The truth is that the levy of a duty may have no influence at all on domestic price; or it may raise the price of the dutiable commodity by its full amount; or it may have an effect intermediate between these extremes.[1]
(1) The first case is the simplest. A duty on a commodity which is produced within the country as cheaply as without, and sold as cheaply, ordinarily has no effect whatever. Of such levies there has been a plenty in our tariff history. Those on the staple agricultural products are the most familiar and conspicuous. In the log-rolling which is an almost universal concomitant of protective tariffs, the notion that a duty will surely be of benefit to domestic producers has caused our farming sections to insist on "their share" of the going favors, and to accept, nay demand, duties on wheat, corn, meat and meat products, which yet have been quite without industrial effect. There has been no more striking illustration of the average farmer's naïve state of mind on this subject than the bitter opposition aroused by the reciprocity treaty with Canada which the Taft administration proposed in 1910–11. The free admission of wheat contemplated by that treaty was supposed to portend disaster to the wheat growers of the northwest; though it was known to all the world that wheat was exported both from the United States and from Canada, and that it was the same in price (allowing for cost of transportation) in these two countries and in England. The range of commodities subjected to duties yet not at all affected by them, has been very wide, including not only agricultural staples, but many manufactured articles.
(2) The second case—that in which the price of the commodity rises by the full amount of the duty—is found when imports continue after its imposition. Nevertheless it is not so easy as may seem at first sight, to determine just how conclusive is the evidence from the fact of importation. It will appear, as we proceed in the discussion, that qualifications of various sorts need to be borne in mind.
- ↑ In this analysis I follow the method of Albert Gallatin, in his Free Trade Memorial of 1831; reprinted in the collection which I have edited, State Papers and Speeches on the Tariff, pp. 122–123.
