The Invisible Tariff - International Economic Relations

American artists and writers are the objects of more tender solicitude. Our copyright law aims to force publishers to manufacture in the United States all books that can find a substantial market here, to protect American authors, and the publishers and printers of their books, and to promote the publication of American editions of books printed in the English language. With the opening of new and wider markets for American musical and literary genius, in popular magazines, the radio and the motion-pictures, the area to which copyright applies has been enormously extended. Protection against unfair foreign competition in these new fields is provided principally through the requirement of registration, and through compliance with formalities prescribed by statute, and in the regulations of the Copyright Office. Certain magazine publishers, motion-picture producers and broadcasting companies, on this account, oppose the adherence of the United States to the International Copyright Union, for such action would automatically give thousands of foreign artists full copyright protection in this country without the necessity for registration or compliance with other legal technicalities.

The Bogey-Man of Foreign Trade

Dumping has long been the bogey-man of foreign trade. Manufacturers in every industrial country, fearing the unloading of foreign goods at cutthroat prices in their domestic markets, demand protective legislation. (The fact that they themselves practice dumping when they have a chance makes them no less active in trying to prevent foreigners from successfully employing the same tactics.) Legislatures in England, Canada, and other countries, as well as in the United States, in response to these complaints, have enacted antidumping laws, most of which fail to accomplish their purpose. Ours, although very skillfully drawn, is no exception.

"Dumping" to the layman means any kind of underselling; to the economist, and usually to the legislator, dumping has nothing to do with the comparison of the prices at which foreign goods sell in our markets with the prices of comparable American goods. The comparison is rather between two sets of foreign prices, prices for sale abroad and prices of the same goods for sale in the United States. In other words, the phenomenon is price discrimination between national markets. Dumping in the technical sense occurs only when a foreigner sells more cheaply in the United States than in his own market.

The authors of the American antidumping law were fully aware of the danger that a carelessly drawn statute might be used as an engine of administrative protectionism. In fact, they were so preoccupied with avoiding this danger that they made their statute practically unworkable. The Treasury Department has received hundreds of complaints of dumping, but has very rarely authorized the application of dumping duties. The trouble is that the law requires two sets of facts to be established: first, that foreigners have been selling goods here more cheaply than in their home market. That is very difficult to prove when, as the law requires, proper ac

count is taken of quantities sold, terms of sale, and other details which might render comparisons invalid. Secondly, the law requires, before a finding of dumping is issued, that the Treasury shall establish the fact that an American industry has been injured. These restrictions on administrative action have to be taken seriously. When Treasury officials occasionally have been inclined to cut corners in enforcing the antidumping law, they have been rebuked by the courts, and their orders have been set aside. Since 1934, no findings of dumping have been made. As long as the courts insist upon a strict interpretation of the statute, it is significant principally as a warning to would-be dumpers.

The Delegation of Tariff-Making Powers

In the field of the tariff, as in the control of banking, the railroads, the stock market and many other phases of business, the remedy for legislative incompetence has been sought in the delegation of power to administrative boards. At first, the new administrative boards have had only investigatory powers; later, these are supplemented by power to exercise positive control over business operations. The inability, and unwillingness, of Congress to deal with the tariff problem honestly and effectively explain the transfer of tariff-making powers to the Executive in the "flexible provisions," and in the Trade Agreements Act. The United States Tariff Commission as originally constituted, in 1916, was merely a fact-finding body. It was given no authority to recommend changes in rates of duty, and was very careful not to do so. Rate-making powers were delegated by Congress in 1922 to the President, not to the Commission. To the latter was given the baffling task of finding and reporting to the President the tariff rate which would be equivalent to the difference between foreign and domestic costs.

This so-called scientific solution of the tariff problem proved a dud. It was not scientific and it did not take the tariff out of politics. Instead it put so much politics into the Tariff Commission as nearly to wreck an organization formerly distinguished for the high quality of its work. Unfortunate personal conflicts of members of the board added to the inherent difficulties of getting costs and comparing them. Few changes in duties were made, and those, much to the disappointment of the sponsors of this species of tariff reform, were mostly in the upward direction. The President still retains the power to adjust tariff rates to differences in costs of production, but this power is at present entirely overshadowed by the new tariff bargaining powers granted him in the Trade Agreements Act of 1934.