PROTECTION (Lat. protectio, from prole to protect, cover over, from pro, before, for icgerc. Gk. ariyelv, stcycin, Skt. sthag, to cover. Lith. shigas, roof, 01r. ley, house, OE1G. doh, Ger. Hach, AS. prce, Eng. thatch). The term applied to the policy of encouraging and develop ing home industries by means either of bounties paid to home producers or of duties imposed upon goods imported from abroad. The encouragement afforded by bounties is so direct and certain that they have been preferred to duties by many writ ers. including Alexander Hamilton. Nevertheless they have been little used in practice, because of their cost and of administrative difficulties con nected with them. The latest examples of the use of bounties are afforded by the sugar bounty provided in the United States tariff of 1890 (the 31cRinley Act) and the export bounties on the same commodity paid by Germany and some other European States. The former remained in force only four years, and is not likely to be re vived, while the latter have been abrogated except in the case of Russia by the Brussels Sugar Con vention.
Import duties serve to encourage home indus tries under the following circumstances: They must apply to goods that may be produced within the country imposing them; they must not be offset either by reductions in the export prices of the commodities taxed nor by internal revenue duties on the same commodities produced within the country; filially, they must serve to raise the prices of the taxed articles in the home market sufficiently to make their home production profit able. Given these conditions, a duty is increas ingly protective according to the completeness with which it excludes the foreign producer from the honipmarket. Its purpose is directly opposed to the acquisition of revenue, since it becomes perfectly protective only when it prohibits all importation, that is. ceases to afford any revenue whatever. it is for this reason that highly pro tective tariffs need to be supplemented by reve nue schedules and even internal revenue duties to satisfy the fiscal requirements of modern gov ernments. See TAnIFF.
The policy of protection does not differ out wardly from the restrictive policy advocated by the Mercantilists (see MEacaNnusm), but is de fended on grounds quite independent of their erroneous balance of trade theory. As pointed out elsewhere (see FREE MADE), protection is the policy practiced by most of the governments of the world. In this article attention will be di rected to protection as it has been applied in the United States. Similar arguments to those re
viewed are advanced in justification of the policy in other countries, and there is therefore no occasion to repeat them.
When the American colonies gained their inde pendence, free exchange with the mother country was the policy advocated on all sides. The re strictive measures put in force by England her self after 1783 made the realization of this ideal impossible and fostered a sentiment in favor of protection to home industries as a means of ren dering the United States industrially, as it had become politically, independent. Tariffs passed by Massachusetts and Pennsylvania in 1785-86 reflect clearly this protectionist attitude, as does the first national tariff passed in 1789. There was still some misgiving as to whether the ebun try was adapted to manufacturing, however. and the first Secretary of the Treasury, Alexander Hamilton, was asked to submit to Congress a report on manufactures, together with recom mendations to guide its future policy.
The famous Report on Manufactures was sub mitted iu December, 1791, and has remained down to the present day one of the most impor tant documents in the literature of protection. Hamilton reviewed the arguments for and against protection, described the development of manu factures in the United States, the resources of the country fitting it for manufacturing indus tries, and the policy of Great Britain in taxing its exports. He concluded that in the light of the actual situation a moderate protective policy designed to build up within the country all of the industries necessary to national independence and to the most rapid development of natural resources was advisable. In coming to this con clusion lie ascribed great importance to England's restrictive policy, and said repeatedly that but for these restrictions a freer policy on the part of the United States might be desirable. He also emphasized his conviction that industrial inde pendence is indispensable to continuous political independence, and that it is the part of wisdom for a new country to foster within its borders, even at considerable sacrifice, the industries necessary to a complete national life, not forget ting those concerned with the munitions of war. Hamilton's arguments continued to carry great weight with American statesmen down to about 1850, when England's secession to free trade and ,' the undoubted ability of the United States to hold its own in any international complication that was likely to arise had deprived them of their force.