The beginnings of American foreign trade.
International Commerce: Its Beginnings.—Before the Revolution a considerable amount of trade was carried on between the American colonies and various European countries, chiefly Great Britain. After the winning of independence this foreign commerce began to grow rapidly because the hindrances that had formerly been imposed upon it were now removed. Moreover, the Napoleonic wars in Europe brought about an enormous increase in the demand for American foodstuffs. These wars retarded agriculture in Europe and forced the various countries to import supplies from overseas. American shipping developed greatly during the period 1790-1805, but it thereafter received a set-back owing to the blockades and the Embargo Act of 1807, followed a few years later by a four-years’ war with England.
Tariff Policy.—During the period immediately preceding the framing of the constitution each of the thirteen states was free to regulate its own commercial relations. Each determined for itself whether it would permit imports to come in freely from other states and other countries or whether it would impose duties on such imports. |The constitution empowers Congress to regulate foreign trade.| This arrangement proved altogether unsatisfactory and the constitution gave to Congress complete authority to control commerce with foreign countries and among the states. This action was taken primarily to afford Congress an adequate revenue in the way of taxes on imports, although it was also designed to put an end to undue commercial rivalry among the states themselves. In 1792, therefore, Congress passed our first tariff law, a measure designed mainly to bring forth income for the new federal government but also to afford protection to American industries. |This is done by tariffs.| This act of 1792 marks the beginning of a long line of tariff measures, some imposing high duties on imports and some setting these duties at lower rates.[[165]]
The Tariff Commission.
The making of the tariff is in the hands of Congress but the function of studying the industrial needs of the country is entrusted to a Tariff Commission of six members appointed by the President. This commission is empowered to make recommendations to Congress, but Congress is under no obligation to follow its advice nor has it usually done so. Tariff rates are fixed, for the most part, in obedience to political pressure.
The case for protection.
The Argument for Protective Tariffs.—Why should American industry be given protection by tariff duties against foreign competition? The answer to this question was first given by Alexander Hamilton in his famous Report on Manufactures (1790) and it has been elaborated by many writers since Hamilton’s time. |1. It develops young industries.| The chief arguments in favor of protection are that it helps home industry, develops a home market, raises wages and keeps them high, provides employment for a country’s own workmen, and makes a country independent of others. Protection, it is claimed, helps new industries or “infant industries” to get on their feet. These new industries, if not shielded against the pressure of foreign competition in their early stages would be unable to make headway, but if given adequate protection for a time they ultimately get well established and add to the nation’s industrial strength. This industrial growth, it is argued, helps the farmer by creating a home market for his agricultural produce. The growth of industry creates large cities and these centers of population form the farmer’s best market.
2. It keeps wages up.
Those who favor the policy of protection also argue that if high duties were not imposed upon imports from other countries, the wages of the American workman would fall and many would be out of employment. Until recent years the general rate of wages in European countries has been much lower than in the United States, but since the World War the disparity has not been so great. The lower wages of labor in Europe have enabled goods to be produced more cheaply there than in America, and were it not for the protective tariff, the United States would be flooded with these products of underpaid European workers. In the end the American scale of wages would be forced down to the same level—so the protectionists argue.
3. It promotes an all-around economic development.