One of these is the anti-dumping argument. From the standpoint of the American tariff, dumping is the practice which some foreign producers have of temporarily selling their surplus goods in this country at an abnormally low price. [Footnote: Some American producers in turn "dump" in foreign markets, but with this practice we are not here concerned.] If dumping were permanent, we would gain because we would be getting goods at a much lower price than we could manufacture them. The evil of dumping grows out of the fact that it tends to force domestic producers out of business. Then later the foreign supply may diminish, in which case we suffer from a shortage of goods. If foreign producers do continue to supply the American market they may take advantage of the fact that American competitors have been forced out of business, and demand monopoly prices. The free trader admits the force of the anti-dumping argument, and concedes that the intense economic rivalry growing out of the World War rendered desirable tariff rates which would protect domestic producers against dumping.
Another protectionist argument which has gained in strength because of the War is the "infant industries" argument. Protectionists claim that industries really adapted to this country may be prevented from arising here because of their inability, while still in the experimental stage, to meet strong competition from well-established foreign producers. When an industry is in the experimental stage the cost of production is relatively high, and the price will be correspondingly high. Well established and economically-conducted businesses can undersell these experimental or "infant" industries. Protection for such "infant" industries is therefore sought until such time as they will be able to stand foreign competition. The free trader has generally replied that such protection may be desirable in some cases, but maintains that care should be taken to make such protection both moderate and temporary, otherwise protection will perpetuate industries for which we are really unsuited. During the World War American producers began to manufacture dyes and chemicals formerly imported from Germany. The industrial importance of these products gave weight to the belief that the new industries which sprang up in this country during the War were entitled to protection against foreign competition.
A third protectionist argument which was strengthened by the World War is the military or self-sufficiency argument. It has long been the claim of the protectionist that high tariff duties encourage the development in this country of all industries producing the necessities of life, as well as all supplies which are vital in war time. High protection was thus defended on the grounds that it permitted the United States to be nationally self-sufficing, thus allowing us to be relatively independent of other countries, especially in war time. Previous to the World War many free traders scoffed at this argument as resting upon an unjustified fear of war, but this attitude was changed by the dangers to which we were subjected by the interruption of our foreign trade during the war. At present the military or self-sufficiency argument is of great importance.
365. THE TREND TOWARD PROTECTION.—Of late years, therefore, there has been a distinct trend toward protection in this country. The fear of dumping, the desire to protect infant industries established during the World War, and the increased importance of the military or self- sufficiency argument have been factors in this trend. Another factor has been that the Republican party, traditionally committed to a policy of high protection, returned to power in 1920. A last important influence has been an increased need for Federal revenue. The World War not only increased our indebtedness, but the advent of national prohibition in 1919 cut off a source of Federal revenue formerly very important.
366. TARIFF NEEDS.—From the standpoint of practical politics, one of the greatest needs of our time is for an intelligent and public- spirited handling of tariff problems. The tariff is a technical and highly complex question, upon which politicians have heretofore had too much to say, and trained economists too little. Too often, vague claims and political propaganda have carried more weight than have facts.
It is asserted by many that the tariff can never be taken out of politics, but this is perhaps too strong a statement. In this connection an interesting development was the establishment in 1916 of the United States Tariff Commission. This Commission consists of six members appointed by the President for twelve years. Not more than three of the members may belong to the same political party. It is the duty of the Commission to investigate conditions bearing upon the tariff and to report its findings to Congress. It is hoped that this plan will place at the disposal of Congress scientific data on which to base tariff legislation. So far the Commission has not materially reduced the influence of politics upon tariff legislation, though it is perhaps too soon to expect results.
It is sometimes said that our tariff policy ought to be less changeable. Certain it is that our tariff history is full of inconsistencies and irrational fluctuations. But the question of a tariff policy is a thorny one. Manifestly, business should not be forced to accommodate itself to a purely political manipulation of the tariff; on the contrary, the tariff ought to vary with changes in business conditions at home and abroad. Whatever may be implied by a tariff "policy," it is also certain that the tariff should somewhat accommodate itself to revenue needs. Beyond these somewhat general statements, however, it is hardly safe to say what should be the basic elements in a national tariff policy.
QUESTIONS ON THE TEXT
1. Explain the gain from exchange.
2. What is meant by the tariff? Distinguish between a revenue and a protective tariff.