If it be once established generally that an industry is to be artificially promoted, and if there be question only of a choice between the different measures to be adopted to thus promote it, moderate[A3-8-1] import duties are not only the most equable, least subject to abuse, but also attended by the greatest number of secondary advantages. Here the sacrifice is imposed on all the consumers of the "protected" commodity, that is, on the entire people, to the extent that they come in contact with the commodity in question. Export duties on raw materials, on the other hand, compel one single class of the people to make sacrifices in order to advance the favored industry.[A3-8-2] Export premiums for commodities on which labor has been expended are distinguished from import duties as the offensive from the defensive: the former promote the artificial trade, the trade which has gone beyond its natural basis, the latter curtail it.
Premiums, advances without interest, gifts of machinery etc., to persons engaged in industry would operate very usefully under an omniscient government.[A3-8-3] But they generally fall to the lot not of the most skillful manufacturers, but of the most acceptable supplicants, who now are doubly dangerous to the former as competitors.[A3-8-4] The same is true to a still greater extent of monopolies granted to undertakings which it is intended to promote.[A3-8-5] They require, at least, to be vigilantly superintended in case of sale from one person to another; otherwise the individual to whom they were first granted is very apt to withdraw with the capitalized value of the privilege accorded, and his successors, loaded with a heavy debt in the nature of a mortgage, to derive no advantage from it.[A3-8-6]
Further, import duties, besides the fiscal advantage which they afford, have the police advantage that they may, like quarantine provisions, prevent somewhat the inroads of many economic diseases: thus, for instance, gluts of the market, and still more, the severe chronic disease of ruinously low wages.[A3-8-7] But only very moderate hopes from protective duties should be entertained in all such respects as these.[A3-8-8]
Prohibition proper operates, as a rule, very disastrously.[A3-8-9] It spoils those engaged in industry by a feeling of too great security (mortals' chiefest enemy: Shakespeare). It may even lead to complete monopoly, when the industry requires very large means and the country is small. The inducement to smuggling is peculiarly great here. But even duties, so high that they far exceed the insurance premium of smuggling, can be of very little advantage either to industry or to the exchequer. They can only promote the smuggling trade. However, the repeal of an import prohibition or the abolition of a tariff approaching to a prohibition should be announced long enough in advance to enable the capital invested in the protected industry to be withdrawn without too heavy a loss.
[A3-8-1] In general, Mäser was in favor of Colbert, and opposed to Mirabeau. (P. Ph. II, 26.) He ridicules the prohibitions of the exportation of raw material by saying that not only flax-seed, flax-yarn, but also the linen, must remain in the country. As Raphael Mengs once ennobled four ells of linen to a value of 10,000 ducats, a hundred Mengs should be sent for, to the end that all the linen should be exported painted. (v. 25.)
[A3-8-2] Rau, Lehrbuch, II, § 214, would prefer to tolerate state premiums (politically so dangerous), rather than protective duties, because, in the case of the former, the magnitude of the assumed sacrifice may be exactly estimated in advance. Similarly, Bastiat, Sophismes, ch. 5.
[A3-8-3] Many striking examples in List's Zollvereinsblatt, 1843, No. 47.
[A3-8-4] Under Colbert, the granting of a monopoly had frequently no effect but to ruin an already existing rural industry in the interest of a city manufactory. Thus, in the case of lace, in Bourges and Alençon, and soap in the south, etc. The upshot of the matter in some places was simply that the carriers on of industry on a small scale were allowed to carry on their industries in consideration of a payment made to the owners of the privilege. (Journ. des Econ., 1857, II, 290.) The King of Denmark bought back, in 1756, at a high price, industrial privileges which his predecessors had granted gratis. (Justi, Polizeiwissensch., § 444.) The Colbert monopoly of the Hollander v. Robais (1665), who was the first to manufacture fine cloths in France, was not abolished until 1767. (Encycl. Mech. Arts et Manuf., II, 345.)
[A3-8-5] Thus, for instance, in 1863, the apothecary shops of the governmental district of Breslau had a value of 2,791,227 thalers, of which the land and inventories of stock were only 29 per cent. The concessions represented 71 per cent. The sick, in the entire state of Prussia, were obliged to contribute 1,780,000 thalers a year to compensate these monopolists. Compare Brefeld, Die Apotheken, Schutz oder Freiheit? (1863).
[A3-8-6] Hermann, in his review of Dönniges' System des freien Handels und der Schützzölle (Münch. G. A. Sept. und Octbr., 1847) calls attention to the point that a decrease of the cost of production, by merely lowering wages, is no gain to the national resources, but only an altered distribution of them, for the most part a very unfavorable one. But when a nation is advancing on this road, it may strengthen its exportation by such means, as it might granting export premiums at the expense of the workmen. This would lead, on the supposition of entire freedom of trade, to a corresponding depression of the lower classes in other countries; and against such contagion a protective tariff may operate in a manner similar to the quarantine. This is much exaggerated by Colton, Public Economy of the United States (1849), p. 65, 178. America needs a protective tariff more than any other nation, because of its dear workmen and capital. In Europe, the upper classes rob labor of its product, while in America, labor itself enjoys its products. Free trade would lower America to the level of Europe.