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UR present tariff system is extraordinarily complex. It levies rates higher than those now imposed by any civilized country, with the possible exception of Russia. It abounds in anomalies and it has had unexpected economic consequences. It levies many duties which, although perhaps reasonable when first imposed, have become unreasonable under the conditions of the present. Its reform is urgently needed.

The best way to illustrate and to prove general statements like these is to take up specific cases. In the following pages, I shall take up two important and typical tariff schedules: that fixing the duties on wool and woolens, and that fixing the duties on sugar.

The central point in the tariff system as it stands is Schedule K,-wool and woolens; and the central point in that schedule is the duty on wool. Schedule K is forty-five years old. Though it has been elaborated since its emergence in 1867, its main features remain as then shaped. The duty on wool has remained at eleven cents a pound (with some slight changes in the different tariff acts). On top of the wool duty there has been built a complex system of rates on woolen goods. Remove the duty on wool, and those on woolens will have to be completely readjusted; carry out both of

these changes, and the whole tariff system will have to be readjusted.

I have given much time and careful study to tariff matters during the last thirty years, with the most earnest endeavor to consider them objectively and impartially. The more I reflect and learn, the less do I find any sound reason for retaining the wool duty at all. There can be no application of protection to young industries. No initial obstacles exist to wool-growing from unfamiliarity or from the need of learning new methods. There is no prospect that the growers will be able to supply the country with all the wool that is called for. withstanding the long-continued high duty, imports continue and are steadily increasing.

Not

Again, no argument based on social or political considerations, or on the need of diversified industries, can be maintained. Possibly, there would be some disadvantages if the country grew no wool at all; though I am not convinced that Germany, for instance, is in any ominous situation because she now imports nine-tenths of the wool that she uses. But it would be idle to debate whether we should lose by importing all of our wool, the fact being that we are certain to grow a good deal of wool, duty or no duty. Free wool would not mean the disappearance of domestic wool. It is a question not of whether or no, but of more or less.

The reason why wool-growing has never been stimulated by the tariff to the point of satisfying all the country's needs is very simple. The farmers have found better things to do with their land and their labor. A certain number of sheep will be kept, and a certain amount of wool and mutton will be brought to market, as adjuncts to general farming. Beyond that, when it comes to large flocks and specialized wool-growing, the question is merely whether other ways of using the land and the labor do not pay better. In the pioneer stage, when land for grazing is superabundant, there is apt to be much wool-growing. Illi

respect, it is like the outlying region to which European countries look for their wool supply, Australia, South Africa, Argentina. But in our Western states, woolgrowing has a tempting alternative in cattle-raising. Meat is in more insistent demand even than clothing; cattle and their products are readily marketed; and the grazing stretches can always be turned readily to this profitable use. There are no climatic or industrial difficulties in growing wool in the ranching states. Indeed, it is a striking fact that, during the years of free

wool and low prices (in 1894-97), the wool clip in a state like Montana

state before the Civil War. Texas

and California were great wool states twenty years ago. As these states emerged from the frontier state, wool-growing declined, simply because agriculture was found more profitable.

In the strictly grazing states, such as Montana and Wyoming, the situation is different. These have vast tracts of land that cannot be irrigated and cannot be cultivated even by dry farming. Such land will always be used for grazing. In this

actually increased. In part, the grazing region will hold its own for wool-growing even if the tariff be abolished. In part, it will turn quickly and without loss of profit to cattle-raising.

Wool is thus the last article to which a protective policy can be applied with promise of good results. Complete domestic supply is out of the question. Complete disappearance of all domestic supply

is equally out of the question. The duty raises the price of wool, and will always continue to do so. It makes clothing dearer, and it increases the manufacturer's everpresent temptation to use substitutes and adulterants. No other civilized country imposes a duty on wool. Even Germany and France, though they are protectionist, and, moreover, protectionist for their agricultural industries, admit wool free. It should be admitted free by the United States.

FREE ADMISSION OF WOOL ADVANTAGEOUS

To be sure, if one is a protectionist of the unflinching type; if one believes that everything should be produced at home that possibly can be produced here; if trading with foreign countries, and especially imports from foreign countries, are thought to bring certain and invariable loss; if one holds, in fact, the Chinese-wall attitude, then the duty on wool will seem not only commendable, but, because of its strategical position in the tariff controversy, even sacredly inviolable. Then every pound of wool that is imported signifies a menace not only to the grand wool industry, but to the very foundation of national prosperity. But nowadays, most people are not thinking in quite this way about the tariff. They are not dismayed if it does appear probable that we shall procure articles like wool from abroad in greater quantity. Americans are not devoid of resource or of resources. We can turn labor and land and capital to plenty of things with advantage. We can raise a little less wool, and grow more corn and wheat and root crops. We can raise more cattle. By admitting wool free, we can get our clothing a little cheaper, and trade a little more with other countries; and we need not fear that the process will upset all our industries. After we get adjusted in this case, a comparatively easy matterwe shall not only find ourselves with cheaper and better clothing, but we shall be rid of an interminable and exasperating bone of contention.

On top of the wool duty is built the imposing structure of duties on woolens-the really intricate part of Schedule K. Here we find extreme duties, in almost all instances as high as ninety and a hundred per cent. sometimes even higher. Here we find old adjustments that have come to be out of accord with the modern situation. Here we find the excesses and inconsistencies

that have led President Taft to state so openly his dissatisfaction with the Schedule, his wish to remodel it, his earnest and honest desire to ascertain precisely how the rates should be changed.

The main characteristic of the present system of woolen duties is that there are two sets of rates; one set compensative, another set protective. Since there is a duty on wool, the American manufacturers must pay more for the raw material than their foreign competitors. To put the Americans on an even footing with the foreigners, there must be a duty on imported woolens equivalent to the higher price of wool in the United States. This equivalent, or compensation, was calculated in 1867, on the supposition that it took four pounds of wool to make one pound of cloth. That may seem a large allowance. But wool as it comes from the sheep's back contains much grease and dirt; and there is, inevitably, loss in the processes of manufacture. At all events, four to one was, and is, the basis of the compensative system. The duty on wool being 11 cents a pound, the compensating duty on foreign woolens may be calculated at 44 cents a pound. Some such figure with minor variations that need not be considered here—is found in all our pro tective tariff acts since 1867. Then there comes, in addition, the really protective duty, the one that is meant to aid the American manufacturers as against their foreign rivals. That net protective duty was designed in 1867 to be moderate-25 per cent. on the value of the foreign woolens. But the ideas of manufacturers and legislators on what is to be regarded as moderate or reasonable protection have much expanded since 1867. The ad valorem or protective rate has gone up and up, first to 35 per cent., then to 40, 45, 50, 55 per cent. The last mentioned rate-55 per cent.—was imposed by the Dingley tariff of 1897 on the woolen goods chiefly imported. It remained at that high figure in the PayneAldrich act of 1909.

COMPENSATIVE SYSTEM OUT OF DATE

Just how and why the woolen duty has come to be not only high, out out of joint, would make a long story. The gist of it is that the compensating part of the duties more than compensates. It serves to add substantially to the protection, already high, given by the ad valorem part of the

of the consequently high net protection lies in the changed character of the wool used. The kind of wool chiefly used in this country in 1867 did shrink heavily. The compensating duty as then fixed (on the basis of four pounds of wool to one pound of cloth) was fair enough. Since that date, the whole wool trade of the world has greatly changed. Most of the wool now used shrinks less than the four-to-one ratio assumes. Moreover, cotton and shoddy have come to be used largely by the wool manufacturers, in part as honest supplements, in part as adulterants. temptation to substitute them for wool is, of course, increased, as has just been intimated, by the artificially high price of wool. All in all, the manufacturers get, in the shape of the compensating duty, a substantial addition to their nominal protection. The effective protective duty on most woolens is 60, 65, 70 per cent.,

ly suffices. There are all kinds of woolen goods-men's goods and women's goods, cloths and worsteds and dress goods. The details of the compensating system are fearful and wonderful, and even an expert would

find it hard to determine just how much of the duty merely compensates, how much serves as protection. But no expert, if pressed to a frank statement, could fail to say that on most goods there is much higher protection than the elaborate system pretends to give.

change. They cry "wolf!" whenever any one undertakes to touch the duties. I am convinced that most of them do not need as high protection as they get. On the face of it, a duty of 65 or 75 per cent. is excessive. Even making every allowance that one cares to make for differences in labor cost, protection to this extent is uncalled for. It must be remembered that 65 or 75 per cent. is the rate of duty on the whole value of the goods, not merely on the labor cost embodied in them. If an industry demands a system of duties that doubles the price of all imported goods; if it intolerantly resists all reductions; if it advocates the policy of maintaining such extreme rates indefinitely, it must expect, sooner or later, á revolt. The woolen manufacturers would have shown wisdom and foresight if they had acceded years ago to a considerable readjustment. The house-cleaning that is sure to come may prove to be much more ruthless than if they had themselves taken the lead in conducting it.

SUGAR TAX $110,000,000 A YEAR The sugar duty presents a case in some respects different from that of Schedule K, in other respects similar. The duty is The duty is specific. As in the case of the wool and woolens duties, it has its complexities; one of which is the reciprocity arrangement for some reduction in the rate on sugar imported from Cuba. By and large, the sugar duty now amounts to 12 cents a pound. This is the rate on raw sugar, and it is the tax that signifies. A small additional duty is imposed on refined sugar, which is, perhaps, of consequence to the Sugar Trust, but signifies very little to the consumers of sugar. There is much misunderstanding on this topic. Many people suppose that the sugar duty is of special advantage to the refiners, and is kept on by their influence. In fact, the persons chiefly concerned are not the refiners (such as the Trust), but the makers of raw sugar on the one hand, the consumers on the other.

The consumers pay, in the way of sugar taxes, in round numbers $110,000,000 a year. That means about $1.25 for every man, woman, and child in the population, or $7.25 for a family of five. When it is said that the consumers pay this amount in taxes, it is meant, of course, that they pay it in the form in which all such indirect taxes are paid-in higher prices for the com

modities. Sugar costs the average family each year $7.25 more than it would cost if free of duty.

Of the total of $110,000,000 paid in sugar taxes, less than one-half (about $50,000,000) goes to the United States Treasury as revenue. More than half (about $60,000,000) operates as protection. This second portion goes to a miscellaneous lot of people in all parts of our country and its possessions and serves to aid them in sugar-making. It is the price that we pay for the luxury of having a sugar industry (or rather, a set of sugar industries) of our own.

SUGAR-MAKERS GET $60,000,000

The portion of the sugar tax that goes to Uncle Sam is $50,000,000. This does bring the community a clear return, in the form of public services. It goes to provide salaries for our senators and representatives and judges, to run the Department of Agriculture, to meet pensions, to pay for battleships, to maintain our military forces in the Philippines, and so on. I will not undertake to say how far we get in all these expenditures a full equivalent for our taxes. The wisdom of Congress has decided what appropriations shall be made, and the bills must be paid. Very likely, a tax on sugar is not the best way of getting the money. But at least the money, when got, is applied to public purposes.

The sum of $60,000,000, which does not go to Uncle Sam's treasury, is applied to purposes which, if they are public, are public in a very different sense. It goes to the persons who grow cane and beets and make raw sugar. Part is turned over to the Louisiana sugar-makers. These feel that they have a long-standing vested right to support; for they were making sugar and getting protection on it before the War, and they have had the protection ever since. Part goes to the beet-sugar people, who are chiefly in the far West-California, Utah, Colorado, and so on. Their sugar industry is of very recent origin. It is prospering and growing. Most of them are making money fast under the high price that the sugar duty enables them to get. A good slice of the consumer's money, again, goes to the sugar planters of Hawaii. They are within the pale of our protective system, and they, too, get the full benefit of the extra price that the duty causes us to pay for our sugar. The same is the case with the