tive tariff systems may also be unimportant. These systems usually include numerous revenue duties, but even in the protective rates, (1) modifications may be too slight in amount, or both the old and the new rates may be too far above or below the "difference in cost of production" to affect the situation; (2) in a period of changing conditions, successive modifications may merely maintain the status quo, or (3) they may decrease or increase the amount of protection, making easier or more difficult the entry of competing foreign goods. The first kind of change has no significance, and the second, only a negative importance. Changes of rates which indicate the adoption or extension of the policy of protection, or its partial or entire abandonment, are alone of great significance in international tariff policy. Most of the recent changes in protective tariff systems have been or have been intended to be of the first or second of the kinds enumerated, and higher tariff rates have been applied largely on the ground that they were necessary that in a period of increasing prices effective protection could be maintained only by advancing the rates.

The assertion that advancing prices demand the scaling up of specific duties to "their [previous] ad valorem equivalent, which is the measure of protection" is so plausible and so misleading that it calls for brief consideration. Unfortunately, even ad valorem duties do not adjust themselves satisfactorily to changing conditions, and the scientific readjustment of specific rates is no such child's play as the quoted assertion would indicate. The most that can be said for the assertion is that there is a general probability that ad valorem duties, or specific duties increased pari passu with the rise of prices, will maintain or increase the effective level of protection. But no general rule can serve as a guide to the

proper "measure of protection." Each industry requires detailed study. As one extreme, a rise in prices will make the protection of some tariff schedules entirely superfluous; and it may be noted that it has been the more recent decline in prices, and not the great rise between 1914 and 1920, which has produced the demand for protection in some quarters. In schedules affecting other industries it may be found that specific duties, not unduly large to begin with, maintain a sufficient measure of protection in spite of a doubling or a trebling of the prices; while in still other schedules-the other extremea proportionate increase of the duties may prove insufficient. Not only each industry but each period must be studied in making a scientific tariff; for instance, a rise in the cost of flour due to a wheat shortage presumably leaves the effectiveness of a specific duty unimpaired, whereas a rise due to local but not international wage increases presumably requires a readjustment. These observations serve to point out that it would be impossible, except by the combined study of a staff of technical and economic experts, to determine the protective effect of many recent changes, e.g., those of the French tariff.

INDICATIONS OF FUTURE POLICIES

The denunciation, since 1917, of most of Europe's commercial treaties, gives a free hand in the reconstruction period. European statesmen are now under no obligation to treat long lists of foreign countries on the "most-favored-nation" basis, or to grant to certain ones the minimum tariff rates or to refrain in certain cases from increasing the rates of conventional tariffs. The slate is clean, and it remains to be seen whether there will be re-written in large degree the "most-favored-nation" provisions, or whether discriminations and tariff wars are to prevail.

Present indications are that the attempt will be made to work out in each country a flexible system, leaving it free to change its policy at will and in all respects. A striking illustration of the desire for stronger and more flexible tariff provisions is seen in the Japanese anti-dumping law (July, 1920) which provides that "in case of imminent danger to industries of importance in this country by reason of imports of goods at unreasonably low prices" the Commission on Dumping is to impose a special surtax, not exceeding the difference between the reasonable market price and the quoted price. In Australia a bill is pending, whose provisions are somewhat less drastic, and in Great Britain and elsewhere there is an evident disposition on the part of manufacturers to obtain the condemnation, as "dumping," of all importations at prices which they can not meet. That is, if through any change of conditions at home or abroad the tariff fails even temporarily to exclude important importations of foreign goods, they would have them stopped by administrative action. The desire for greater flexibility is seen also in the new intermediate schedule of Australia and in the authorization (1918) of the French government to concede, in negotiating commercial treaties, rates between those of the general and

minimum schedules.

A tendency may be noted, especially in the British Dominions, to follow the lead of the United States in establishing a permanent commission for the scientific study of tariff problems. Elsewhere there are semi-permanent and semi-political commissions engaged in tariff revisions. In France the co-efficients of increase are regulated by a large inter-ministerial commission.

The tendency to rely upon other than tariff measures for the control of trade was very pronounced during the war,

when embargoes, prohibitions, licenses, rationing systems, government requisitions, monopolies and price regulations were relied upon. Even the trade of neutrals was controlled through their need of allied shipping and of bunker coal and by blacklisting and financial measures of various kinds. To a considerable degree the war restrictions persist in Europe, though most of them are professedly tempo

rary.

Some of the tendencies toward more drastic control of trade than was afforded by the pre-war tariff systems

are:

(1) The protective and preferential system in regard to dyestuffs, used since the war in the British Empire and now the law of the United Kingdom, is a general prohibition tempered by the licensing of such classes of imports as are not satisfactorily produced within the empire. It is not improbable that the same method be applied to other key industries.

(2) Government fiscal monopolies, which have concerned chiefly tobacco, matches and salt, have been extended to new objects, especially in Italy.

(3) There has been considerable development of direct governmental ownership in competitive industries. The British Government has invested millions in the AngloPersian Oil Company, in the British Dyestuffs Corporation, and in several minor companies. New South Wales is building ships; Tasmania is developing electrical power; the Australian states are apparently about to organize semi-governmental corporations for the manufacture of wool

ens.

The Australian government also is financing and handling the wheat crop.

The

(4) Monopolistic combinations are the order of the day. Since the war huge banking and industrial amalgamations have succeeded one another in Europe, some of them being international in their scope. German organizations which, at the outbreak of the war, were found in control of the chemical industries, of non-ferrous metals, and of other commodities, were displaced by Allied organizations or governments rather than disintegrated. Com

bination and monopolization have meant and will mean an extension of government

control.

(5) The movement for the nationalization of coal and other commodities means the substitution of direct government action for that of individuals or combinations. Even without nationalization, Great Britain has been supplying coal at three different prices, the lowest (said to be an unprofitable rate) for domestic consumption, and the intermediate for allied countries. Recent international agreements in Europe have enumerated the kinds and quantities of materials or manufactures which the parties to the treaty are to exchange.

(6) Differential export duties, which have been used in the comparatively unimportant Portuguese, Spanish and Italian colonies, have recently been extended in the British colonies in a new and menacing manner. Following the policy which had been abandoned in the Philippine Islands before the war, the British have introduced in certain colonies differential export duties on important raw materials, selecting those in which they have a more or less complete monopoly. In some cases the rates are, or were expected to prove, prohibitive, which was never the case with the Philippine duties. The chief point, however, about these duties, is that their object is not revenue nor is it the control of the shipping and entrepôt trade, or merely the encouragement of general trade with the mother country; but the object is to obtain for the British Empire, insofar as the world is dependent thereon for its raw materials, the monopoly of the industrial processes of tin smelting, expression of palm kernel oil, and the tanning of hides and skins.

To conclude: While protectionist sentiment has been greatly increased by the war, and while there have been increases in most of the world's tariffs within the last two years, the industrial and protectionist nations whose tariff policies are of real significance have removed restrictions upon their freedom of action without, as yet, adopting a permanent policy. The signs indicate a period of exaggerated pro

tectionism, beginning with high tariff rates, proceeding to more direct and drastic means of excluding foreign competition in manufactured articles, and basing itself finally upon the monopolistic control of the earth's raw materials. The explosive feature of the situation lies in the extension of international monopolies and of direct government control over necessary raw materials-coal, oil, iron, non-ferrous metals, fertilizers, timber, wool, cotton, hemp, jute, hides and vegetable oils. Because of its enormous extent and the number of materials of which it dominates the world's supply, the British Empire which was allowed to attain such size and importance largely because of its profession and enforcement of a free-trade policy-presents the crux of the present problem. That the right of a sovereign state to pursue a monopolistic policy is legally unassailable offers no solution, for some of the world's most momentous conflicts have grown from the irreconcilability of unassailable legal rights with widespread beliefs in natural rights. But those excluded will not have to base their claims to participation in the distribution of raw materials entirely upon natural rights. As Sig. Tittoni1 reminded the Council of the League of Nations, the Allies, at the Economic Conference of Paris in 1916, promised

1 La Revue de Genève, November, 1920. Sig. Tittoni says: "One may well ask if it was worth the trouble to make such a fuss before and during the war about German 'dumping' to attain after the war a system of excessive protectionism which renders more uneven pre-existing inequalities [in the natural resources of nations] and creates new ones, multiplying the chances of rivalry and of conflict among the nations." After referring to Article XXIII of the League Covenant, he exclaims: "What irony to look at the actual régime of monopoly and excessive protection! How many obstacles and commercial barriers!"

It is hardly necessary to state that the promise to "open their markets" had nothing to do with free trade; it was followed merely by special concessions to the trade of certain belligerents.

to open their markets reciprocally, and Article XXIII of the Peace Treaty guarantees "freedom of communications and of transit, and equitable treatment for the commerce of all members of the League."

The present drift is toward narrow nationalistic policies and the resultant wars; the situation demands the united consideration and coöperation of the world's most far-sighted and broad-minded statesmen.

ports carried in American vessels have been a feature of our tariff legislation from the establishment in 1789 of a national policy governing foreign trade to the present time. During much of this period such duties have, for the most part, been rendered inoperative by reciprocal treaties with practically all the commercial countries of the world, mutually exempting from such discrimination the goods carried in the vessels of the contracting nations, or by provisions in the laws themselves excepting from their enforcement articles imported in the ships of countries levying no discriminatory rates against goods carried to their ports in American bottoms. The Merchant Marine Act recently passed by Congress and signed by the President provides for the termination of treaties or conventions which restrict the right of the United States to impose discriminatory duties in favor of imports entering this country in American vessels. The evident purpose of this enactment is to encourage trade in American bottoms as a means of protecting and enlarging our mercantile marine.

While discriminatory legislation of this character avowedly aims at the establishment and upbuilding of a national mercantile marine, its ultimate object is the development of foreign commerce. The belief that trade fol

the flag of a country are agents in the development of its commerce is a popular and deep-seated one, and finds pretty general expression in the commercial policies of the leading countries of the world today. world today. It is, however, in large measure, a survival of a period when the association of a national or communal shipping organization with the development of foreign trade was necessarily closer than at the present time, and when the separation of the functions of common carrier from those of purely mercantile operation had not gone so far as they have today. In the Middle Ages the "active" trade of such commercial cities as Venice and Genoa and of the towns of the Hanseatic League was closely connected with their shipping policies. Thus, at Venice

1 In mediaeval commerce "active" trade signified the carriage of goods to foreign lands and the establishment there of commercial agencies. It implied the control of the transportation of the articles of commerce to such countries. Where goods were carried by foreigners to one's city or country and commercial transactions carried out by foreign agencies the trade was characterized as "passive." The trade of Venice, for example, with Constantinople, Beirut, Alexandria and northwestern Europe was active-i.e., the articles of commerce were carried to and from these places in Venetian galleys and contracts made through Venetian agents at these ports or regions. The overland trade of Venice with Germany was mainly "passive," as the German brought his goods to the city and carried on his transactions at the Fondaco dei Tedeschi.

from about 1300 to 1500 A. D. the sailing of the Flanders galleys was strictly regulated by the Venetian senate. Separate voyages were as a rule prohibited. This regulation was practiced in the interest of safety, both as a protection from piracy and as a means of mutual help in case of accident. It was also a feature of the politics of a community whose economic basis was foreign trade. The galleys that carried the articles of commerce were as much a part of the city's trading operations as was the sale of the articles them. selves.

With the growth of the large commercial companies of the fifteenth, sixteenth and seventeenth centuries in England, France and the Netherlands, the close association of shipping and foreign trade persisted, largely because vessel operation and commerce were carried on by the same people. The merchants belonging to such organizations as the Eastland Company, the Merchant Adventurers, the Levant Company and the various East India companies, either individually,' or through these organizations, owned the vessels that carried their goods. It was on account of this association, as well as on account of the growth of economic nationalism or mercantilism, that the Navigation Acts became such a prominent feature of the commercial policy of England in the seventeenth and eighteenth centuries. These acts,

1 It should be remembered in this connection that most of these commercial concerns began as "regulated" companies, i.e., as associations of individuals who had been granted charters by their governments giving them as an association certain exclusive privileges for carrying on trade between the home country and certain foreign lands. The members of these associations, however, carried on their trading operations severally, losing or gaining as individuals. Eventually the "regulated" company evolved into a joint stock company. The English East India Company began its existence as a "regulated" company but adopted the joint stock company principle in 1612.

among other things, restricted or tabooed the carriage of articles of commerce to or from England in foreign vessels. The British mercantile marine, as far as possible, was to perform this function. It must, therefore, be fostered, not only because it would obviate the necessity of paying foreigners for the transportation of English goods, but also because a large national mercantile marine meant an extensive foreign trade.

ENGLISH NAVIGATION ACTS

Before discussing the provisions contained in American tariff acts discriminating against goods imported in foreign vessels a few observations should be made concerning the English Navigation Acts, as certain features of these acts have been embodied in our own legislation. The beginnings of the English Navigation Acts antedate by some centuries the development of mercantilism as a national policy. The earliest of these laws go back to 1381 and 1390. They ordained that no merchandise should be shipped out of the realm except in British ships on payment of forfeiture. These laws and their successors till about the middle of the seventeenth century remained for the most part unenforceable. The great Navigation Act of 1651, passed under Cromwell and aimed primarily at the shipping and commercial interests of the Netherlands, stands out as a landmark in British commercial history. This wellknown act provided among other things that all products "of the growth, production, or manufacture of Asia, Africa or America, or any part thereof . . . as well of the English plantations as others" should be imported into England or its territories only in British-built and Britishmanned vessels. Articles grown or made in Europe could be shipped to England only in the vessels of the pro