after the War of 1812, to recover the American market of which they had been temporarily deprived by the long period of nonintercourse. "English manufacturers, eager to regain control of the lost markets, sent in shiploads of cotton and woolens and iron manufactures, which they offered on the most liberal terms to their agents in this country. The goods were taken on credit and disposed of at auction. The object was to undersell at any cost, and thus break down the infant industries. Lord Brougham justified the speculative character of this trade on the ground that 'it was well worth while to incur a loss upon the first exportation, in order, by the glut, to stifle in the cradle those rising manufactures in the United States which the war had forced into existence contrary to the natural course of things.'" 1

3. Closely connected with the preceding arguments is a defense of protection based upon grounds of war and military necessity. Industrial independence, it is asserted, prepares a nation better for international war. There is unquestionably a great deal of truth in the argument. Germany has deliberately used protective tariffs to preserve herself at least in part as an Agrarstaat, and there has already been striking evidence of the wisdom of her policy of maintaining a large measure of economic self-sufficiency. Certainly a wise nation will see to it that within its boundaries factories exist which can manufacture arms and all the necessary munitions of war. Success in war is not dependent upon arms and ammunitions alone. There must be a plentiful supply of money, and whatever use may be made of credit, enormous amounts of money must be raised by taxation.2 The source of taxation is a flourishing condition of private industry; and the industry of the average nation dependent upon international trade cannot flourish in times of war. But even the ability to secure public revenues in adequate quantities is less important in time of war than the ability of a nation to feed and clothe its people and its armies when international trade is suddenly cut off. The failure of the South in the Civil War was very largely due to her industrial dependence upon the cotton export trade. A sufficient diversification of industry to

1 Coman, Industrial History of the United States, p. 185.

For a classic explanation of the dependence of both public credit and taxation upon a flourishing condition of private business in times of war, see Henry C. Adams, Public Debts.

prevent industrial paralysis and to insure an adequate supply of the necessaries of life in times of war is, we believe, manifestly desirable.

4. The home market argument for protection naturally follows. Much that is said in defense of this claim is childish or silly. One distinguished American economist seriously maintained that a country can remain permanently prosperous only on condition that what is taken from the soil shall be returned in manure and other kinds of fertilizers, and that this will be accomplished only when the products of the soil are consumed at home. A much stronger application of the argument, however, is found in the assertion that the home market is superior because it is a surer market. A foreign market is usually a precarious market. It is likely to be closed by war or by capricious changes in tariff policy. Protection is unquestionably expensive to the country that protects, but in the long run it is worth paying something to keep industries in continuous operation.

5. This brings us to the argument for protection as a defense against "dumping." By dumping is meant the sale of products abroad at prices lower than those charged at home. Dumping arises in a variety of ways. Export bounties may be granted by the home country for the specific purpose of encouraging foreign trade; or a monopoly may find it profitable to dispose of a surplus abroad at prices which would be needlessly low in the highly protected home country; or manufactures may avail themselves of the difference between fixed and variable expenses of production to secure some profits over the specific or variable expenses of production by selling abroad at prices which would not be remunerative if applied to their entire output. Moreover, there is good reason to believe that many manufacturers for the export trade make it a practice to sell abroad at unusually low prices whenever they believe that their foreign market is threatened. As was stated above, the custom of "coddling" the export trade seems to be very general.

Now if the reduction of prices were permanent, the country in which the products are dumped would have no real cause for complaint. On the contrary, it might logically regard itself as

the beneficiary of the costly bounties of the other nation. But real dumping is not, and in the nature of things cannot be, permanent. So far as it may be said to have a rational object, it aims to secure foreign markets by selling temporarily at prices. which in the long run would not be profitable; and when the market is secured, prices will be raised. So true is this that economists have generally indorsed import taxes and other temperate retaliatory measures designed to abolish dumping. Canada, for instance, has authorized the levy in such cases of a special dumping duty "equal to the difference between the selling price of the article for export and the fair market value thereof for home consumption." A few years ago the beetsugar industry of France and Germany was so stimulated by bounties that even England, the principal dumping ground of the product, was forced to threaten reprisals in the shape of countervailing import duties. England's resolute attitude, it may be added, led finally to the virtual abolition of sugar bounties at the International Sugar Conference of 1903. In general, there seems to be ample justification for protective duties that are honestly used to ward off destructive attacks upon home industries which, if subjected only to legitimate competition, would be able to maintain themselves in the long run. is evident that we have here returned to the substratum of truth contained in the infant industry and home market arguments.

Dumping has been more productive of arguments against protection than of arguments for protection, in the United States; and the opponents of protection have laid great emphasis upon the fact that many articles of American manufacture are sold abroad more cheaply than at home. That this is a fact is now generally admitted. But the protectionists maintain that most of this can be explained by the rebates allowed to American exporters under our drawback laws. Ex-Secretary of the Treasury Shaw estimates that in 1906, owing to these drawbacks, about $140,000,000 of American manufactures might have been legitimately sold abroad at less than domestic prices.1

6. Intimately related to the arguments which we have been considering is the claim that the utilization of labor and capital

1 Leslie M. Shaw, Current Issues, Chap. xxi.

of a free-trade nation is subject to the control, and indeed, one may say, to the whim and caprice of foreign nations. Industries. differ in their effect upon the physique and character of the people who pursue them. The builder, the skilled engineer, the electrical worker, are benefited intellectually, physically, and morally by their occupations. But the tailor, the maker of ready-made clothing, and the sweat-shop worker are probably harmed rather than elevated by the nature of their employment. Now if foreign nations subsidize by protection and bounty the desirable industries, they may leave to the free-trade nation only those industries which the protected nations do not wish to maintain.

7. Finally, protectionists appeal to the wage-earning classes with the argument that protection increases wages by diversifying industry and thus stimulating the demand for labor. Indeed the typical protectionist goes farther than this, and maintains that every American industry is entitled to an amount of protection equal to the difference between the wages which it pays and the wages paid by its most efficient foreign competitor. The latter variety of this argument seems to be plainly absurd, or at least obviously inconsistent with the initial assertion that protection raises wages. For, taken together and they are frequently advanced in company - they result in this magnificently cumulative plea for ever increasing tariffs: protection raises wages but high wages put the American manufacturer at a disadvantage in competing with foreign producers - and the home producer must be protected to the extent of the difference in wages therefore every advance in protective duties laid for the benefit of the wage earner must be accompanied by an additional advance for the benefit of the manufacturer and so ad infinitum.

8. That protective duties should be used to " equalize costs of production" here and abroad, has been widely advocated as the modern and scientific basis of protection. It would be hard to find a more unscientific proposal. In the first place it is vague and uncertain. Costs of production are not uniform, either here or in foreign countries. What costs are to be

equalized? costs to the most efficient producer here and the most efficient producer abroad, or costs to the "typical" producer here and the "typical" producer abroad, or costs to the least efficient producer here and the most efficient producer abroad? In the second place, certain costs, such as rent and even wages, are more or less dependent upon tariff duties themselves, so that the proposal to determine duties by costs merely get us into the vicious circle noted above. Furthermore, there is no logical or natural limit to this process. If we are to equalize costs in the textile and steel industries, why not equalize costs in the production of bananas, coffee, and tea?

As a matter of fact if this program could be carried out it would stop all trade and so wipe out the whole gain from the international division of labor. But fortunately the program cannot be carried out. Economic goods take on a thousand forms. We bar the importation of one variety only to find an equivalent exchange springing up in another variety. This is what we should expect from the theory of international trade, and theoretical expectations are amply confirmed by history and statistics.

Arguments of Free Traders. In the first place, we may dismiss a number of arguments which are so extreme as to weaken rather than strengthen the cause of free trade.

1. For instance, it is frequently alleged that protective tariffs violate the assumed natural right of every man to buy his goods where he will and sell his products wherever he sees fit, untrammeled by human laws. The futility of arguments based upon an assumption of natural rights has been sufficiently exposed elsewhere, and needs no elaboration at this point.

2. It has also been claimed that protective tariffs in the United States are unconstitutional, but this argument is idle; it would be most unfortunate and anomalous if nowhere in our country were lodged the power to pass such regulations regarding international commerce as might appear to be required for the promotion of the public welfare. Furthermore, the charge of unconstitutionality does not correspond to the opinion of our