. Hewett, a New York Democrat, and a member of the Ways and Means Committee, on May 12 introduced a new tariff bill, providing for a reduction of 10 to 20 per cent. on a considerable number of articles and placing several others on the free list." The bill was reported favorably to the House, but action upon it was not reached before the adjournment. During the same session, a bill to restore the duties of 1867 on raw wool was defeated in the House; an amendment to the shipping bill, permitting a free importation of iron and steel steamships for employment in the foreign trade, passed the House and was, defeated in the Senate; and a bill reducing the duty on works of art from 20 to 10 per cent. was defeated in the House. In the next Congress, the Forty-ninth, Mr. Morrison led a new undertaking to diminish the protective duties which were producing an enormous surplus of revenue. The bill which he introduced (February 15, 1886) received radical changes in the Ways and Means Committee, "inasmuch as it was clearly seen that the opposition from the metal and coal interests was sufficiently strong to destroy all chance of consideration in the House. Accordingly, it was found preferable to make the duties on wool and woolens the special point for assault." But the bill modified on this new line,—lowering duties on woolens to 35 per cent. ad valorem, and placing wool in the free list, with lumber, wood, fish, salt, flax, hemp and jute,—was refused consideration by a vote of 157 to 140 in the House, on the 17th of June. Again there were 35 members of his own party arrayed against Mr. Morrison. At the second session of the same Congress, December 18, 1886, Mr. Morrison repeated his attempt with no better success.

_O. H. Perry, Proposed Tariff Legislation since 1883 (Quarterly Journal of Economics, October, 1887)._