A history of the American tariff. 1789-1860

Front matter

Class Book Volume

Ja O9-20M

A HISTORY

Preface

This sketch of the American tariff does not give any new facts in the history of that subject during the period covered. It is only a gathering together of some of the main events of that history. It is written from the point of view of no political party. And it closes with the opening of the Civil War period because that was the beginning of a new era. The legislation from 1789 until i860 was, strictly speaking, experimental in character, and as a result it was continually changing from a policy of protect tion to one of revenue only, or the reverse. It required all these years — almost three-quarters of a century — for the country to decide which of these policies it really wished to adopt and retain. But comparing its experience under the one with that under the other, it turned to the policy of protection and has adhered to it for a period now half as long as the experimental one. New tariff laws making various changes have during this time been passed, it is true. But the principle of a tariff for the protection of home industries, as well as for revenue, has not yet been abandoned. Whether or not it will be, and if so how soon, is a subject on which every one has or is supposed to have an opinion. It will not be discussed here.

E. C. L.

I

\ I

THE AMERICAN TARIFF.

Chapter I. The First Tariff Act

Those were dark times when the first Congress under the Constitution met, April 6, 1789, the date on which a quorum first appeared. The adoption of the new instrument of government and the election of Washington had not of themselves mended and would not mend all the ills of the country. A great step toward that end had been taken, but something more was needed. For one thing, the financial condition of the country was sunk so low as to demand immediate attention from Congress. Poverty was written on the face of more than one member, as well as on the door of the public treasury, says Professor Bolles.^ There was great depression in business affairs everywhere, and a great number of petitions pra3fing for relief had been sent to Congress from all parts of the country. These petitions affirmed that competition with the foreign trader had been the cause of this demoralization of business, and united in asking the general government to adopt protective measures.

1. “Financial History of the United States,” II. ,73.

That sent by the business men of Baltimore^ will show the general character of these communications:

To the President and Congress of the United States, the petition of the tradesmen, mechanics, and others of the town of Baltimore humbly sheweth:

That, since the close of the late war, and the completion of the Revolution, your petitioners have observed, with serious regret, the manufacturing and trading interests of the country rapidly declining, while the wealth of the people hath been prodigally expended in the purchase of those articles from foreigners which our citizens, if properly encouraged, were fully competent to furnish.

To check this growing evil, applications were made by petitions to some of the state legislatures; these guardians of the people in the several states interposed their authority ; laws were by them enacted with the view of subduing, or at least diminishing the rage for foreign, and encouraging domestic manufactures; but the event hath clearly demonstrated to all ranks of men that no effectual provision could reasonably be expected until one uniform, efficient government should pervade this wide-extended country.

The happy period having now arrived when the United States are placed in a new position; when the adoption of the general government gives one sovereign legislature the sole and exclusive power of laying duties upon imports; your petitioners rejoice at the prospect this affords them, that America, freed from the commercial shackles which have so long bound her, will see and pursue her true interest, becoming independent in fact as well as in name; and they confidently hope that the encouragement and protection of American manufactures will claim the

I. "American State Papers, Finance,” I., 5. Other petitions are also there given.

earliest attention of the supreme legislature of the nation ; as it is an universally acknowledged truth that the United States contain within their limits resources amply sufficient to enable them to become a great manufacturing country, and only want the patronage and support of a wise, energetic government.

Your petitioners consider it unnecessary to multiply arguments to so enlightened a body as the one they have now the honor of addressing, to convince them of the propriety and importance of attending to matters so obviously necessary and, indeed, indispensable; as every member must have observed and lamented the present melancholy state of his country ; the number of her poor increasing for want of employment; foreign debts accumulating; houses and lands depreciating in value; trade and manufactures languishing and expiring. This being a faint sketch of the gloomy picture this countr}" exhibits, it is to the supreme legislature of the United States, as the guardians of the whole empire, that every eye is now directed; from their united wisdom, their patriotism, their ardent love of their country, your petitioners expect to derive that aid and assistance which alone can dissipate their just apprehensions, and animate them with hopes of success in future, by imposing on all foreign articles which can be made in America such duties as will give a just and decided preference to their labors and thereby discountenancing fhat trade which tends so materially to injure them and impoverish their country, and which may, also, in their consequences, contribute to the discharge of the national debt, and the due support of the government.

. Your petitioners take the liberty to annex a list of such articles as are, or can be, manufactured in this place, on moderate terms; and they humbly trust that you will fully consider their request, and grant lO

TflE AMERICAN TARIFF them, in common with the other mechanics and manufacturers of the United States, that relief which, in your wisdom, may appear proper.

The list referred to numbers about one hundred and twentj^-five articles of all kinds, from hair powder to ships, after which come the names of the petitioners, about one hundred and forty in all.

In compliance with the requests contained in these petitions, Mr. Madison on April 8, two days after the counting of the electoral vote, introduced into the House a bill levying certain duties on goods, wares, and merchandise imported into the United vStates, and on the tonnage of vessels bringing them into the country. I’he preamble declared such an act to be '‘necessary for the support of the United States and the encouragement and protection of manufacturers.” In introducing this bill Mr. Madison urged its speedy adoption in the following language:^

The deficiency in our treasury has been too notorious to make it necessary for me to animadvert upon that subject. Let us content ourselves with endeavoring to remedy the evil. To do this a national revenue must be obtained; but the system must be such a one that, while it secures the object of revenue, it shall not be oppressive to our constituents. Happy it is for us that such a system is within our power; for I apprehend that both these objects may be obtained from an impost on articles imported into the United States.

In pursuing this measure, I know that two points occur for our consideration. The first respects the

1. Benton’s “Abridgment of the Debates of Congress,” I,, 22.

II general regulation of commerce; which, in my opinion, ought to be as free as the policy of nations will admit. The second relates to revenue alone; and this is the point I mean more particularly to bring into the view of the committee.

Not being at present possessed of sufficient material for fully elucidating these points, and our situation admitting of no delay, I shall propose such articles of regulations onl}" as are likely to occasion the least difficulty.

The propositions made on this subject by Congress in 1783, having received, generally, the approbation of the several states of the Union, in some form or other, seem well calculated to become the basis of the temporar}^ system which I wish the committee to adopt. ^ I am vv?ell aware that the changes which have taken place in many of the states and in our public circumstances since that period will require, in some degree, a deviation from the scale of duties then affixed; nevertheless, for the sake of that expedition which is necessary in order to embrace the spring importations, I should recommend ^general adherence to the plan.

This, sir, with the addition of a clause or two on the subject of tonnage, I will now read and, with leave, submit it to the committee, hoping it may meet their approbation as an expedient rendered eligible by the urgent occasion there is for the speedy supplies of the federal treasury, and a speedy rescue of our trade from its present anarchy.

The resolution proposed duties on rum and all other spirituous liquors; on molasses; on Madeira

1. The scale of duties offered by the Continental Congress of 1783, wiiich had been recently agreed to by all the states except New York, proposed small specific duties on a few enumerated articles (wines, spirits, teas, cocoa, molasses, sugars, and pepper) and an ad valore77t duty of five per cent upon all other goods, com” puted on the value of the article at the time and place of importation.

and all other wines; on common bohea teas and all other teas; on pepper; on brown, loaf, and all other sugars; on cocoa and coffee; and on the value of all other articles at the time and place of importation. It also recommended tonnage duties on all vessels in which merchandise should be imported, the rate to vary according as the vessels belonged to citizens of the United States, to subjects of powers with whom the United States had formed treaties, or partly to subjects of such powers and partly to citizens of the United States, or on vessels belonging wholly or in part to the subjects of other powers. The rates on these different items were not specified in the resolution, but were to be inserted as the committee should agree upon them.

Full and trustworthy statistics were wholly lacking, and for this reason some thought a uniform ad valore7n duty would be best to begin with. The measure proposed, as Madison said, was merel}^ temporary, the intention being to replace it as soon as possible by a more perfect one. As the debate progressed, however, it wms seen that the people were making known their wishes to the members of Congress. The debates in the House on this first tariff bill bring out fairly well most of the arguments since used.^ According to Hildreth^ the only point not brought out that has since been used was that of the want of powder in the

1. Schouler, “History of the United States/’ I. ,87; ed. of 1880.

2. “History of the United States.’’ IV., 65; rev. ed. of 1851.

federal government to lay duties for protection.^ Agricultural and manufacturing interests clashed somewhat. The leading manufacturing states, Massa-- chusetts and Pennsylvania, naturally wished their interests protected, and the bill was so shaped.

A statement made by Mr. Madison after the debate had been going on for some time is interesting as showing the position taken by him and by many others at the time regarding protection. He said: ‘Hf my general principle is a good one, that commerce ought to be free, and labor and industry left at large to find their proper object, the only thing which remains will be to discover the exceptions which do not come within the rule I have laid down.

. . . Although the freedom of commerce wouhd

be advantageous to the world, yet, in some particulars, one nation might suffer to benefit others, and this ought to be for the general good of society.”

The debate continued in committee of the whole House on the state of the Union until May 16. other subject,” sa^^s Mr. Gay,^ could have been hit upon to test so thoroughly the strength of the new bond of union. It was to brush aside all those trade regulations in the several states which each had hitherto thought essential to its prosperity. Every interest

1. The debate may be found in ‘The Annals of Congress,” and in Benton’s “Abridgment;” a brief outline as regards particular articles in Schouler, loc, cit., and one somewhat fuller in Hildreth, loc. cit,

2. “James Madison,” in “The American Statesmen Series,” p. 133.

H in the country was to be considered, and their different, sometimes opposing, claims were to be reconciled.”

On May i6 a bill was formulated from the various resolutions fixing the rates on different articles which had been adopted by the committee during the discussion. It was taken to the Senate on Monday, May i8, and the following Thursday was assigned for it. On that day it was postponed until the 25th. Senator Maclay of Pennsjdvania says:^ ‘^The idea has got abroad that the mercantile interest has been exerted to delay this bill. The merchants have undoubtedly regulated the prices of their goods agreeably to the proposed duties, so that the consumers of dutied articles reall}^ pay the whole impost; and w'hatever the proposed duties exceed the state duties‘^ now paid is clear gain to the merchant. Some of them, indeed, dispute the payment of the state impost.”

On the 25th he writes: ‘^We sat on the impost bill, and debated long on the style of the enacting clause. It was an old field, and the same arguments were used which had formerly been advanced; but the style of the law, which had already passed, was adopted. Now came the first duty of 12 cents 00 Jamaica proof. We debated until a quarter past

1, “Sketches of Debates in the First Senate of the United States,” p, 55. The Senate sat with closed doors until February 20, 1794, previous to which' date there is no report of its debates except such as Mr. Maclay’s.

2. Under the Articles of Confederation each state levied its own tariff duties.

^5 three; and it was reduced to 8. Adjourned. I fear that our impost bill will be rendered in a great measure unproductive. This business is the work of New England men. They want the article of molasses' quite struck out, or a least greatly reduced; therefore they will strike out everything; or, to place it in a different point of view, almost every part will be proscribed either by one or other of those who choose to be opponents, for every conspirator must be indulged in the sacrifice of his particular enemy.”

Discriminations in favor of nationshaving commercial treaties with the United States occupied all the time on the 26th, and carried by a vote of four. “All the arguments of the other House were repeated over and over,” says Maclay. The discussion of the bill wascontinued daily, on June 9 being conducted “with less order, less sense, and less decency, too, than any question I . have ever 37et heard debated in the Senate.”^ On the nth there was a lengthy debate on drawbacks. “Butler^ flamed away, and threatened the dissolution of the Union with regard to his state, as sure as God was in the firmament, . . . His

state would live free or die glorious.”

On the conclusion of the debate Maclay writes: “The senators from New Jersey, Pennsylvania, Delaware, and Maryland, in their every act, seemed de-

1. Molasses was imported from the West Indies for the making of New England rum.

2. Maclay, loc, cit. , p, 75.

3. Of South Carolina.

sirous of making the impost productive, both as a revenue, and effective for the encouragement of manufactures; and seemed to consider the whole of the imposts (salt excepted) much too low. Articles of luxury, many of them would have raised one-half. But the members both from the north and, still more particularly, from the south, were ever in a flame when any articles were brought forward that were in any considerable use among them.”

The bill was much changed in passing through the Senate, so much so that the House refused to agree to the amendments there made. Committees of conference were appointed to reconcile these differences, and on June 27 it was reported to the House that they had adopted the Senate bill with a few amendments. The lower House agreed to this, though with considerable reluctance on some points,^ and the bill was signed b}^ the president on July 4. It was not only the first tariff act, but the first revenue act of any kind passed after the organization of the government under the Constitution. Although the bill occupied less than three pages of the proceedings, it named quite a long list of articles, as will be shown later, on which specific duties were levied, and imposed ad valorem rates on five classes of goods. It enumerated a short list of articles to be admitted free of duty; provided for the repayment of all duties, less one per cent, upon goods again ex-

1. Hildreth, IV., 97.

ported, and discriminated in favor of commodities coming in vessels owned in the United States,

The letters of Madison contain many interesting references to the debate on this bill. On May 9 he wrote to Jefferson:^ ‘^The deliberations of the House of Representatives have been mainly employed on the subject of an impost. Opinions have been considerably divided on the quantum of duties that would be practicable, and, in some instances, on the ratio of the different duties likely to operate differently in different States that would be just. In general, the interests and ideas of the Northern and Southern States have been less adverse than was predicted by the opponents or hoped b}^ the friends of the new Government. Members from the same State, or the same parts of the Union, are as often separated on questions from each other as they are united in opposition to other States or other quarters of the continent. This is a favorable symptom. The points on which most controversy has been raised are: ist. The duties on molasses. 2nd. The discrimination between nations in and those not in Treaty. The arguments against what appears to be a proportionate duty on molasses to that of rum turned on its disproportion to the value of the article; the effect on the trade in it, which yields the only market for certain exports from the Eastern States; the effect on the

1 Madison’s “Works’' {“Letters and Other Writings’’), I., 463.

i8 fisheries, in which both rum and molasses are consumed; and, finall}^ the effect on the poor in that part of the Union where the latter enters into their ordinary diet. The opposite arguments have been, that a proportion to the duty on rum was essential to the productiveness of the fund, as well as to the rules of justice as applied to different States, some of which would consume foreign and some country rum ; that if the proportion was not violated, the trade in molasses would not be affected nor the distilleries injured; that the effect on the fisheries would be too small to be felt; and that the poor who consume mo« lasses would escape the burden falling on the poor

who consume sugar It will become a

serious question whether a general reduction of the rates shall be made or not, on the idea of the danger of smuggling. The distinction between the nations in and not in Treaty has given birth to three distinct and urgent debates. On the last, the minority was very small for putting Great Britain at once on the same footing w^^th the most favored nation. This policy, though patronized by some respectable names, is chiefly abetted b}^ the spirit of this City,^ which is steeped in Anglicism. It is not improbable, from the urgency of its representative, that a further effort may yet be made.”

On May 17 he wrote to Edmund Pendleton: ^^The progress of our new revenue system continues to be

1. New York, then the seat of government.

slow. The bill rating the duties is still with the Senate. It is said that many alterations will be proposed, consisting of reductions chiefly. It is said, also, that the proposition for putting Great Britain on the same footing with our Allies in all respects, prior to a treaty with her, will have a majority in that House, and will undergo another agitation in the House of Representatives. It had before three trials in the latter, but it lost ground in each, and finally was in a minority of nine or ten against near forty. I think it is an impolitic idea as it relates to our foreign interest, and not less so, perhaps, as it relates to the popular sentiment of America, particularly of Virginia, and still more particularly of that part of it which is already most dissatisfied with the new Government.”

There are one or two passages worth noting in a letter written by William Grayson^ to Patrick Henr}/ on June 12: ^‘Inclosed you have the bill for imposts, b}^ which you will see there is a great disposition here for the advancement of commerce and manufactures in preference to agriculture. I have marked all the amendments made in the Senate which I at present recollect. The bill with the amendments is before the lower house ; you will easily perceive the ascendency of the eastern interest by looking at the molasses, which is reduced from 2^

I. “Patrick Henry; Life, Correspondence, and Speeches,’’ by William Wirt Henry, III., 392. Mr. Grayson was then one of the senators from Virginia.

cents, while salt continues at six, and with an allowance of a drawback on their fish, &c.”

A little further on in the same letter he says : ‘‘The raising of money by impost has been thought very favorably of throughout America; I am, however, of opinion that considering the extent of our coasts, the impossibility of preventing smuggling, that it will be found on experiment to be the most expensive mode of raising mone}^ that could have been devised. Satisfied I am that it will be particularly injurious to the Southern States, who do not and cannot manufacture, and must therefore pay duties on everything they consume. The cry here is, raise everything in this way; and to be sure this is good policy with the States east of Mar3dand; some of the other States join in the cry, not because it is their interest, but because they are afraid of trying any other mode of taxation.”

Specific duties were fixed by the act at 8 and lo cents per gallon on spirits; lo to i8 cents on wines;

5 cents on beer, ale, and porter in casks; 20 cents per dozen on the same if in bottles; 2^ cents per gallon on molasses; i to 3 cents per pound on sugar;

6 to 20 cents on teas imported in American vessels from India and China; 8 to 26 cents per pound on teas imported from Europe in American vessels; 15 to 45 cents on teas imported in any other manner; 50 cents per pair on boots; 7 cents per pair on leather shoes, and lo cents on shoes of silk; 75 cents per 1 12 pounds on cables and tarred cordage, and 90 cents if untarred; $2 per 112 pounds on twine and pack thread; 56 cents per 112 pounds on un wrought steel; i cent per pound on nails and spikes; 6 cents per pound on manufactured tobacco; docents per 1 12 pounds on hemp; 3 cents per pound on cotton; 50 cents per dozen on wool and cotton cards; 2 cents per bushel on coal; 75 cents per barrel on pickled fish, and 50 cents per quintal on those dried; 6 cents per bushel on salt; 2i cents per pound on coffee; i cent per pound on cocoa; 16 cents per pound on indigo; 10 cents per pound on snuff; 4 cents per pound on cheese; 2 cents per pound on tallow candles and soap; 6 cents per pound on candles of wax or spermaceti; and 10 cents per pack on playing cards.

Ad valorem duties were levied as follows: On all forms of glass except black quart bottles, on china-, stone-, and earthenware, gunpowder, paints ground in oil, shoes and knee buckles, gold and silver lace, gold and silver leaf, 10 per cent.

On all writing, printing, or wrapping paper, paper hangings, and pasteboard, cabinet wares, buttons, saddles, gloves of leather, 7! per cent.

On hats of fur, wool, or beaver, millinery ready-made, castings of iron, slit and rolled iron, tanned or tawed leather, leather goods, canes, walking sticks, whips, ready-made clothing, brushes, gold, silver, and plated ware, jewelry and paste work, anchors, wrought, tin, and pewter ware, 7^ per cent.

On every coach, chariot, or other four-wheeled carriage, and on every chaise or other two-wheeler, or any part of these, 15 per cent.

On all other goods, wares, and merchandise, 5 per cent on the value thereof at the time and place of importation, except the following free list: saltpetre, pig and plate tin, lead, old pewter, brass, iron, brass wire, copper in plates, wool, cotton, dyeing woods and dyeing drugs, raw hides, beaver, and all other furs and deer skins.

The discount allowed from the above rates on goods coming in American vessels was 10 per cent. The act was to go into effect on August i and to remain in effect until June i, 1796, and from thence until the end of the next succeeding session of Congress, and no longer. The average of duties levied equaled an ad valorem rate of 8i per cent, and the net amount collected on imports and tonnage from August I to December 31, 1789, was $768,797.40.

Being the first move in the direction of taxing imports, the act of 1789 was largely experimental in character. Unquestionably one purpose it was intended to serve was the production of revenue. But the preamble goes further and speaks of the encotir---^ ugemcnt and froteciio7i of manufactures . It reads as follows: ‘‘Whereas it is necessary for the support of the government, for the discharge of the debts of the United States, and the encouragement and protection of manufactures, that duties be laid on goods, wares, and merchandise imported. Be it enacted,” etc. So absolutely necessary were these purposes deemed that not a solitary voice was raised against them.

“In the whole history of tariff legislation in this country it is the only law that was thus openly passed for the protection of American industry. For prudential reasons this form of preamble was changed, and tariff enactments have on their face since been for the purpose of revenue only.”^ Even the “Mc- Kinley Bill,” which many hold to be an extreme protection measure, calls itself “an act to reduce the revenue.”

“It is not a little remarkable,” says Justice Stoiy,^ “that the culture of cotton was just then beginning in South Carolina; and her statesmen then thought a protecting duty to aid agriculture was in all respects proper and constitutional.”

Did this act encourage and protect manufactures? Later generations of statesmen down to the present day have, as one answer to the denial of the constitutional right to enact protective duties, pointed to the preamble and said, “Thus our fathers understood

1. Lalor’s “Cyclopedia of Political Science,” III., 858.

2. “Commentary on the Constitution,’’ sec. 1092, note 4, 5th edition.

it.” On the other hand must be placed the fact that throughout the debate the members of that first Congress show their main purpose to have been the raising of revenue. The need of money was so pressing if current expenses and past obligations were to be honorably met, that any other consideration was, at least for the time being, a secondary matter. As such, protection was discussed and duties were adjusted to afford it; for, as Mr. Madison said, the states which were ripe for manufactures could rightfully claim that their particular interests be attended to. ‘‘One object in adjusting duties to afford protection, as well as to obtain revenue, was to reconcile the states to the new revenue system by the promise of the advantage which protection held out to them; and it was also believed to be good policy to develop every resource of the country essential to its support, to the end that it need not be dependent for supplies upon any foreign market.”^

Under this act both specific and ad valore^n duties were very low. Unwrought steel, for instance, was rated at 56 cents per 112 pounds. This, as Hamilton pointed out in a report to Congress^ in the following April on the operation of the act, at an average cost of the article, was then less than the five per ceniad valoj^em rate levied on all goods not specially named in other parts of the act. As an enumerated ar-

1. Landon, “Constitutional History and Government of the United States, ”p.98,

2. See his “Works,’' edited by his son, III., 55.

tide it was to be presumed that Congress intended to rate it higher than five per cent, ‘^especially as a higher rate would be in favor of the manufacture of it among ourselves, in which considerable progress has been made, especially in the state of Pennsylvania.” The highest ad valorem rate was 15 per cent. But while the rates fixed upon were low, the freights of the time were high. This fact of itself tended to protect American industry to a great degree.^