articles, the growth, product, or manufacture of the United States, upon which no drawback of customs duties has been allowed therein, shall be admitted to the Philippine Islands from the United States free of duty," " thus placing the duty-free admission of American goods into the islands on a compensatory basis in return for dutyfree admission of Philippine products into the United States.

This third phase of American tariff policy respecting the Philippines extended from 1909 to 1913. During this period complete tariff exemption was granted the then leading Philippine export products (sugar, cigars, and tobacco) for quantities which exceeded the capacity of Philippine export production at the time. All other Philippine natural products, and predominantly Philippine manufactured products, except rice, were granted unlimited duty-free admission.12 Concurrently, American products except rice entered the Philippines unlimited as to quantities and foreign material content, but with tariff preferences considerably smaller than those enjoyed by the leading Philippine export products by virtue of their exemption from the higher level of duties in the United States.

Present Status of United States-Philippine Tariff Relations.

The fourth phase of American tariff policy respecting the Philippines, which still subsists, was inaugurated by the tariff act of October 3, 1913. The essential change in policy from that of the tariff act of 1909 was the removal by the act of 1913 of the limitations on the quantity of Philippine sugar, cigars, and tobacco admissible duty free into the United States, although these limitations had not been nearly approached by actual shipments up to that time. The earlier exception of rice from duty-free trade movement in both directions also was omitted in the act of 1913, and all Philippine export duties on products shipped to any destination were repealed. But the limitation as to the permissible foreign material content of Philippine products granted duty-free admission into the United States was not removed in 1913, and is still in effect. Nor have any changes been made by Congress since 1909 in the rates of the Philippine import tariff.

American goods entering the Philippines enjoy no preference respecting internal-revenue taxes levied in the islands as compared with internal-revenue taxes levied there on like goods of Philippine production or like goods imported from other countries, and Philippine goods entering the United States are in the same nonpreferential situation in the American market.13 All American goods going into the Philippines from the United States are exempt from United States internal-revenue taxes, and all Philippine goods going into the United States are exempt from Philippine internal-revenue taxes.

No step implying tariff assimilation of the Philippines was ever taken by Congress. Significant elements of United States tariff policy which were not applied by Congress in the Philippine import tariff are the antidumping, countervailing, or contingent duty, and the flexible provisions of the United States tariffs. Congress has, in fact, divested itself of responsibility for import tariff legislation for the

11 Tariff act of 1909, sec. 5; tariff act of 1913, Sec. IV, C; tariff act of 1922, sec. 301; tariff act of 1930, sec. 301. 12 A limitation as to the maximum permissible foreign material content in duty-free importations from the Philippines was originally suggested by a represen ative of the Connecticut Tobacco Growers' Association to prevent other than American wrapper tobacco being used in Philippine cigars shipped to the United States duty free, but the limitation was enacted so as to apply to all Philippine products.

13 Since passage of the United States tariff act of Aug. 5, 1909, all United States internal revenue collected on Philippine goods coming to the United States has been currently paid over to the Philippine treasury for the benefit of the insular government. (See Table 35.)

Philippines under the provisions of the Philippine organic act of August 29, 1916. This act, while reserving to Congress the sole right to legislate respecting trade relations between the United States and the Philippines, empowered the Philippine Legislature to enact tariff legislation for the islands, subject to approval or final veto by the President of the United States.

CHRONOLOGICAL DEVELOPMENT OF UNITED STATES COMMERCIAL POLICY IN THE PHILIPPINES

First Reduction in United States Duties on Philippine Products.

The first United States tariff legislation to favor Philippine products by means of special rates was the act of March 8, 1902. During the life of this legislation, until August 5, 1909, two Philippine import tariffs also were prepared under American administration in the islands and approved by Congress, neither of which, however, established preferential rates on American goods.

From the time of the American occupation of the Philippines in August, 1898, until the decision in 1901 of the United States Supreme Court in the Fourteen Diamond Rings case, the full rates of the tariff act of 1897 were applied in the United States to dutiable commercial shipments from the Philippines. In that decision the Supreme Court held that the Philippines by the treaty of peace with Spain ceased to be "foreign" territory, and that therefore the duties imposed by the tariff act of 1897 upon imports from foreign countries could not be levied upon products of the Philippines entering the United States. Although in the absence of legislation to the contrary, Philippine products were entitled under this decision to duty-free admission into the United States, the Supreme Court in this and the later "insular" cases recognized that Congress possesses full power to regulate the tariff relations with the Philippines.

After these decisions in the insular cases, Congress at once took up the matter of Philippine tariff legislation for several reasons. First, the Philippine insular tariff of September 17, 1901, was in question, this tariff having been proclaimed by the Philippine Commission under certain restricted legislative powers granted under the Spooner amendment to the Army appropriation act of March 2, 1901. Secondly, by virtue of the above decision of the Supreme Court, imports into the United States from the Philippines were, at least temporarily, admissible free of duty. And thirdly, these recent decisions of the Supreme Court rendered it likely that if the question came up for decision American coastwise shipping laws (which excluded foreign shipping from the American coastwise trade) would be held applicable to commerce between the Philippines and the United States. But on account of the small number of American merchant vessels then engaged in Philippine trade, such a decision would have driven the commerce of the islands to foreign countries whose ships could trade between the Philippines and foreign ports, but not between Philippine and American ports.

To meet this situation bills were introduced by Senator Lodge in the Senate on December 4, 1901, and by Mr. Payne in the House on December 10, 1901. Both bills provided for reenactment by Congress of the Philippine insular tariff of 1901.

The Philippine Commission asked that the rates of the tariff act of 1897 be reduced by one half or more upon Philippine products

shipped to the United States. In this connection the commission had the advice of Filipinos interested in sugar and tobacco, among them Messrs. José R. de Luzuriaga, a sugar planter, and Benito Legarda, with important tobacco and distilling interests in Manila, who had, in fact, been appointed members of the Philippine Commission on September 1, 1901.

The American sugar and tobacco interests, which expressed alarm at the prospect of competition with the Orient, protested against any reduction in the full rates of the tariff act of 1897.

The House bill provided for the enforcement of the full rates of the tariff act of 1897 on imports from the Philippines, while the Senate bill provided that such imports be given a reduction of 25 per cent from the rates of that act, and the House acquiesced in the change. The bill with the provision just described became law on March 8, 1902.14

Free Entry of Philippine Products under the United States Tariff Act of 1909.

Following the reduction of 25 per cent on March 8, 1902, in the United States tariff rates on Philippine products, two bills were introduced in the House in 1902 and 1905 by which it was proposed to secure a greater reduction (75 per cent from the rates of the United States tariff of 1897) on Philippine sugar, tobacco, and other Philippine products not already on the free list. The Cooper bill passed the House December 17, 1902, but failed to reach a vote in the Senate. The Payne bill, introduced on December 4, 1905, with substantially the same provisions, passed the House January 16, 1906, but likewise failed to reach a vote in the Senate.

In 1909, when Congress was in special session to consider the United States tariff bill, the question of tariff treatment of Philippine products was again under discussion. The limitations in the treaty of peace with Spain, under which Spain could require equality of tariff treatment with American goods in the Philippines, expired on April 11, 1909. The expiration of these limitations made it possible to provide exclusive tariff preferences for American goods in the islands in return for United States tariff preferences to Philippine products.

As enacted and approved, section 5 of the United States tariff act of August 5, 1909, granted the annual duty-free entrance of 300,000 long tons of sugar, 150,000,000 cigars, 300,000 pounds of wrapper tobacco, 1,000,000 pounds of filler tobacco, and unlimited duty-free entrance to all other Philippine products except rice. Any excess shipments of these products beyond the quantity limits stated were to be dutiable at full tariff rates. The limitation as to quantities of sugar and tobacco intended to protect American producers against too keen competition from Philippine products was sufficiently generous at the time, permitting larger duty-free shipments to the United States than the entire annual exportation of Philippine sugar and tobacco to all destinations. Section 5 of this act provided further that refined and unrefined sugar and tobacco manufactured or unmanufactured imported into the Philippines from foreign countries (other than the United States) should be dutiable at rates not less than those imposed by the United States on like products from foreign countries. The full American duty was retained on Philippine rice,

14 The act of Mar. 8, 1902, also provided that United States customs collections on Philippine products entering the United States be turned over to the insular government of the Philippines.

with the purpose of preventing possible oriental competition in the American market. To protect the American market against nonPhilippine competition with other imports from the islands, products or manufactures of the Philippines which contained foreign (nonAmerican or non-Philippine) materials to the extent of more than 20 per cent of their value were made dutiable in the United States. For the same reason duty-free entry from the Philippines was limited to direct shipments and to articles upon which no drawback of customs duties had been allowed in the islands. The three last-mentioned conditions for duty-free admission have been retained in each succeeding tariff of the United States.

The United States Tariff Act of October 3, 1913.

All limitations respecting duty-free shipments of Philippine products into the United States and its possessions were removed under Section IV, C, of the tariff act of 1913, except the requirements of direct shipment, limitation of maximum permissible foreign material content of 20 per cent of their value, and limitation of the duty-free entry privilege to articles on which no drawback of customs duties had been allowed in the Philippines.

The annual quantity limits regarding duty-free shipments of sugar and tobacco products from the Philippines under the tariff act of 1909 were not approached while that act was in effect, so that the statistical record of such shipments at that time afforded no ground for keeping the restrictions in effect when the tariff of 1913 was under consideration by Congress. Shipments of sugar from the islands had made comparatively slow progress, notwithstanding its exemption from import duties. Moreover, since Congress intended to place all sugar on the free list in 1916,15 there was no apparent reason for continuing the tonnage limitation on duty-free shipments of Philippine sugar.

The measure of tariff preference to Philippine-as against foreignsugar entering the United States was for a time reduced under the act of October 3, 1913, as a result of the reduction in the rate of duty on foreign sugar. The quantity limitations originally fixed for duty-free Philippine sugar still had not been reached by actual shipments when Congress passed the act of April 27, 1916. That act repealed the provision making all sugars duty free after May 1, 1916, but did not restore the tonnage limitation upon duty-free Philippine sugar. Emergency Tariff Act of 1921 and Tariff Acts of 1922 and 1930.

When the emergency tariff act of 1921 and the tariff act of 1922 were under consideration in Congress, the greatest quantity of Philippine sugar received in any one year since its duty-free admission was 196,000 long tons in the fiscal year 1912--about 65 per cent of the original 300,000 long tons limitation. In the calendar year 1921 our receipts of Philippine sugar reached only 147,000 long tons, or about 49 per cent of the limitation originally established. On the face of these figures there was no more ground for expecting, when the emergency tariff act and the tariff act of 1922 were under consideration by Congress, that the quantity limits imposed in 1909 upon duty-free admission of Philippine sugar would be exceeded than there had been in 1913 or in 1916. As a matter of fact, the 300,000

15 The tariff act of 1913, par. 177, provided that on and after May 1, 1916, sugar would enter the United States free of duty.

tons limit imposed in 1909 was not reached by actual shipments until 1924, since when it has been exceeded in every year to and including 1930.

The preferential rates on Cuban sugar (96° centrifugal) were increased to 1.60 cents per pound under the emergency tariff act of 1921, to 1.7648 cents under the tariff act of 1922, and to 2 cents under the act of 1930, as compared with 1.0048 cents under the tariff act of 1913. Under the act of 1909 the rate was 1.348 cents per pound. Thus by increasing the duty on foreign sugar greater tariff preferences were given Philippine sugar in the United States under the emergency tariff act of 1921 and the tariff acts of 1922 and 1930 than it had theretofore enjoyed under any previous acts.

Philippine cigar shipments to the United States had declined in the calendar year 1921 to 68,000,000, a figure very far below that during the World War and immediate postwar years (1916-1920), which were the only years in which the 150,000,000 limit of duty-free shipments originally contemplated had been exceeded. Exports of Philippine leaf and other tobacco products to the United States had exceeded the limitation originally imposed in 1909 only during the war years 1917 and 1918 and the immediate postwar year 1920, but had diminished during the calendar year 1921 to a figure far below the original limitation. There was no general demand at this time for a reimposition of the limits on duty-free shipments, either respecting Philippine cigars or other tobacco products, and apparently there was no expectation in 1921 or 1922 that the limits originally set on Philippine tobacco products would be exceeded in normal years. That attitude has been justified to and including the year 1929 as regards leaf tobacco; but the average annual shipments of Philippine cigars to the United States during 1923-1928 exceeded the limitation originally contemplated by about 27 per cent, although in 1929 the quantity again was almost within the original limitation.

A tariff preference to Philippine coconut oil entering the United States was first created under the emergency tariff act of 1921 by fixing a tariff rate of 20 cents per gallon (about 2.67 cents per pound) on nondeodorized and unrefined coconut oil of foreign origin. Such foreign oil continued to be dutiable under the act of 1922, but the rate was reduced to 2 cents per pound, and was so retained in the tariff act of 1930. This was done notwithstanding the fact that shipments of Philippine coconut oil to the United States had increased without tariff preferences from practically nothing in the fiscal year 1912 to $23,866,000 in the calendar year 1920, supplying in that year about 72 per cent of the total value and 71 per cent of the total quantity of coconut oil imported into the United States from all sources, including the Philippines.

On the other hand, copra, which is the immediate raw material of coconut oil and largely produced in the Philippines, received no tariff preference in the American market, being retained on the general free list of the tariff acts of 1922 and 1930, as in previous tariff acts. Shipments of Philippine copra to the United States amounted to $423,000 in the calendar year 1920, and to $3,148,000 in the calendar year 1921, supplying about 3 per cent of the total value and 11 per cent of the total quantity in 1920, and in 1921 about 43 per cent of the total value and 44 per cent of the total quantity of United States copra imports from all sources, including the Philippines.