Chapter III. How Duties were Raised above the War Rates

IN THE PRECEDING chapter it has been shown how the duties levied during the war failed to be reduced after its close. But in many cases not only has there been a failure to diminish the war rates, but an actual increase over them. We have already noted how the maintenance of the tariff of 1864 brought about gradually a feeling that such a system was a good thing in itself, and desirable as a permanent policy. This feeling, and the fact that Congress and the public had grown accustomed to heavy taxes and high rates, enabled many measures to become law which under normal circumstances would never have been submitted to. In the present chapter we are concerned with the not infrequent instances in which, in obedience to the demands of the protected interests, duties were raised over and above the point, already high, at which they were left when the war closed. The most striking instance of legislation of this kind is to be found in the wool and woollens act of 1867; a measure which is so characteristic of the complications of our tariff, of the remarkable height to which protection has been carried in it, and of the submission of Congress and the people to the demands of domestic manufacturers that it deserves to be described in detail. Such a description is the more desirable since the woollen schedule of our tariff is the one which imposes the heaviest and the least defensible burdens on consumers, and at the same time is the most difficult of comprehension for those who have nothing but the mere language of the statute to guide them.

In order to understand the complicated system that now exists, we must go back to the Morrill tariff act of 1861. In that act specific duties on wool were substituted for the advalorem rates of 1846 and 1857. The cheaper kinds of wool, costing eighteen cents or less per pound, were still admitted at the nominal rate of five per cent. But wool costing between eighteen and twenty-four cents per pound was charged three cents per pound; that costing more than twenty-four cents was charged nine cents per pound. The duties on woollens were increased correspondingly. An ad-valorem rate of twenty-five per cent. was levied on them; in addition they paid a specific duty of twelve cents for each pound of cloth. This specific duty was intended merely to compensate the manufacturers for the duty on wool, while the ad-valorem rate alone was to yield them any protection. This is the first appearance in our tariff history of the device of exact compensating duties. Compensation for duties on raw materials used by domestic producers had indeed been provided for in previous tariffs; but it was not until the passage of the Morrill act and of its successors that it came to be applied in this distinct manner. As the principle of compensation has been greatly extended since 1861, and is the key to the existing system of woollen duties, it may be well to explain it with some care.

It is evident that a duty on wool must normally cause the price of all wool that is imported to rise by the full extent of the duty. Moreover, the duty presumably causes the wool grown at home, of the same grade as that imported, also to rise in price to the full extent of the tax. It is clear that, if foreign wool continues to be imported, such a rise in the price of domestic wool must take place; since wool will not be imported unless the price here is higher, by the amount of the duty, than the price abroad. It may happen, of course, that the tax will prove prohibitory, and that the importation of foreign wool will cease; in which case it is possible that the domestic wool is raised in price by some amount less than the duty, and even possible that it is not raised in price at all. Assuming for the present (and this assumption was made in arranging the compensating system) that domestic wool does rise in price, by the extent of the duty, as compared. with foreign wool, it is evident that the American manufacturer, whether using foreign or domestic wool, is compelled to pay more for his raw material than his competitor abroad. This disadvantage it becomes necessary to offset by a compensating duty on foreign woollens. In 1861 the duty on wool of the kind chiefly used in this country (costing abroad between ten and twenty-four cents a pound) was three cents a pound. The compensating duty for this was made twelve cents a pound on the woollen cloth, which tacitly assumes that about four pounds of wool are used for each pound of cloth. This specific duty was intended to put the manufacturer in the same situation, as regards foreign competition, as if he got his wool free of duty. The separate ad-valorem duty of twenty-five per cent. was then added in order to give protection.

The compensating system was retained in the acts of 1862 and 1864. During the war, it is needless to say, the duties on wool and woollens were considerably raised. They were increased, and to some extent properly increased, to offset the internal taxes and the increased duties on dye-stuffs and other materials; and care was taken, in this as in other instances, that the increase in the tariff should be sufficient and more than sufficient to prevent the domestic producer from being unfairly handicapped by the internal taxes. In the final act of 1864 the duties on wool were as follows:

On wool costing 12 cents or less, a duty of 3 cents per pound.

On wool costing between 12 and 24 cents, a duty of 6 cents per pound.

On wool costing between 24 and 32 cents, a duty of 10 cents per pound, plus ten per cent.

On wool costing more than 32 cents, a duty of 12 cents per pound, plus ten per cent.¹

The wool chiefly imported and chiefly used by our manufacturers was that of the second class, costing between twelve and twenty-four cents per pound, and paying a duty of six cents. The compensating duty on woollens was therefore raised in 1864 to twenty-four cents per pound of cloth. The ad-valorem (protective) duty on woollens had been raised to forty per cent.

During the war the production of wool and woollens had been greatly increased. The check to the manufacture of cotton goods, which resulted from the stoppage of the great source of supply of raw cotton, caused some increase in the demand for woollens. The government’s need of large quantities of cloth for army use was also an important cause. After the war, a revolution was threatened. Cotton bade fair to take its former place among textile goods; the government no longer needed its woollens, and threw on the market the large stocks of army clothing which it had on hand. In the hope of warding off the imminent depression of their trade, the wool growers and manufacturers made an effort to obtain still further assistance from the government. A convention of wool growers and manufacturers was held in Syracuse, N.Y., in December, 1865. That both these classes of producers, as a body, understood and supported the views of this meeting, is not at all certain. The mass of wool growers undoubtedly knew nothing of it; they were represented chiefly by a few breeders of sheep. Among the manufacturers, many held aloof from it when its character became somewhat more plain. There is good evidence to show that the whole movement was the work of a few energetic manufacturers of New England, engaged chiefly in producing carpets and worsted goods, and of some prominent breeders of sheep.² The fact that the rates of duty, as arranged by the Syracuse convention, were especially advantageous to certain manufacturers—namely, those who made carpets, worsted goods, and blankets—tends to support this view. On the surface, however, the movement appeared to be that of the growers and manufacturers united. The latter agreed to let the wool producers advance the duty on the raw material to any point they wished; they undertook, by means of the compensating device, to prevent any injury to themselves from the high duty on the wool they used. The tariff schedule which was the result of this combination was approved by the United States Revenue Commission.³ It was made a part of the unsuccessful tariff bill of 1867, already referred to;⁴ and when that bill failed, it was made law by a separate act, to whose passage no particular objection seems to have been made. The whole course of events forms the most striking example—and such examples are numerous—of the manner in which, in recent tariff legislation, regard has been had exclusively to the producer. Here was an intricate and detailed scheme of duties, prepared by the producers of the articles to be protected, openly and avowedly with the intention of giving themselves aid; and yet this scheme was accepted and enacted by the National Legislature without any appreciable change from the rates asked for.⁵

We turn now to examine this act of 1867, whose main provisions were retained in the acts of 1883 and 1890, and, after a brief period of radical change under that of 1894, were once more reinstated in the tariff of 1897. In this examination we will follow the statement published in 1866, in explanation of the new schedule, by the Executive Committee of the National Association of Wool Manufacturers.⁶ To begin with, the duties on wool were arranged on a new plan. Wool was divided into three classes: carpet, clothing, and combing wool.⁷ The first class, carpet wool, corresponded to the cheap wools of the tariff of 1864. The duty was three cents a pound if it cost twelve cents or less, and six cents a pound if it cost more than twelve cents. The other two classes, of clothing and combing wools, are the grades chiefly grown in this country, and therefore are most important to note in connection with the protective controversy. The duties on these were the same for both classes. Clothing and combing wools alike were made to pay as follows:

Value 32 cents or less, a duty of 10 cents per pound and. 11 per cent. ad valorem.

Value more than 32 cents, a duty of 12 cents per pound and 10 per cent. ad valorem.⁸

Comparing these figures with the rates of 1864, one would not, at first sight, note any great change. In 1864, wool costing between twenty-four and thirty-two cents had been charged ten cents per pound plus ten per cent. ad valorem; and wool costing more than thirty-two cents had paid twelve cents a pound plus ten per cent. These seem to be almost exactly the rates of 1867. But in fact, by the change in classification, a very considerable increase in the duty was brought about. In 1867 all wool costing less than thirty-two cents was made to pay the duty of ten cents per pound and eleven per cent. In 1864 wool costing (abroad) between eighteen and twenty-four cents had been charged only six cents per pound. This is the class of wool chiefly grown in the United States, and chiefly imported hither; and it was charged in 1867 with the duty of ten cents and eleven per cent. With the ad valorem addition, the duty of 1867 amounted to eleven and a half or twelve cents a pound, or about double the duty of 1864. The consequence was that in reality the duty on that grade of wool which is chiefly used in this country was nearly doubled by the act of 1867; and the increase was concealed under a change in classification. The duty on clothing and combing wools, as fixed in 1867, has been on the average more than fifty per cent. on the value abroad.

The duty on wool being fixed in this way, that on woollens was arranged on the following plan. It was calculated that four pounds of wool (unwashed) were needed to produce a pound of cloth. The duty on wool, as has been explained, amounted to about eleven and one half cents a pound, taking the specific and ad-valorem duty together. Each of the four pounds of wool used in making a pound of cloth, paid, if imported, a duty of four times eleven and one half cents, or forty-six cents. If home grown wool was used, the price of this, it was assumed, was equally raised by the duty. The manufacturer in either case paid, for the wool used in making a pound of cloth, forty-six cents more than his foreign competitor. For this disadvantage he must be compensated. Moreover, the manufacturer in the United States, in 1867, paid duties on drugs, dye-stuffs, oils, etc., estimated to amount to two and one half cents per pound of cloth. For this also he must be compensated. In addition he must have interest on the duties advanced by him; for between the time when he paid the duties on the wool and other materials, and the time when he was reimbursed by the sale of his cloth, he had so much money locked up. Add interest for, say six months, and we get the final total of the duty necessary to compensate the manufacturer for what he has to pay on his raw materials. The account stands:

Duty on 4 pounds of wool at 11½ cents	46 cents
Duty on oils, dye-stuffs, etc	2½ cents
Interest	4½ cents
Total	53 cents

Congress did not accept the exact figure set by the woollen makers. It made the compensating duty fifty cents per pound of cloth instead of fifty-three; but this change was evidently of no material importance. The woollen manufacturers got substantially all that they wanted. It will be remembered that in 1864 the compensating specific duty on cloth had been only twenty-four cents per pound.

The ad valorem duty was fixed at thirty-five per cent. The woollen manufacturers said they wanted a “net effective protection” of only twenty-five per cent.⁹ This does not seem immoderate. But ten per cent ad-valorem was supposed to be necessary to compensate for the internal taxes, which were still imposed in 1867, though abolished very soon after. This ten per cent., added to the desired protection of twenty-five per cent, brought the ad-valorem rate to thirty-five per cent. The final duty on woollen cloth was therefore fifty cents per pound and thirty-five per cent. ad valorem: of which the fifty cents was compensation for duties on raw materials; ten per cent. was compensation for internal tax; and of the whole accumulated mass only twenty-five per cent. was supposed to give protection to the manufacturer.

This duty was levied on woollen cloths, woollen shawls, and manufactures of wool not otherwise provided for—which included most of the woollen goods then made in this country. On other classes of goods the same system was followed. An ad-valorem duty of thirty-five per cent. was imposed in all cases; twenty-five per cent. being intended to be protection, and ten per cent. compensation for internal taxes. The specific duty varied with different goods, but in all cases was supposed merely to offset the import duties on wool and other supplies. For instance, on flannels, blankets, and similar goods, the specific duty varied from fifty cents a pound to twenty cents, being made to decrease on the cheaper qualities of goods, as less wool, or cheaper wool, was used in making a pound of flannel or blanket. The duties on knit goods were the same as those on blankets. On carpets the system was applied with some modification. The specific duty was levied here by the square yard, and not by the pound. A calculation was made of the quantity of wool, linen, yarn, dye-stuffs, and other imported articles used for each yard of carpet; the total duties paid on these materials, with interest added as in the case of cloth, gave the compensating duty per yard of carpet. On this basis, for instance, the specific duty on Brussels carpets was made forty-four cents per yard (the manufacturers had asked for a duty of forty-eight cents); the ad-valorem duty of thirty-five per cent. being of course also imposed. In the same way the specific duty on dress goods for women’s and children’s wear was made from six to eight cents per yard, according to quality. It is evident that the task of making the specific duty exactly compensate for the duties on wool was most complicated in these cases, and that any excess of compensation would here be most difficult of discovery for those not very familiar with the details of the manufacture. As a matter of fact, it is precisely in these schedules of the woollens act that, as we shall see, the “compensating” system was used as a means of securing a high degree of protection for the manufacturer.

These duties, ad valorem and specific taken together, have been from fifty to one hundred per cent., and even more, on the cost of the goods. On cloths generally they have been from sixty to seventy per cent. on the value. On blankets and flannels they have been from eighty to one hundred per cent., and have been entirely prohibitory of importation. On dress goods they have been from sixty to seventy per cent.; on Brussels carpets again from sixty to seventy per cent.; and on ingrain carpets from fifty to fifty-five per cent. Yet a net protection of twenty-five per cent. is all that the manufacturers asked for and were intended to have; and the question naturally presents itself, did they not in fact get more than twenty-five per cent.?

The first conclusion that can be drawn from this explanation of the woollens duties is that there was at all events no good reason for the permanent retention of the ad-valorem rate of thirty-five per cent. Of that rate ten per cent. was in all cases meant to compensate for the internal taxes. These disappeared entirely within a year or two after the woollens act was passed. Yet the rate on woollens remained at thirty-five per cent. without change from 1867 to 1883. Moreover, as the course of the narrative will show, it was steadily raised in later years, from 1883 to 1897, until in the act of 1897 it became as high as fifty-five per cent. There is no more striking illustration of the way in which duties which were imposed in order to offset the internal taxes of the war period, have been retained and have become permanent parts of our tariff system, although the original excuse for their imposition has entirely ceased to exist.

It may seem that the retention of the specific duties on woollens was justified, since the duties on wool were not changed. It is true that the duties on dye-stuffs, drugs, and such articles have been abolished or greatly reduced since 1867; but these played no great part in the determination of the specific duty. The duties on wool were not changed till the passage of the act of 1883. There are, however, other grounds for criticising the specific duties on woollens, which have been in fact not merely compensating, but have added, in most cases, a considerable degree of protection to the “net” twenty-five per cent. which the act of 1867 was supposed to give the manufacturers.

The compensating duties, as we have seen, were based on two assumptions: first, that the price of wool, whether foreign or domestic, was increased by the full extent of the duty; second, that four pounds of wool were used in making a pound of cloth. The first assumption, however, holds good only to a very limited extent. A protective duty does not necessarily cause the price of the protected article to rise by the full extent of the duty. It may be prohibitory; the importation of the foreign article may entirely cease; and the domestic article, while its price is raised to some extent, may yet be dearer by an amount less than the duty. This is what has happened with regard to most grades of wool. The commoner grades of wool are raised in this country with comparative ease. The duty on them is prohibitory, and their importation has ceased. Their price, though higher than that of similar wools abroad, is not higher by the full extent of the duty. It is true that the importation of finer grades of clothing and combing wools continues; and it is possible that the wools of Ohio, Michigan, and other States east of the Mississippi are higher in price, by the full amount of the duty, than similar wools abroad. Even this is not certain; for the wools which continue to be imported are not of precisely the same class as the Ohio and Michigan wools. As a rule, the importations are for exceptional and peculiar purposes, and do not replace or compete with domestic wools. At all events, it is certain that the great mass of wools grown in this country are entirely shielded from foreign competition. Their price is raised above the foreign price of similar material; but raised only by some amount less than the duty. The manufacturer, however, gets a compensating duty in all cases as if his material were dearer, by the full extent of the duty, than that of his foreign competitor. The bulk of the wool used by American manufacturers does not show the full effect of the tariff, and the manufacturers clearly obtain, in the specific duty, more compensation than the higher price of their wool calls for. The result is that this duty, instead of merely preventing the domestic producer from being put at a disadvantage, yields him in most cases a considerable degree of protection, over and above that given by the ad-valorem duty.¹⁰

There is another way in which the compensating duty is excessive. A very large quantity of woollen goods are not made entirely of wool. Cotton, shoddy, and other substitutes are in no inconsiderable part the materials of the clothes worn by the mass of the people. In these goods very much less than four pounds of wool is used in making a pound of cloth, and the specific duty again yields to the manufacturer a large degree of protection.

The second assumption of the compensating system, that four pounds of wool are used in making a pound of cloth, is also open to criticism. The goods in which cotton and shoddy are used clearly do not require so much wool. But it is probable that even with goods made entirely of wool, the calculation of four pounds of unwashed wool for each pound of cloth is very liberal. Wool, unwashed, shrinks very much in the cleaning and scouring which it must receive before it is fit for use; and the loss by wear and waste in the processes of manufacture is also considerable. The shrinkage in scouring is subject to no definite rule. In some cases wool loses only forty per cent. of its weight in the process, in others as much as seventy-five per cent. The shrinkage in scouring on American wools is rarely more than sixty per cent; and if to this is added a further loss of twenty-five per cent. in manufacture, there will be needed for a pound of cloth no more than three and one third pounds of wool.¹¹ With the great majority of goods made in this country, the shrinkage and the loss in manufacture do not amount to more than this. The calculation of four for one is for most American goods a liberal one; and it is evident that the compensating duty, based on this liberal calculation, yields a degree of protection in the same way that it does on goods that contain cotton or shoddy. On the other hand, there are some grades of imported wool on which the shrinkage and loss in manufacture are so great that the compensating duty is not excessive. Some grades of Australian wool, which are imported for manufacturing fine goods and worsteds, are subject to exceptional shrinkage and to exceptional waste in the process of manufacture. Of this class of wool four pounds, and sometimes a little more, are apt to be used for a pound of cloth.¹² In such cases the compensating duty evidently may fail to counterbalance entirely the disadvantage under which the manufacturer labors in the higher price of his raw material; for the wool, being imported into this country, and paying the duty, must be higher in price by the full amount of the duty than the same wool used by the foreign producer. In other words, there are cases where the specific duty is not sufficient to offset the duty on the raw material. It is probable that this fact explains, in part at least, the regular importation of certain dress goods and finer grades of cloths, which continue to come into the country from abroad in face of the very heavy duty. But such cases are exceptional. For most goods made in the United States the compensating duty on the four to one basis is excessive.

One other provision in the act of 1867 may be pointed out, which bears on the calculation of four pounds of wool to one pound of cloth, and at the same time illustrates the spirit in which the act was prepared. It has already been said that the duty on wool is laid on unwashed wool; and the compensating duty is fixed on the calculation that it requires four pounds of unwashed wool to make a pound of cloth. The act of 1867 provided that clothing wool, if washed, should pay double duty, and if scoured, treble duty. Similarly combing wool and carpet wool were made to pay treble duty if scoured. But no provision whatever was made as to combing and carpet wools if washed; they were admitted at the same rate of duty whether washed or unwashed. This amounted practically to lowering the duty on them. The provision was of no small importance in the case of combing wools; for these always come to market in the washed condition, and would have been regularly subject to double duty if treated as clothing wool was. It was alleged in justification of their more liberal treatment that a double duty on them would have been virtually prohibitory. Very likely this was the case; and, regarded by itself, the arrangement made in the act of 1867 (and retained in all later acts to 1897) was reasonable. But in its train one would have expected a corresponding moderation of the compensatory duties on the goods for which combing wool was used. No such reduction, however, was made; the full compensating duty was imposed; and the ad-valorem duty, consequently, was far from indicating the real degree of protection afforded. As it happened, for several years after the act was passed, a turn in fashion brought worsted goods, made with combing wool, into great demand; and during these years certain manufacturers of such goods found their business exceedingly profitable.¹³

If the compensating duty was thus liberal in the case of most woollen goods, and more than liberal in the case of worsteds, it was to be expected that other schedules where a check was more difficult to apply, would also contain excessive compensation. The specific duty on carpets was levied by the yard; that on Brussels carpets, for instance, was forty-four cents a square yard. Similarly the specific duty on dress-goods was levied by the square yard. That on blankets, flannels, worsteds, yarns, etc., was fixed by the pound, but was made to vary from twenty to fifty cents a pound, according to the value of the goods. The last-mentioned goods, for instance, paid a duty of twenty cents a pound if worth forty cents or less a pound; a duty of thirty cents if worth between forty and sixty cents; and so on. In every case, of course, the ad-valorem (nominally protective) rate of thirty-five per cent. was added to the specific duties. It is evidently a very complex problem whether these “compensating” duties represent the exact sum necessary to offset the increased price of materials due to the tariff rates on wool, hemp, dye-stuffs, and other dutiable articles used by manufacturers. We have seen that the movement that resulted in the passage of the act of 1867 was brought about chiefly by the manufacturers of carpets and worsteds. These men adjusted the specific duties, and alone could know with how great accuracy they attained their object of compensation. In some instances it was confessed that there was more than compensation in their scheme; this was admitted to be the case with blankets and dress-goods. On all goods it is not to be doubted that a liberal allowance was made in favor of the manufacturers, and that the specific rates gave them a certain amount, sometimes a great amount, of pure and simple protection.

The truth is that the wool and woollens schedule, as it was framed in the act of 1867, and as it remained in the successive modifications of later tariff acts, was in many ways a sham. Nominally it limited the protection for the manufacturer to a clearly defined point, indicated by the advalorem rate. As a matter of fact, no one could tell how much of the different duties was protective, and how much merely compensating. So complicated was the schedule, and so varying were the conditions of trade and manufacture, that the domestic manufacturer himself found it difficult to say exactly how great a degree of encouragement the government gave him. In some cases the effectual protection might be less than the twenty-five (or thirty-five) per cent. which the tariff was supposed to yield. In the great majority of cases it was very much more than this, and was meant to be more. The whole cumbrous and intricate system—of advalorem and specific duties, of duties varying according to the weight and the value and the square yard—was adopted largely because it concealed the degree of protection which in fact the act of 1867 gave. Duties that plainly levied taxes of 60, 80, and 100 per cent. would hardly have been suffered by public opinion or enacted by the legislature. Probably few members of Congress understood the real nature and bearing of the scheme; and no attempt was made to check the calculations of the woollen manufacturers, or to see whether, intentionally or by accident, abuses might not have crept into their proposals.

The most remarkable fact in the history of this piece of legislation was its failure to secure the object which its supporters had in mind. Notwithstanding the very great degree of protection which the manufacturers got, the production of woollen goods proved to be one of the most unsatisfactory and unprofitable of manufacturing occupations. As a rule, a strong protective measure causes domestic producers to obtain, at least for a time, high profits; though under the ordinary circumstances of free competition, profits are sooner or later brought down to the normal level. But in the woollen manufacture even this temporary gain was not secured by the home producers after the act of 1867. A few branches, such as the production of carpets, of blankets, of certain worsted goods, were highly profitable for some years. These were the branches, it will be remembered, in which the compensating duties were most excessive, and the prominent manufacturers engaged in them had done most to secure the passage of the act of 1867. Profits in these branches were in course of time brought down to the usual level and in many instances below the usual level, by the increase of domestic production and domestic competition. The manufacture of the great mass of woollen goods, however, was depressed and unprofitable during the years immediately following the act, notwithstanding the speculative activity and seeming prosperity of that time.¹⁴ It has sometimes been said that this was the effect of the act itself; but other causes, such as the cessation of the the war demand and the increasing use of worsted goods in place of woollen goods, probably suffice to account for the unprosperous state of affairs. It has also been said that the lack of diversity in the woollen manufacture of the United States can be traced to those provisions in the act of 1867 by which particularly high protection was given on the common and cheaper goods; the more so since the high duty on wool has tended to hamper the manufacturer in the choice of his material. No doubt it is true that at present the majority of finer woollen goods are imported, and the manufacture in this country is confined mainly to cheaper grades. The situation is not essentially different from that which we have already described as existing before 1860.¹⁵ But here again too much is ascribed, for good or evil, to the tariff. The limited range of the woollen manufacturer is probably due to deeper causes; in part to the adaptability of the domestic wool for making the woollen goods which form the staples of the American manufacture, in part to the fact that the methods and machinery for those goods are fitted to our economic conditions. The causes, in fact, are probably analogous to those which have confined the cotton manufacture within a limited range. But, on the other hand, it is clear that the act of 1867 has not been successful as a protective measure; it has not stimulated the woollen industry to any noticeable degree, nor has it greatly affected the character or extent of the imports. So far as the wool-growers are concerned, it has not prevented the price of wool from declining in the United States, in sympathy with the decline elsewhere; nor has it prevented the shifting of wool-growing from the heart of the country to the western plains, where wool is raised under conditions like those of Australia and the Argentine Republic. The manufacture probably would have been, on the whole and in the long run, more satisfactory to those engaged in it if they had had free wool and if woollens had been charged with no more than the protection of 25 per cent. which the act of 1867 was supposed to give.¹⁶ Some establishments, no doubt, have arisen which could not continue under such a system, and for these temporary provisions should be made if the present duties are swept away.

The woollens act of 1867 has been discussed somewhat at length because it is the most striking illustration of the manner in which protective duties were advanced after the war at the request of domestic producers. There are not a few other cases in which an increase of duties beyond the level reached during the war was made. After the woollens act, perhaps the most remarkable is the copper act of 1869. Before that year the duty on copper ore had been five per cent., that on copper in bars and ingots had been two and a half cents per pound. Under the very low duty on copper ore a large industry had grown up in Boston and Baltimore. Ore was imported from Chili, and was smelted and refined in these cities. But during the years immediately preceding 1869 the great copper mines of Lake Superior had begun to be worked on a considerable scale. These mines are among the richest sources of copper in the world, and under normal circumstances would supply the United States with this metal more cheaply and abundantly than any other country; yet by virtue of our tariff policy these very mines caused us for many years to pay more for our copper than any other country. The increased production from these mines, with other circumstances, had caused copper to fall in price in 1867 and 1868; and their owners came before Congress and asked for an increase of duties. Copper ore was to pay three cents for each pound of pure copper, equal to twenty-five or thirty per cent., in place of the previous duty of five per cent.; and ingot copper was to pay five cents per pound, instead of two and a half cents. The bill making these changes was passed by both houses. President Johnson refused to sign it, and sent in a veto message, which bore marks of having been composed by other hands than his own. But the President was then perhaps the most unpopular man in the country; Congress had got a habit of overriding his vetoes, and the copper bill was passed in both Houses by the necessary two-thirds vote, and became law.¹⁷ The effect of the higher duty was to accelerate the closing of the smelting establishments which had treated imported ores, and to aid the domestic producers of copper in pocketing large profits. The displacement of the imported copper by the Lake Superior product would have come in any case; for, as events proved, the sources of supply in this country were rich enough not only to oust foreign competitors at home, but soon to invade the market abroad. With the aid of the duty, the mining companies were able to form a combination which fixed the price of copper within the country at a higher price than that ruling abroad. When it was impossible to dispose of the entire product within the country, large quantities were sent abroad and sold at whatever price could be got,—lower in any case than the domestic price. The great profits secured by those who were shrewd and fortunate in developing the mines were doubtless due in the main to the unsurpassed richness of the copper deposits. But they were increased by the copper duty of 1869; and thus for a series of years the great natural resources of the country became a cause not of abundance and cheapness, but of curtailment of supply and dearness.¹⁸

Still another instance of the increase of duties since the war is to be found in the case of steel rails. Before 1870 steel rails had been charged with duty under the head of “manufacturers of steel not otherwise provided for,” and as such had paid forty-five per cent. The tariff act of 1870 changed this to a specific duty of 1¼ cents per pound, or $28 per gross ton. At the time, the change caused an increase, but no very great increase, in the duty. The Bessemer process of making steel had hardly begun to be used in 1870, and the price of steel rails at that time in England was about $50 per ton. The advalorem rate of forty-five per cent., calculated on this price, would make the duty $22.50 per ton, or not very much less than the duty of $28 per ton imposed by the act of 1870. Between 1870 and 1873, the price of steel rails advanced in England, and the specific duty of $28 imposed in the former year was not higher than the ad-valorem rate of forty-five per cent. would have been. But after 1873 the prices of Bessemer steel and of steel rails steadily went down. As they did so, the specific duty became heavier in proportion to the price. By 1877 the average price of steel rails in England was only a little over $31 per ton; and since 1877 the English price has not on the average been so high as $28 per ton. The duty of $28, which this country imposed, therefore became equivalent to more than one hundred per cent on the foreign price. The result of this exorbitant duty was an enormous gain to the producers of its steel rails in the United States. The patent for the use of the Bessemer process was owned by a comparatively small number of companies; and these companies, aided by a patent at home and protected by an enormous duty against foreign competitors, were enabled for a time to obtain exceedingly high prices for steel rails. During the great demand for railroad materials which began on the revival of business in 1879, and continued for several years thereafter, the prices of steel rails were advanced so high that English rails were imported into this country even though paying the duty of one hundred per cent. During this time the price in England was on the average in 1880 about $36 per ton, and in 1881 about $31 per ton. In this country during the same years the price averaged $67 and $61 per ton. That is, consumers in this country were compelled to pay twice as much for steel rails as they paid in England. Anything which increases the cost of railroad-building tends to increase the cost of transportation; and a tax of this kind eventually comes out of the pockets of the people in the shape of higher railroad-charges for carrying freight and passengers. The domestic producers of steel rails secured enormous profits, of one hundred per cent. and more on their capital, during these years. These profits, as is always the case, caused a great extension of production. The men who had made so much money out of Bessemer steel in 1879–81 put this money very largely into establishments for making more steel. New works were erected in all parts of the country. At the same time the demand fell off, in consequence of the check to railroad-building; and the increased supply, joined to the small demand, caused prices here to fall almost to the English rates. But during the years of speculation and railroad-building the tariff had yielded great gains to makers of steel rails; and popular feeling against this state of things was so strong that in 1883 Congress felt compelled, as we shall see, to make a considerable reduction in the duty.¹⁹

Still another case, and one which bears some resemblance to the woollen act of 1867, is to be found in the change of the duty on marble, which was made in 1870. The duty on marble had been put in 1864 at fifty cents per cubic foot, and twenty per cent. in addition. This, it may be remarked, is one of the not infrequent cases in which our tariff has imposed, and still imposes, both ad-valorem and specific duties on the same article. No compensating principle, such as is found in the woollen schedule, explains most of these mixed duties; and it is hard to find any good reason for retaining them, and giving the customs authorities the task of assessing the duty both on value of the article and on its weight or measure. The cause of their retention, there can be little doubt, is that they serve to conceal the real extent of the duties imposed. The duty on marble, for instance, had been thirty per cent. in 1861, and had been raised to forty per cent. in 1862. The mixed duty put on in 1864 was equivalent to eighty per cent, and more.²⁰ A direct increase of the duty from forty to eighty per cent. would hardly have been ventured on; but the adoption of the mixed duty veiled the change which was in fact made. One would have supposed that this rate of eighty per cent. would have sufficed even for the most ardent supporter of home industries; but in 1870 a still further increase was brought about. It was then enacted that marble sawed into slabs of a thickness of two inches or less should pay twenty-five cents for each superficial square foot, and thirty per cent. in addition; slabs between two and three inches thick should pay thirty-five cents per square foot, and thirty per cent.; slabs between three and four inches thick should pay forty-five cents per square foot, and thirty per cent.; and so on in proportion. Marble more than six inches thick paid at the old rate of fifty cents per cubic foot, and twenty per cent. It is evident that the change made in the duty on marble in slabs caused a great increase. The duty on the thinnest slabs (two inches or less in thickness) became $1.50 per cubic foot, and thirty per cent. in addition; this same marble had hitherto been admitted at fifty cents per cubic foot, and twenty per cent. The new rates of 1870 were equivalent to between 100 and 150 per cent. on the value, and proved to be practically prohibitive. The effect of the marble duty and of the change made in it in 1870 can be understood only by those who know the circumstances under which marble is produced and imported in this country. The only marble imported, and that which alone is affected by the duty, is fine marble used for ornamental purposes in mantel-pieces, furniture, gravel stones, etc. Such marble comes into use very largely in the shape of slabs of a few inches in thickness. The marble is imported, notwithstanding the heavy duty, from Italy, whence it is brought cheaply by ships that have taken out grain and other bulky cargoes. It is produced in the United States in a single district in Vermont. The owners of the marble quarries in this district had their product raised in price almost to the extent of the duty of 80 or 150 per cent. The result was to make these quarries very valuable pieces of property, and to put very handsome profits into the pockets of their owners; profits which represent practically so much money which Congress ordered those who used ornamental marble to pay over to the quarry-owners.²¹

Wool and woollens, copper, steel rails, marble, which we have now considered, are sufficient examples of the manner in which duties, already raised to high figures during the war, were still further increased after the war, for the benefit of the domestic producers. Other instances could be given in which an equal disregard of the consumer and taxpayer has been shown. The duty on flax, the raw material of a manufacture not over-prosperous, had been $15 per ton in 1864; in 1870 it was raised to $20 on undressed flax, and to $40 on dressed flax. Nickel had been admitted free of duty in 1861, and had paid only fifteen per cent. by the act of 1864. In 1870 the duty was suddenly made thirty cents per pound, or about forty per cent. on the value. Nickel, like marble, is produced in only one locality in this country. There exists a single nickel mine, in Pennsylvania, owned by a well-known advocate of protection, and, with the aid of the tariff, this mine, doubtless, has yielded the owner very handsome returns.²² Examples need not be multiplied. Enough has been said to show how the increase of duties of which the war was the immediate occasion, continued after the war had ceased.

The retention of the high duties of the war is to be explained by the pressure of other problems, the fear of infringing on vested rights and interests, the powerful opposition which is always met in withdrawing public bounty when once it has been conferred. To explain the additions to the protective system made after the war, by measures like the woollens act of 1867 and the copper act of 1869, some regard must also be had to the influence of private interests in Congress. The details of these acts, and of other acts passed since the war, have undoubtedly been settled in large part by men who had a direct pecuniary interest in securing an increase of the duties. It is highly improbable that bribery, direct or indirect, was ever used to affect tariff legislation. But it may be fairly said that a general laxity of opinion on the duties of public men enabled provisions to find their way into tariff legislation which could not have been carried through in a more healthy state of affairs. The demoralization has shown itself quite as strikingly in other parts of federal legislation as in tariff matters; it has shown itself most strikingly of all in some State legislatures and in municipal administration. During the period immediately after the war, the state of things was probably worse than at any other time in our history. The redundant currency promoted speculation and gambling; jobs were plenty and lobbyists strong; some legislators thought it not improper to become “interested” in enterprises which their votes might affect, and few Congressmen hesitated to advocate measures that would put money in the pockets of influential constituents. Conditions of this sort account largely for the higher duties of the years after the war. It cannot be said that there was any consistent policy or sustained public opinion in favor of extending the protective system.

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¹ Exactly how this duty on wool of ten per cent. on the value, in addition to the specific duty, came to be imposed, the writer has never seen satisfactorily explained. It probably came into the tariff in connection with the discriminating duty of ten per cent. which was imposed on goods imported in the vessels of nations that had no treaty of commerce with us.

² “This tariff (of 1867) was devised by carpet and blanket makers, who pretended to be ‘The National Woollen Manufacturers’ Association,’ in combination with certain persons who raised fine bucks and wished to sell them at high prices, and who acted in the name of ‘The National Wool-Growers’ Association.’ * * * A greater farce was never witnessed. * * * Many who took part in the proceedings of 1866, finding that the Association [of Wool Manufacturers] was used for the convenience of special interests, have since withdrawn.”—Harris, “Memorial,” pp. 22, 23.

Mr. Harris says elsewhere: “The carpet interest was predominant [in the Wool Manufacturers’ Association]. * * * The President was, and is now (1871), a large carpet manufacturer and the Secretary was a very talented and astute politician, from Washington, chosen by the influence of the President.” And again: “The Association having spent considerable sums in various ways peculiar to Washington (the italics are Mr. Harris’s) increased the annual tax on its members very largely; and at the present time (1871) it is hopelessly in debt to its President.”—“Protective Duties,” pp. 9, 10; “The Tariff,” p. 17. See also “Argument on Foreign Wool Tariff before Finance Committee of Senate,” New York, 1871.

³ Mr. Stephen Colwell, a disciple of the Carey protectionist school, was the member of this commission who had charge of the wood and woollens schedule. Mr. Wells, who was also a member of the commission, had nothing to do with this part of the tariff.

⁴Ante, p. 21.

⁵ The proceedings of the Syracuse convention may be found in full in the volume of “Transactions of the Wool Manufacturers” also in “U.S. Revenue Report, 1866,” pp. 360–419. Mr. Colwell’s endorsement of the scheme is also in “U.S. Revenue Report, 1866,” pp. 347–356. Mr. Wells, in his report of 1867, sharply criticised the act as passed.

⁶ See “Statement of the Executive Committee of the Wool Manufacturers Association to the U.S. Revenue Commisson,” printed in “Transactions,” as above; also printed in “Revenue Report for 1866,” pp. 441–460.

⁷Clothing wool is of comparatively short fibre; it is carded as a preparation for spinning; it is used for making cloths, cassimeres, and the other common woollen fabrics. Combing wool is of longer fibre; it is combed in a combing machine as a preparation for spinning; and it is used in making worsted goods, and other soft and pliable fabrics.

⁸ Here again we have the rather absurd combination of specific and ad-valorem duties on wool. In the act of 1867, there is the further complication that the ad-valorem duty is in the one case ten per cent., in the other eleven per cent. This difference resulted by accident, as the writer has been informed, from the need of complying technically with certain parliamentary rules of the House. It is hardly necessary to say that this mixture of specific and ad-valorem duties on wool has no connection with the compensating system. The compensating scheme accounts only for the two kinds of duties on woollen goods.

⁹ All manufactures composed wholly or in part of wool or worsted shall be subjected to a duty which shall be equal to twenty-five per cent. net; that is, twenty-five per cent. after reimbursing the amount paid on account of wool, dye-stuffs, and other imported materials, and also the amount paid for the internal revenue tax imposed on manufactures and on the supplies and materials used therefore.” Joint Report of Wool Manufacturers and Wool Growers, “Revenue Report, for 1866,” p. 430 also in “Transactions.” The Executive Committee of the Wool Manufacturers Association said, in 1866 “Independently of considerations demanding a duty on wool, the wool manufacturers would prefer the total abolition of specific duties, provided they could have all their raw material free, and an actual net protection of twenty-five per cent.” Harris, “Memorial,” p. 9.

¹⁰ See the instructive remarks of Mr. John L. Hayes, in Bulletin Wool Manufacturers vol. xiii. pp. 98–108. Cf.“Tariff Comm. Report,” pp. 1782–1785. The production and importation of wool in different parts of the country for a series of years are given in some detail in “Tariff Comm. Report,” pp. 2435, 2436.

¹¹ See, as to the loss of wool in scouring, Quarterly Report Bureau of Statistics, for quarter ending June 30, 1884, pp. 563–565; Harris, “Memorial,” p. 11; Schoenhof, “Wool and Woollens,” p. 10; Bulletin Wool Mf., vol. xiii., p. 8. The least loss I have found mentioned is twenty-five per cent. (coarse Ohio), and the highest seventy per cent. (Buenos Ayres wool). Ordinary American wool loses between fifty and sixty per cent, in scouring. The loss in weight in manufacturing varies much with the processes, but with care will not exceed twenty-five per cent. With most goods it is less.

If the loss in scouring 100 lbs. of wool is sixty per cent., there remain	40 lbs. scoured wool.
Deduct twenty-five per cent. for loss in manufacture	10 lbs.
Leaves	30 lbs. of cloth,
or 1 lb. of cloth for 4 lbs. of wool.
If the loss in scouring 100 lbs. of wool is sixty-five per cent, there remain	35 lbs. scoured wool.
Deduct twenty-five per cent, for loss in manufacture	8¾ lbs.
Leaves	26¼ lbs. of cloth,
or 1 lb. cloth for not quite 4 lbs. of wool.

¹² See the instances given by Mr. Hayes in Wool Manufacturers’ Bulletin, vol. xii., pp. 4–9. These all refer to Australian wool, which, as Mr. Hayes says elsewhere (ibid., p. 107), is imported in comparatively small quantities for exceptional purposes.

¹³ Under the reciprocity treaty with Canada (1854–1866) wool from that country had been admitted free, and considerable quantities of combing wool had been imported. The loss of this opportunity was one ground why the manufacturers in 1867 were desirous of securing washed wool of this kind without double duty. In 1867–72, there were very heavy imports of combing wool, partly from Canada, mainly from England. In later years, the imports of wool of this class have been small, and the proviso here under discussion has been of minor consequence. Though opposed by the wool-growers, the admission of washed combing wool at the same rate as unwashed was maintained in all the tariff acts from 1867 to 1897.

¹⁴ See an instructive article, by a manufacturer, in “Bulletin Nat. Assoc. Wool Mf.,” vol. III., p. 354 (1872). “There is one thing that all who are interested in the manufacture will agree to, that for the last five years (from 1867 to 1872) the business in the aggregate has been depressed, that the profits made during the war have been exhausted mainly, and that it has been extremely difficult during all this time to buy wool and manufacture it into goods and get a new dollar for an old one.”—Cf. Mr. Harris’ pamphlets, cited above.

¹⁵ See above, p. 127.

¹⁶ There is a voluminous literature on the wool and woollens duties. The original scheme was discussed in Mr. Wells’s “Report for 1866–67,” pp. 50, 60. Further attacks on the scheme will be found in Mr. Wells’s “Report for 1869–70,” pp. xcii-cv; Wells, “Wool and the Tariff” (1873); Harris, “Memorial to Committee on Ways and Means” (1872); Schoenhof, “Wool and Woollens” (1883). On the other side a steady advocacy of the compound system will be found in the Bulletin of the Association of Wool Manufacturers, to which reference will be frequently made in the following pages. Mr. Wells’s remarks in 1870 are criticised in the Bulletin, vol. Ii., pp. 19–34; the changes made in the compound system in 1883 are defended in vol. xiii., pp. 1–13, 89–128; and the changes of 1890, in vol. xx. Compare also the “Examination of the Statements in the Report of the Revenue Commissioner,” House Rep., 41st Cong., 2d session, Report No. 72; the “Tariff Commission Report of 1882,” pp. 2240–2247, 2411–2440; and the references given on p. 296, note, in this volume. Statistics are collected in the Wool Book (1893), published by the Wool-Manufacturers’ Association, and in the volume on Wool and Manufactures of Wool (1894), issued by the Bureau of Statistics, Treasury Department.

¹⁷ The veto message is in Congress. Record, 1868–69, p. 1460. It was written by Mr. David A. Wells, as that gentleman has informed the writer. The character of the bill was made clear enough in the course of the debate, at well as by the veto message. See Brooks’s speech, ibid., p. 1462. The manner in which this bill, and others of the same kind, were carried through Congress is illustrated by some almost naive remarks of Mr. Frelinghuysen: “My sympathies are with this bill, as they always are for any tariff bill. I confess, however, that I do not like this system of legislation, picking out first wool, then copper, then other articles, and leaving the general manufacturing interests without that protection to which they are entitled, and thus dividing the strength which those great interests ought to have. But still, if a bill is introduced which gives protection to copper, trusting to the magnanimity of the Representatives from the West who have wool and copper protected, I should probably vote for the bill.”—Ibid., p. 161.

¹⁸ On the effect of the copper act, see Mr. Wells’s Essay, already referred to, in the Cobden Club series, pp. 518–521 Cf. the “Report of the Tariiff Comm.,” pp. 2554–2577. See also Appendix, V., where the total production of copper in each year, prices at home and abroad, etc., are given.

¹⁹ The effect of the steel-rail duty is discussed more in detail in Mr. J. Schoenhof’s “Destructive Influence of the Tariff, ch. vii. On the profits made by the manufacturers, see Mr. A.S. Hewitt’s speech in Congress, May, 16, 1882, Congress. Record, pp. 3980–83; also printed separately. Cf. infra, p. 94, and figures of production, prices, etc. in Appendix, VI.

²⁰ The duty of 1864 was fixed, as Mr. Morrill then explained, in accordance with an arrangement made between the importing merchants and “the gentlemen in Washington in the marble-quarry interest.” The latter were Mr. Morrill’s constituents. It did not seem to occur to that gentleman that the persons who were to pay for the marble should be regarded at all. Originally Mr. Morrill had even proposed a duty of seventy-five cents per cubic yard, with twenty per cent. in addition. See Congr. Globe, 1863–64, pp. 2746–2747.

²¹ In regard to the duty on marble, see “Tariff Commission Report,” pp. 227, 1560, 1648.

²² Mr. Joseph Wharton, of Philadelphia, is the owner of the nickel-mine, and has appeared frequently before Congressional Committees in advocacy of this duty and of others. See the “Tariff Commission Report,” pp. 201–204. A heated controversy on this subject was raised by Mr. Wharton’s pamphlet, “The Duty on Nickel” (Philadelphia: 1883), with which may be compared the remarks of Mr. D.A. Wells, in the Princeton Review, July, 1883, pp. 8–11.

In the years after 1870, the nickel situation was affected, first, by the discovery of rich mines in New Caledonia, controlled by a French Company; and next, about 1889, by the discovery of a rich mine in Canada. The Pennsylvania mine seems to have shown signs of exhaustion, and its owner advocated the admission of nickel ore and matte at a low rate of duty, with the retention of the duty on nickel itself for the protection of the works which had been put up to refine the Pennsylvania nickel. See the statements of Mr. Wharton and others in the Senate “Tariff Testimony” of 1888–89, pp. 1347–64, and in the House “Report on the Revision of the Tariff,” 1890, pp. 1153–1161.