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THE CITIZEN'S LIBRARY

OF

ECONOMICS, POLITICS, AND
SOCIOLOGY

EDITED BY
RICHARD T. ELY, PH.D. , LL.D.

PROFESSOR OF POLITICAL ECONOMY,
UNIVERSITY OF WISCONSIN



INTERNATIONAL COMMERCIAL
POLICIES

WITH SPECIAL REFERENCE TO THE

UNITED STATES

A TEXT BOOK



THE CITIZEN'S LIBRARY

International
Commercial Policies

WITH SPECIAL REFERENCE TO THE

United States
a Cest T5oofe

BY

GEORGE MYGATT FISK, PH. D.

w

PROFISSOR OF COMMERCE, UNIVERSITY OF ILLINOIS.
FORMERLY SECOND SECRETARY OF AM-
ERICAN EMBASSY AT BERLIN

AUTHOR OF

Deutsch-Amerikanische Handelsbeziehungen;

Handelspolitik der Vereinigten Staaten 1890-1900;

Middle-European Tariff Union, Etc.



THE MACMILLAN COMPANY

LONDON: MACMILLAN & CO.. LTD.
1911

All rights reserved



COPYRIGHT, 1907,
BY THE MACMILLAN COMPANY.



Set up and electrotyped. Published November, 1907.
January, 1910 ; May, 1911.



Reprinted




NortoooU
Berwick & Smith Co., Norwood, Mass., U.S.A.



To
ANDREW D. WHITE

association with whom during
nearly four years of official life
at Berlin has been a permanent
source of inspiration to the author.



259808



PREFACE

An effort has been made in the present volume
to bring together in a form available for students
of economics as, well as for general readers, a sys-
tematic treatment of the politics of international
commerce. Such an effort is beset with many
difficulties. In the first place no method of treat-
ment is entirely free from all objections. Again
while there is an abundance of literature on some
of the topics considered in the following pages, the
literature is very meagre as regards other topics.
As to general works no English books cover the
entire field of international commercial politics al-
though some German writers notably Roscher,
Cohn, Lexis, van der 'Borght and Grunzel have
treated the subject in a scholarly way. The author
wishes to make special acknowledgments to the
last named author for frequent use which he has
made of his excellent work, System der Handels-
politik. For services rendered he wishes also to
express his appreciation to the officers and attend-
ants of the libraries of Congress, University of
Illinois, University of Wisconsin and Wisconsin
Historical Society and to his colleagues, professors
N. A. Weston, M. H. Robinson and J. W. Garner.
Professors Weston and Robinson read the manu-
script and their criticisms were invaluable. Pro-
1 fessor Garner furnished valuable assistance in the

vii



PREFACE

preparation of the last two chapters on navigation
policies. The author feels a special debt of grati-
tude to his former teacher, the editor of Macmillan's
"Citizen's Library," both for earlier services in the
class room at the Johns Hopkins University and
for reading, re-reading and revising the manuscript
of the present work.

G. M. F.

CHAMPAIGN, ILLINOIS,
October 8, 1907.



viit



CONTENTS

CHAPTER I.

INTRODUCTION

PAGE

I. General Statement .... 3

2- Meaning of Commerce ... 5

3. Materials of Commerce ... 6

4. Classification of Commerce ... 7

5. Politics of Commerce ... 8

6. Political Control of Commerce . . 9

7. General Character of Ancient Commerce n

8. Development of Ancient Commerce . 12

9. Commercial Policy of the Middle Ages . 14
10. Development of Mediaeval Commerce . 16

Bibliography, Suggestive Topics and Questions 18



CHAPTER II.

DEVELOPMENT OF MODERN COMMERCIAL POLITICS:
THE MERCANTILE SYSTEM

11. General Character of Early Modern Period 21

12. General Character of Mercantilism . 23

13. First and Second Phases of Mercantilism . 24

14. Third Phase of Mercantilism . . 25

15. Criticism of Mercantilism ... 27

16. Portugal and Spain . . .29

17. The Netherlands . . .30

18. France . . 32

19. England ..... 33
Bibliography, Suggestive Topics and Questions 34

ix



CONTENTS

CHAPTER III.

DEVELOPMENT OF MODERN COMMERCIAL POLITICS:
FREE TRADE

PAGE

20. Political and Economic Revolt against Mer-
cantilism 37

21. The Physiocratic System ... 38

22. The Free Trade System ... 38

23. England . . . -39

24. The United States .... 41

25. Continental Europe .... 42
Bibliography, Suggestive Topics and Questions 44

CHAPTER IV.

DEVELOPMENT OF MODERN COMMERCIAL POLITICS:
PROTECTION

26. General Character of Protection . 47

27. Causes of Recent Growth of Protection l . 48

28. Main Arguments for Protection . . 49

29. The United States, 1789-1887 . . 51

30. The United States, 1887-1897 . . 53

31. Present Situation in the United States . 55

32. France ..... 56

33. Germany ..... 58

34. Other European Countries ... 59
Bibliography, Suggestive Topics and Questions 60

CHAPTER V.
CUSTOMS GENERAL: IMPORT DUTIES.

35. Definition and Development of Customs Duties 62

36. Classification of Customs Duties . . 63

37. Definition and Classification of Import Duties 65

38. Present Importance of Import Duties . 66

39. Who Pays the Tax? ... 67

40. Trusts and "Dumping" ... 69
Bibliography, Suggestive Topics and Questions 71

x



CONTENTS

CHAPTER VI.

CUSTOMSEXPORT AND TRANSIT DUTIES : PROHIBITIONS

PAGE

41. Definition and Classification of Export Duties 73

42. Revenue Export Duties ... 74

43. Protection Export Duties ... 75

44. Transit Duties . .76

45. Import, Export and Transit Prohibitions . 77

46. Protection and Revenue Prohibitions . 78

47. Prohibitions based on Sanitary Grounds . 79

48. Prohibitions based on Moral or Religious Grounds 81

49. Prohibitions based on Grounds of Public Security 82
Bibliography, Suggestive Topics and Questions 84

CHAPTER VII.
CUSTOMS TARIFFS AND TARIFF SYSTEMS

50. Introduction .... 86

51. Contents of the American Tariff Act . 87

52. The Free List . . 89

53. Tariff Enactment and Administration . 89

54. Territorial Scope of Tariff Laws . . 9

55. Revenue Effect of Anticipated Tariff Changes 91

56. General or Autonomous Tariff System . 92

57. General and Conventional Tariff System . 92

58. Maximum and Minimum Tariff System . 94
Bibliography, Suggestive Topics and Questions 96

CHAPTER VIII.
CUSTOMS AD VALOREM, SPECIFIC AND DIFFERENTIAL DUTIES

59. Introduction .... 98

60. Advantages and Disadvantages of Ad Valorem
Duties . . ... 99

61. Advantages and Disadvantages of Specific Duties 101

62. General Method of Tariff Administration . 102

63. Payment of Customs Duties . . 104

xi



CONTENTS

PAGE

64. Discriminating Duties on Vessels and their
Cargoes . . . . .105

65. Interstate Preferential Duties . . 107

66. Colonial Preferential Duties . . 108

67. Countervailing Duties . . . 109

68. Retaliatory Duties . . . . Ho
Bibliography, Suggestive Topics and Questions in

CHAPTER IX.
CUSTOMS ADMINISTRATIVE INSTITUTIONS

69. Ports of Entry and Ports of Delivery . 115

70. Meaning and Advantages of Bonded Warehouses 115

71. United States Bonded Warehouses for Imported
Goods . . . . .116

72. General Regulations regarding United States
Bonded Warehouses for Imported Goods 118

73- Free Ports . . . .118

74. Free Districts . . . .120

75. Proposed American Free Districts . 121

76. Frontier Traffic in the Narrower Sense 122

77. Mexican Free Zone . . . 123

78. Treaty Ports . . . .124
Bibliography, Suggestive Topics and Questions 125

CHAPTER X.

CUSTOMS INTERNAL TAXATION : EXPORT AND IMPORT
FAVORS

79. Internal Taxes .... 127

80. Internal Taxes on Imported Merchandise 128

81. Internal Taxes on Domestic Products destined

for Exportation .... 129

82. Drawbacks ..... 130

83. Drawback System in the United States . 131

84. Direct or Open Bounties . . . 132

85. Indirect or Concealed Export Bounties . 134

86. International Sugar-Bounty Question . 136-

xii



CONTENTS

PAGE

87. Free Re-Importation of Unaltered Domestic
Articles 137

88. Free Importation of Foreign Articles to be Re-
exported after Alteration or Repair: General 139

89. Free Importation of Foreign Articles to be Re-
exported after Alteration or Repair: United
States . . 140

90. Miscellaneous "Free List" Articles . 140
Bibliography, Suggestive Topics and Questions 142

CHAPTER XI

COMMERCIAL TREATIES THEIR NATURE, FORM AND
CONTENTS

91. Definitions ..... 145

92. Development of Commercial Treaties . 145

93. European Commercial Treaties of the Free Trade
Era . 147

94. European Commercial Treaties of the Protection
Era . ... . .147

95. What States may negotiate Commercial Treaties ? 148

96. Who may negotiate Commercial Treaties? 149

97. Duration of Commercial Treaties . 150

98. Protocol . . . . .151

99. Subject Matter of Commercial Treaties . 151

100. Groups of Commercial Treaties . . 152

101. Provisions of Commercial Treaties . 154
Bibliography, Suggestive Topics and Questions 158

CHAPTER XII.

COMMERCIAL TREATIES RECIPROCITY AND THE MOST
FAVORED NATION CLAUSE

102. Meaning of Reciprocity . . ' . 161

103. First Phase of American Reciprocity . 162

104. Second Phase of American Reciprocity . 162

105. Third Phase of American Reciprocity . 163

106. Fourth Phase of American Reciprocity . 164

xiii



CONTENTS

PAGE

107. Fifth Phase of American Reciprocity . 165

108. Sixth Phase of American Reciprocity . 166

109. Seventh Phase of American Reciprocity . 167
no. Eighth or Final Phase of American Reciprocity 168
in. Meaning of the Most Favored Nation Clause 169

112. Restricted (or American) Most Favored Nation
Policy ..... 170

113. Unrestricted (or European) Most Favored Na-
tion Policy ..... 171

114. Scope of the Most Favored Nation Clause 171
Bibliography, Suggestive Topics and Questions 173

CHAPTER XIII.
PUBLIC TRADE- PROMOTING INSTITUTIONS

115. General ..... 177

1 1 6. United States Department of State . 178

117. General Consular Service . . . 179

118. Development of the American Consular Service 181

119. Present American Consular Law . . 182

120. Recent Regulations Governing Appointments
and Promotions . . . .185

121. Present Regulations Governing Appointments
and Promotions . . . .186

122. Regulations Governing Examinations . 187

123. Criticism of the Present American Consular
Service . . . 189
Bibliography, Suggestive Topics and Questions 191

CHAPTER XIV.
PUBLIC TRADE- PROMOTING INSTITUTIONS (Continued)

124. Commercial Attaches . . . 192

125. Proposal for Commercial Attaches in the
American Diplomatic Service . . 192

126. United States Treasury Department . 194

127. United States Department of Agriculture 195

xiv



CONTENTS

PAGE

128. United States Department of Commerce and
Labor (a) Bureau of Statistics: (b) Bureau

of Manufactures .... 197

129. United States War Department . 200

130. Trade Commissions . . . 201
Bibliography, Suggestive Topics and Questions 202

CHAPTER XV.
QUASI- PUBLIC AND PRIVATE TRADE- PROMOTING INSTITUTIONS

131. General ..... 206

132. Commercial Museums and Bureaus of Infor-
mation ..... 207

133. The Philadelphia Commercial Museum . 208

134. Export Sample Warehouses . . 209

135. Domestic Chambers of Commerce in Foreign
Countries .... 210

136. Export Syndicates . . . .211

137. Miscellaneous Trade-Promoting Institutions 213
Bibliography, Suggestive Topics and Questions 214

CHAPTER XVI.

COMMERCIAL STATISTICS: BALANCE OF TRADE AND FOREIGN
EXCHANGE

138. Definition of Commercial Statistics . 216

139. Classification of Commercial Statistics . 217

140. General Methods of Obtaining Commercial
Statistics ..... 220

141. American Methods of Obtaining Commercial
Statistics . . . . . 219

142. Difficulties of Statistical Comparisons . 221

143. Methods of Statistical Comparisons . 222

144. Meaning of Balance of Trade . . 224

145. Visible Exports and Imports . . 225

146. Invisible Exports and Imports . . 226

147. How Balance are Adjusted . . 228
Bibliography, Suggestive Topics and Questions 229

xv



CONTENTS

CHAPTER XVII.

NAVIGATION POLITICS

PAGE

148. General ..... 233

149. Mare Clausum .... 234

150. Freedom of Navigation . . . 235

151. Navigation Laws .... 236

152. English Navigation Policy . . 237

153. Navigation Policy of the United States . 238

154. Character of Shipping Subsidies . . 240

155. History of Foreign Shipping Subsidies 241

156. Early American Shipping Subsidy Policy 242

157. Postal Subsidy Act of 1891 . . 244

158. Arguments for and against Navigation Laws 247
Bibliography, Suggestive Topics and Questions 248

CHAPTER XVIII.
PUBLIC NAVIGATION-PROMOTING INSTITUTIONS

159. General ..... 251

160. Bureau of Navigation and Shipping Com-
missioners .... 252

161. Steamboat-Inspection Service . . 253

162. Light-House Board . . . 253

163. Coast and Geodetic Survey . . 254

164. Public Health and Marine Hospital Service 255

165. Life-Saving Service . . . 256

1 66. Revenue Cutter Service . . . 256

167. Navy Department .... 257
Bibliography, Suggestive Topics and Questions 258

General Bibliography .... 259

Index .,..,, 273



XVI



INTERNATIONAL
COMMERCIAL POLICIES



CHAPTER I.
INTRODUCTION

i. General Statement. There run through the
writings of early authors on economic subjects two
prominent ideas regarding commerce, one relating
to its value and the other to its content. As re-
gards the former Montesquieu, the immortal writer
of the "Spirit of Laws," has tersely said: "the
effect of commerce is riches; the consequence of
riches, luxury; and that of luxury, the perfection
of arts." The emphasis laid on not only the ma-
terial but also the cultural value of commerce by
early writers a characteristic almost lacking in
economic literature of the present day is not diffi-
cult to understand. Trade among early civilized
peoples, especially among the Greeks and, to a
greater extent, the Romans was largely in the
hands of foreigners and was essentially piratical
in character. These conditions stamped trade as
an unworthy occupation and perpetuated traditions
and prejudices which have taken centuries to eradi-
cate. The civilized world has, however, been
gradually converted and but few writers of the
present time think it worth while to demonstrate
that the material advantages of trade are mutual
and that commercial intercourse is civilizing in its
effects.



COMMERCIAL POLICIES

As regards the second characteristic, the content
of commerce, it may be stated that the ancients did
not discriminate between commerce in its restricted
and in its general sense; that is, they did not dif-
ferentiate commerce from navigation, transportation
and communication, money and banking, and even,
in some instances, from general industry or from
political economy. They used the term in much
the same sense in which in modern phraseology we
speak of commercial education and schools of com-
merce, meaning thereby much more than mere
studies of trade or even of general economics.
The complex character of modern industrial life has
led to a high degree of specialization not only in art
but also in science. Such subjects as transporta-
tion and communication, or money and banking,
have become so important and also so complex that,
although of course recognized as perhaps the most
important instruments of commerce, they are treated
as special subjects in themselves rather than as
synonymous with commerce. It should also be
noted in this connection that there is a legal con-
ception of commerce which may be, and in fact
usually is, different from the economic use of the
term. While economically considered the meaning
of commerce tends to become more and more re-
stricted, legally considered the opposite tendency is
observable at least so far as the federal government
of the United States is concerned, since the inter-
pretation given by the Supreme Court to the mean-
ing of commerce as used in the Constitution is
much more extensive now than formerly. This

4



INTRODUCTION

discussion naturally brings us to a consideration of
the meaning of commerce and its relation to eco-
nomics and industry. In the treatment of the sub-
ject in the present text the term commerce is used
in its restricted rather than in its broad meaning.

2. Meaning of Commerce. Political economy,
or economics, deals with those activities of man
which are directed toward getting a living. It
has often been defined as the science of wealth.
Wealth in the economic sense consists of those
goods and services which are useful to man, which
possess utilities. These may be classified into ele-
mentary or material, form, time, place and quantity
utilities. Both industry and commerce are impor-
tant parts of the economic life of society. The
former is primarily concerned with the creation of
form utilities and the latter with those of time,
place and quantity. The agent in industry is the
manufacturer; in commerce, the merchant. The
separation between the two is never complete either
in theory or in practice. Theoretically, many mod-
ern economists treat commerce as merely a part of
economic production on the ground that the latter
is incomplete until goods which have been manu-
factured or produced are put into the hands of
final consumers. In practice there are many occu-
pations in which the manufacturer and distributor
or merchant, are united. A simple illustration is
that of the baker who not only makes the bread, but
often offers it for sale to final consumers. While
the development of the division of labor has tended
toward a differentiation of industry and commerce,

5



COMMERCIAL POLICIES

the latest phase of industrial consolidation has led
in many instances to a closer union. Giant con-
cerns like the United States Steel Corporation and
the Standard Oil Company are both industrial and
commercial institutions. They are engaged not
only in the creation of form, but also of place, time
and quantity utilities.

Commerce is defined in the dictionary as "the
exchange or buying and selling of commodities,
especially the exchange of merchandise on a large
scale." It is characterized as trade in its most
extended form. The terms "commerce" and
"trade" mean very much the same thing, although
the former often refers to commercial dealings
between nations, while the latter is more often ap-
plied to internal mercantile intercourse. Thus we
speak, on the one hand, of the foreign commerce or
commercial relations of the United States and, on
the other hand, of the wholesale or retail trade of
individual merchants.

When goods have been manufactured they must
be distributed to those places where consumers are
to be found, held until they are wanted and fur-
nished in desired quantities. That branch of eco-
nomics which thus serves as a bridge between
initial producers and final consumers by creating
the necessary place, time and quantity utilities, is
commerce.

3. Materials of Gommerce. The materials of
commerce are variously designated as goods, com-
modities, merchandise, wares or products. While
these terms are often used indiscriminately, their sig-

6



INTRODUCTION

nificance is not always the same. Owing to the dif-
ference in usage in different countries or even in
different parts of the same country, fixed definitions
are difficult to frame. The term goods usually means
transferable articles of portable or personal prop-
erty such as are intended for sale or might realize
a money value if sold. Thus we speak of dry-
goods, fancy goods, high-priced goods, the goods
of the merchant and the like. A commodity is any-
thing movable that is a subject of trade or of ac-
quisition. Goods and commodities are nearly syn-
onymous. The former term is somewhat more
comprehensive than the latter which usually, but
not always, refers to articles of necessity. Mer-
chandise is the generic term for all portable articles
of trade considered as such in the aggregate. The
American trade statistics, for instance, refer to the
exportation of articles of domestic merchandise,
meaning thereby the sum total of all articles of
domestic production exported to other countries.
The term ware or wares designates the sum of arti-
cles of a particular kind or class. It is often used
in composition as in hardware, glassware or tin-
ware. Webster defines a product as anything that
is produced, whether as the result of generation,
growth, labor or thought, or by the operation of
involuntary causes. We speak of the products of
the season or of the farm, the products of manu-
factures, the products of the brain, etc.

4. Classification of Commerce. Trade is either
wholesale or retail. The latter may be defined as
sales to the final consumer and the former as mer-

7



COMMERCIAL POLICIES

cantile transactions among all classes except the
final consumer. Usually, but not always, wholesale
trade is in larger values than retail trade. Com-
merce is also divided into domestic trade, carried on
entirely within the boundaries of a particular coun-
try, and foreign or international trade between in-
dividuals of different nations. The present work
has to do primarily with foreign commerce which
is divided into various classes. Import trade com-
prises dealings in those goods brought into a coun-
try from foreign localities; export trade refers to
shipments sent out of a country; and transit trade
is traffic passing through third countries en route
from one country to another. Trade passing be-
tween two countries via third countries is charac-
terized as indirect trade in contradistinction to
direct trade, or trade passing directly between two
countries. Foreign commerce is also classified as
land trade and sea trade. Where a country em-
ploys home capital and labor in carrying on its for-
eign trade its commerce is called active, while on
the other hand, if its foreign trade is carried on by
foreign merchants its trade is characterized as
passive. The foreign commerce of all countries,
taken in its entirety, is called world commerce.

5. Politics of Commerce. Political science is
the science of government; politics is the art of
governing. The former deals with principles,
while the latter has to do with practice, and finds
formal expression in law. While good government
is a necessity for commercial development and
nearly all governmental regulations, such as those



INTRODUCTION

relating to education, private property, revenue or
communication, influence commerce more or less,
only those affecting it directly and consciously
belong to the sphere of commercial politics. Com-
mercial politics, therefore, comprises the laws, in-
stitutions and executive methods by means of which
the sovereign will controls commerce. While the
activities of the government are generally directed
toward increasing commerce, this is not always the
case. In fact, many laws such as protective tariff
regulations often aim to discourage commerce;
others, especially those of a police, moral or sani-
tary character, as, for example, laws relating to the
sale of fire arms, intoxicating liquors or adulterated
foods are often prohibitory. The aim of all laws
regulating commerce should be to benefit society at
large. There is no other justification for law,
whether it be to regulate commerce or any other
activity.

6. Political Control of Commerce. In the Mid-
dle Ages the political control of commerce was vested
theoretically in the central government represented
by the king. Owing, however, to the lack of effec-
tive centralization the power to regulate commerce
came more and more under the control of local quasi-
public corporations or guilds. This control became
nearly absolute and extended over both domestic
and foreign commerce. In strongly centralized
governments, such as those of modern England,
France or Italy, the control of commerce is largely
concentrated in the hands of the central govern-
ment; but in federal states, like the United States

9



COMMERCIAL POLICIES

or the German Empire, where there is a division of
power between central and local authority, foreign
commerce is largely under the control of the former
while domestic commerce comes more naturally
under the purview of the latter. The situation in
the United States in this particular is interesting.
Although the American colonies were constantly
interfered with by the mother country, the political
troubles of England at home and on the Continent,
coupled with the dangers of navigating the broad
Atlantic which lay between her and her colonists,
resulted in the latter having, in a large measure,
their own way in matters of government. Their
constant struggle, however, for both economic and
political existence developed in the English resi-
dents of the New World strong sentiments of self-
government. When separation from the mother


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