PARAGRAPH 431-TOYS. $8,264,000. That is an increase of about 100 per cent in a period of 10 years. This same census discloses there are 226 establishments in the United States which manufacture toys. These establishments were located in a number of States, but out of the whole 226 there were more than 200 in the New England States and the States of New York, New Jersey, Pennsylvania, Ohio, Michigan, Indiana, and Illinois; so that we have here a compact industry in the United States which manufactured over $8,000,000 worth of products in the year 1909, and I believe that in the year 1912 those products exceeded $10,000,000 in value. We ask that this duty be maintained. We ask for a continuance of this 35 per cent ad valorem rate. When the hearings were had before this committee in 1909, the importers and manufacturers both appeared here by counsel and asked for a continuance of that same rate. The CHAIRMAN. They import as much as they make, and I do not think you need worry about further argument. Mr. SCHARPS. I have put all these facts into my brief, which I submit, and I think we are entitled to a continuance of this rate. There is one thing I would like, with your permission, to say. I would call your attention to the advances which the Japanese are now making. I have a specific instance to which I want to call your attention. They make baseballs and import them into the United States to sell at retail for 10 cents, as good an article as can be bought from the American manufacturer at retail for 25 cents. Mr. KITCHIN. Baseballs? Mr. SCHARPS. Yes, sir. Mr. KITCHIN. Those are a necessity now, are they not? Mr. SCHARPS. Yes, sir. That only shows the character of labor and competition which we actually meet as manufacturers of toys. Mr. HULL. What is the present attitude of the importers? Mr. SCHARPS. They would be delighted to have the rate reduced. I do not know whether it means necessarily a greater revenue to the Government, but it means practically the wiping out of these American toy manufacturers who all have factories. The CHAIRMAN. Your product is not a necessity, and you are importing as much as you make, so I do not think you need worry about a 10 per cent duty. Mr. SCHARPS. Does the committee care to have any of these exhibits filed with them? The CHAIRMAN. Yes; you may file them with the clerk. Mr. FORDNEY. What do these baseballs retail for? Mr. SCHARPS. Ten cents, after paying a 35 per cent duty. Mr. FORDNEY. They retail for 10 cents? Mr. SCHARPS. Yes, sir; the Japanese baseballs do. That shows what the competition might amount to. In fact, so far as the Japanese are concerned, we ought to have an increased duty. Mr. SCHARPS. Thirty-five per cent. PARAGRAPH 431-TOYS. Mr. HULL. There are no trade agreements among the manufacturers? Mr. SCHARPS. Absolutely not. I have adverted in my brief to a trade agreement some years ago, which was a gigantic failure and finally went into a receivership, and the creditors got 30 cents on the dollar and the bondholders and stockholders got nothing. Mr. KITCHIN. I noticed in that paragraph all toys except those made out of rubber bear a 35 per cent duty? Mr. SCHARPS. Yes, sir. Mr. KITCHIN. Did not they formerly, under the Dingley Act, bear a duty of 35 per cent? Mr. SCHARPS. That was a change made in 1909. Mr. KITCHIN. What duty do they bear now? Mr. SCHARPS. I understand 45 per cent. Mr. KITCHIN. An increased duty on rubber itself was put in there since? Mr. SCHARPS. Yes, sir; it has been changed afterwards. Mr. PALMER. Is that a Rhode Island industry? Mr. KITCHIN. Oh, yes. [Laughter.] The CHAIRMAN. That seems to be all, Mr. Scharps; you may be excused. BRIEF ON BEHALF OF AMERICAN MANUFACTURERS OF DOLLS AND TOYS IN SUPPORT OF CONTINUANCE OF PRESENT RATE OF 35 PER CENT AD VAlorem. The COMMITTEE ON WAYS AND MEANS, House of Representatives: The American manufacturers of toys are unanimous in support of the continuance of the present tariff rate, as provided in section 431 of Schedule N, and, as connected therewith, in section 93 of Schedule B. They advance as argument in support of the present schedule historical and statistical data as follows: HISTORY. The manufacture of dolls and toys began in the United States as early as 1836, but no impetus was given to the trade for a number of years. Its greatest growth has been during the past 20 years, and particularly in the last 10 years, when, from 1899 to 1909, according to the Thirteenth Census compiled by the Department of Commerce and Labor, the increase has been 100 per cent, the value of the products in 1899 being $4,010,000 and in 1909, $8,264,000. The increase in imports during the period between 1899 and 1909 has been greater than ever in the history of the country. The increase in imports were nearly twice as great as the increase of value of domestic products for this period. Nevertheless, the total value of dolls and toys manufactured in this country has so largely increased that since 1909 it has exceeded the total value of those imported. The value of the imports for these years is shown in Schedule A, attached hereto. On that schedule is also given the value of domestic manufactures for the years 1899, 1904, and 1909, respectively. The largest increase of imports has occurred during the time when the present rates of duty have been in effect, and it is during this period as well that domestic manufacturers have made their greatest advancement. From 1890 to the present date the value of the imports of dolls and toys has shown an increase every year, with a resultant increase of revenue, with the exception of a few years where the decrease has been comparatively small and was due either to changes or contemplated changes in the tariff or general business depression throughout the country. (See Schedules A and B annexed.) The demand for dolls and toys has developed not only in amount but in the quality and value of the individual dolls and toys, imported as well as domestic. PARAGRAPH 431-TOYS. NECESSITY FOR TARIFF. There are two factors which permit American manufacturers to compete with foreign manufacturers- First. The existence of the present tariff. Second. The use in the trade of highly developed and perfected machinery and automatic appliances. The use of these highly developed machines and automatic appliances alone would not render it possible for American manufacturers to produce toys successfully to compete with toys made by hand or by machine labor abroad. The cost here for labor, factory rent, and other expenses of production so greatly exceeds the cost of these items abroad that the continuance of the present tariff is absolutely essential to the existence of the industry in this country. Practically all American toys are made in factories. America excels in many toy lines, particularly in mechanical, steam, and electrical toys, which require considerable factory equipment, such as dies, tools, jigs, and other special machinery. Abroad, factory production is the exception and house labor the rule. In Germany the making of toys is scattered through the houses of hundreds of small towns, where children as young as 2 or 3 years are engaged in their manufacture, particularly small children who are trained to dip the toys in colored material and to do crude painting almost before they learn to walk. The Thirteenth Census of the United States, as compiled by the Department of Commerce and Labor in a pamphlet entitled "Bulletin of Manufactures of the United States," shows that there are 226 establishments making toys and games, which number is divided among the States as follows: This list of States in the United States in which toys are manufactured shows that practically all the toys are manufactured in the New England States, New York, New Jersey, Pennsylvania, Ohio, Michigan, Indiana, and Illinois. In all of these States there are stringent laws against child labor. It is impossible for toy manufacturers in these States to utilize the labor of persons younger than those permitted to be employed in factories. This condition renders it impossible for the American manufacturer, unaided by at least a moderate tariff, successfully to compete with the child and house labor almost exclusively employed in Germany in the production of toys. From that country come the greater part of imported toys. It is estimated by American toy manufacturers that 75 per cent of the cost of production of toys in this country is labor and only 25 per cent material. This applies especially to that class of toys coming in competition with foreign toys. With an added duty of 35 per cent, the American manufacturer, even under statuttory conditions as to labor and in a factory, is able to meet the German competition. There has also grown up in the last few years a new and important factor in the American toy situation-the manufacture of dolls. Dolls are now made here in large quantities, which, through special methods and processes and distinctive designs, are competing successfully against German goods-which latter heretofore have completely dominated the market. There is promise of continued growth in this new doll industry; but it would be annihilated by even a slight reduction of the present moderate tariff. Up to within the last few years practically all foreign toys were from continental Europe. But now Japan is successfully imitating European and American toys. As against Japanese competition, the tariff at its present rate is an absolute necessity for the existence of the American industry. PARAGRAPH 431-TOYS. As an illustration of Japanese competition, Japanese manufacturers are producing imitations of American mechanical inventions as applied to toys; and, although they are unable to sell them in the United States because protected by United States Letters Patent, they are nevertheless selling them in Europe at retail, at prices much lower than the American manufacturers can wholesale them here. In view of the strenuous character of the foreign competition and the impossibility of future cheapening of the cost of production here, the toy manufacturers are strongly of opinion that any reduction, however slight, in the present 35 per cent ad valorem tariff on toys would be fatal to the successful continuance of this industry in the United States. Popular priced dolls and toys are sold in this country upon what is termed the "single coin basis, " to wit, at prices of 5, 10, 25, 50 cents and $1; and are manufactured to sell at wholesale prices such that they can be retailed at these prices. To sell toys at prices other than those, e. g., at 15, 20, 35, or 40 cents has been attempted, with uniform lack of success. If a new toy is introduced which would sell to the retailer at a price too high to be retailed at 50 cents and yet not be of sufficient value to justify the price of $1, alterations are made to the toy so as to bring it to one or the other of these prices. Wherefore, a reduction of tariff on a toy now retailing at 10 cents would not result in a reduction of the price to the ultimate consumer, but would resolve itself into a larger profit either to the foreign manufacturer or to the retailer. As a matter of fact, the largest share of the profit in toys accrues not to the domestic manufacturer or to the jobber, but to the retailer, the only one in this country who would profit by tariff reduction on toys. The only potential benefit to the consumer might be a possible slight increase in the size of certain toys, as suggested in the letter of Baker & Bennett Co., submitted herewith. In this brief mention has been made only of competition from two foreign countriesGermany and Japan. These countries do practically all the import business in the United States. Schedule C, hereto annexed, contains a tabulation of imports from 1908 to 1912, showing amounts imported from five countries making the greatest amount of imports. This schedule shows Germany has almost a complete monopoly of the business with Japan second in importance. The United States has always been an exporter of dolls and toys, but on a small and constantly decreasing scale. The figures for past five years are collated on Schedule D, annexed. They show the uncertain character of this export business and the wide fluctuations. They point out with great clearness the trifling character of this business done in competition with the countries which import the greatest amount of toys into the United States. By way of illustration, in the year 1909 the United States manufactured $8,264,000 of dolls and toys, of which $1,724,620 was exported. Germany in that year (a period of great financial depression) exported to the United States alone toys and dolls of a value of $4,408,745. The United States exported to Germany for a like period $40,606, a ratio of 1 to 100 against this country. Like comparisons have been prepared for your committee by Daniel C. Roper, clerk, and the portion of that report relating to the subject matter of this brief is set forth in Schedule E, annexed. DEVELOPMENT OF INDUSTRY. The American toy industry is one of small factories and no combinations. There has never been a successful combination either as to factories or prices. The only consolidation of important factories which was ever attempted was formed in 1903 under the name of National Novelty Corporation, which name was subsequently changed to the Hardware & Woodenware Manufacturing Co. This was a consolidation of some 18 or 20 independent factories. In 1908 the said corporation went into the hands of receivers. Its creditors are assured that they will receive a sum not to exceed 30 cents on the dollar, the stockholders and bondholders losing their entire investment. There are no especially large concerns engaged in the manufacture of dolls and toys. Some two or three concerns have a commercial rating of from $300,000 to $500,000, but the greater number are rated at between $10,000 and $100,000. A concern doing a business of $100,000 annually is considered large and one doing a business of $500,000 is almost unique. The report of the Department of Commerce and Labor (1909) shows that the 226 establishments had $6,541,000 of capital employed in the industry and the total value of the output was only $8,264,000; the ratio of invested capital to output being approximately 75 per cent, a far higher ratio than in almost any other industry. The industry at the present time is practically in its infancy. America, more than any other country, is developing the toy business from a seasonal one lasting but a PARAGRAPH 431-TOYS. few months in the year to a business which can be profitably conducted every month in the year. Indeed, the manufacturers hope that within the next five years the output will bear a considerably higher ratio to the capital invested than at present. In addition to the establishments exclusively engaged in the manufacture of toys, the industry is one which has an important bearing upon various other industries in this country in that many factories are able to employ their waste material, remnants, and scraps in the manufacture of toys. The total of the amounts manufactured in this way almost equals the production of factories making toys exclusively. This is of supreme importance for the reason that these factories engage in the manufacture of toys in those seasons of the year when business is dull in their regular product, when they would otherwise be compelled either to work half time or to reduce their working force. By employing their force in the manufacture of toys they are able to keep their hands employed during the entire year. Here again the reduction of the tariff would render the manufacture of toys unprofitable and would result in the enforced idleness of highly skilled employees for considerable periods in each year. It is of the utmost importance not to lose sight of the fact that toys are essentially luxuries. Even in the remote contingency, therefore, that the elimination or reduction of the present tariff might be of some pecuniary benefit to the ultimate consumer in this country, it is clear that that ultimate consumer will not be of that class which it is the purpose of modern legislation to relieve from the harmful effects of the present high cost of living. If in spite of all that has been said here and elsewhere, the policy of the dominant majority be that only such tariffs shall be assessed as are necessary for the collection of revenues to defray the expenses of government, it is well to take note of the fact that even from this purely utilitarian standpoint a reduction or cancellation of the tariff on toys would be inadvisable. For during the first two of the three years when the tariff on toys had been reduced to 25 per cent ad valorem the gross quantity of imports was less than under the higher tariff; so that the revenues were reduced both positively and relatively. For the last year the imports, in anticipation of an increase in the rate, were, of course, considerably larger. In support of this brief we have filed two copies of Playthings-one the issue for February, 1912, and the other the issue for June, 1912. This last number is called the American toy number, and a glance through its pages and advertising matter will clearly disclose the nature and character of the industry as it exists to-day. This is a monthly publication devoted to toys, dolls, games, and like subject matter, and was first published in 1903, when the toy industry began to take a prominent place among American trades. The size and character of this magazine is indicative of the growth and development of the industry at the present time. There is also submitted a list of the concerns which have from time to time advertised in this publication. All of these concerns urge upon this committee the continuance of the present tariff. Submitted as a part of this brief are catalogues and numerous letters to this committee from American manufacturers of toys. These catalogues evidence the degree of perfection which this industry has reached, the high grade of toys manufactured, the skilled labor and machinery employed, and the large investment of capital. The attention of this committee is particularly called to the black penciled portions of the letters of The Ives Manufacturing Corporation, the A. Schoenhut Co., Mitred Box Co., and M. H. Christensen & Son Co., submitted herewith, It is respectfully requested that a short period of time be allowed for the submission of additional letters. This brief is submitted not only on behalf of all the manufacturers whose letters are attached to the exhibits, but also on behalf of numerous other manufacturers as well; and, in general, on behalf of all domestic toy manufacturers. Dated New York City, January 28, 1913. ALBERT T. SCHARPS, (For American Toy Manufacturers.) |