There are but two cases in which duties on commodities can in any degree, or in any manner, fall on the producer. One is, when the article is a strict monopoly, and at a scarcity price. The price in this case being only limited by the desires of the buyer—the sum obtained for the restricted supply being the utmost which the buyers would consent to give rather than go without it—if the treasury intercepts a part of this, the price can not be further raised to compensate for the tax, [pg 580] and it must be paid from the monopoly profits. A tax on rare and high-priced wines will fall wholly on the growers, or rather, on the owners of the vineyards. The second case, in which the producer sometimes bears a portion of the tax, is more important: the case of duties on the produce of land or of mines. These might be so high as to diminish materially the demand for the produce, and compel the abandonment of some of the inferior qualities of land or mines. Supposing this to be the effect, the consumers, both in the country itself and in those which dealt with it, would obtain the produce at smaller cost; and a part only, instead of the whole, of the duty would fall on the purchaser, who would be indemnified chiefly at the expense of the land-owners or mine-owners in the producing country.
Duties on importation may, then, be divided “into two classes: (1) those which have the effect of encouraging some particular branch of domestic industry [protective duties], (2) and those which have not [revenue duties]. The former are purely mischievous, both to the country imposing them and to those with whom it trades. They prevent a saving of labor and capital, which, if permitted to be made, would be divided in some proportion or other between the importing country and the countries which buy what that country does or might export.
“The other class of duties are those which do not encourage one mode of procuring an article at the expense of another, but allow interchange to take place just as if the duty did not exist, and to produce the saving of labor which constitutes the motive to international as to all other commerce. Of this kind are duties on the importation of any commodity which could not by any possibility be produced at home, and duties not sufficiently high to counterbalance the difference of expense between the production of the article at home and its importation. Of the money which is brought into the treasury of any country by taxes of this last description, a part only is paid by the people of that country; the remainder by the foreign consumers of their goods.
“Nevertheless, this latter kind of taxes are in principle as ineligible as the former, though not precisely on the same ground. A protecting duty can never be a cause of gain, but always and necessarily of loss, to the country imposing it, just so far as it is efficacious to its end. A non-protecting duty, on the contrary, would in most cases be a source of gain to the country imposing it, in so far as throwing part of the weight of its taxes upon other people is a gain; but it would be a means which it could seldom be advisable to adopt, being so easily counteracted by a precisely similar proceeding on the other side.
“If the United States, in the case already supposed, sought to obtain for herself more than her natural share of the advantage of the trade with England, by imposing a duty upon iron, England would only have to impose a duty upon corn sufficient to diminish the demand for that article about as much as the demand for iron had been diminished in the United States by the tax. Things would then be as before, and each country would pay its own tax—unless, indeed, the sum of the two duties exceeded the entire advantage of the trade, for in that case the trade and its advantage would cease entirely.
“There would be no advantage, therefore, in imposing duties of this kind with a view to gain by them in the manner which has been pointed out. But, when any part of the revenue is derived from taxes on commodities, these may often be as little objectionable as the rest. It is evident, too, that considerations of reciprocity, which are quite unessential when the matter in debate is a protecting duty, are of material importance when the repeal of duties of this other description is discussed. A country can not be expected to renounce the power of taxing foreigners unless foreigners will in return practice toward itself the same forbearance. The only mode in which a country can save itself from being a loser by the revenue duties imposed by other countries on its commodities is, to impose corresponding revenue duties on theirs. Only it must take care that [pg 582] those duties be not so high as to exceed all that remains of the advantage of the trade, and put an end to importation altogether, causing the article to be either produced at home, or imported from another and a dearer market.”
By “reciprocity” is meant that, when one country admits goods free of duty from a second country, this latter country will also admit the commodities of the former free of duty; or, as is often the case, if not free of duty, at a less than the usual rate. Until the last few years we have had a reciprocity treaty with Canada, but it is not now in force; and an arrangement for closer commercial relations with Mexico is now under consideration.