After the war for independence from England, trade jealousies and restrictions among the colonies proved such a nuisance that when the Constitution was adopted the power to levy duties on interstate trade was taken from the states. The first United States tariff act was passed in 1789 under the influence of Alexander Hamilton. This provided for a general duty of 5 per cent on imports except for a few commodities which were more highly taxed. Preceding and during the War of 1812 manufacturing industries were developed in this country because of the difficulties of carrying on trade with Europe. After the War of 1812 English manufacturers began dumping their surplus products here at such low prices as to threaten the existence of American manufactures. To guard against this, the first general protective tariff was passed in 1816 with rates of about 30 per cent on textiles. These duties were increased in 1824 and 1828 but in 1833 provision was made for gradual reductions. From 1846 to the Civil War the duty on imports was on a tariff for revenue basis. Since the Civil War we have, with an occasional setback, gradually increased our general average of tariff duties until the climax was reached in the Dingley Act of 1897. The Payne-Aldrich tariff of 1909 made slight reductions from the Dingley tariff rates, and the Underwood tariff of 1913, which is still in force, represents a strong reaction from the extreme of protection but is still definitely a tariff for protection.

Questions

1. Why does not the United States produce all of the things which it needs?H If it did produce all that could possibly be produced for itself, how would this affect its exports?

2. Show that it will sometimes pay for one country to import from another country goods which can be produced absolutely cheaper in the first country than in the second.

3. Has congress the power to levy duties on exports? Why? What is meant by a tariff for revenue? By a protective tariff?

4. State and discuss the merits of the balance of trade argument for a protective tariff. The home market argument. The infant industry argument. The wages argument. The diversified industries argument.

5. What is the general argument for freedom of international trade?

6. What is the conclusion in the text as to the merits of a protective tariff policy?

Supplementary Reading

Ely, Outlines, Chap. xviii.

Johnson, Introductory Economics, Chap. xix.

Seager, Principles, Chap. xxii.

Seligman, Principles, Chap. xxxii.

Taussig, Principles, Chaps. xxxv.-xxxvii.

Walker, Political Economy, Part IV, Chap. xvii.