, 1922-05-17
Rates Necessarily Higher

T is ELATE that Abraham Lincoln being asked
a how long a mans legs should be, replied that they
should be long enough to reach from his body to the
ground One is reminded of that in reading the re-
port upon the tariff bill issued by the Democratic
minority of the senate finance committee.
One of the subjects of violent protestation upon
the part of the Democrats is the fact that tariff rates
are in many cases much higher in the proposed bin
than they were in the Payne-Aldrich bill. From the
standpoint of the free trader, who does not believe in
protesting American industries, any advance of tariff
rates is indefensiblo, but the Democratic minority re-
port engages in the ~sophistry that if the Payne-Aldrieh
rates were high enough to afford adequate protection
to American industries in pre-war days. then it fol-
lows that the higher rates of the present bin are much
too high
work out a simple problem in percentage, which any
school boy or girl can quickly do. If one wants to
get a certain sum he multiples the base by the rate.
II the base is lowered then he must increase the rate
in order to get the same sum. If the base is raised
then he must lower the rate to get the same sum.
That is all there is to the problem of tariff rates.
In tariff computations the base is the valuation of
the imported goods. The desired sum, from the
standpoirS of the protective tariff. is a figure equiva-
lent to the cost of producing the goods in the United
States. The higher the valuation of imported goods
in comparison to production cost of like American
goods the lower the rate to cover the difference be-
tween their valuation and the cost of production Of
like goods in this country; and the lower their valua-
ton the higher must be the rate to obtain the same
result. In brief, to apply the theory of Lincoln's
answer, the Republican party believes that tariff
rates should be high enough to afford protection. In
asrnuch as imports today are valued. in terms of de-
preclated foreign currency, the base upon which tariff
IS computed is much lower today than it was in pre-
war days. Therefore, to obtain the same measure
of protection today as was obtained in the Payne
Aldrich days the rate must be higher.
To give an illustration: in pre-war days, when inter
national exchange was normal, the value of the Ger
man mark was "a cents in American money. An arti-
Gle imported from Germany valued at 100 marks was
worth, therefore, S24. In order to afford protection
to the American manufacturer of like articles there
was. we viii say, a tariff on the article of 50. 80. and
made the article. with the tariff added, cost $685. so
laid down in this country.
Today the German mark is worth cne-half a cent
A German article imported into this country TO-DAY
and valued at 100 marks is worth only SO cents. A
20 per cent rate upon SO cents would be one cent.
which would enable the article to be laid down, tariff
paid, for 81 cents.
1t is perfectly apparent that so long as imports are
permitted to be valued in terms of foreign currency.
the old rates are going to be not only Inadequate. but
absolutely ludicrous. In order to afford the Ameri-
can manufacturer the same amount of protection that
he obtained in pre-war days, one of two things must
be done-either the imports must be valued on an
American basis instead of a basis of deprecated for.
Eeign currency, or there must be a terrific increase in
the rates.
To get back to the problem of percentage. 10 tb.
base is to be lowered then the rate must be CORE
spondingly increased; and the base Represented NV
foreign valuation in terms of deprecated currencvl
has been lowered in the case of nearly every FOREIGN
country. Therefore. so long as tariff rates on i'm
ported goods are based on foreign valuation (which
in many cases is only a small percentage of what II
was IN pre-war days) the rates must be much higher
than they were in pre-war days in order to provide the
same degree of protection