Comparative Ad Valorem Equivalents of Duties Reciprocally Waived by the United States and the Philippines through Duty-Free Trade Relations.

A comparison of reciprocal tariff treatment in terms of general ad valorem equivalents of the respective import duties shows that during the whole duty-free trade period from 1909 to 1929, with the sole exception of 1920, the ad valorem equivalent of the United States duties nominally waived upon Philippine products was always very considerably higher than the corresponding ad valorem equivalent of Philippine duties nominally waived upon American products. This relation holds true regardless of whether shipments of tobacco and tobacco products are included in or excluded from the comparison on both sides.

From the beginning of duty-free trade relations with the Philippines to the end of 1929 the average computed ad valorem equivalent of duties nominally waived by the United States on Philippine products was about 64 per cent, or nearly three times as great as the corresponding average of 23 per cent nominally waived in the Philippines on products of the United States. It should be noted, however, that these figures lose much of their significance if allowance is made on both sides for duty-exempted shipments of tobacco and tobacco products, upon which but a fraction of the nominally high tariff preference was effective. But even if the trade in tobacco and tobacco products is eliminated from the computation, the ad valorem equivalent of duties waived by the United States on Philippine products from the beginning of duty-free trade to the end of 1929 was much greater in every year, except 1920, than that of the Philippines on products of the United States.

A convenient summary of the comparative ad valorem equivalents of duties reciprocally remitted is presented in Table 7, by years and annual averages.

Levels of the Philippine Import Tariffs Preceding Philippine-United States Duty-Free Trade Relations.

Specific rates of duty were levied in the Philippines during the first three years of American occupation. In the tariff revisions of 1901 and 1905 a few ad valorem and minimum ad valorem rates were introduced, but specific rates greatly predominated both in numbers and effect.10

Under the United States provisional tariff in the Philippines" the ad valorem equivalent of duties collected on all dutiable goods imported from all sources was 24.95 per cent; under the tariff of 1901 12 it was 22.74 per cent; and under the tariff act of 1905, it was 24.91 per cent. This computation disregards all duty-free imports, and covers about 95 per cent of the periods when these tariffs were in force. The general free lists of the earlier Philippine tariffs were of limited importance. Under the tariff of 1905 the free list included about 8 per cent of all commercial importations, principally live animals, refrigerated meats, and fresh milk. There were few Philippine industries demanding duty-free raw materials. Moreover, the revenue

The exception is accounted for by the high prices received for Philippine sugar in 1920, and the conversion of the constant specific rates of duty on sugar into ad valorem equivalents for the purpose of this comparison.

10 Numerous ad valorem and minimum ad valorem rates were incorporated in the later tariff of 1909 (which is still in effect), applying to goods of non-American origin.

11 Adapted from the Spanish colonial tariff.

12 Reenacted by Congress in the act of Mar. 8, 1902.

purpose of the earlier tariffs precluded extensive free lists applying to commercial imports. Supplies for the United States and Philippine Governments, however, entered duty-free, from any source.

The ad valorem equivalents of duties collected during the fiscal years 1906-1909, the last four years immediately preceding duty-free trade with the United States, on some of the principal groups of Philippine commercial imports, computed on dutiable values, are shown in the following table:

Ad valorem equivalents of Philippine import duties collected on American goods: 1906-1909

Levels of the Philippine and United States Import Tariffs, Respectively, Follow-ing Inauguration of Reciprocal Duty-Free Trade.

The rates of the Philippine import tariff of 1909, as planned and as enacted by Congress, were in general considerably lower than those of the United States tariff act of 1897, with which they were compared in Congress when the bill was under scrutiny.13 It was sought by Congress to give American goods tariff preferences in the Philippines, but not as great a measure of preference or protection as they had in the markets of the United States. The rates of duty had to be fixed at points which would not be unproductive from a revenue standpoint, and care was taken not to make them so high as to discourage completely the importation of non-American dutiable goods. into the islands. The intention was to make the ad valorem equivalent of the Philippine import tariff of 1909 about 23.2 per cent,' computed on the basis of all dutiable importations expected from countries other than the United States. The number of ad valorem and minimum ad valorem rates was greatly increased in the Philippine tariff of 1909, although specific rates still predominated.

14

The intended ad valorem equivalent of 23.2 per cent was very closely approached by actual results during the first full fiscal year of operation of the act, July 1, 1910-June 30, 1911. The ad valorem equivalent of duties collected during that year under the Philippine import tariff of 1909 was 23.8 per cent, computed on the basis of

13 The average levels of the three earlier consecutive Philippine import tariffs following American occupation of the islands in 1898 and preceding the tariff of 1909 were 24.95 per cent, 22.74 per cent, and 24.91 per cent ad valorem equivalent, respectively, computed on the basis of dutiable values imported from all sources, including the United States. Most of the rates in these tariffs were specific, although a limited number of ad valorem and minimum ad valorem rates had been incorporated in the two later tariffs of 1901 and 1905.

14 S. Rept. No. 9, 61st Cong., 1st sess., p. 97, letter of Col. George R. Colton, insular collector of customs, June 17, 1909.

dutiable values. The highest point reached to the end of 1929 was 24.7 per cent ad valorem equivalent, during the calendar year 1915; and the lowest was 12.8 per cent, during the calendar year 1920. The extreme variation between individual years was therefore nearly 12 per cent ad valorem.

The decreases in ad valorem equivalents of the Philippine tariff of 1909 during a part of the World War period and the years following the war may be attributed generally to the regressive effect of a predominating number of specific rates of duty, nearly all of which remained unchanged during these periods of increasing prices."

That the rates of the Philippine import tariff, as fixed in 1909 on competing goods of non-American origin, have been fairly satisfactory from the Philippine viewpoint, is evidenced by the fact that the Philippine legislature has made few changes in the rates of that tariff, although authorized to do so under section 7 of the act of Congress of August 29, 1916.16

Table 8 presents a comparison of the approximate levels of the Philippine and United States import tariffs from the first full fiscal year following reciprocal duty-free trade (1911) to 1929.

15 During the period July 1, 1910-December 31, 1914, an average of about 62 per cent of the value of all dutiable importations was subject to unqualified specific rates of duty, and during the calendar years 1922-1926 the average was about 61 per cent.

Under the authority of this act, products of Guam entering the Philippines were granted duty-free entry in 1918; the duties on rice were increased in 1922, those on cement in 1925 and again in 1931; and those on cattle in 1931.

Part III

DEVELOPMENT OF PHILIPPINE-UNITED STATES TRADE

PHILIPPINE SHIPMENTS TO THE UNITED STATES

Increase of Philippine Shipments to the United States During the Preferential Tariff Period (Fiscal Years 1903-1909).

The annual average value of Philippine exports to all destinations during the 5-year period 1890-1894 under Spanish sovereignty was $20,063,000, of which 17 per cent was shipped to the United States. This was the last relatively long normal period preceding the American occupation and was followed by the serious revolt of 1896 against Spain.

Soon after American occupation, during the three fiscal years 19001902, the annual average value of Philippine exports to all destinations was $22,298,000, of which 21 per cent was shipped to the United States. This period ended a few months after the 25 per cent tariff reduction was accorded to Philippine products in the United States, and during the earlier part of this period there was still armed resistance to American authority in the islands.

During the seven fiscal years 1903-1909, following practical pacification of the islands under American occupation, the annual average value of all Philippine exports to all destinations was $32,166,000, of which 38 per cent was shipped to the United States. During these years a tariff reduction of 25 per cent of the duty was granted Philippine products in the United States under the act of March 8, 1902. Average annual Philippine exports to all destinations during the period 1903-1909 exceeded those during the Spanish period 18901894 by $12,103,000 and exceeded those of the early period of American occupation, 1900-1902, by $9,868,000. But this increase was more than accounted for by the gain of $15,792,000 (as compared with 1890-1894), and largely accounted for by the gain of $8,412,000 (as compared with 1900-1902), in the annual average Philippine world exports of manila fiber and copra, both of which were duty free in the United States, and therefore not affected by the 25 per cent tariff reduction accorded in 1902.

It was expected that the 25 per cent tariff preference accorded in 1902 to Philippine goods would increase shipments to the United States of sugar and tobacco products, the two leading Philippine export products to all destinations (except manila fiber), both during the years 1890-1894 of Spanish sovereignty, and during the earliest years of American occupation. But the annual average value of these shipments to the United States-sugar and tobacco products. combined decreased slightly by $177,000 during the 7-year preferential tariff period (1903-1909) as compared with the 5-year Spanish period (1890-1894). Compared with the early 3-year period of American occupation (1900-1902), before the tariff preference was 'n effect, the annual average value of these shipments increased by $988,000 under the 25 per cent tariff preference accorded in 1902.

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