CHAPTER IV

INCONSISTENCIES WITH SECTION 317 IN THE GENERAL CHARACTER AND PARTICULAR PROVISIONS

OF THE TARIFF ACT OF 1922

In framing the Tariff Act of 1922 the Congress permitted itself to be swayed by a number of diverse policies. Both in general features and in special clauses there are to be found enactments that appear to violate the spirit and purpose of Section 317. Attached to certain schedules of duties are provisos that are so utterly inconsistent with Section 317 as to require that the United States itself engage in some of the very practices against which, when engaged in by other countries, Section 317 is aimed. The present chapter is devoted to an analysis of the obstacles to the development of the new American commercial policy which are found in the very American statute of which Section 317 is a part.

26. GENERAL CHARACTER OF THE TARIFF ACT OF 1922

The Tariff Act of 1922 is high-protectionist to the core. Admitting, as has already been done, that the provisions of Section 317 are consonant with a policy of protection, it must nevertheless be recognized that a foreign policy which seeks markets and demands the Open Door is not consistent with a domestic policy of virtual prohibition; for the professions of a country that preached equality and sought equality would be indeed hollow if the equality it practiced were the equality of negation. Moreover, the provision.

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empowering the President to levy fifty per centum additional duties would not be taken seriously if its application would merely increase already prohibitive rates. If the rest of the world followed suit and presented to the United States and all other countries an equally insurmountable tariff wall, there would not, it is needless to say, be any use for Section 317.

Somewhere between moderately protective rates and rates that are prohibitive is the line of demarcation between consistency and inconsistency with the policy expressed in Section 317. There can be little doubt that very many of the rates of the Act of 1922 have projected themselves above this line; and there is much to be said in support of the thesis that the first general characteristic of the present tariff law, its ultra-protective policy, is out of harmony with Section 317.

Commenting upon the act as a whole, Professor Gustav Cassel, writing in the Svenska Dagbladet of October 22, 1922, opens an interesting article with the following paragraph:

After a long conflict the United States now has a new tariff. This tariff is the expression of a protectionist undercurrent in American politics which has greatly increased in in strength during the past months. The aggressive character in these new rules is less evident in the tariff itself than in the additions to it in the way of regulatory powers. The President has the right to change the classification of merchandise and to increase or decrease the prescribed rates of duty up to 50 per cent in case he finds that these rates of duty do not even out the difference between the cost of production of American made goods or partly American made goods and the cost of production of similar goods manufactured in the foremost competing foreign country. Furthermore the President has the right under certain conditions to disregard the general rule

that these duties shall be calculated upon the value of the goods in their country of origin and impose a new regulation basing the amount of such duties on the selling price of similar goods made in the United States. Thus far the Fordney Bill's demands for " American valuation" have been acceded to. This means that the President practically has the right to close the American market to every unwelcome competitor.1

Whatever view may be taken in regard to this partial analysis of the flexible-tariff policy, no one can deny that in studying a policy that is bound up with international relations, the opinions of citizens of other countries must be considered whether they are strictly accurate or not. It is natural for a European to emphasize the power of the President to increase duties and to disregard his duty to reduce them. This emphasis may conceivably tend to decrease the usefulness of Section 317 by making other countries believe that the policy of the United States is insincere. Professor Cassel continues:

The most remarkable part of it would seem to be the economic theory upon which it is built. It is explained quite frankly that the intention is to even out the difference of the cost of production between the United States and other countries. If we take it for granted that all other counries do the same, then there would be created a series of tariff walls that would make international commerce impossible.2

The criticism here voiced by Professor Cassel may be read as an answer to the discussion of the tariff question by the American President in his address to the Congress, December 6, 1921: "We cannot go far wrong," the latter said, "when we base our tariffs on the policy of preserving the productive activities which enhance employment and 1 Italics of last sentence not in original.

Ibid.

add to our national prosperity," meaning thereby a protective tariff. In justifying his policy he made use of this statement: “It is not an unworthy selfishness to seek to save ourselves, when the processes of that salvation are not only not denied to others, but commended to them." To commend to others a practice of high protection seems a strange element in the commercial policy of a country with a provision such as Section 317, which has as its chief practical purpose the advancement of export trade.1 This practical purpose is, however, dependent upon the method of action employed for its achievement and the method provided in Section 317 undertakes to seek equality of treatment but not low tariff rates.

Under the title "The American Stone Wall", a Norwegian paper that has always been considered friendly toward the United States, and things American, has remarked editorially:

The full text of the American tariff is now available. It is a trade political stone wall of such height that foreign goods can climb it only after great difficulties. After seeing this proof of the strength of American protectionism we must be prepared for the worse for our shipping as well. This evidence of the desire on the part of Americans to be sufficient unto themselves is in itself unpleasant and has appeared at an

'As Professor Cassel says:

"Commerce between different countries rests upon the condition that the cost of production is different in different countries, and the idea of international commerce is to take advantage of this difference to bring about a rational division of work among various countries and thereby make production more profitable, that is to say, establish a better means of support for the entire mankind.

"Protectionism as demonstrated in the American tariff means a denial of the advantages of this development, a proclaiming of the belief that a country, and therefore all countries, are better off when fully shut off from the world and organized for self-sufficiency. The absurdity of this view should be evident enough to eliminate the possibility of legislation willing to support it."-Ibid.