ing the top in a pound of cloth was $0.0049, for yarn $0.057, and for cloth $0.18, making a total difference of $0.2419 in the conversion cost of one pound of the specified cloth. Its price was estimated at $0.59 per pound. The ad valorem tariff rate then necessary in the case of that sample to equalize the difference in cost of production was 41 per cent.19 In case foreign costs cannot be obtained, foreign prices may be available, and with them at hand significant comparisons may be made for tariff purposes. In fact, although the study of domestic costs is essential, the securing of foreign costs is not. It is the price of the foreign exporter, not his cost, that the domestic producer must meet. Even if the amount the foreign producer pays out as a matter of cost cannot be obtained, the price he sells his goods for can be obtained, and the question is, can the home producer meet this competition? This question cannot be answered without knowing domestic costs. Domestic prices disclose what a producer does sell his goods for, not the minimum amount that he must have to stay in business. Although a comparison between domestic costs and foreign costs is highly desirable, when obtainable, and even a comparison of domestic and foreign prices may be helpful, the fundamental question is touched by a comparison between domestic costs and foreign prices. A danger must not be forgotten in collecting foreign prices. Prices selected should represent the normal competitive strength of the foreign industry in its principal market. Dumping prices present a special tariff problem, dealt with in a later chapter.20 Factory prices, 19 Appendix V, Table 10. Many other cases and the method of their computation are contained in this article. 20 Chapter VIII. uncomplicated by middlemen's profits and commissions, Trade discounts, if they exist, should be are desirable. allowed for. A study of domestic costs may be useful for tariff purposes even if neither foreign costs nor foreign prices can be obtained for making comparisons. If the domestic conversion costs are known, they at least indicate the maximum tariff duty. No one advocates that the tariff should amount to the total cost of the American product. Usually all that is asked is a tariff sufficient to equalize the difference with a fair margin. In the debate on the Tariff Act of 1913 Senator Robert M. La Follette used the cost figures of the Taft Tariff Board on cotton cloths in this way.21 His most important table, given as an appendix to this volume,22 reproduces the domestic conversion cost on the 100 cotton fabrics investigated by the Tariff Board and compares them with duties in the Payne-Aldrich Tariff Act, in the bill then pending before the Senate, and in his proposed substitute bill. Sample No. 34, for example, was fancy white goods, 8.47 square yards to the pound, bleached. Its total American conversion cost per square yard was $0.0699, and the total English selling price per square yard, on which duty would be assessed if it were imported, was $0.1968. The Payne-Aldrich Act duty was specific, and on this fabric amounted to $0.11. The Senate bill proposed 30 per cent. ad valorem on this fabric, and at the price then 21 Congressional Record, vol. 50, pt. 5, 63d Cong. 1st Sess., September 9, 1913, p. 4589 et seq. Cf. Tariff Board, "Cotton Manufactures," H. R. Doc. No. 643, 62₫ Cong. 2d Sess. (1912), p. 442 et seq. 22 Appendix VI. prevailing the duty would have been $0.059. The La Follette bill proposed 25 per cent. ad valorem, or a duty on the prevailing price of $0.0492. Before leaving the subject of how the amount of tariff may be determined it should be said that elaborate detailed cost and price studies are not necessary in the case of every article affected. Less comprehensive data on the majority of articles will be adequate to enable Congress to determine rates as well as policy. A careful industrial survey such as the Tariff Commission is making in its Tariff Information Catalog-including a general description of the article, amount and locality of its production, imports and exports, processes, uses, and other data readily obtained-will in the case of hundreds of tariff items dispose of the question of the tariff. Such an encyclopedic survey is highly important and will contribute decisively to scientific tariff making. But there are a number of highly contentious industries which require a more detailed study to determine their competitive strength. It is in these that the elaborate investigations of costs and prices may be made with profit. The relation of the tariff to labor standards has been. hinted at but the reference should be amplified here. Three attitudes assumed by nations toward labor are distinguishable. In the first place, labor may literally be "burnt up" in the industrial process. Where the labor supply is plentiful and docile, it may be paid low wages, worked long hours under unsanitary conditions, and when worn out, cast aside and a new supply recruited. In the second place, labor may be paid just enough to keep up its efficiency, on the same theory that 23 U. S. Tariff Commission's Second Annual Report, 1918. a slave owner would keep his slaves in good condition, that is, that they may yield a maximum product. In the third place, labor may be given, or it may demand, not only "subsistence wages," but a surplus income and leisure hours which may be devoted to recreation and education. This third standard, of course, is the one to which this and every other country should aspire. An international agreement should be entered into that would tend to bring it about.24 In some industries the labor of the United States, although it receives higher wages per man than labor in foreign competing industries, produces at a cheaper unit cost because of natural advantages, more efficient machinery, and efficiency in operation. It is possible that in some industries expensive labor may be able to produce goods that undersell the products of low-paid labor. Great Britain is able to compete successfully in some products with Japan. Thus far the free trader is satisfied and he would go no further. But the advocate of protection believes that the national welfare requires the establishment of industries in which American labor cannot compete on an equality and maintain its standards. When the industry to be established is determined on and when its competitive disadvantage is measured, a tariff is put on foreign competing products in order to maintain American standards of living in that industry- and it does it. The maintenance of the American standard of living in the great protected industries is, from a practical standpoint, a very important argument for the tariff. Whatever American society might have been under free trade, it is sure to remain well diversified for some time 24 Cf. Article XXIII of the Covenant of the League of Nations, Appendix IX. |