§ 13. The Payne-Aldrich tariff, 1909-1913. The tariff act of 1909 was the attempt of the successful party to redeem its campaign promises in regard to the tariff. Many changes of rates were made, both downward and upward.

9 See § 12 in ch. 16.

It was estimated that rates were reduced in 584 instances, affecting 20 per cent of imports. These changes included placing hides upon the free list (taxed 15 per cent before,) and cutting down the rate on leather, shoes, coal, lumber, iron ore, pig iron, and steel-rails. But on the other hand

Fig. 3, Chapter 14, is a continuation, on a different scale, of Figure 1 (seven years, 1909-1915, overlapping, to make comparison easier). The increased valuations from 1916 to 1919 reflect mainly price increases, and the enormous increase in 1920 evidences, in addition, the strenuous, yet inadequate effort of the rest of the world to keep on trading with us without getting more deeply into debt. The data are for fiscal years.

rates were increased in three hundred instances (including many items in the cotton schedule). The general belief that little reduction was effected, on the whole, was confirmed by the experience under the act. As compared with the last two years (1908-1909) of the Dingley tariff the first two years of the Payne-Aldrich tariff showed a decline of 1.5 per cent, and on free and dutiable a decline of less than 3 per cent. These reductions in the statistical results are no greater than occurred within like periods while the Dingley Act continued in operation without change.10

Probably no tariff since "the act of abominations" in 1828 has called forth more widespread criticism than this one, and the tariff became a leading issue in the campaign of 1912. After 1910, The House being Democratic, many bills to reduce duties were presented, and some were passed by both houses; but all were vetoed by President Taft, mainly on the ground that it would be best to await the report of the tariff board which had been authorized and appointed for the purpose of ascertaining the cost of production referred to in the "true principle of protection."

§ 14. The Underwood tariff, 1913. After President Wilson was inaugurated, March 4, 1913, the tariff was at once taken up by Congress. The general features of the act that was passed were as follows:

(a)   Considerable additions to the free list of raw materials.

(b)   Abolition of compensatory duties corresponding with the old rates on raw materials.

(c)   Replacement of specific by ad valorem rates in many cases.

(d)   Taxation of plain kinds of goods less than fancy kinds luxuries higher than necessities.

(e)   Reduction of rates generally (most of the few increases being to correct some apparent error in the old law).

10 Probably resulting from the rising prices, as explained above, § 3. For example, in one year, from 1899 to 1900, the average ad valorem rate collected on dutiable goods fell 3 per cent, and that on all goods fell 2 per cent; in the two years from 1904 to 1906 the average rates on dutiable fell 4 per cent and on all goods fell 2 per cent. See Fig. 2, ch. 14.

(f) Application of the so-called competitive principle to rates intended to be protective, viz., to leave the rate just barely high enough to keep out foreign products.11

Articles placed on the free list were raw wool (which had borne a rate equivalent to about 44 per cent), metals, agricultural implements, raw sugar (the lower rate to go into effect gradually), coal, lumber, many agricultural products including live cattle, meats, wheat, corn, flax, tea, and hemp, and numerous manufactures including boots, shoes, gunpowder, wood pulp, and print paper.

Moderate reductions were made in the schedules for chemicals, earths, cotton goods, and sundries, while rates on various luxuries were either unchanged or raised. Left almost unchanged were the schedules for tobacco, for spirits and wines, and for silks (already very high).

This act was signed October 3, 1913, and had been in operation about nine months when the great war broke out in August, 1914. "What its effects would have been under more normal conditions we can judge little from the actual experience.

§ 15. Operation of the tariff act, 1913-1921. The revision of the tariff of 1913, viewed with non-partizan eyes, appears to have been carried out as consistently with regard to its professed doctrine, and as little influenced by the malevolent arts of the old-time Congressional lobby, as any debated tariff act in our history. It still contained, on the whole, a large measure of protection, evidenced by the fact that in the first eight months that the act was in operation the ad valorem rate on dutiable goods was but 4 per cent less, and the average rate on free and dutiable together was about 3 per cent less, than in the preceding year. Apparently this was far from a "free-trade tariff." The reduction in the average rate collected was less than was expected. Many of the reductions had little effect, the former rate having been much higher than was needed to exclude the goods. In other cases the old rates were but nominal and inoperative because they were upon goods regularly exported, not imported (e. g., farm products, cotton goods, and some other manufactures). But some of the reductions doubtless would have forced the less efficient plants in some industries to increase their efficiency or go out of business. Time, in any normal period, is needed for adjustment, but an adjustment of a most abnormal kind was in progress during the war. Imports from Europe fell somewhat, while total imports (after 1915) increased, and exports increased enormously. Old industrial establishments were converted to different and temporary uses. The comparatively low duties had no harmful effect, and enabled our trade to adapt itself far more quickly to international conditions and to profit more by the great opportunities than could have been possible with a high tariff.

11On this see further ch. 15, § 5, § 6; ch. 16, § 12.

Fig. 4, Chapter 14, shows the rapid growth of our foreign trade in the period of the World War, and the still greater relative growth in the excess of exports. The data are for fiscal years, ending June 30.