CHAPTER XXVI

CONGRESSIONAL LEGISLATION

Taxation without representation is good cause for revolt.

American Speech of 1776.

As a colony of Spain the Philippines enjoyed certain special privileges in the way of trade with the "mother country." When at the beginning of our military occupation in 1898 General Otis detailed an army officer to take charge of the Customs House, he continued for the time being the Spanish tariff laws concerning imports and exports. On September 17, 1901, the Philippine Commission passed a tariff act [511] fixing the duties on imports into the Islands and also continuing to a considerable extent the system of duties on Philippine exports inherited from the Spanish regime. Among the products of the Philippine Islands on which the Act of September 17, 1901, imposed an export tax were the following:

Hemp, 75c. per 100 kilos [512]; sugar, 5c. per 100 kilos; manufactured tobacco, $1.50 per 100 kilos; raw tobacco, $1.50 down to 75c. per 100 kilos. [513]

On March 8, 1902, the United States Congress passed an Act, "temporarily to provide revenue for the Philippine Islands and for other purposes." The Act of 1902 re-enacted the Commission's tariff law for the Philippines of September 17, 1901, with one change, hereinafter to be discussed, as to its export tax features. As to the tariffs to be collected at our custom-houses on Philippine products shipped to the United States, the Act of 1902 reduced the rates fixed by the Dingley tariff to seventy-five per cent. of said rates. That was all Congress did in the way of lowering our tariff wall to Philippine products until 1909, when the Payne-Aldrich tariff bill became a law. This twenty-five per cent. reduction was no better than no reduction whatever would have been.

Governor Taft pleaded very earnestly with Congress, at the time of the passage of the Philippine Tariff Act of March 8, 1902, for a substantial reduction of the Dingley tariff rate on sugar and tobacco, so as to give his "constituents"--his Filipinos--something in lieu of the markets they had had under Spain. But our sugar and tobacco interests defeated his efforts, because they feared what they termed "competition with cheap Asiatic labor."

The Act of Congress of March 8, 1902, repealed the export duties imposed by the Act of the Philippine Commission of September 17, 1901, as to exports to the United States, leaving unrepealed, however, the export duty on Philippine products shipped to foreign countries. Section 2 of said Act of 1902 provided, as to exports from the Philippines to the United States, that the rates of duty upon products of the Philippine Archipelago coming into the United States, should be less any duty or tax levied, collected, and paid thereon (under the Act of the Philippine Commission of September 17, 1901, aforesaid) upon the shipment thereof from the Philippine Archipelago. This sounds liberal enough. It is, as far as it goes. But what those familiar with the hemp infamy of the Act of 1902 call "the joker" in it, is as follows:

All articles, the growth and product of the Philippine Islands, admitted into the ports of the United States free of duty under the provisions of this act, and coming directly from said islands to the United States, for use and consumption therein, shall be hereafter exempt from any export duties imposed in the Philippine Islands.

This also sounds liberal, on first reading, but its object was, and its effect has been, to enable the American Hemp Trust to corner and control the Manila hemp industry. There is but one article of Philippine export which any one in the United States is interested in, that was admitted into the United States free of duty under the Dingley Act. [514] That article is hemp. The object of the law was to favor Americans interested in exporting hemp from Manila to the United States as against Europeans exporting it to England and other foreign countries. This does not look, on its face, either unpatriotic or un-Christian. It is not unpatriotic or un-Christian, ordinarily, to favor your own people, as against their foreign competitors. The moral quality of such favoritism, however, must depend on who is to pay for it. Under the Act of 1902, the Manila authorities have always collected an export tax on hemp coming to the United States, just as they do on hemp going from Manila to foreign countries, exactly as if the law abolishing the export tax on hemp coming to the United States had never been passed. Later, on proof that the hemp was in fact carried to the United States and used and consumed therein, they refund the export tax. This is on the idea that they cannot tell where the hemp is going to until they know where it went to, nor where it is going to be "used and consumed" until they know where it was in fact finally "used and consumed." Of course the small farmer is in no position to follow his bale of hemp into the markets of the world and show, if it happens to go to the United States, that it did in fact go there and that it was there "used and consumed," and, finally obtaining the proof of this, submit it to the Manila Government and get his little export tax on his bale of hemp refunded. Only the big buyer's agents at Manila are in a position to do this. So the hemp crop is bought and moved under conditions which are the same as if all hemp were subject to an export tax. And only the big fish get the benefit. For instance, the International Harvester Company has its hemp buyers at Manila. And as to the part of the Philippine hemp crop it handles, it can, of course, follow the hemp to its ultimate consumption in the United States, make the proof, and get the refund.

The wealth of the Philippines is practically entirely agricultural. Neither mining nor manufactures cut any appreciable figure. Hemp, sugar, tobacco, and copra [515] are the chief staples and main exports, and of the first of these Secretary of War Taft says in one of his reports: [516]

The chief export in value and quantity from the Philippines is Manila hemp, it amounting to between 60 and 65 per cent. of the total exports.

Let us see just how far, according to the annual reports of our own agents in the Philippines--those charged by us with governing them,--this piece of legislation gotten through by "special privilege" has depressed the Manila hemp industry, the chief source of wealth of the Islands. And before we even get to the main trouble, let us permit the Insular Government to "place on the screen," as a preliminary "view," a glance at what the instinct of self-preservation of American sugar and tobacco interests, fearing competition from "cheap Asiatic labor," have deemed it necessary to do to the Philippine sugar and tobacco industries, through the Dingley tariff. The annual report of the Philippine Commission for 1904, before it gets to the subject of hemp, draws a most gloomy picture of how we killed the markets for sugar and tobacco the Islands had under Spain, and gave them none instead. They speak of "the languishing state of these industries" (p. 26), and describe a state of affairs that sounds more like Egypt under Pharaoh than anything else, including a cattle disease that carried off ninety per cent. of the beasts of burden of the country, and wholesale destruction of crops by locusts. [517] What they have to say of the annual tribute levied by the American Hemp Trust, through Congress, on the Manila hemp industry, should not be re-stated, but quoted. They say: [518]

We desire to call attention to the injustice effected upon the revenues of the islands by section 2 of the Act of Congress approved March 8, 1902, which provides that the Philippine Government shall refund all export duties imposed upon articles exported from the islands into and consumed in the United States. Under the provisions of this section there has been collected in the Philippine Islands, since its enactment down to the close of the fiscal year 1904, the sum of $1,060,460.20 United States currency, which is refundable. These refundable duties are principally upon hemp exportations to the United States, and are in effect a gift of that amount to the manufacturers of the United States who use hemp in their operations.

They add:

It is manifestly a discrimination in favor of our manufacturers as against those of foreign countries. No good reason is perceived why this bounty to American manufacturers should be extracted from the treasury of the Philippine Islands, and it is respectfully submitted that the law authorizing it should be repealed.

The annual report of the Philippine Commission for 1905, after the usual complaint about being made a political football by Benevolent Assimilation on the one side, and Louisiana and our sugar-beet States on the other, and the usual annual and true description of the consequent poverty, says concerning hemp:

We have several times in our reports called attention to the practical workings of that portion of the Act of Congress approved March 8, 1902, which provides for the refund of duties paid on articles exported from the Philippine Islands to the United States and consumed therein, and have as repeatedly recommended its repeal. It is a direct burden upon the people of the Philippine Islands, because it takes from the insular treasury export duties collected from the people and gives them to manufacturers of hemp products in the United States. These manufacturers were already prosperous before this bounty was given them and it seems hardly consistent with our expressions of purpose to build up and develop the Philippine Islands when we are thus enriching a few of our own people at their expense. [519]

By the end of the fiscal year 1905 (June 30), the American importers of Manila hemp--of whom the International Harvester Company and its allied interests are the most influential--had, under the operation of the rebate system based on the Act of 1902, milked the Philippine people to the tune of about $1,000,000. Says the Philippine Commission's annual report for 1905, immediately after the passage last above quoted:

The amount of duties refunded under this act to manufacturers in the United States during the three years ending June 30, 1905, is $1,057,251.12. Many of the departments of the government are much hampered in their operations because of the lack of funds, notably the bureau of education, and were the sum thus taken available for educational purposes, to say nothing of any other, the government would be enabled to give instruction to thousands of Filipino children whom they are now unable to reach and who must remain steeped in ignorance because of the lack of funds to provide such instruction.

Said the Manila Chamber of Commerce to the Taft Congressional party in August, 1905: "The country is in a state of financial collapse." [520]

Says the Philippine Commission's report for 1906 (pt. 1, p. 68):

The Commission has repeatedly called attention in its reports to the action of Congress providing for a refund of duties paid on articles exported from the Islands to the United States and consumed therein. The reasons that led the Commission heretofore to recommend the repeal of that provision are still operative. Since the passage of that act on March 8, 1902, the amount of duties collected and paid into the Philippine treasury and handed over to manufacturers in the United States down to June 30, 1906, is $1,471,208.47. This money has been taken out of the poverty of the insular treasury to be delivered directly into the hands of manufacturers of cordage and other users of Philippine hemp in the United States for their enrichment. The cordage interests are prosperous and do not need this help; the Philippine Islands are poor. Legislation which takes money directly from the Philippine treasury and passes it over to a particular industry in the United States is not founded on sound principles of political economy or of justice to the Filipinos. We renew our recommendation for the repeal of this provision.

You also find in the Commission's report for 1906 the usual annual protests against the Dingley tariff on Philippine sugar and tobacco. Said the Honorable Henry C. Ide in an article in the New York Independent for November 22, 1906, written shortly after he retired from the office of Governor-General of the Philippines and returned to the United States: "By annexation we killed the Spanish market for Philippine sugar and tobacco, and our tariff shuts these products from the United States market, and to-day both these [industries] are practically prostrated." In their annual report for 1907, the Philippine Commission say with regard to the American corner on Philippine hemp: [521] "The price of hemp has fallen from an average of twenty pesos ($10 American money) per picul [522] to thirteen pesos per picul." It thus appears that by judicious manipulation of the hemp market at Manila, through the leverage of the refund system, based on collection and subsequent refunding of the export tax on hemp coming to the United States, the Manila agents of the American hemp manufacturers had, as early as 1907, beat the price of hemp down to not far above half of what it had been formerly. To-day (1912) the Filipino hemp farmer gets for his hemp just one half what he got just ten years ago. During all this period of economic depression, the public utterances and State papers both of President Roosevelt and Mr. Taft are full of such preposterous stuff as the following:

No great civilized power has ever managed with such wisdom and disinterestedness the affairs of a people committed by the accident of war to its hands. [523]

This is what Mr. Roosevelt and Mr. Taft were publicly pretending to believe. But at practically the same time, during as dark a year, economically, as the American occupation has seen, 1907, let us see what they were privately admitting to their intimate friends.

In the North American Review for January 18, 1907, in an article contributed to that Review by the author of this volume, our treatment of the Philippine people, through our Congress, was briefly discussed. The article chanced to attract the attention of Mr. Andrew Carnegie, who gave a considerable sum of money to have it reprinted and distributed. Some correspondence followed between us, in the course of which Mr. Carnegie stated that he had been at the White House shortly before writing me, and described what happened as follows:

When at supper with the President [Mr. Roosevelt] recently, pointing to Judge Taft [then Secretary of War], who sat opposite, he [President Roosevelt] said: "Here are the two men in all the world most anxious to get out of the Philippines."

In another letter Mr. Carnegie described this same incident, this other letter's version of President Roosevelt's supper-table remark being:

Here are the two men in America most anxious to get rid of them [the Philippines]. [524]

Now why all this public boasting about our "disinterestedness," when, if he had been a Filipino, Colonel Roosevelt would probably have hunted up all the American speeches of 1776 about taxation without representation, and played hide-and-seek with the public prosecutor at Manila, to see how far he could violate the sedition statute without getting in jail? And why this private admission to his friend Mr. Carnegie, which neither he nor Mr. Taft has ever publicly made? Why did he not send a message to Congress showing up the hemp rebate system? Simply because to do so would lose support for the Administration, would alienate powerful interests from the fatuous policy of Benevolent Assimilation bequeathed to Mr. Roosevelt by Mr. McKinley. His party was irrevocably committed to indefinite retention of the Islands. It was like Lot's wife. It could not turn back. So the protected and subsidized interests were permitted to continue to prey upon the Philippine people. Tariff evils were never President Roosevelt's specialty. Nor has war against intrenched privilege of any sort ever been Mr. Taft's specialty. Mr. Taft went out to the Philippines in 1907 to open the Philippine Assembly. In 1908 he came back and made a report to President Roosevelt which is as bland as his Winona declaration that the Payne-Aldrich bill is "the best tariff bill the Republican party ever passed." It makes the American reader's heart swell with pious pride at what he is doing for his "little brown brother," in the matter of vaccination, sewers, school-books, and the like. President Roosevelt sent this report to Congress, accompanied by a message, from which we have already quoted. In that same message he said:

I question whether there is a brighter page in the annals of international dealing between the strong and the weak than the page which tells of our doings in the Philippines.

Apparently, Messrs. Roosevelt and Taft thought, in 1907, that granting the Filipinos a little debating society solemnly called a legislative body, but wholly without any real power, was ample compensation for deserted tobacco and cane plantations and for the price of hemp being beat down below the cost of production by manipulation through an Act of Congress passed for the benefit of American hemp manufacturers. If we had had a Cleveland in the White House about that time, he would have written an essay on taxation without representation, with the hemp infamy of this Philippine Tariff Act of 1902 as a text, and sent it to Congress as a message demanding the repeal of the Act. But the good-will of the Hemp Trust is an asset for the policy of Benevolent Assimilation. The Filipino cannot vote, and the cordage manufacturer in the United States can. No conceivable state of economic desolation to which we might reduce the people of the Philippine Islands being other than a blessing in disguise compared with permitting them to attend to their own affairs after their own quaint and mutually considerate fashion, the Hemp Trust's rope, tied into a slip-knot by the Act of 1902, must not be removed from their throats. By judicious manipulation of sufficient hemp rope, you can corral much support for Benevolent Assimilation. Therefore, to this good hour, the substance of the hemp part of the Philippine Tariff Act of March 8, 1902, remains upon the statute books of the United States, to the shame of the nation.

At last, under the Payne tariff law of 1909, Mr. Taft's long and patient quiet work with Congressional committees prevailed upon Congress and the interests to admit Philippine sugar and tobacco to this country free of duty, up to amounts limited in the Act. [525] Since then you find the reports of our American officials in the Philippines palpitating with gratitude to Congress. As a matter of fact all Congress had said to the Filipinos by its action may be summed up about thus: "The sugar and tobacco interests of this country have at last realized that such little of the sugar and tobacco you raise as may stray over to this side of the world will not be in the least likely to hurt them. Therefore they have graciously decided, in their benignity, to permit you to live, provided you do not get too prosperous." But this very same Payne bill continued the export tax features of the Act of 1902. Section 13 of the Payne bill is as follows:

Section 13. That upon the exportation to any foreign country from the Philippine Islands, or the shipment thereof to the United States or any of its possessions, of the following articles there shall be levied, collected, and paid thereon the following export duties: Provided, however, that all articles the growth and product of the Philippine Islands coming directly from said islands, to the United States or any of its possessions for use and consumption therein shall be exempt from any export duties imposed in the Philippine Islands:

352. Abaca (hemp), gross weight, 100 kilos, 75 cents. 353. Sugar, gross weight, 100 kilos, 5 cents. 354. Copra, gross weight, 100 kilos, 10 cents. 355. Tobacco, gross weight:

(a) Manufactured or unmanufactured, except as otherwise provided, 100 kilos, $1.30.

(b) Stems, clippings, and other wastes of tobacco, 100 kilos, 50 cents.

Let us briefly glance at the net results of this law, and its predecessor, the Act of 1902, the export features of which it re-enacted. It is important that every fair-minded American who can possibly spare the time should take such a glance at what Congress has done to the Philippine hemp industry, because of the obvious bearing that such taxation without representation will probably have on the attitude of the Philippine people whenever we get into a war with a foreign power. Certainly the legislation Congress has perpetrated upon them, at the behest of special interests in the United States, has not soothed the original desire of those people to be free and independent.

At page 27 of the report of the Philippine Collector of Customs for 1910, a table is given showing the export duties subject to refund collected under the Act of Congress of March 8, 1902, and deposited in the Philippine treasury to the credit of the Insular Government at the end of each fiscal year (June 30), as follows:

1902 $ 71,064.69 1903 527,228.10 1904 462,433.83 1905 486,475.56 1906 433,991.79 1907 433,458.58 1908 370,513.36 1909 598,917.69 ------------- $3,384,083.60

The following table, taken from this same annual report of the Collector of Customs of the Philippines for 1910 (p. 22) shows the size (weight in kilograms), and value, of the annual Philippine hemp crop from 1899 to 1910, both inclusive. It gives in one set of columns the total exported to all countries, and in the other the part which comes to the United States:

To All Countries. To United States. Kilos Value Kilos Value

1899 59,840,368 $ 6,185,293 23,066,248 $ 2,436,169 1900 76,708,936 11,393,883 25,763,728 3,446,141 1901 112,215,168 14,453,110 18,157,952 2,402,867 1902 109,968,792 15,841,316 45,526,960 7,261,459 1903 132,241,594 21,701,575 71,654,416 12,314,312 1904 131,817,872 21,794,960 61,886,592 10,631,591 1905 130,621,024 22,146,241 73,351,136 12,954,515 1906 112,165,384 19,446,769 62,045,088 11,168,226 1907 114,701,320 21,085,081 58,388,504 11,326,864 1908 115,829,080 17,311,808 48,813,720 7,684,000 1909 149,991,866 15,883,577 79,210,362 8,534,288 1910 170,788,629 17,404,922 99,305,102 10,399,397

If you have the time and inclination, you can easily figure out the annual "rake-off" of the American hemp importers from the above table. For instance, take the last year, 1910: 99,305,102 kilos at 75 cents per 100 kilos is $744,788.26, which is more than 4% of $17,404,922, the total value of the hemp crop of the archipelago for that year. Add this $744,788.26 to the $3,384,183.60 shown by the above table of refundable duties collected from 1902 to 1909 inclusive, and you have over $4,000,000 rebates accruing to American importers of Manila hemp from 1902 to 1910 inclusive.

In his remarks on Section 13 of the Payne Law of 1909 (above set forth), in the House of Representatives, May 13, 1909, [526] Hon. Oscar W. Underwood said, in part:

When you put a tax on your people for engaging in export trade, to that extent you lessen their ability to successfully meet their foreign competitor and reduce the territory in which they can successfully dispose of their surplus products abroad. Our forefathers in writing the Constitution of the United States, recognizing the false principle on which an export tax was based, put it in the fundamental law of our land that the United States Government should not lay export taxes. If we enact this law, we write into the statute book for the Philippine Islands, legislation which is little short of barbarous, legislation that no government in the civilized world except Turkey, and Persia, and other second-class nations countenance to-day.

But the hemp interests won out and the section was adopted. In an argument for the repeal of the export tax, delivered in the House of Representatives August 19, 1911, the Philippine delegate, Hon. Manuel L. Quezon, said:

There is one section in the Philippine tariff law, approved August 5, 1909, which is seriously injuring the proper commercial development of the islands.

Of course the earnestness with which Mr. Quezon pleaded his cause may be imagined from the circumstance that, as he says, he is continually advised by letters from his people, and verily believes that if the export tax is not taken off soon the Philippine hemp industry will be entirely destroyed, and the hemp farmers will have to take to raising something else in lieu of hemp, because the present prices hardly permit them to live. In the course of his speech Mr. Quezon offered the following truly eloquent and absolutely unanswerable argument:

Although it has been decided by the Supreme Court of the United States that the provisions of the Constitution are not in force in the Philippines, I have serious doubts as to whether said decision also meant that this Government has the power to enact laws for the islands which are expressly prohibited by the Constitution in the United States.

It is through the courtesy of Mr. Quezon that such light as I may have been able to throw on the subject has been obtained. He has shown me letters from the Philippine Chamber of Commerce at Manila and other commercial organizations prophesying ruin to the Manila hemp industry in the event the export tax should continue. One of these letters is addressed to the two Philippine Commissioners in Congress, Mr. Legarda and Mr. Quezon. It informs them of the hopes of the Filipinos at Manila that they, Messrs. Legarda and Quezon, may be successful in their campaign to get the law repealed and that many of them (the Filipinos at Manila) feel hopeful of results in that regard. Speaking for their fellow countrymen at Manila, they say, "The optimists are of the opinion that the matter being in such good hands as yours will be carried to a successful conclusion." Then they give the darker side of the picture thus:

But the representatives at this capital of the famous syndicate, the International Harvester Company, are of the opinion that we will be able to accomplish nothing, and theirs is an opinion to which great weight should be attached, because the vast interests which that concern represents can set in motion powerful influences to keep the present law as it is, since it concerns their interest to do so.

Mr. Quezon has also shown me a letter written to him, March 30, 1911, by his and my warm personal friend, Hon. James F. Smith, formerly Governor-General of the Philippines, now (1912) Judge of the Court of Customs Appeals at Washington, D. C., in which letter General Smith says, concerning the operation of that part of the export tax act of March 8, 1902 (continued by the Payne Tariff Law of 1909) by which American manufacturers are relieved from the payment of the export tax on Manila hemp:

In effect this really and truly amounts to the payment by the Philippine Government and the Filipino people of a large subsidy to American manufacturers of hemp. More than that, this concession to the American manufacturer, by enabling him to undersell his British competitor, gives him an undue control of the situation and has put him in a position, to some extent, to control prices for the raw product.

It seems to me that the American people had better look to their own liberties, when they remember that in the campaign for the Republican nomination in 1912, the Roosevelt Headquarters gave out that pending the Roosevelt dictation of Mr. Taft's nomination in 1908, the International Harvester Company furnished a floor of its Chicago building to the Taft people, this interesting fact being part of the leakage from the Roosevelt-Taft quarrel caused by the Roosevelt charge that Mr. Taft was unfit for re-election because he "meant well feebly"; and when it is recalled, on the other hand, that in the Roosevelt campaign of 1912 for the presidential nomination for a third term, Mr. George W. Perkins, [527] the very personification of undue corporation influence with the Government, assumed the role of Warwick for an ex-President who, when President, had repudiated the advice of his counsel, Governor Harmon, that a railroad company [528] be prosecuted for taking rebates because the vice-president of the company was his personal friend. [529] But let us return to the Philippine rebates, and their corner-stone, the export tax, Section 13 of the Payne-Aldrich Tariff.

In the case of Fairbanks vs. United States, 181 U. S. Supreme Court Reports, page 290, a case in which the court was asked to declare a certain Act of Congress unconstitutional and void, because it imposed what was virtually an export tax, the opinion of the court cites the absolute inhibition against such a tax imposed by our Federal Constitution, and says concerning the wise theory on which this fundamental tenet of our government rests:

The requirement of the Constitution is that exports should be free from any governmental burden.

The decision then goes on to elaborate on what it terms "that freedom from governmental burden in the matter of exports which it was the intention of our Constitution to protect and preserve." Finally, the court uses an expression which is certainly a stinging rebuke to any law-making power that permits the selfish greed of a little set of importers to get a law passed imposing for their special benefit a paralyzing export tax on the chief staple of a helpless colony:

The power to tax is the power to destroy.

But Mr. Quezon has no vote in Congress and his voice was not heard, at least not heeded.

The summation of the whole matter is this: Both the Philippine people and the American people are, and long have been, suffering from unjust taxation through laws for which special selfish financial interests in the United States, exercising grossly undue influence on governmental action, are responsible. Neither will ever get relief until the government of this nation is wrested from the control of the money-hogs and restored to the people. Until that is done, selfish greed will continue to sow sedition in the Philippines, and socialism in the United States.