Some Aspects of the Tariff Question
By Frank William Taussig
The main purpose of the present volume is to consider and illustrate some questions of principle in the controversy on free trade and protection. The three chapters which constitute Part I state these questions and summarize the main conclusions. The succeeding Parts give illustrations and verifications drawn from the history of several industries,—sugar, iron and steel, and textiles. Something is thereby done, I trust, to make more precise and complete the theory of the subject, and to vivify it through illustrations from experience; and some contribution is offered also on the general economic history of the United States. [From the Preface]
First Pub. Date
Cambridge, MA: Harvard University Press
The text of this edition is in the public domain.
- Part I, Chapter I, Duties, Imports, Prices
- Part I, Chapter II, Protection to Young Industries
- Part I, Chapter III, The Principle of Comparative Advantage
- Part II, Chapter IV, Introductory--Louisiana
- Part II, Chapter V, Hawaii
- Part II, Chapter VI, Porto Rico, The Phillipines, Cuba
- Part II, Chapter VII, Beet Sugar
- Part II, Chapter VIII, Refined Sugar and the Sugar Trust
- Part III, Chapter IX, A Survey of Growth
- Part III, Chapter X, How Far Growth was Due to Protection
- Part III, Chapter XI, Copper
- Part III, Chapter XII, Protection and Combinations. Steel Rails, Tin Plate
- Part III, Chapter XIII, Imports and Exports--Dumping
- Part IV, Chapter XIV, The Growth of the American Silk Manufacture
- Part IV, Chapter XV, The Silk Manufacture, continued. European and American Conditions, Imports and Domestic Production
- Part IV, Chapter XVI, The Silk Manufacture--Some Conclusions
- Part IV, Chapter XVII, The Cotton Manufacture. Progress of the Domestic Industry
- Part IV, Chapter XVIII, The Cotton Manufacture, continued. Contrasts with Other Countries, the Influence of the Tariff
- Part IV, Chapter XIX, Wool
- Part IV, Chapter XX, The Woolen Manufacture. The Compensating System, Woolens and Worsteds
- Part IV, Chapter XXI, The Woolen Manufacture, continued. Characteristics of the American Industry
The Silk Manufacture—Some Conclusions
Part IV, Chapter XVI
Summarizing the results of the preceding chapters, we may say that an industry quite new has been brought into being by protection. Imports of great classes of articles have been supplanted almost wholly by domestic products. Not only this; the domestic industry has progressed in technical effectiveness as well. Great advances have been made in its appliances and organization. The further question may now be taken up: has the progress been such as to justify the protectionist policy, not merely on the vulgar mercantilist grounds, but on the more tenable ground that a young industry has been successfully nurtured?
In seeking to answer this question two considerations must be borne in mind. One is that the technical progress in the industry may not have been peculiar to the United States. It may have been,—to some extent beyond doubt it was,—but one phase of a general advance, observable in other countries as well as the United States. So far as the American manufacturers simply adopted those changes which their foreign rivals also were making, they did no more than keep abreast of the times. But to forge ahead is the essential desideratum under the young industries argument. And, second, even if some unusual and unexampled progress was made in the American industry, we must inquire whether it was carried so far as to bring the industry up to the full American standard,—whether it was so great as to enable the industry eventually to hold its own quite without protection. This result has been attained in the iron manufacture; but whether as the consequence of protection or of more general causes, we have found it difficult to determine. If attained at all in the silk manufacture, it is to the protective policy that the result must be fairly credited. Has it been attained to the full? Quite conceivably the technical and industrial improvements, though excelling those in other countries, have brought the industry only to a half-way stage, in which it has risen above the level of effectiveness in rival countries, yet not quite up to the prevailing and dominant level of effectiveness in the United States. It may have reached the stage where it could be maintained with duties lower than those imposed at the outset, yet would succumb to foreign competition if there were no duties at all.
Unfortunately the evidence on these points is far from conclusive; and there is much difficulty in weighing such pertinent evidence as is available. The decisive test of unaided competition with foreign rivals has not been applied; its full application at any early date in the future is beyond the bounds of political probability. On the other hand, the attitude of the American manufacturers,—assumed as a rule without consciousness of its economic significance,—would indicate that no progress whatever had been achieved and that the free traders’ goal was not in sight. Not only removal of the duties, but the slightest reduction, is resisted tooth and nail. We are told that the retention of the protective barrier at its original height is indispensable for the very existence of the industry. Every endeavor to lower it is met by declarations that the result must be either a wholesale reduction of operatives’ wages or complete abandonment.
Among the things that are clear, however, is the exaggeration in these protests. The case of the protectionists is not so bad as their own spokesmen make it out. As has been already pointed out,
*39 opposition of this sort is always offered when reduction of protective duties is suggested. It is due partly to a wish to take no chances,—to “play safe”; partly to mere bluff, with the expectation not so much of preventing reduction as of minimizing it; partly to a vague panicky feeling about the terrors of foreign competition, engendered by the frothy declamation on cheap foreign labor. These same manufacturers, if they are questioned in quiet and give answers without the fear of the terrible free trader on them, will admit that they are not averse to “scientific” reductions; that many duties could be lowered without harming them; that some articles they really can probably produce as cheaply as the foreigners, at least under the technical conditions existing for the time being (they will usually make reservations as regards the future); and that they simply do not know just how far the process of reduction or removal could be carried without disturbance. They will virtually say, though not using the phraseology of the economists, that there has been after all some approach to the free traders’ goal.
Looking for evidence in other directions, I have sought to find facts of significance as regards technical conditions, and have also questioned persons presumably well informed, yet not biased, concerning the general conditions of the competition between domestic and foreign producers. The results so secured are not without haziness, but are not entirely inconclusive.
As regards technical progress, one fact of significance is the source of supply for the machinery. Is it made within the country, or is it imported? Any industry which steadily imports its machinery from other countries makes thereby a confession of the lack of a comparative advantage. Its appliances are
ipso facto no better than those of its competitors. Not only this, but the appliances are likely to be less effectively utilized. Though machinery imported from elsewhere may be operated as skilfully as in the country of origin, the probability is the other way. The same ingenuity and watchfulness that cause it to be devised in one country cause it also to be worked to best advantage there. On the other hand any industry which in this regard has got quite beyond foreign tutelage,—for which the machinery is of domestic design and make,—can claim at the least full equality. And if the machinery is not only made within the country, but is sought for elsewhere, being exported to other countries or copied there, the claim may be for more than equality: there is evidence of superiority. Every student of economic history knows that such a position of superiority was held by England through the greater part of the nineteenth century. Then foreign manufacturers, and especially those of the Continent, secured their machinery from England, or copied English models. Yet they were very slow to get the full results from the British machines; and as fast as they did, the British had progressed a stage further, invented or improved still more, and retained their superiority indefinitely. A similar position of sustained excellence is now held by the Americans in the machine tool trades,
*40 and in wood working apparatus. How is it with the machinery used in the silk manufacture?
This situation, it appears, is creditable to the American industry,—indicative of real and sustained progress and at least some superiority. As has been noted,
*41 the first silk working machinery was imported. The industry began by following the familiar paths. But soon it struck out for itself, and quite left behind the old exemplars. For a decade or two, all the more important silk machinery has been made within the country; only certain specialties, presently to be described, have been imported. This cessation of imports of machinery cannot be ascribed merely to the fact that duties on the machinery itself have been high. True, protection has been applied here also; but by no means with the result of keeping out all machinery of every sort. In other textile industries, and especially in the worsted manufacture, much of the machinery continues to be imported notwithstanding the duties.
*42 The fact that it is otherwise for the silk industry,—that most of the equipment of the American mills is of domestic design and construction,—is significant. Still more significant is the exportation of such equipment; or, if not exportation, the copying of American models in foreign countries. Throwing machinery was invented in the United States, following the principle of cotton spinning machinery for which also American ingenuity had taken the initiative.
*43 It was developed to a high degree of perfection, and American throwing machines were sent to foreign countries, and introduced into the technical schools of England and Switzerland.
*44 Ribbon weaving machinery, already mentioned among those improved by Americans, was brought to a high pitch of automatic operation. It too was exported, or manufactured in European countries after American designs.
*45 So it was with broad looms. For all the textiles, weaving machinery has been a peculiarly fertile field for American invention. Looms for broad goods as well as for ribbons have been brought to an exceptional pitch of mechanical effectiveness. All thought of importing silk looms has ceased; and broad looms, like ribbon looms, have been exported, or manufactured abroad after American models. They have moreover been operated to best effect within the country. The example of the cotton and worsted industries has been followed: the weaver (in reality a loom tender and watcher) has been called on to take care of several looms, and usually of more looms than are allotted to the weaver of similar fabrics in European countries. Both in construction and in operation there is evidence of superiority,—of a comparative advantage.
It is not inconsistent with this conclusion that certain kinds of machinery are still imported. On the contrary, the continuing partial reliance on foreign makers proves on careful scrutiny to be not inconsistent with a general trend to progress and emancipation. The machinery that continues to be imported is chiefly for finishing purposes. The rapid changes in fashion bring corresponding changes in these devices. An apparatus will be contrived to secure a particular appearance in the fabrics; in a season or two something else comes into fashion; then a new kind of apparatus comes into use. American manufacturers of machinery do not find it worth while to cater to such temporary and sporadic demands. It is a case of “specialties”; and these tend to be imported, whether they are tools or finished products. Such finishing machinery as is continuously used, year after year, is commonly of American make.
Turn now to another kind of evidence. Repeatedly I have asked persons who buy and sell silks,
*48 what would happen if there were no duties? Are there any goods which are so cheaply made in the United States that they would in no event be imported? And as regards those which might be imported under free trade, how great is the present difference in price between the European goods and the American? Here, unfortunately, our prohibitive duties so veil the situation that it is difficult to secure satisfactory information. The question, are any silks as cheap in the United States as abroad, is usually answered unhesitatingly: yes, most domestic goods are cheaper than the imported. But a very little further inquiry shows the answer to mean that domestic goods are cheaper than
duty-paid foreign goods. And when the question is again asked, with careful explanation of its precise bearing; how if the foreign goods were admitted free of duty?—the person in the business hesitates. This question he is not called on to consider in the ordinary course of his dealings. The purchase of most foreign goods, with the duty added, is quite out of the question and the dealer pays no attention to them or their prices. Certain classes of articles, and some specialties, are indeed so much cheaper abroad that they can be imported, even with payment of the duties; and reference is then made to the imported silks described in the preceding chapter. But how much cheaper are the foreign goods which are never imported? are these cheaper at all? One witness who impressed me as well-informed and judicious stated his belief that ribbons and broad silks are, as a rule, somewhat cheaper abroad; perhaps 25 per cent cheaper? yet as regards most goods admitted this to be but a guess. Some goods, he said, are certainly quite as cheap in the United States; such as spun silks and certain smooth-faced satins. And it is significant that another well-informed observer has publicly expressed the opinion that certain standard silk fabrics are so cheaply made that an export trade in them is among the possibilities of the early future.
The fact that the makeup of the American purchasing constituency is different from that of foreign countries adds to the difficulties in comparing domestic silks with the imported. A merchant who had been lifelong in the trade remarked to me that it was almost impossible to compare American ribbons with foreign. The former, of the kind made “for our general trade,” are of good quality; better than what is made for mass consumption in Europe, though not so choice as what is there made for the rich and is still exported to the United States for our own rich. The different conditions of the American market,—an enormous number of purchasers who are well-to-do, even though not affluent, and who buy a staple article of good quality,—has caused the American manufacturers to turn out great quantities of ribbons that are not expensive, yet not vilely cheap. These are made on very large looms, twenty or twenty-five feet wide,
*50 which are run faster than are looms in European countries, and enable a great yardage to be turned out at low cost per piece. All the witnesses unite in remarking on the great improvements in American silk goods during the last twenty years, the betterment of the quality and taste, the greater variety of goods, the steady lowering of prices.
On the whole, the conclusion seems warranted that there has been at least some approach to a successful application of protection to young industries. How near the approach is to complete success, how good the prospects for such success, would be difficult to say. But it seems beyond question that great advances have been made in the domestic industry, and that both in its technical appliances and in the adaptation of its products to the demands of the domestic market the characteristic American excellencies have been shown. The peculiarities of the raw material and the long-standing traditions of the industry interposed at the outset obstacles which would almost certainly have prevented ventures into this new field but for the stimulus from protection. Competition among the domestic producers stimulated invention, lowered prices, displaced the foreigners in the most important classes of goods, made the burden of the duties (so far as a burden remained at all) much less than the nominal rates indicated.
This general conclusion is not weakened by a comparison with the course of development in other countries. The contrast both with England and with Germany and Switzerland is instructive. The older type of silk manufacture succumbed in England under free trade. It was no better adapted to the industrial conditions of England than of the United States; it did not offer the same advantages as other English industries; its disappearance cannot be reasonably a matter for regret. A new silk industry has indeed arisen in England, self-supporting, and profitable alike to the owners and to the country. But it is modest in size, limited in scope, not comparable to the young American giant. Who can say whether a similar great industry would have developed in Great Britain under high protection? Whether innovation, invention, rapid change and improvement, would have been stimulated such as to produce even that success,—still with an uncertain ultimate outcome,—which has been achieved in the United States? Bearing in mind the general character of British industries, their tenacious adherence to ways well-approved, their sustained excellence in the goods of established position, one is led to question whether any prospect existed of eventual gains under protection. The British have doubtless done their best under free trade. On the other hand, the Germans (and apparently the Swiss also) have shown in the silk industry, as elsewhere, a curious juxtaposition of the old industrial régime and the new. The machine has conquered larger and larger sections of the field; yet not to the complete displacement of the handicraft and the household. The quantitative growth of the German silk manufacture has been comparable to that in the United States; the qualitative advance also has been striking. Here also it would be difficult to say how far the protective policy has contributed to the growth and how far that policy can be justified on the ground of having nurtured the industry to independence. The case would seem less strong in Germany than in the United States. The German industry has old roots; the application of protection was less rigorous and stimulating; the machine has had no such sweeping victory. Yet the problem is part of the larger problem how to explain the extraordinary industrial burst which is transforming the German people. Great political and social forces have been at work. The unbiased historian, when he comes in later times to survey with the needed perspective this marvellous change, will probably conclude that the external commercial policy of the nation was among the least of the impelling causes. A conclusion in general similar is likely to be reached for the United States. Here also the share of protection in causing or even modifying the country’s general industrial advance will be found much less than the vehemence of the present controversy would imply. But in the particular case we are here considering,—the American silk manufacture,—a dominant influence from the protective system is not to be gainsaid; nor can it be denied that this influence has shown more potentiality of eventual benefit than the free traders are disposed to admit.
Our survey of the silk industry thus raises more questions than it answers. It appears that protection has caused a great industry to spring up; and there are tenable grounds for maintaining that the growth has been qualitative as well as quantitative, and may illustrate the validity of the argument for protection to young industries. But the protection has been so high and so long-continued that it conceals from view many facts of essential significance. We cannot be sure how great has been the progress of the American silk manufacture. An incisive reduction of duties,—much sharper than that made in the tariff act of 1913,—would show whether its progress toward independence has really been as considerable and as promising as it has been inferred to be, from evidence more or less inconclusive, in the preceding pages. A complete abolition of duties, like that which England made in 1860, would alone show whether the eventual end of protection to young industries has been reached,—complete independence, ability to supply the commodities as cheaply as by importation.
Tariff Commission Report, paragraphs 3275, 3391. It is quite true, I am told, that some old English looms, solidly built, continued to be used thus long, even though it would have paid to substitute new and more efficient looms. The ribbon looms in use at Coventry in 1860 seem to have been made in Basel and exported thence to England. Timmins,
The Resources… of Birmingham (London, 1866), p. 187.
Proceedings, Twenty-sixth Anniversary Meeting New England Cotton Manufacturers Association, p. 31.
Silk Industry of the World, p. 27. The leading American firm that manufactures this machinery writes me: “For a number of years we have been exporting throwing machinery to various silk producing European and Asiatic countries. It seems to be a constant trade, although not large, but is gradually extending into different fields of silk manufacturing.”
Silk Industry, p. 29, and
Census Report on Manufactures, 1900, p. 209. A large American firm making ribbon looms writes to me thus (1913) “For a number of years we exported our ribbon looms to Europe—to Switzerland, France, and Germany—but we are now represented in Europe by a large manufacturing concern who build our machinery over there from our models.”
Silk Industry, p. 27): “In weaving perhaps there has been more progress in improved machinery the last decade than in the three preceding decades. The improvements have produced a loom of very high efficiency, equipped with mechanical devices designed for saving time, labor, material, such as numerous multipliers, two weave, leno, swivel, embroidery motions, and many others, all arranged to work automatically. Special mention should be made of the improvements by which all classes of taffeta effects,
formerly made on hand looms only, are now made on power looms” (the italics are mine; the passage deserves emphasis).
Here again I can refer to correspondence (1913) with a great loom making firm. “We commenced exporting silk looms many years ago and as soon as they became established in some of the foreign countries they were copied and are being made there today, exact copies of our machine. The labor cost is so much less there that it is impossible for us to continue to export, although we have sent from time to time quite a lot of machinery into the different countries, but as above stated, as soon as they get well established they get a local maker to manufacture…. Were it not for the fact that we have been able, by an enormous expenditure of money and skill to invent improved machinery, we should never have been able to take the position we have amongst the silk manufacturers of this country.” It should be added that this firm, like most makers of machinery, expressed its objections to “any appreciable change” in the tariff as it stood in 1912.
Another manufacturer (one making silk fabrics, not machinery) writes me that “in the knitting industry,—silk underwear, hosiery, neckties,—the American machinery is vastly superior to the foreign machinery, against which there is still a considerable prejudice abroad. This prejudice will undoubtedly be broken down within another decade.” Here is again the assertion of superiority, and again the fear that it will not be maintained. Cf. the same state of mind among the makers of other machinery, chapter xii, p. 196, above.
“There are many fabrics such as liberty satins, cotton back satins, crêpes de chine, taffetas, etc., that have been so specialized on here as to encourage the belief that their cost is so low that an export business might be done in them.” From a chapter on “Finding Foreign Markets” in Chittick,
Silk Manufacturing and its Problems (1913), p. 324.
The exports of silks, as recorded in the Treasury statistics, were as follows:—
|EXPORTS OF SILK MANUFACTURES|
|To Great Britain||To Canada||Total, to all countries|
The only countries besides Great Britain and Canada to which any considerable quantities went, were Cuba and Mexico. The exports to Great Britain were chiefly of knitted silks, for which some newly-devised American machinery had caused a considerable foreign market (cf. p. 254., above). Those to Canada have been explained to me as due largely to mere propinquity; a Canadian merchant whose stock is depleted can send a buyer to New York and get what he wants over night, disregarding for such sporadic purchases a comparatively high price. With all allowance for these exceptional circumstances the recent increase in exports of silks remains striking and apparently significant.
Thirty-ninth Report of the Silk Association, p. 46, are some expressions of vain longing for a curtailment of competition. In Germany, the Kartel has become, in the silk manufacture as in others, a permanent part of industrial organization; yet, it would seem, mainly as a “condition” Kartel, not one effective in raising prices. Beckerath,
Kartelle der Seidenweberei-industrie, p. 187