ours, is necessarily at a disadvantage in bargaining with countries with intermediate and minimum tariffs. Some nations grant their minimum rates to all most-favored nations unconditionally and automatically. But in a number of cases we have not received the full benefit of minimum schedules and Canada, as has been pointed out, has insisted in applying to her dealings with us our own interpretation of the most-favored-nation clause and has refused concessions except in return for concessions. The lowering of the duties in a general or maximum tariff, which represents ostensibly at least the settled policy of a country, always makes an appeal, and as long as we are not in a position to offer reductions in our tariff schedules, we are not likely to benefit fully, at least, from intermediate and minimum schedules fixed for the purpose of bargaining. Penalty duties, in the second place, do not prevent effectively discriminations concealed in regulations and classifications. There has been a marked tendency, particularly in European tariffs, to increase the number of classifications within the different industrial groups, primarily in order to apply specific duties more accurately, but sometimes with the purpose and frequently with the result that when a concession is made to one country, the benefit to other countries entitled to the concession under the most-favored-nation clause is reduced to a minimum. It is clear that if classification is carried far enough, third nations will benefit very little from their rights under most-favored-nation clauses. The general, or higher, tariff rates, therefore, may remain in effect on peculiarly American products, simply because we have not been in a position to negotiate for the minimum rates. Penalty duties are of little help in this situation, although Secretary Knox was able to obtain a few concessions by the use of the maximum and minimum provisions of the tariff act of 1909. Generally speaking, the result will be that we shall receive mostfavored-nation treatment, but, as a matter of fact, peculiarly American products will bear relatively a much higher duty than the goods of those countries which were able to negotiate for concessions.1 Discriminations may also be found in regulations. From 1883 to 1891 Germany prohibited the importation of American hogs, pork and sausages. The official ground assigned for this action was sanitary but the measure was, in fact, for the protection of German agrarian interests. FORM WHICH THE CONCESSION THE UNITED STATES At least the first of these disadvan tages of the penalty method is avoided by the concession method. Congress might fix the rates of the tariff in the next revision at a level which would permit a reduction of 20 per cent thereof without injury to any American interest, and at the same time authorize the President to reduce the tariff on any article in any amount up to 20 per cent of the duty in the general schedule (or to place certain specified articles on the free list) in return for the lowest rates granted to any other nation. The law should state specifically that special and exclusive concessions were not to be asked from foreign powers and that all concessions in the American tariff granted to 1I.e., even though the foreign country had no discrimination in mind. Of course, a bargaining tariff would hardly deter a foreign country which had adopted a policy of protection for typical American products. any one country should be granted immediately and automatically to all other countries granting us their lowest rates.1 This provision, it should be noted, would differ from Section 4 of the tariff act of 1897 (the Kasson Treaty section) in three respects: (1) No ratification by the Senate of trade agreements entered into thereunder would be necessary. (2) No special or exclusive concessions would be sought, but only equality of treatment. (3) The concessions made in the United States tariff would be generalized to all countries granting us their lowest tariff. It is obvious how this provision might be used to obtain the intermediate or minimum rates of foreign tariffs. It might also be adapted to prevent with greater effectiveness discriminations concealed in regulations and classifications. To make this possible, however, the President would have to be given discretionary power to withhold our minimum tariff rates from any country which he should find upon investigation insisted on keeping in force concealed discriminations against the United States.2 The mere existence of high tariff rates does not constitute a discrimination. Suppose, however, a nation has a general and conventional tariff and no conventional rates are fixed on products in which the United States is particularly interested. A refusal to fix a conventional rate would constitute at least a prima facie case of intent to discriminate and warrant the withholding of reductions in duties on products imported from that nation. 1 Cf. Section 644 of the Tariff Act of October 3, 1913. 2 Cf. the act passed by the Congress of the United States to cause the removal of discriminations by Germany against American meats. U. S. Tariff Commission, Reciprocity and Commercial Treaties, p. 424. DRIFT TOWARD SPECIAL BARGAINING AND DISCRIMINATIONS At a time when a policy of equality of treatment seems particularly desirable, not only for the United States but also for all nations, a policy of discrimination and special bargaining of the harshest character is being advocated and applied by foreign nations. Indeed, it is not absent from the United States. It has appeared in the sections of the Merchant Marine Act providing for special export and import railroad rates on goods shipped in American bottoms, for an American monopoly of Philippine shipping, and for discriminatory customs duties on goods imported in American ships. Even a return to the reciprocity practices of the tariff acts of 1890 and 1897 is suggested.1 The policy of discrimination and exclusion expressed itself in its extreme form in the Teuton program for Mittel Europa, and in its counterpart among the Allies, the Resolutions of the Paris Economic Conference of June, 1916. These measures on the part of the Allies were undoubtedly justified for strategic reasons, but they have no place in a program for harmony and good will among nations. Unfor1 Mr. Longworth recently said (Congressional Record, Dec. 21, 1920, p. 21): If discrimination in favor of the debtor nations is to be a feature of our future tariff policy, there is one way to my mind by which it can be effectively accomplished, and that is through the medium of separate and reciprocal trade agreements. I can see difficulties in the way of such a policy, but to my mind they are by no means insurmountable. I can conceive that it might be greatly to the benefit of England or France or Italy or Belgium and not greatly to our detri ment to permit them certain advantages over other countries in the shipment of certain kinds of goods into our market, in return for which it might be greatly to our benefit and not greatly to their detriment to receive in return certain advantages to American goods in their markets. Under such a policy we would not be giving something for nothing. Such arrangements would be and ought to be to our mutual advantage. tunately, therefore, when the Allied and Associated Powers sat down at Paris to negotiate the final treaty of peace, these doctrines of revenge, punishment, exclusion and trade war were a guiding influence in the construction of the treaty, particularly in the construction of its economic clauses. The same spirit of exclusion and narrow commercialism which ruled at Paris is still menacing the world with the possibility of trade wars. Attempts are being made to justify special discriminatory arrangements, upon the ground that only by such means can nations economically weak maintain themselves in competition with the stronger. Certain countries, it is urged by some, should be permitted to enter into special arrangements with other nations and not be required to generalize their concessions. It may be desirable for political reasons to tolerate an exception to the general rule of equal treatment in order to enable a country to recover from the war. A general principle recognizing special bargaining would in the long run not help, but would injure nations economically weak. If such a principle be conceded to weak nations, it must be allowed also to the strong, and it is inevitable that the former would be worsted in any international test of power with the latter. Special bargaining might work to the advantage of the weak nation if the strong refrained from exerting its power, but in international dealings that is not likely to occur. Weak nations, if they champion a régime of special bargaining, are only forging weapons for their own disadvantage. On the other hand, the principle of equality of treatment gives to the economically strong nations only the advantages which are theirs by reason of their strength. At the same time it affords the economically weak nations. a degree of protection, which they can not have under the harsh procedure of a system of special dealings. The best thing in the long run for any nation (and all that any is entitled to in international affairs) is a fair, equal chance. Weak nations should count themselves happy to have this guaranteed. The United States, it is true, would have, because of its economic power, some advantages in the free, open and equal competition which would take place under a system of unconditional most-favored-nation treatment among nations, but it could obtain much greater advantage if it chose to use its power to exert pressure and exact special concessions. OUR NATIONAL POLICY An effective bargaining tariff in the United States is necessary to protect American interests from the discriminations which today threaten our interests abroad. The adoption of a definite policy by the United States today would unquestionably have a very wholesome, restraining effect upon objectionable tendencies in the commercial policies of other nations. The first step in the framing of such a policy would be to eliminate from our own practice unequal treatment wherever it exists. In the next place, it would be a great gain if we should set forth equality of treatment as the basic principle which is to guide us in the application of our commercial policy, and then to organize our tariff in such a way as to penalize other nations which refuse to grant to American interests equality of treatment in their markets. Furthermore, the need is great today for an agreement among the nations upon a model clause in commercial treaties guaranteeing equality of treatment. The old controversy over the conditional and unconditional mostfavored-nation clause should be avoided. It should be recognized that the object of both forms of the clause is to establish equal treatment among nations and this principle should be embodied in future commercial treaties, regardless of the traditional forms and interpretations which the clause may have had in the past. The limits of a bargaining tariff can not now be set. In the past they have not applied to tariff relations within empires. Whether our bargaining tariff policy, however, should extend to include the preferential schedules of the self-governing dominions of the British Empire is a question which can not be considered closed. These dominions are today, for all practical purposes, nations; and having assumed the rights of nations, it seems that they should be willing also to assume the corresponding obligations. preferential export taxes recently adopted in British West Africa and India. In the case of India, for example, an export tax of 15 per cent was imposed on hides and skins exported from India and two-thirds of this duty is remitted when exports are made with the guarantee that the hides and skins are to be tanned in the British Empire. Should we in such a case impose additional or penalty duties on leather and leather goods imported from any part of the British Empire which benefits from this special export concession? These are large problems and, since they are not such as have been disposed of under general policies of bargaining in the past, it is better to consider them as subjects for general negotiation. Nevertheless, they press for solution and those who wish to avoid trade wars and national conflict will do well to give A further question is raised by the them early consideration. THE Post-War Tariff Changes and Tendencies HE generalization may be made that practically all countries either have increased their tariff rates since the war or are taking more or less definite steps in that direction. The statement holds even for a number of the countries whose rates are limited by treaties. The recent treaty between the United States and Siam is a first step toward the relaxation or removal of the restrictions which now limit Siamese import duties to 3 per cent ad valorem. Egypt is asking Great Britain to obtain for her a like tariff autonomy. China's tariff is limited in principle to 5 per cent ad valorem, but the rates enforced are "equivalent" specific rates, which have been revised only at long intervals, and which, in 1918, actually yielded only 2.6 per cent of the value of the imports. During that and the following year new rates "to restore an effective 5 per cent" were worked out on the basis of the prices of 1912-1916, and the new schedule went into effect in September, 1919. Most recently the powers have agreed to a temporary surtax of 10 per cent of the duties to provide funds for famine relief, and the press has announced that this will go into operation January 16, 1921. By the peace treaties, Germany and Austria were put temporarily among the countries which might not increase their pre-war tariff rates.1 1 Imports from the Allied and Associated Powers were to pay for six months the lowest rates payable on similar articles on July 31, 1914. Upon vegetable products the restriction extends to an additional thirty months. (Treaty with Germany, Art. 269.) They were permitted, however, to require payment in gold; and payments in paper are now accepted in Germany at 10 times, and in Austria at 33 times the gold rate. Exceptions to the generalization that recent tariff changes are upwards are found in certain of the belligerent countries which pushed their revenue rates very high during the war and have since lowered or only maintained them. The removal of the Canadian war surtaxes and reductions on farm machinery may be cited. The repeal of duties upon the raw materials of a new or expanding industry is a part of protectionist policy which has been recently illustrated in Japan, Australia and the Union of South Africa. War prices led in some instances to the suspension of duties on foodstuffs and these suspensions have been largely continued, while the needs of reconstruction in Europe have led to removals of duties from machinery and building materials. On the other hand, the fall in prices in the latter half of 1920 led to the lowering of export duties on rubber, hides, wool and other products upon which unusually high duties had been levied during the period of high profits. In a few cases very high duties have been reduced, e.g., France reduced the rate on automobiles from 70 to 45 per cent, and Ceylon, from 100 to 7 per cent. While a complete enumeration of the tariff reductions of the last two years would fill pages, they are few compared to the increases, although relatively few countries have made an approach to a general revision of their tariffs changes have perhaps been most extensive in France, Belgium, Spain, Portugal, Argentina, Brazil, Mexico and Peru. The European states named, however, consider the changes already made merely tentative. Argentina's revision consisted in revising the official valuations, which had remained unchanged since 1906. Canada, Japan, New Zealand, Spain and Italy have revisions in process. The governments of Chile and Switzerland have proposed revisions. Anti-dumping legislation and provision for key industries remain on the government's program in Great Britain. The transition period since the war has been too short and unsettled for statesmen and nations to determine upon large changes of policy. Trade in Europe is still, to a considerable extent, under direct government control. With the possible exception of Great Britain and her dependent colonies, no revolutions in policy have been made or seem imminent. While no other change appears likely in regard to free trade, other features of tariff policy may soon be revised on a large scale. Europe is today almost without commercial treaties, and it is too soon to predict what policies will be adopted in regard to most-favored-nation treatment, the use of maximum, minimum and intermediate schedules, and similar points. The Italian Government has expressed a preference for an autonomous tariff; i.e., a two-column tariff whose lower rates may be accorded by treaty en bloc, but which remain alterable by the legislature. It would be nearly as tedious as difficult to enumerate the increases of tariff rates recently made. A few isolated points may be mentioned before considering recent changes in France and the British Empire. Japan has levied 35 per cent ad valorem upon dyes and drugs. In Italy, which lacks both coal and iron, the tariff dispute centers around the demand of the iron industry for high protection. From Italy and Portugal to Norway there has been a general movement to restrict the importation of luxuries, either by prohibitions or by high duties. |