Although Philippine coconut oil had, without any tariff preference before 1921, made relatively greater progress in the American market than copra, its raw material, an import duty (resulting in a tariff preference for the Philippine product) was placed on coconut oil but not on copra.

Under the tariff act of 1922, the rate on shredded coconut meat (desiccated coconut) was increased from 2 cents to 3%1⁄2 cents per pound, which resulted practically in the inauguration of the Philippine shredded coconut industry. Coconuts were made dutiable by the tariff act of 1922 at one-half cent each, and although this was intended primarily to favor Porto Rican coconuts which enter the United States duty free, it had the indirect effect of favoring Philippine shredded coconut manufacturers rather than continental American manufacturers of shredded coconut who might wish to utilize other than Porto Rican nuts. In the tariff act of 1930 no changes were made in either of these rates.

The rates on shell buttons, certain classes of straw hats, 16 cotton embroideries, and manila fiber cordage also were increased under the tariff act of 1922, thus increasing the tariff preference to such articles entering the United States duty free from the Philippines.

Under the tariff act of 1930 the rates on cotton embroideries and manila fiber cordage and on certain edible tropical nuts were increased, while reptile leathers and copra-oil cake and meal were made dutiable instead of free, thus again increasing or creating a tariff preference to such articles of Philippine origin entering the United States.

The more important rate changes affecting Philippine products in the different United States tariff acts since 1909 are compared in Table 1 annexed to this report.

The Philippine Import Tariffs, 1898-1909.

The first import tariff applied in the Philippines under American administration was that annexed to the Executive order issued in Washington on July 12, 1898. This was an adaptation of the Spanish colonial tariff in force before the American occupation of the islands, Subsequent slight revisions of this tariff prior to September 15, 1901, were made by the military governor of the Philippines. The tariff preference to Spanish goods, existing prior to the American occupation of the Philippines, was abolished as of November 10, 1898, under General Orders, No. 10, October 26, 1898, office of the military governor in the Philippine Islands.

The first import tariff under American civil administration of the Philippines was proclaimed September 17, 1901,17 by the United States Philippine Commission, acting under authority of the President of the United States, to be effective November 15, 1901. This tariff was reenacted by Congress in the act of March 8, 1902.

The next Philippine tariff on imports was established by the act of Congress of March 3, 1905, to take effect 60 days after its passage, and one amendment to this act was passed by Congress. All the tariffs mentioned above and this amendment of February 26, 1906, were applied equally to American and non-American goods entering. the Philippines. During the period when those tariffs were in force. supplies for the United States Army and Navy and for the insular

16 But the rates on, and hence the tariff preference to, hats of the classes most generally shipped from the Philippines to the United States were not increased under the tariff act of 1922. 17 Act No. 230, U. S. Philippine Commission.

government were admitted into the Philippines duty free from the United States or from any other source. 18

All the Philippine tariffs preceding the inauguration of duty-free trade between the United States and the Philippines on August 6, 1909, were designed and applied as revenue measures.

Alleged Preferential Philippine Treatment of American Goods Prior to Duty-. Free Entry in 1909.

Under the provisions of the treaty of peace with Spain American products could not be admitted at lower rates of duty than Spanish products until 1909, and until August 6 of that year the goods of all countries were given identical treatment under the Philippine import

tariffs.

Decreases in the Philippine import trade from Spain during the period 1898-1909 could not be attributed to a policy of favoring American goods by tariff classification, but were rather the result of abolishing preferential treatment of Spanish goods soon after the American occupation and of decreases in the Spanish population of the islands.

It was contended that the classifications of cotton cloths in the Philippine import tariff acts of 1901, 1905, and the congressional amendment of 1906, were specially devised to help the American at the expense of the British cotton-cloth trade with the islands. This. / appears to be true, but the net result was not of striking importance. The United Kingdom always led by far in the cotton-cloth import trade of the islands throughout the period of American occupation to the inauguration of duty-free trade with the United States. The proportions of this trade supplied by the United Kingdom were about 59 per cent from July 1, 1900-October 31, 1901;19 56.6 per cent from January 1, 1902-April 30, 1905, under the 1901 tariff act; 68.3 per cent during the period of less than a year when the tariff of 1905 on cotton cloths was in effect; and 57.2 per cent from July 1, 1906-June 30, 1909, under the amendment of 1906 respecting cotton cloths. The American share of Philippine imports of cotton cloth during the same periods was, respectively, about 1.2 per cent, 9.1 per cent, 7.1 per cent, and 12.9 per cent.

Correlation of Duty-Free Admission of American Products into the Philippines with the Philippine Import Tariff on non-American Goods.

Duty-free entry of American products into the Philippines was enacted by Congress under section 12 of the Philippine tariff act of August 5, 1909, concurrently with the limited duty-free entry provisions as to Philippine products entering the United States under section 5 of the tariff act of August 5, 1909.

The Philippine Assembly, then the only elective legislative body in the islands, was opposed to the duty-free entry of American products, except on a very limited scale, fearing its possible effect on the insular revenues, of which import duties at that time formed the largest item. The Assembly declared that "the duty-free exchange of products between the United States and the Philippines in the long

18 Pars. 23 and 363, tariff and regulations, accompanying the Executive order issued in Washington, D. C., July 12, 1898, and corresponding provisions in succeeding United States military decrees; par. 385, Philippine tariff of Sept. 17, 1901, and par. 385, congressional Philippine tariff acts of Mar. 8, 1902, and Mar. 3, 1905.

19 Tariff and regulations accompanying the Executive order issued in Washington, D. C., July 12, 1898, and succeeding decrees of the military governor in the Philippine Islands were in force during this period.

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run would be highly prejudicial to the economic interests of the Philippine people and would create a situation which might delay the obtaining of its independence." 20 This attitude was not concurred in by the Philippine Commission, which was the appointive branch and "Upper House" of the Philippine Legislature, and reflected the views. of the executive branch of the Philippine Government. Both the Philippine Assembly and the Philippine Commission, however, favored the duty-free admission of Philippine products into the United States, under restrictions that were generous to the Philippines at the time. Over the objections to the Philippine Assembly duty-free admission of American products into the islands was authorized by Congress in passing the United States tariff act of 1909 and the Philippine tariff act of the same year, with the single exception of rice, which remained dutiable at the rate of the Philippine import tariff, regardless of origin, Philippine rice being also dutiable under the United States tariff act of 1909. As in the case of Philippine products entering the United States, duty-free entry of American products into the Philippines was restricted to direct shipments and to articles on which no drawback of customs duties had been allowed in the United States. But no restriction was placed on the maximum permissible foreign material content of "all articles, the growth, product, or manufacture of the United States" entitled to duty-free entry into the Philippines, as was done in regard to "all articles the growth or product of or manufactured in the Philippine Islands from materials, the growth or product of the Philippine Islands, or of the United States, or of both" entitled to duty-free entry into the United States.

There have been no amendments by Congress to the original provisions of the act of August 5, 1909, admitting American goods into the Philippines free of duty, except as to rice, which was also made duty-free by Section IV, C, of the United States tariff act of October 3, 1913.

Philippine Import Tariff of August 5, 1909, on non-American Goods.

The expiration of the provisions in the treaty of peace granting Spanish goods and vessels equality of treatment in the Philippines with those of the United States for a period of 10 years and the inauguration of mutual free trade between the United States and the Philippines, raised the problem of a new import tariff to be applied in the Philippines to goods of non-American origin.

The Philippine import tariff enacted by Congress and approved August 5, 1909, which became applicable on October 5, 1909, to foreign merchandise entering the islands, was designed primarily to yield the greatest possible amount of revenue consistent with the duty-free status of American goods in the islands. The new tariff was intended as a corollary to the limited duty-free trade provisions of the Payne bill respecting Philippine products entering the United States. The rates were not identical with those of the United States tariff act of 1909, and were not intended to give all American products entering the islands a degree of protection mathematically equal to that afforded in the home market. There was some attempt to stimulate certain Philippine industries, either established or considered potential, by placing raw materials on the general free list regardless of origin, or by

20 Primera Legislatura Filipina, Segundo Periodo de Sesiones. Actas de la Comisión, p. 263. 21 The United States tariff act of 1909, sec. 5, and Philippine tariff act of 1909, sec. 12.

admitting them at low rates of duty although they were duty free from the United States. But the articles and raw materials placed on the general free list of the Philippine import tariff were not of great importance in relation to the whole Philippine import trade. This was all in line with the revenue-producing purpose of the tariff, but it was also evident that a great expansion of the general free list or very low rates on imports of non-American origin would have tended either to prevent tariff preferences for American goods or to diminish the possible benefits of such preferences by reducing their magnitude. Under these circumstances it was obviously not possible to protect Philippine industry comprehensively by means of the tariff against potential competition from the United States, since protection to a local industry almost inevitably meant protection of the corresponding American product in the Philippine market.2

22

Under the Philippine organic act approved August 29, 1916, the Philippine Legislature, which became wholly elective under the act, was authorized to enact tariff legislation for the islands, subject to the approval of the President of the United States, but Congress expressly reserved to itself the exclusive right to govern by its own laws the trade relations between the Philippines and the United States. This authority to enact tariff legislation for the islands has been used sparingly by the Philippine Legislature. The principal changes made relate to the duty-free admission into the islands of copra from the island of Guam as of 1918 and to the increase of the following Philippine duties: On foreign rice in 1922; on cement in 1925, and again in 1931; and on cattle, to become effective in 1931. The rates of the import tariff therefore remain substantially unchanged from those enacted by Congress in 1909, more than 20 years ago.

PHILIPPINE EXPORT DUTIES

Philippine Export Duties Under the Earlier American Administrations. Export duties were a part of the Philippine revenue system before American occupation of the islands and were continued under American administration until 1913. By far the largest proportion of Philippine export duties were derived from manila fiber, the production and stripping of which has been practically a natural Philippine monopoly until the present time. The removal of export duties on Philippine products going to the United States accompanied the first reduction in United States duties on Philippine products under the act of March 8, 1902, and was therefore one of the first steps taken by Congress in the development of American commercial policy in the Philippines.

The military government found a moderate schedule of export duties in effect in 1898 on the principal Philippine products, and this was continued until November 15, 1901, under the United States provisional customs tariff and regulations in accordance with the Executive order of President McKinley, dated July 12, 1898. No distinction was made during this period between the export rates to the United States and to other countries, and they were regarded simply as an item of Philippine revenues.

22 As a measure of incidental protection to American sugar producers and American tobacco producers and manufacturers, it was provided in sec. 5 of the United States tariff act of 1909 that sugar and tobacco entering the Philippines from countries other than the United States should not be dutiable at rates less than those of the United States tariff on foreign sugar and tobacco. In other respects, as regards rates on imports of non-American origin, the Philippine tariff act of 1909 was a separate congressional measure from the United States tariff act of 1909, although both were approved on the same date.

The Philippine customs tariff act of 1901, first enacted by the United States Philippine Commission 23 and reenacted by Congress early in 1902 24 following the decision of the United States Supreme Court in the Fourteen Diamond Rings case and the so-called insular cases, continued the export duty system in the Philippines. Except on manila fiber and copra, upon which rates had already been doubled by the Philippine customs tariff of 1901, the rates were left substantially as they had been in the United States provisional customs tariff and regulations.25

It was provided, however, in the act of 1902, that any American import duties levied upon importation of Philippine products into the United States would be subject to deduction of any Philippine export duties paid thereon; and, further, that products of the Philippines shipped direct to the United States for use and consumption therein would not be liable to export duties in the Philippines if they were on the free list of the United States tariff.

Later Legislation Respecting Philippine Export Duties.

Under the congressional act of March 3, 1905, the Philippine export duty on rice was removed. Rice had not been a factor in Philippine exports for many years, nor has it been important as such at any time since the American occupation.

The congressional Philippine tariff act of August 5, 1909, section 13, reduced the number of Philippine products subject to export duties to the five principal export products: Abacá (manila fiber), sugar, copra, tobacco manufactured or unmanufactured, and tobacco stems, clippings, and other wastes of tobacco. This act included a general prohibition against export duties upon all Philippine products coming directly from the islands to the United States or any of its possessions, for use and consumption therein.

Complete abolition of all Philippine export duties was provided for in the act of October 3, 1913, and this policy of duty-free exportation was further confirmed by the Philippine autonomy act of 1916, which conferred upon the Philippine Legislature the power to enact tariff legislation for the islands, but prohibited the levying of export duties.

Table 2 presents a complete schedule of Philippine export duties from the time of American occupation in 1898 to 1913.

Exports of Manila Fiber, Under Exemption from Export Duties When Shipped to the United States.

During the early years of the American occupation manila fiber was by far the leading export product of the Philippines to all countries and to the United States. In 1899-1902 an average annual value of $9,356,000 in manila fiber was shipped to the United States, which was then 31 per cent of all manila fiber exported and 95 per cent of the value of all Philippine products shipped to the United States. In 1929 the value of manila fiber shipped to the United States was $12,276,000, as compared with $9,527,000 in 1928, the United States receiving 43 per cent and 36 per cent, respectively, of the total value of shipments. to all destinations. Shipments of the fiber to the United States represented 9.9 per cent in 1929 and 8.2 per cent in 1928, of the value

23 Act No. 230, United States Philippine Commission.

24 Act of Mar. 8, 1902.

25 Executive order, Washington, D. C., July 12, 1898.