Conflict between general and special interests
Prevalence of protective tariffs
2. Free foreign trade thus has in its favor the presumption of advantage to the citizens; but various interests may be adversely affected. The general attitude of economic students for a century and a half has been favorable to a large measure of freedom in foreign trade. But the actual practice of nations is opposed to the principles laid down by the philosophers and accepted by nearly all serious students of the question. Germany adopted very restrictive measures under Bismarck in 1879 and by a recent law has discouraged trade still further. France, Italy, and other smaller nations of Europe have strong protective tariffs. The United States has followed a restrictive policy for the last century almost unvaryingly. The explanation of this contradiction is not entirely simple. Free trade is not the most desirable thing for every one. Great interests are affected by foreign trade and certain of these interests are able to dominate legislation. The general proposition of free trade between nations, as advocated by most economists since Adam Smith, is rejected by a majority of the people, by the politicians, and by the legislators.
CHAPTER 51
THE PROTECTIVE TARIFF
§ I. THE NATURE AND CLAIMS OF PROTECTION
Nature of a tariff for revenue
1. A protective tariff is a schedule of import duties so arranged as to give appreciably more favorable conditions to some domestic industries than they would enjoy with free trade. Tariff duties were first laid to get revenues for the government. The first effect of the tariff is the same as that of any tax that enters as a new factor into enterpriser's cost—the domestic price of the taxed article tends to rise. Other results then follow. If the article cannot be produced within the country (as oranges, spices, and coffee, in England, Norway, and Sweden), its consumption is reduced. The lessening of demand may affect somewhat the price in the producing country and may compel the foreign producers to sell each unit for less than before. As such a tariff does not increase home production, it is for revenue, not for protection.