The Invisible Tariff - International Economic Relations

Indirect Protection

Extra-tariff controls of imports are objects of suspicion. In every customs regulation, every sanitary restriction on importation of animals and plants, it is possible that there is concealed a measure of economic protection. Hence the origin of the phrases "indirect protection" and "administrative protection." But since legislatures are often responsible for such chicanery, the first of these expressions seems preferable. The United States, having acquired a reputation for ultra-high protection in its visible tariffs, has been accused of having used administrative controls unfairly to reenforce further its protectionist system. Such accusations are not without foundation, as the following chapters will show. But the American record, when compared with that of other countries, is not bad. In all countries every additional measure of import control, whether it refers to tea, milk, alcoholic beverages, obscene literature, sealskins, meat, fruits, vegetables, or lottery tickets, constitutes an added handicap to imports; but if the new measure applies with equal force to domestic trade in the regulated articles, no economic protection is afforded. In the United States the administrative regulation of domestic trade is as comprehensive as that of imports.

Everywhere the world over since 1914, administrative measures have been attaining greater importance in the control of foreign trade. So great has been this change that rates of duty in certain foreign countries have ceased to have much significance when contrasted with the new invisible tariff barriers, the import quotas, exchange controls, clearing and compensation agreements and barter deals. From these measures, the commercial policy of the United States has thus far been almost entirely free. The reason is found, not in any stronger attachment on our part to the principles of free trade, but in our continuing surplus of exports over imports. Our balance of payments has been active: the gold has all come in our direction. Hence we have not needed to seize upon drastic new measures to restrict imports.

Origins of the Invisible Tariff

Recently, increased administrative control over American import trade has been urged as a weapon necessary to combat aggressive trade policies of foreign countries, particularly the so-called totalitarian states. As we shall presently see, steps have already been taken in this direction. But the origins of our invisible tariff are of an entirely different character. They are to be found (1) in the growth of protectionism as a principle of our foreign trade policy, and (2) in the increasing regulation of interstate and intrastate commerce through the police powers of federal and state governments. . . .

Protectionism was firmly established as an enduring policy in the United States by the Civil War. In the tariff legislation of the succeeding half-century, import duties were raised repeatedly. Also, in successive tariff revisions, the classifications of dutiable goods were refined and narrowed so as to bring duties to bear more directly on specific types of imports. Both of these processes of change in the "visible tariff," entailing greater and more important activity on the part of customs officials, were responsible for the development of customs law. The increasing complexity of tariff schedules gave rise to innumerable disputes over classification of dutiable merchandise; the higher duties put an increasing premium on smuggling, undervaluation and other evasions of the tariff law. As the tariff barriers rose higher and higher, greater attention had to be given to stopping the chinks through which illegal imports might seep.

To the layman, much of the customs formalities and customs procedure which evolved in legislation, administrative regulations and court decisions appears absurdly technical. Some of the regulations, and more of the court decisions, appear to have been devised expressly in order to make things as difficult as possible for importers. Certain congressmen have given color to this view by taking the attitude that importing is a privilege, not a right, and that bringing foreign-made goods into this country is not a suitable occupation for patriotic citizens. But their attitude is exceptional; it would be absurd to contend that the purpose of our customs law,, either statutory or administrative, is to obstruct imports. It is nevertheless true that, given the complex character of import trade and the corresponding complexities of our visible tariff, any system of customs laws, no matter how neutral in intent and in administration, inevitably interposes added obstacles to the entry of foreign merchandise.

Through the Customs Maze

A well-known customs lawyer once outlined the process of importing in a little book called Through the Customs Maze. The metaphor is appropriate. The safest and quickest ways through the intricacies of customs procedure are known only to a highly specialized group of customs brokers and customs lawyers. The costs of their services constitute a part of the costs of importation. The premiums on bonds which are not infrequently demanded are another cost. Litigation must sometimes be resorted to for the protection of importers' rights. Competing domestic interests sometimes take advantage of privileges afforded them in the invisible tariff to harass importers. Thus importing has become an expensive, even a hazardous business.