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William D. (William Darrah) Kelley.

Mr. Hurd's free trade resolution online

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A



Mr. KURD'S FREE TRADE RESOLUTION.



SPEECH



HON. WILLIAM D. KELLEY,

i\

OF PENNSYLVANIA,



HOUSE OF REPRESENTATIVES,



FEBRUARY 18, 1881.



WASHINGTON.
1881.




SPEECH



HON. WILLIAM D. KBLLEY



The House being in Committee of the Whole House on the state of the Union,
and having under consideration the bill (H. K. No. 7099) making appropriations for
the Agricultural Department of the Government for the fiscal year ending June
30, 1882, and for other purposes-
Mr. KELLEY said :

Mr. CHAIRMAN : On the 6th of December last the gentleman from
Ohio introduced and caused to be referred to the Committee of
Ways and Means what is now popularly known as "the Hurd
free-trade resolution." It embodies nine propositions, which the
author declares set forth the principles that should regulate any
tariff levied by the American Congress. In view of our varied,
complex, and expanding industries ; of the illimitable store and
variety of raw material for m-anufacture with which our country is
endowed, vital elements of Avhich are found in every part of our
country, and which, by reason of this wide diffusion, necessitate
internal traffic, and offer remunerative business to the amplest con-
ceivable systems of internal transportation ; of the immense capital,
most of which having been created by our productive industries, is
now invested in railroads, buildings, and machinery constructed for
the transportation and con version of native raw materials into finished
commodities; of the constantly increasing millions of people to which
these furnish employment at wages so remunerative as to make our
home market for the productions of the field and the factory the best
market in the world, and to invite an immense annual immigration
in view, I say, of all these stupendous facts, the gentleman from
Ohio [Mr. HURD] in this resolution proposes to declare it to be the
duty of Congress to modify our tariff, to which these great interests
have adjusted themselves, in accordance with a few abstract propo-
sitions which have commended themselves to his judgment.

In January, 1870, the Corps Legislatif entered upon an exhaustive dis-
cussion of the effect upon French interests of the commercial treatie i
between France and other countries. M. Thiers bore a conspicuous
part in that controversy. Having in his opening speech presented
the protectionist side of the question, from time to time as occasion
invited he defended the positions he had assumed. In the course of



his speech on the 26th of January he exclaimed, "My adversary
proves that he has studied the question more in books than in prac-
tice."

As I gave the propositions of the gentleman from Ohio a first hasty
reading, I concluded that he had not studied the question as a practical
one, but in books only, though his propositions are vitally related to
every detail and ramification of our industries. This judgment in-
vestigation and reflection have confirmed. The form of the resolution
may be claimed by the gentleman, but its substance belongs to others.
It would be an easy matter to assign each of his propositions to the
British writer who propounded it, or who has given it prominence in
discussion. There is not one of them that the senior members of the
House will not recognize as a familiar acquaintance. Indeed, every
one of them has during my congressional career been discussed by
scores of gentlemen in this Hall. They are so many exploded fallacies,
and the refutation of each and all of them may be drawn from our
industrial experience or that of other nations. The assumption that
underlies this remarkable production is that trade, which calls into
ceaseless action the emotions and master passions of men, is regu-
lated by laws as absolute as those of geometry. The laws which gov.
ern production, distribution, and consumption are not those of an ex-
act science. " It is true," said Hamilton, " that in arithmetic two and
two make four, but it is not true in trade and finance."

Let me state the propositions propounded by the gentleman. They
are as follows :

First. A tariff is a tax upon imported goods, which is ultimately
paid by the consumer, as the importer always adds to the selling price
the amount of duty paid.

Second. A tariff for protection, so called, does not in most cases pro-
tect the interest it pretends to foster.

Third. A protective tariff does not increase the wages of working-
men.

Fourth. A protective tariff builds up one citizen at the expense of
another, for every dollar of additional price that protection enables
the manufacturer to charge must be paid by another citizen.

Fifth. A protective tariff disturbs the operation of the primal law
of trade which governs all exchanges by the supply and demand of
the articles to be exchanged.

Sixth. The present protective tariff has driven the American car-
rying trade from the high seas by enhancing the price of the materi-
als which enter into the construction of vessels so that American ship-
builders cannot compete with foreigners engaged in the same busi-
ness.

Seventh. A protective tariff increases the possibility of the crime
of smuggling.

Eighth. A protective tariff shuts out the American manufacturer



from the markets of the world. Our manufacturers need more an
increase of market by which foreign capital can be brought into this
country than protective legislation which takes money from one Amer-
ican pocket to put It into another.

The ninth paragraph is a statement of the means by which the
gentleman would bring our tariff to a revenue standard. It wilJ
be regarded by practical men, whether merchants or manufacturers,
as eminently illustrative of the author's want of knowledge of the
relation of customs duties to the productive industries of his country.

Let us examine these propositions seriatim :

IS THE DUTY PAID BY THE CONSUMER?

Is the tariff on imported goods always paid by the consumer?
Is it true that the importer always adds the amount of duty paid
to the selling price of a commodity ? As a proposition touching the
goods imported into the United States, with few and marked excep-
tions, this proposition is absolutely untrue. Indeed, it can only be
true, and not invariably there, in such free-trade, and consequently
non-manufacturing countries as Turkey, India, and the South Amer-
ican States. In our country, France, Belgium, Germany, and Austria,
which, by aid of the protective system, have developed the capabili-
ties of their people and made the investment of capital in manu-
factures safe, the foreigner who finds a market for his wares in com-
petition with those of like character of native production ordinarily
pays the duty. The recent increase of Canadian duties elicited a
pointed illustration of this general law. The duty on type had been
5 per cent. The new tariff law raised it to 20 per cent. Did the im-
porters of type raise the price of their goods by imposing the increased
duty on the consumer ? No ; for, seeing that increase of price might
develop domestic production of type, they at once assumed the pay-
ment of the duty. The leading importing house, that of Miller & Rich-
ard, at once advised the printers of the Dominion by advertisement dis-
played in the commercial journals that "imported type would, not-
withstanding the increase of duty, be sold at the old prices." Re-
lated to this question is that of paper, every grade of which, whether
for writing, printing, or wrapping, has been cheapened under pro-
tective duties.

A little reflection would, I think, have satisfied the gentleman that
his first proposition is worse than a glittering generality, that it is
a sophism calculated to mislead the ignorant and unthinking. Had
he questioned himself as to its truth, it would probably have occurred
to him that he who seeks a market for his goods must bear all charges,
and that this law holds good in international as well as in local trade
It is only when demand exceeds supply or the market is controlled
by a foreign monopoly that duties can be imposed on the consumer
of imported goods. The truth is that the primary dependence of the
manufacturer is upon the home market of his country. In this market



6

the producer and consumer are near to each other. Charges for trans -
portation are consequently light, and as purchases may be made in ac-
cordance with the demands of the season, there is little loss of inter-
est by either manufacturer or merchant from holding goods in stock
for an uncertain demand. In purely domestic trade the interest charge
on stock account is reduced to a minimum and the profits of middle-
men are avoided.

Exports to manufacturing countries whose manufactures' are ade-
quately protected, except such articles as the importing country does
not produce, are largely made on consignment by the manufacturer, and
consist of goods produced for the home market, but which have been
found to be in excess of its requirements. They are generally con-
signed to an agent who sells them at auction or otherwise irrespect-
ive of tariff regulations or of the question of profit or loss. His busi-
ness is to sell the consignment, earn his commission, and promptly
remit the proceeds of sale to his principal. When the spice crop ex-
ceeded the demand of the market, the Dutch maintained prices by
burning the surplus. The foreign rivals of our inanuf act urers adopt
a less expensive plan of maintaining prices in their home market ;
they throw the surplus of each spring and autumn upon the markets
of rival countries. While thus interfering with the legitimate course
of trade in the country to which they -consign goods, they add what
they receive for their consignments to the profits derived from the
home trade regardless of the question of duties or even of that of
price. They have realized the season's profit and now seek by damag-
ing the market of a rival to avert a glut in their home market for
the next year. This is not theory. It is but a statement of com-
mercial practice, a law of international trade recognized by all mer-
chants.

Under the ordinary conditions of trade we export but few manu-
factured commodities. The volume increases from year to year, but
our exports of manufactured goods consist generally of specialties, in
the production of which we excel all others. Our home market is the
best in the world, and we have not the producing capacity to supply
the wants of American consumers, as is attested by our immense con-
sumption of foreign staple goods. Yet the expediency of unloading
their surplus stock of goods in foreign markets is not unknown to our
manufacturers and merchants. During the financial depression which
followed the demonetization of silver by Germany and the United States
and our enactment of a law to reduce the volume of our circulating
Treasury notes to $300,000,000, our manufacturers, perceiving the
steady diminution of their home market, and consequent decline of
prices, sought relief in an export trade, and month by month an-
nouncements, sometimes official and always of a flaming character,
were made of our increasing exports of manufactured goods. When
leisure afforded opportunity, I sought many of the consignors of



goods and found that they were availing themselves of the teachings
of older nations and of ordinary commercial prudence. " No," said
one of the most intelligent of them in response to my question as to
whether the foreign market was a real one, " to force sales of our
goods at home would be to further depress an already unremuner-
ative market. We are making our losses abroad, and sharing them
with those who usually supply the countries to which we ship, whether
they be English, French, or Germans. We are sacrificing our goods
where others will share our loss, instead of further depressing our
own market." The truth of these statements was proven by the fact
that with the renewal of our domestic trade our unusual export of
American manufactures ceased.

CRUCIBLE-STEEL, SILK, AND BESSEMER RAILS.

The converse of my proposition is also true. He who sells goods
for which there is an active demand may subject them to all charges.
Many facts in our own history illustrate this side of the proposition.
Let me allude to cast-steel, silk, and Bessemer rails as illustrations of
this law. Many attempts to establish the manufacture of cast-steel
had been made in this country. They had cost the enterprising men
who made them their fortunes. Calculating the cost of production,
and taking the prices at which cast-steel then sold in their market, they
saw room for a reasonable profit. But when they had constructed
their works, gathered about them workmen, and put their product on
the market, they found that the price had fallen ; that their British
competitors were selling at rates which were not only unremunerative
but which might prove ruinous to them ; and after a brief strug-
gle, they succumbed, not to fair competition under free trade or a
revenue tariff, but, as I shall show, to a combination of foreign cap-
italists. The last signal failure of an American establishment for
the production of cast-steel occurred in 1860. The Morrill tariff bill
of 1861 and its supplements, passed under the exigencies of the war,
imposed large duties on cast-steel. Under those adequately protective
duties it has come to be one of our well-established industries, and we
supply from our own raw materials, converted by American tax-payers,
to the manufacturers of every form of steel tool and implement as
good steel as the world can produce ; and it is a noteworthy fact that
we supply it at lower prices than the same grade could be imported
before the higher duties were imposed.

The same story may be told as to silk, except that its manufacture
was attempted at a much earlier period than that of steel. It was, I
think, Queen Caroline who, on the occasion of her coronation, wore a
dress made of silk produced from American cocoons in the then loyal
colony of Georgia; and from that time until 1861 ineffectual efforts to
establish various branches of the silk industry in this country had been
made. The financial exigencies of the war forced us to develop it.
Silk goods were a luxury which the then Committee of Ways and



8

Means believed the people would have at any price, and they imposed
high rates of duty upon all forms of such goods. What has been the
result ? Silk has taken high rank among our industries. We may now
speak of silk goods as among our great staple manufactures. Its
establishment has created prosperous and beautiful towns and cities,
chief among which stands Paterson, New Jersey. And though fashion
may yield the palm of beauty of design to French goods, utility seeks
assurance that the silk which is to grace the farmer's or mechanic's
wife or daughter is of American production. In this case, as in that
of cast-steel, price has receded as quality has improved.

In the matter of Bessemer steel the story, like unto those of cast-
steel and silk, is all within my own memory. In 1865 small impor-
tations of Bessemer rails were made for use in the station-yards at
Philadelphia of the Pennsylvania and the Philadelphia and Baltimore
Railroads. The lowest price at which they could be imported was $150
per ton in gold. Enterprising proprietors of American iron- works
counted the cost of producing Bessemer rails, and in view of the lowest
price at which they could be bought, invested large sums of money in
the purchase of the patents under which alone such rails could be pro-
duced, constructed works at Troy, New York, and at two points in
Pennsylvania, and commenced the production of an article for which,
guided by the price demanded by British producers, they supposed a fair
market price was $150 per ton. They were, however, when they came
to put their rails upon the market, met with the best quality of Brit-
ish rails at $120 a ton. Their fortunes were in the patents and their
plant. They must find a market, and their first sales were made at $120
per ton. Their foreign rivals, with an enormous combination of capital,
knew the value of the American market, and determined to retain it,
and that, which before this competition arose they would not sell at less
than $150 per ton, was now offered at $100. Embarrassment overtook
two of our young establishments, and ruin overwhelmed the third.
American genius was brought into requisition. The aid of the geol-
ogist and mining engineer was invoked, and while our mechanical
engineers and artisans improved the processes for production the
mining engineer reported stores of ore for spiegelheisen, for which we
had hitherto depended on Germany, as abounding in the Appalachian
range. But science and mechanical skill could not have vanquished
the combined iron-masters of Britain. Another agency was needed,
the protection of the Government to the labor and enterprise of its
citizens. This was happily accorded.

The tariff was adjusted to the exigencies of the case ; our manu-
facturers of rails were assured that they should have a fair chance in
their own market if they would prepare the means of furnishing our
railroad companies at reasonable prices an adequate supply of rails
equal to the best foreign product. Under this guarantee of protec-
tion Bessemer works have multiplied and expanded, and the price of



9

rails has been reduced to less than one-half of that which had ruled
under a revenue tariff, and, as was shown by reports from some of the
leading railroad companies of the country in the investigation of the
subject by the present Committee on Ways and Means, the American
rail almost invariably outlives its foreign rival. Thus, protection has
enabled American citizens to resist an organized warfare upon them
and their country's interest ; and those who sanctioned what, super-
ficially considered, seemed to be a tax on commodities they were to
consume, find themselves rewarded a thousandfold by improvement
of quality and reduction of price, and may indulge in a good degree
of self-congratulation when they contemplate their further emanci-
pation from the commercial thraldom in which the British Govern-
ment and its organ, the Cobden Club, have hoped to hold the Ameri-
can people.

Eleven Bessemer works were in operation during last year. They
produced 1,203,173 net tons of ingots. How steady and rapid the
increase of this production has been the annexed table shows :

Tons.

1872 120,108

1873 170,652

1874 191,933

1875 375,517

1876 525,996

1877 560,587

1878 732,226

1879 923,972

1880 1,203,173

The total quantity of Bessemer rails produced by these eleven works
during last year was 917,592 net tons, and the following table shows
the steady increase of their production :

Tons.

1872 94,070

1873 129,015

1874 144,944

1875 290,863

1876 4.2,461

1877 4:52,169

1878 550,398

1879 683,964

1880 917,592

But these figures do not exhibit the total American production of
Bessemer rails during 1880. Several mills hitherto engaged in pro-
ducing iron rails have found it more profitable to purchase ingots and
blooms of Bessemer steel for conversion into rails, and a recent number
of the Bulletin of the Iron and Steel Association informs the trade
that at least 50,000 net tons of rails were thus produced during the
last year. It is now apparent that the production for 1881 will mark
an immense advance upon that of 1880. Many of the eleven original



10

works are enlarging their plant and improving their methods. The
Vulcan Works at Saint Louis, after several years of idleness, were in
full blast on the 1st of January. The Pittsburgh Bessemer Steel Com-
pany, Limited, is about commencing operations with a capacity of
sixty thousand tons of ingots a year. The North Chicago Steel Com-
pany are pushing their works rapidly to completion, and the Colo-
rado Coal and Iron Company are crowning the Rocky Mountains with
Bessemer steel works and a mill for rolling rails, with which it is hoped
to extend our railroad system, not only to the borders of Mexico, but
to her capital.

If the gentleman would kn ow whether the duty on cast-steel, silk, and
Bessemer rails is paid by the consumer, let him consult the cominei>
cial journals which have for years recorded the daily price of those
articles from 1860 to 1880, and he will find that they are all sold irre-
spective of the rate of duty and at prices lower than they commanded
when the American people were wholly dependent on foreign markets
f or such goods.

But, as these papers may not be accessible to the gentleman, I will
furnish him with ample information as to the question of price and
who pays the duty on Bessemer rails. That duty is $28 a ton. Be-
fore it was imposed, the lowest price at which British rail- makers
would sell their goods for the American market was as I have said $150
gold a ton. What effect this duty has had upon prices is shown by
the following table which has been carefully prepared by Mr. James
M. Swank, the accomplished secretary of the American Iron and
Steel Association :

Prices in dollars of American Bessemer steel rails, at ivories, from 1SG8 to
1880. Tons of 2,240 pounds.



Year.



1870
1871
1872
1873

1874.
1875
1876.
1877.
1878.
1879.
1880



$165 $167*1174
145
110
95
104*
121



143}
110
96
104



120

in,

65
49

g"

85



135
108$
106
104}



122*
115
71
62
49

41
43
82



$172
134
107
95



120



5165
130]

106
103

lit)
L20

!-

69
69

4:



65



I162
128
109i
104
113
121|
9fi}
69
60
46J
43
43
63}



}$150
130
110
1032



91
69
59



$150
130
110
104
11
121



63}



130

1082

106

114

118

78}

69

56

44

42J

50



$150
130
101
L05

H3
120

78}
67
54
42

60



2}





$148
130}
102i
103}
118
120
75|
66
53

ff

61
59



1147}$'

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120

755

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41"

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58



DOES THB REPEAL OF PROTECTIVE DUTIES REDUCE PRICES?

But the fallacy involved in the gentleman's proposition may be



11

farther illustrated by considering the question, "Does the removal of
a duty from an import reduce its price to the American consumer f "
Three instances of this kind in our recent experience have furnished
evidence that it does not, and that in many instances the question
of high or low duty or no duty has nothing to do with the price of
imported commodities in our market. Before the reciprocity treaty
between Canada and the United States, provincial coal paid a duty
of $1.50 per ton. Under that treaty it was for more than ten years
free. On the expiration of the treaty, the duty of $1.50 was revived.
It was subsequently reduced to 1.25, and subsequently to fifty cents
per ton. Daring all this period, through all these changes, the price
of provincial coal in our market was regulated by that of American
coal. It sold at our rates when paying the duty of $1.50 per ton.
Under the treaty the mine-owner retained the duty, and sold his coal at
our rates ; and so since the expiration of the treaty the mine-owner or
shipper of the coal has paid the duty, but has been unable to get for
that on which he has paid duty any better prices than those current
for American coal.

A fresher illustration is found under the Hawaiian treaty. When
the question of approving the treaty was before this House in 1878,
it was asserted by the chairman of the Committee of Ways and Means
and other advocates of the treaty, that the people of the Pacific coast
would obtain the whole sugar crop of the Hawaiian Islands at the
American market rate less the duty. But every gentleman from the
Pacific coast will bear me witness that the hundreds of thousands of
dollars which but for the treaty would have gone into the Treasury as
duty on Hawaiian sugar have been retained by the Hawaiian pro-
ducers who employ Chinese cheap labor.

A still more recent illustration of the truth I am considering comes to
my mind. The duty on quinine was denounced for years by free-traders
as a " blood tax." To retain the duty was to tax the sick and the dying
for the benefit of a few monopolists ; and in a furore, without discus-
sion in either House, the duty was repealed. Now, I affirm, without
fear of contradiction, that the repeal of the duty on quinine has not
reduced its cost in a single case to an American consumer, but was a


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Online LibraryWilliam D. (William Darrah) KelleyMr. Hurd's free trade resolution → online text (page 1 of 6)