(b) Abolition of compensatory duties corresponding with the old rates on raw materials.
(c) Replacement of specific by ad valorem rates in many cases.
(d) Taxation of plain kinds of goods less than fancy kinds —luxuries higher than necessities.
(e) Reduction of rates generally (most of the few in creases being to correct some apparent error in the old law).
to Probably resulting from the rising prices, as explained above, § 3. For example, in one year, from 1899 to 1900, the average ad valorem rate collected on dutiable goods fell 3 per cent, and that on all goods fell 2 per cent; in the two years from 1904 to 1906 the average rates on dutiable fell 4 per cent and on all goods fell 2 per cent. See Fig. 2, ch. 14.
(f) Application of the so-called competitive principle to rates intended to be protective, viz., to leave the rate just barely high enough to keep out foreign products." Articles placed on the free list were raw wool (which had borne a rate equivalent to about 44 per cent),-metals, agri cultural implements, raw sugar (the lower rate to go into effect gradually), coal, lumber, many agricultural products including live cattle, meats, wheat, corn, flax, tea, and hemp, and numerous manufactures including boots, shoes, gun powder, wood pulp, and print paper.
Moderate reductions were made in the schedules for chemi cals, earths, cotton goods, and sundries, while rates on various luxuries were either unchanged nr raised. Left almost un changed were the schedules for tobacco, for spirits and wines, and for silks (already very high).
This act was signed October 3, 1913, and had been in opera tion about nine months when the great war broke out in August, 1914. What its effects would have been under more normal conditions we can judge little from the actual ex perience.
§ 15. Operation of the tariff act, 1913-1921. The revi sion of the tariff of 1913, viewed with non-partizan eyes, appears to have been 'carried out as consistently with regard to its professed doctrine, and as little influenced by the ma levolent arts of the old-time Congressional lobby, as any debated tariff act in our history. It still contained, on the whole, a large measure of protection, evidenced by the fact that in the first eight months that the act was in operation the ad valorem rate on dutiable goods was but 4 per cent less, and the average rate on free and dutiable together was about 3 per cent less, than in the preceding year. Apparently this was far from a "free-trade tariff." The reduction in the average rate collected was less than was expected. Many of the reductions had little effect, the former rate having been much higher than was needed to exclude the goods. In other 11 On this see further eh. 15, § 5, § 6; eh. 16, § 12.
cases the old rates were but nominal and inoperative because they were upon goods regularly exported, not imported (e. g., farm products, cotton goods, and some other manufac tures). But some of the reductions doubtless would have
forced the less efficient plants in some industries to increase their efficiency or go out of business. Time, in any normal period, is needed for adjustment, but an adjustment of a most abnormal kind was in progress during the war. Imports Fig. 4, Chapter 14, shows the rapid growth of our foreign trade in the period of the World War, and the still greater relative growth in the excess of exports. The data are for fiscal years, ending June 30.
from Europe fell somewhat, while total imports (after 1915) increased, and exports increased enormously. Old indus trial establishments were converted to different and temporary uses. The comparatively low duties had no harmful effect, and enabled our trade to adapt itself far more quickly.to international conditions and to profit more by the great oppor tunities than could have been possible with a high tariff.
§ 16. The return to high tariff, 1921. With the ending of warfare in November, 1918, began to be heard anew the ag itation for higher duties. Some industries, such as the chemical, which had sprung up during the war, saw their end if, and when, German trade was resumed. The financial de pression about the middle of 1920 further stimulated the demand from many quarters for a return to high protective duties to "give employment to our labor." The demand for a prohibitive tariff is always heard at such times. Our pre diction made in 1916 was that 12 the conclusion of the war must bring a new readjustment that must cause a severe shock to some enterprises and this must have been so under any possible variety of tariff, for such changes are logically re lated to the subject of financial crises rather than to that of the tariff." Further it was said at that time: "Under various pretexts, such as the danger of a flood of cheap goods after the close of the great war, attempts will be made to make the tariff still more prohibitive. If the attempt is made through temporary rates to reduce the shock of the trade adjustments, of the 'dumping' after the war, then the devising and admin istration of such measures should be delegated to an expert, disinterested, permanent tariff board. The task is to prevent temporary 'unfair competition' and sudden changes, rather than to raise permanent barriers to fair trade." The sweeping victory of the Republican party in November, 1920, was probably aided in some part by the belief that higher protective duties would remedy the situation. Agri cultural interests were particularly hard hit by falling prices due to the closing of European markets because American credit was suddenly withdrawn. So temporary acts provid ing for higher duties on both manufactured and agricultural products were passed in 1921, and the country moves again toward a period of higher duties.
12 First edition of this work, pp. 236, 238.
13 See below, ch. 16, I 13.