As to the productive capacity of the country in cloth-making to meet the domestic demand, there is at the present time no indication of any lack of adequate equipment. It is true that some years ago a greatly increased demand for worsted fabrics, assisted by the high tariff on worsted goods and their by-products, made the manufacture of such goods very profitable and the investment alluring, but this led to a rapid increase of worsted machinery in this country and the building of great modern mills in rapid succession in various parts of the East. A very considerable part of this increase was due to the inflow of foreign capital and the transfer of experienced cloth manufacturers from other countries. The result has been a great increase in competition.

Relative costs of manufacturing. The cost of manufacturing woolen and worsted yarns and cloth in the United States is much higher than in Europe. The main elements of cost of production are cost of plant, material, and labor.

The cost of erecting and equipping both woolen and worsted mills is much higher in this country than in England. The cost of erecting and equipping a woolen mill is about 45 per cent greater. The same is true of the weaving department of a worsted mill using American machinery.

The excess in cost in the case of worsted spinning is greater, as most of the machinery is imported. This pays a duty of 45 per cent ad valorem, and to this must be added charges for packing, freight, etc., which makes the foreign machine cost 70 per cent over or more in this country than abroad. Nor does this include the cost of erection, as does the price to the English manufacturer. The same is true of weaving machinery when imported.

The material is increased in price by the duty on raw wool. The manufacturer who imports his wool must pay the full amount of the duty, and this means either additional working capital or an additional interest charge to be paid. Wools grown in the United States are increased in value by the duty, but not by the full extent of the duty.

Wages are much higher in the United States, but wages are in themselves no necessary indication of relative cost of production. Frequently it is found that high wages and low labor costs go together. The question at once arises whether the labor in American woolen and worsted manufacturing is more efficient than such labor abroad, or whether by more efficient management or greater speed in machinery the

American manufacturer is able to get a larger product per operative in proportion to the difference in wages.

It appears that this particular industry is one in which the high elements of costs in this country are not in general offset by any particular advantage or by any marked superiority in the efficiency of labor. To a certain extent, in fact, European countries have the advantage of us in this latter regard. In the centers of the industry abroad there is an adequate supply of labor which has been trained for generations in this one industry. In the United States a considerable portion of the labor is found to be of unskilled immigrants with no previous experience in manufacture; and in certain centers this population is of a very fluctuating kind, and the manufacturer is obliged continually to break in a new set of inexperienced operatives.

The American tendency to secure the maximum output is noticeable in some cases, but comparing this country with England, at least, it may be said that the possibilities of speed have been practically reached in the latter country. So far as worsted spinning is concerned, the best mills in this country seem to be able to operate with fewer operatives per machine and to get a greater product per operative than in some European countries, but if this means a sacrifice of quality of product to output it is not really a decrease in cost. Looms in the Bradford district run, on the whole, at a higher rate of speed than do looms in the United States.

Furthermore, there is no superiority in American machinery over foreign machinery. As a matter of fact, a large amount of foreign machinery is used in this country, and in the worsted mills covered by the investigation into machine efficiency 87 per cent of all the machinery, from the scouring of raw wool through to the finished yarn, was imported. Only 22.9 per cent of looms were imported.

It may be said, then, that, taking the industry as a whole, the American manufacturer practically has no advantage in efficiency of labor and equipment over his foreign competitor, although this statement is subject to exceptions in the case of particular processes at particular mills. On certain specialties the largest and most efficient American mills are able by skilful organizations materially to reduce the difference in cost.

Detailed figures as to relative costs of production are given in Part III of the report. Roughly summarized they may be expressed as follows:

Tops. The difference in the cost of turning wool into tops in this country and England varies with the quality of the tops. Considering all grades, it may be stated that 80 per cent presents a rough approximation of the excess of the American cost over the English. This, of course, does not mean 80 per cent of the value of the tops, but merely 80 per cent of the conversion cost. The cost of conversion in the case of tops is in any case but a few cents and but a small fraction of the total value of the product, including material. The charges for commission combing in the two countries vary about 60 per cent. The reason for the divergence of the cost figures from the commission charges is explained in the report.

Worsted yarns. The cost of producing yarns varies in different countries according to particular qualities and methods. In England the method of frame spinning is the more common, and on the Continent mule spinning. The latter is the more expensive process. Comparing frame spinning in England with frame spinning in the United States - which is the common method here - it may be said that although there are wide variations in both countries from mill to mill, the conversion cost for the same quality and count of yarns in the United States is about twice that in England. The difference in the cost between the United States and Germany is not so great.

This refers to the mere cost of turning tops into yarn, and of course does not mean that the difference in cost is equal to 100 per cent of the foreign selling value. The foreign conversion cost of yarn from tops, except in the case of the finest yarns, is normally less than 20 per cent of the total market value of the yarn. Care should be taken not to confuse the ratio between manufacturing costs and the ratio between total values, including cost of raw material.

Woolen and worsted industry. The difference in manufacturing cost here and abroad of woolen and worsted fabrics (from yarn to finished cloth) varies greatly, according to the character of the fabrics. The main processes included are weaving, finishing, and dyeing. The figures of the board show that the cost of turning yarn into cloth in the United States compared with England is all the way from 60 per cent to 170 per cent higher, according to the character of the fabric. For a great variety of fabrics the American conversion cost is from 100 to 150 per cent greater than the English cost. This is further substantiated by the fact that the weaving scales per yard of product in the two countries vary in almost exactly the same proportions.