CAM

No. 277

VOL. XXIV.

REVIEW OF TARIFF BOARD'S REPORT ON COTTON.

The synopsis of the tariff board's report on cotton manufactures conveys the same impression of painstaking and impartial investigation as the report in schedule K. The number of mills investigated in the

United States was 81 out of a total

of 1,077, as reported by the census of 1905. The mills ranged in size from one having 5,184 spindles to one having 602,312 spindles, and from one having 54 looms to one having over 20,000 looms. Besides these, 17 mills in the hosiery and underwear industries were examined. The foreign investigation extended to England, France, Germany, Canada and Japan.

A superficial reading of the report might bring considerable comfort to the advocates of a downward revision of the duties on cotton goods. For instance, in regard to yarns, the report says: "Comparing all of the yarns selected, the English labor cost is found on the average to be practically seven-eighths of the American" in the case of two of the most efficient mills examined; and, "a comparison of the cost of production in the two countries shows that

in the case of the ordinary warp and filling yarns, the present duty is regularly in excess of the difference in the cost of conversion." Moreover, figures are presented in the report which show that labor costs in the cotton industry are in many cases lower in the United States than in

England, although the wages paid in this country are much higher than they are abroad. Batter down the tariff, then! Why retain any duties, if this is the case? The President, too, recommends that Congress proceed at once to a revision of the schedule, but he asks that it be made on the protective tariff principle.

Effect of Equalizing Tariff.

On the theory that the correct basis of tariff duties is the difference in the cost of production at home and abroad, many duties in the cotton schedule would necessarily be reduced. What does this theory really mean? Tariff duties based on the difference in the cost of production equalize the price of the foreign and domestic product. They put American goods on an equality with foreign goods, and foreign goods on an equality with American goods. Such duties eliminate the principle of protection. Under the policy of

protection, American-made goods are given an advantage in the American market. In the one case, American products are subjected to foreign competition; in the other case they are protected from it. It was a protective tariff, not an equalizing tariff, which built up the cotton industry in the United States, brought about the investment of $822,000,000 in cotton mills, and divided $132,000,000 in annual wages among 387,000 wage earners. It was not an equalizing tariff which gave to Massachusetts 158 cotton mills, and led to the investment of eighty-two millions of dollars in cotton manufacturing in Fall River, fifty millions in New Bedford, and twenty-four millions in Lowell.

Under an equalizing tariff the cotton manufacturers of England would control the American market today as they did before protection enabled American manufacturing to become established. There is a vast difference between a tariff which equalizes the prices of foreign and domestic goods and a tariff which restricts foreign importations in the interest of domestic production; and the New England States will be the first to learn this lesson if a tariff based upon the mere difference in the cost of production should become a law.

If the President's recommendation that reduction be made on the protective tariff principle is adopted, some other measure of rates than the cost of production must be considered. For example, in this report figures are presented showing the relative costs of completing and equipping spinning and weaving plants in England and the United States. The figures show that the

cost of erecting a building is about 40 per cent. greater in this country than in England, the cost of equipment for a spinning mill about 70 per cent. higher and the cost for a weaving plant about 50 per cent. higher. Where a mill is equipped with automatic looms, as is more frequently the case in this country, the cost of the looms is at least two and one-half times as much as in a mill equipped with plain looms, as is customary in England. A largely increased capitalization is necessary in this country, and a duty based merely upon the cost of production leaves out of consideration the additional cost of building and equipment, on which reasonable dividends must be earned.

Manufacturers Absolved.

The report completely absolves the cotton manufacturers from blame for the high prices of cotton goods, for it shows that in a majority of cases the American prices for plain goods at the mills are somewhat lower than in England. Many standard fabrics of simple construction are sold by American manufacturers at a price as low as or lower than that of English manufacturers.

One of the most interesting results of the investigation relates to the different methods of distribution in the two countries. A greater margin exists in this country than in England between the price at which the manufacturer sells his goods and the price at which the consumer buys them. The costs of distribution are greater here and the profits added by jobbers and retailers are larger. The significant fact is revealed by this report that it is the jobber and the retailer, not the man

ufacturer, who have benefited most by enhanced profits in the handling and sale of cotton goods.

An Erroneous Idea.

Tariff changes which will increase the importation of foreign made goods will not bring lower prices to the consumer unless the jobber and retailer reduce their margin of profit and the cost of distribution.

To divide the American market with the foreign producer, as would result from any considerable reduction in tariff rates, would mean a great increase in the importation of foreign made cotton goods, now amounting to almost $70,000,000 worth annually, equivalent on a duty paid basis to more than the total production of the 61 cotton mills of New Bedford and Fall River for the year 1909. It is easy to see that this would mean less sale for Americanmade goods, less work for American operatives, less wages for those who do find employment and the complete shutting down of many mills. Is this what the country wants? For this is what the abandonment of the protective policy means.

The reports of the tariff board, already made, have proved, however, that the difference in cost of production at home and abroad can be ascertained with sufficient accuracy to throw much valuable light on the subject.

The chief value in the reports of a competent scientific non-partisan board is that such reports command the confidence of the general public. Therefore, such reports serve as a firm basis for arguments to show the need of protection. They stand as a bulwark against arbitrary and excessive reductions in tariff rates.

The ultimate criterion of tariff rates is the adequate protection of the home market, nothing more and nothing less. Protectionists would stand for this, but they should not stand, and they should convince the country that they do not stand, for more protection than is necessary. Whatever we may believe to be the economic effect of excessive rates, it weakens our position to prevent the abolition of rates which can be shown to be excessive or unnecessary.

If we act with political wisdom. and good judgment in this matter, the protective policy cannot be successfully assailed. When we come down to the hard facts of the situation, we find that there are few Democrats who do not wish adequate. protection for the industries in which they are directly interested. The policy of protection in this country is perfectly safe.

The difference in the cost of production, as shown by the reports of the tariff board, should be used not as the ultimate and only criterion of tariff rates, but merely as throwing

light upon the subject. Other facts may properly be considered-especially the record of imports under any particular rate. Tariff rates must be fixed by Congress in the light of all the facts. Reasonable rates made in the light of all the facts and based upon them are more likely to command the confidence of the country, and so to stand, than the rates made merely as a compromise between Congressmen representing various districts. I realize the necessity of reasonable compromise in legislation, designed to harmonize conflicting interests, and there is a vast difference between reasonable compromise and purelogging.

Now, then, what should be the attitude of the Republican party at this time? I believe that the Republican platform should announce in no uncertain terms:

Ist That the party stands for the adequate protection of home industries.

2nd That the party does not stand for any rate which, after proper investigation, is shown to be excessive

THE ABERRATIONS OF A FREE TRADE GOV

ERNMENT.

A Study in Psychology.

By a Student of English Politics. Among the problems daily forcing themselves upon the distracted British voter none is more interesting than the apparently guileless query: "What is Free Trade?" Be it remembered that the implied state of doubt does not rest solely with that overworked newspaper entity, the man in the street, for, if acts count for anything in the way of evidence, highly salaried cabinet ministers are equally in the dark on a subject assumed to partake largely of elementary simplicity.

What, for instance, is to be made of the circumstance that one of the first legislative performances of the present "Free Trade" ministry was to exempt, by a special statute, labor unions from all financial responsibility for their acts? The Trade Disputes Act of 1906 places these organizations in the unique and protected position of being absolved from the pains and penalties under the laws aimed at unlawful conspiracy; it thus endows them with a free hand, careless of the risks. otherwise attaching to their accumulated funds, in fomenting and financing industrial warfare. The question arises: Is this Free Trade?

Again, the Patents Act (1907) of this same "Free Trade" government provides for the cancellation of foreign-owned British patents unless it can be shown that the articles covered by patents are being made in that unprotected territory known as