Among the changes in duties made in the act of 1913 by far the most conspicuous and important are those on sugar and wool. Both are admitted free; wool at once, and sugar after an interval of three years. The duty on sugar under the Acts of 1897 and 1909 had been one and two-thirds cents (on the grade most largely imported and commonly taken as the standard). The duty becomes one cent a pound, until May 1, 1916; after that date, all sugar is to be admitted free. The transitional duty of one cent a pound remains subject to the reduction of 20 per cent for sugar from Cuba, whence most of the imports have come in the past, and whence virtually all of them are likely to come in the near future. There are some clear advantages in the course thus taken, and more particularly in the three-year interim. In the first place, there is a fiscal advantage in postponing complete remission. The sugar duty contributes heavily to the customs revenue. The income tax, which is expected to make up for loss in the customs revenue, will almost certainly require time for working out its full yield. The temporary retention of the sugar duty eases the process of fiscal rearrangement. Second, the sugar producers are given time for readjustment to new conditions. The production of raw sugar, whether cane or beet, is in these modern days a manufacturing industry almost as much as extractive one. The abolition of the sugar duty presents squarely the problem of vested interests in an industry where there is large investment of fixed capital. In all such cases there is good ground for postponed reductions. But it is to be admitted also that there is likely to remain a lingering doubt whether such a program of reduction will be carried out to the bitter end, and hence some uncertainty whether the transi This is the strong tion will really be prepared for. argument against the plan, sometimes advocated as the best for dealing with duties deemed excessive, of spreading all reductions over a series of years. There is always a question whether the political situation will not shift in the meanwhile. Even during the last year or two, when it has been obvious to every unprejudiced observer that a considerable pruning of the protective system was inevitable, the interested producers have continued to manoeuvre against the inevitable, trying to persuade themselves that the changes could be prevented or postponed. The same unwillingness to face squarely an unwelcome prospect may appear during the three-year period allowed before sugar becomes free. It may be thought that the Democrats will lose their majority in Congress at the elections of 1914; still more, that they will lose everything in 1916. The tactics of the protectionists have suggested in many ways that they hope for an early return of the good old days. In this frame of mind, deliberate accommodation to the new tariff conditions is hardly to be expected; and if the present program really is carried out to the bitter end, the sugar producers may be as ill prepared for it in 1916 as they are now. The strong tactical and political argument for free sugar is that thereby the cost of living will be reduced. Few economists would subscribe to the statement, often made by the Democrats and embodied in their platform, that the tariff system is the main cause of that general rise in prices which people describe as the high cost of living. But here is one commodity which is universally consumed, is made dearer by the existing duty, and is tolerably certain to become cheaper after the remission of duties. It is true that untoward crop conditions may disguise the effect in 1916. It is conceivable that then the abolition of the duty will not cause sugar to be cheaper, but will simply prevent it from becoming dearer. No intelligent person will think that, so far as the effect of the tariff is concerned, this would be an important difference. But the enormous majority of persons think about these matters with singular lack of intelligence; and some chances are taken as regards the impression made on the mass of the community by the free admission of sugar when the final change is postponed for three years. It is difficult to see how anything can be said in favor of free sugar on the principle of a competitive tariff, or on that of attacking only the "illegitimate" industries. The imports of sugar have always been large. Certainly so far as raw sugar is concerned, there has been steady competition between the domestic producers, as well as between them and the foreign producers. The production of cane sugar and beet sugar within the United States has been as legitimate as can be the case with any highly protected industry. Possibly the circumstance that the sugar planters of Hawaii and Porto Rico, and in less degree those of Cuba and the Philippines, had been among the beneficiaries from the duty, may have promoted an unrelenting attitude. Yet in the main the abolition of the duty, while tactically justified as a move toward lowering the cost of living, can be defended with consistency only on the ground that a cheap supply from abroad is better than a dear supply at home. This is the gist of the principle of free trade. More considerable economic effects are likely to follow from free sugar than from any other change in the act. Tho the producers in Louisiana and in the beet sugar states have exaggerated their dependence - on protection, — as is habitually done by domestic producers when making pleas for duties, it would seem that in fact most of them are not able to meet foreign competition on equal terms. Both cane and beet sugar makers have been prosperous of late years; so much is indicated by the increase in their output. Some among them may be able to hold their own even under free sugar. This is more particularly probable for some beet sugar districts advantageously placed in the West. So in the case of Hawaiian sugar: it is to be expected that the output will diminish, yet not that sugar planting will be given up. Hawaii, and Porto Rico as well, will be hard hit, but hardly compelled to give up completely. Cuba and Java will probably send in much larger imports. One may be distrustful of the predictions concerning the extent of these changes, but considerable they are likely to be.1 What has been said of free sugar holds for the complete and immediate abolition of the duty on wool. In their tariff bills of 1911 and 1912, the Democrats had not ventured to go so far. It had been proposed to leave the duty on wool at 20 per cent. Through the influence of President Wilson, the bolder step is taken of admitting it free once for all. It will be remembered that this had been the one radical change made in the illstarred tariff act of 1894. In taking the same unflinching step at the present time, President Wilson showed the unhesitating courage which has won the respect of 1 On the general sugar situation, one of the most interesting phases of our tariff history during the last generation, I refer the reader to my article in the Atlantic Monthly, March, 1908, on Sugar: a Lesson on Reciprocity and the Tariff "; and on beet sugar, to one in this Journal, for February, 1912, on " Beet Sugar and the Tariff." On this latter topic, see also Dr. R. G. Blakey's careful monograph, "The United States Beet Sugar Industry and the Tariff," Columbia University Studies, No. 119 (1912); and two articles by Dr. Blakey, on " Beet Sugar and the Tariff," Journal of Political Economy, June, 1913, and "The Proposed Sugar Tariff," Political Science Quarterly, June, 1912. A his opponents no less than of his friends. It happened that the juncture was favorable for the change. sweeping reduction, perhaps amounting to complete abolition, had been on the cards for so many months that the market had adjusted itself to the prospect, and the price of wool had been for some time on a free wool basis. Here again none of the current formulas were applicable in justification of so sweeping a change, neither those of the Democrats nor those of the Republicans. The Republican formula about equalizing cost of production had indeed been shown to be quite impossible of application. The excellent report of the Tariff Board had made it clear that the expense of producing wool under the ordinary farming conditions was impossible of any precise demarcation, and that even for wool produced under ranching conditions cost varied so much in different regions as to make the equalization formula useless. The principle of a competitive tariff was quite as unserviceable. The wool duty had for many years been competitive; that is, the imports had been continuous, and had tended to grow. So far as revenue was concerned, complete abolition unmistakeably meant a fiscal loss. Nor could it be said that wool growing was an illegitimate industry, except from the free trader's point of view. Here again, a clear decision seems to have been made against even the veiled and apologetic arguments for protection. I need not repeat my often stated conviction that the decision was wise. Those arguments for protection which have weight with trained thinkers, young industries, national independence, and the like, have no application in this case. The wool duty cannot be defended except from the most extreme protectionist point of view. can |