The result. In some cases the products exchanged are quite dissimilar, but usually of the trad work requiring skill and taste, but not such as to fit it for kinds of work requiring great muscular strength and endurance. In another region the population may be almost incapable of acquiring taste and skill, although it is well fitted for labor demanding rude muscular power. Capital may be plentiful and cheap in one region and scarce and dear in another. [Thus] industries requiring vast capital can be operated to greater advantage in the former region than in the latter. Land may be plentiful in one region, relatively to the population, and scarce in another. Industries requiring an extensive use of land will find their natural habitat in the former region. The populations of two regions, though differing little in fundamental character, may differ widely in their attitude toward particular forms of toil. They possess different habits, or, more properly, traditions of workmanship, which fit the one better for one kind of labor, the other for another. So long as any of these differences persist, there is obviously reason why there should be differences in the industries of the two regions With adequate means of communication, trade between the two regions naturally arises. In some cases the products of two regions are quite dissimilar. Neither region can produce the commodities which it receives from the other. Thus in the Middle Ages an important trade was carried on between northern Europe and the Indies. The former region furnished furs and amber, the latter, spices and gems. A modern example of the same sort of trade is the exchange of iron and steel products for teas, coffee, and spices between England on the one hand, and the East Indies on the other. In general, the trade between countries in the temperate zone, on the one hand, and countries in the torrid zone, on the other, is largely of this character. . . More commonly one of the trading regions, or both, can produce one or both both classes of commodities exchanged. The United States can produce both sugar and pork; so also can Cuba. But the United States possesses exceptional advantages for the production of pork; for the production of sugar it is not especially well adapted. Cuba, on the other hand, has unsurpassed advantages for the production of sugar, but can produce pork with only a moderate degree of suc ing regions can produce both of the products exchanged. cess. It is, therefore, natural that an exchange of products between the two countries should take place. there were no interfer ence with international Suppose, in the case just mentioned, that there were no artificial What would hindrances to the exchange of pork and sugar between the United happen if States and Cuba. In such an event, economic considerations would determine the extent and nature of this international trade. In such a case we should adjust our production in such a way as to produce trade. all the pork that Cuba needed, while Cuba would tend to specialize in the growing of sugar for our consumption. But the international exchange of products is not always unfettered, in many instances artificial restrictions are placed upon such exchange, that is to say, a tax or duty known as a tariff is levied upon the goods of foreign na- The tariff. tions as they enter a particular country for sale. The nature of the tariff is briefly described by Professor Johnson in the following language: ulation of trade. Since early modern times a great part of the energy of governments Two reasons has been expended upon the regulation of international trade. The for the regreason for such regulation has been twofold. In the first place, there international is a deep-rooted belief in the people of every nation that the national prosperity may be furthered by restrictions upon trade with foreigners. In the second place, such trade has long been recognized as a convenient and appropriate source of public revenue. A century ago the policy of prohibiting the importation of some classes of goods, and the exportation of other classes, was widely followed. At present this policy has practically fallen into disuse. Some of the states of eastern Europe prohibit the exportation of grain when the supply appears to be insufficient to keep the people of those states from starving. Most countries prohibit the importation of certain commodities that are believed to menace the health of the consumer. Omitting such exceptional cases, however, we may say that the regulation of foreign trade is everywhere carried on under the guise of taxation. If we wish to prohibit the importation of cotton from Egypt, 1 From Alvin S. Johnson, Introduction to Economics. D. C. Heath & Co., 1909; pp. 348-350. How undesirable goods are kept out of a country. Our tariff problem relates solely to taxes on imports. Duties may be for revenue, or for protective purposes. Revenue duties may afford some protection, and protective duties yield rev enue. we place such high taxes upon imports of Egyptian cotton that no one finds it worth while to import it. Taxes on foreign trade may be levied upon either imports or exports or upon both. Export taxes are generally unpopular, because of the common belief that it is a good thing to export as many goods as possible. In the United States export taxes are prohibited by the Constitution. We shall, therefore, confine our study to taxes on imports. [The difference between taxes levied for revenue, and taxes levied for protection may be illustrated as follows]: Before the annexation of Porto Rico all the coffee used in the United States came from foreign soil. A tax (or "duty") of, say, five cents a pound under the conditions would have discouraged importation in only a slight degree. [In such a case the tax would constitute a "revenue” tariff.] A duty of $20 a ton on steel, on the other hand, would practically prohibit the importation of steel. . . . Suppose that we can produce steel at $15 a ton, while in some foreign country it can be produced at $12. If the cost of bringing steel from the foreign country is $2 a ton, foreign producers can sell steel here at lower prices than our own producers can afford to take. But if foreign steel is compelled to pay a duty of $20 a ton, none of it can be sold here, unless the American producers combine and force steel up to the price of $34 a ton. Such a duty, since it "protects" domestic producers against foreign competition, is known as a protective duty.... Of course a duty the aim of which is the raising of revenue may be incidentally protective. Thus if we were to levy a duty on imported coffee, it would "protect" the coffee growers of Porto Rico. On the other hand, protective duties may incidentally yield a revenue. In the case employed above, if the duty on foreign steel had been $1 instead of $20, foreign steel would have continued to be imported, and thus a revenue would have been obtained. At the same time the foreigner would have been prevented from underselling the American; accordingly, the latter would have been protected. Most of our duties are protective, but incidentally yield a revenue, as they are not high enough to prevent importation altogether. The schedule of all duties levied by a country is known as the "tariff." A tariff consisting of duties whose main object is the rais- Conclusion. ing of a revenue is known as a revenue tariff. A protective tariff consists mainly of duties whose purpose is the protection of domestic producers against foreign competition. Such a tariff has been in force in the United States since early in the nineteenth century; its character has been most strongly marked since the Civil War. 171. The United States Tariff Commission 1 In the United States, and in other highly industrial countries A Tariff Commission in which the protective principle is intrenched, a great deal of time created to and ingenuity must necessarily be expended upon the determination facilitate tariff legisof tariff policies and administration. Congress enjoys the privilege of legislating on tariff questions, but there has long been need of some agency which would supply the national legislature with adequate information on tariff questions. In 1916 there was an attempt to fill this need by the creation of the United States Tariff Commission. This Commission consists of six members appointed by the President for twelve years, not more than three of whom may belong to the same political party. The work of the Commission was described in 1920 by its chairman, Thomas W. Page, as follows: The United States Tariff Commission has no administrative duties whatever. It was created to make investigations, assemble and digest information, and lay the results before the President and Congress. The Tariff Commission is required to respond to any request made upon it by the President, the Congress as a whole, either house of Congress, the Finance Committee of the Senate, and the Committee on Ways and Means of the House of Representatives. It is contemplated that these requests will be for information. Thus far, I may say, the requests have been, in the main, limited to this field. ... General purpose of the Com mission. The most important of [the duties of the Commission] may be Duties of grouped under three heads. First, the Commission is required to investigate the operation and the form of the law actually in force with a view to ascertaining 1 From the National Tax Association, Proceedings of the Thirteenth Annual Conference on Taxation, held at Salt Lake City, September 6-10, 1920. New York, 1921; pp. 221-224. the Commission: The codifi cation and simplification of the customs administrative laws. The study of foreign tariffs. Effects of the tariff upon American industries. A commodity survey necessary. whether the true intent of Congress is being carried out. ... The second group of duties of the Tariff Commission deals with the relation of our tariff to foreign tariffs. This bids fair to be a field of great importance and of intense interest. Tariff policies of the whole world are in process of being remade since the war. . . . In revising our tariff Congress needs explicit and ready information as to the policies and legislative measures of the nations with which we trade. This country and others have long looked upon the tariff as a means of preventing discrimination and unfair treatment, and it will be necessary for Congress to know in detail what is the treatment of our commerce by other countries when it comes to framing a new tariff bill. . . The third, and in some respects the most important of all the duties devolving on the Tariff Commission, consists in investigating the effects of the tariff on American industries and in making such a survey of the conditions surrounding these industries as will show when the need exists for tariff revision. Thus far the Commission has covered nearly half of the items mentioned in the tariff and a large number of equally important items that are not mentioned by name. The information assembled is recorded for each item in what we call a Tariff Information Survey and each survey is intended to contain in regard to the item it covers all the facts that are pertinent to the tariff.. With some items an important fact would consist in explaining what the thing under consideration really is. In practically every schedule occur the names of commodities that are commercially dealt in, but the nature and uses of which are unknown to most citi |