-THE FRENCH CARTEL AND THE CUSTOMS TARIFF.
In France ten concerns have acquired a monopoly of oil. They are : MM. Fenaille et Despeaux.
MM. Desmarais freres.
Les fils de A. Deutsch.
La Compagnie industrielle des Paroles.
La Raffinerie du Midi.
La Societe Lille-Bonnieres et Colombes.
MM. Paix et Cie.
MM. G. Lesieur et ses fils.
La Compagnie generale des Paroles.
La Raffinerie de Parole du Nord.
Of course, there has been no competition ; their primary concern has been to form a " cartel " in which they divide among themselves the different districts of France, fix the quantities to be placed on the market, and pledge themselves to sell at the same price—which is, naturally, the highest.
It is impossible for an eleventh company to establish a footing in France, for the ten others, having large reserves, could lower prices, and even sell at a loss for long enough to ruin the new competitor.
All the same, since the cartel imports the whole of its supplies, foreign companies producing their own oil could sell at a cheaper rate, and destroy its existing monopoly.
To avoid this catastrophe, our oil magnates approached Parliament.
Our deputies, for the most part, are fierce democrats, and —in the Chamber at any rate—enemies of the moneyed powers ; but they are also ardent patriots. For forty years they have lived in dread of hostile invasion, and in the long run their fear has spread from men to things ; before the War, the entry of a German pencil into France inspired them with almost the same terror as that of an Uhlan would have done. Besides, their morbid solicitude extended equally to British, Spanish and American products. They trembled for sugar as for petroleum or steel. They were never appealed to in vain to raise the barrier of a prohibitive tariff against the foreigner. The Customs officer appeared to them an agent of national defence, on the same footing as the soldier. Protection was for them merely the economic aspect of patriotism.
Our oil magnates were not unaware of this state of mind ; they knew perfectly our democratic constitution— not as it is taught in the schools, but as it is understood in the lobbies of Parliament—, and they were able to play upon that instrument with delightful virtuosity.
The first essential was to prevent foreign producing companies from selling their oil and its by-products directly in the French market. To this end they obtained in 1893
a minimum tariff of fr. 9 per quintal' on crude oil, and of fr. 13.5o on refined oil. Then they got classed as crude all oil which contained up to 90 per cent. of the products of refining. Such a quality was rare then (it has since com pletely disappeared), and it existed practically only in Pennsylvania. Our people then arranged contracts with American companies by which this oil was reserved for them. It was then only necessary to heat this product slightly to obtain refined oil, while paying only the duty on crude oil—that is, fr. 9.
Meanwhile foreign companies were handicapped ; either they had to import crude petroleum with a poor yield of spirit (3o to 4o per cent.) while paying the same duty of fr. 9 as our " refiners," which put them at a disad vantage ; or they had to bring in refined oil, but then they must pay fr. 13.5o per quintal.
A pleasant alternative Thanks to this simple vote of Parliament, first, our refiners found themselves protected from all foreign competition, either in crude oil or spirit ; second, all their work consisted in slightly heating the 90 per cent. oil, when the last impurities disappeared and they had oil ready to be sold to the public, thus dispensing with costly installations, numerous workpeople, and large capital ; third, they were certain of big profits. Indeed, it is an invariable rule that the price of a protected article in the home market is always equal to the price of that article abroad plus the Customs duty. Our gentlemen of the cartel, paying fr. 9 a quintal on the raw product, but protected by a tariff of fr. 13.5o on the refined, enjoyed, after deducting all the expenses of refining, a profit of at least fr. 3.5o a quintal is to say, they could sell oil to the French public at fr. 3.5o more than it would have been obliged to pay to any foreign company.
No doubt this was worth a few showy grants to French aviation, which were equally useful as advertisements and as preliminaries for the development of a new market. Such are the fruits of a skilful manipulation of " national representation."