Veto of a Bill To Amend the Tariff Act of 1930.

To the House of Representatives:

I am returning without my approval H. R. 6662, entitled "An act to amend the tariff act of 1930 and for other purposes."

My first objection to the bill is the misimpression and uncertainty it may convey as to its purpose. If the purpose of the proponents of this act is to secure lower tariffs on the 35 per cent of our imports which are not on the free list it would seem that the direct and simple method of so doing would be to recognize that tariffs are duties applied to particular commodities, and to propose definite reduction of the duties on such particular commodities as are believed to be at fault and upon which the full facts can be developed. Alternatively, the Congress is able to direct the Tariff Commission under the "flexible" provisions of the act of 1930 to act upon such schedules as are believed to be too high.

As a matter of fact there never has been a time in the history of the United States when tariff protection was more essential to the welfare of the American people than at present. Prices have declined throughout the world, but to a far greater extent in other countries than in the United States. Manufacturers in foreign countries which have abandoned the gold standard are producing goods and paying for raw materials in depreciated currency. They may ship their goods into the United States with great detriment to the American producer and laborer because of the difference in the value of the money they pay for their raw materials and the money they receive for their finished products. Under such conditions it is imperative that the American protective policy be maintained. If the intent or the effect of the proposed bill is to remove the possibility of executive action or to reduce tariff protection there never was a time more inappropriate on account of widespread domestic unemployment and the possibilities which lie before us.

The second objection to the bill is that it practically destroys the "flexible" tariff through the removal of executive authority to render conclusions of the Tariff Commission effective. This bill would again reduce the Tariff Commission to a purely advisory body to the Congress, and thus defeat a reform so earnestly sought ever since its first advocacy by President Roosevelt and finally fully realized in the tariff act of 1930. By the act of 1930 the principle of a "flexible" tariff based upon determinations by a bipartisan commission, subject to approval of the Executive, was firmly and effectively established. Beyond the ability to change the duties by 50 per cent there lies within the provisions the development of the definite principle of preference of the home market for American industry, workmen, and agriculture, based upon the difference of cost of production at home and abroad, plus transportation to the principal markets. This open process, upon the application of any responsible party, is an assurance against either excessive duties or nonprotective tariffs upon dutiable goods.

The broad purpose of the present form of executive action upon the "flexible" provision is promptly to remedy inequities and injustices in the tariff as they may be discovered; to prevent any tariff system being frozen upon the Nation despite economic shifts; and by providing this flexibility to meet changing economic conditions, greatly to lessen the necessity for periodic general revision of the tariff with its disturbance to economic life and its orgy of politics and log rolling. The "flexible" provision has, since the act of 1930, proved its high usefulness in these particulars. The commission has completed or has in progress investigations covering 291 different articles. Of those which come under the "flexible" provisions, the recommendations were for no change in about 54 per cent of the cases, increases in 16 per cent, and decreases in 30 per cent, which were placed in effect within a few days. This effective "flexible" tariff as a protection to sound progress and for the future protection of our farmers, workmen, industries, and consumers, should be maintained in our American system. The proposal in the bill under consideration will effectively destroy it and is a step backward.

Under the present law the Congress has the benefit of the advisory functions of the Tariff Commission, upon which it can act at any time. If this bill is to have any practical result by reserving to the Congress incidental or occasional readjustment of the tariff it simply opens the way for log rolling every time Congress is called upon to consider a report of the Tariff Commission recommending any specific change in rates or schedules. In an effort to avoid this obvious objection, the act attempts to limit Congress, in legislating upon the recommendations of the commission, to the specific items included in the report. But no Congress can bind another Congress in any such manner, relating as it does to a question of legislative procedure.

My third objection to the bill lies in the conditions stipulated for action in an international conference which it is proposed should be called to deal with trade questions. I wish to say at once that I am in fullest accord with the proposal for an international action or conference to "eliminate discriminatory and unfair trade practices," "preventing economic wars," and "promoting fair, equal, and friendly trade and commercial relations among nations." The American Government has participated in several international economic conferences for these identic purposes since the Great War. They have resulted in very little accomplishment.

But the objectives proposed in this bill for such a conference are not limited to the constructive purposes above mentioned. Some of the proposals in the bill for such a conference raise questions of futility or alternatively of abandonment of essential American policies. The first legislative act of Washington's administration was a tariff bill. From that day to this, one of our firm national policies has been that tariffs are solely a domestic question in protection of our own people. It is now proposed that an international conference should be called with view to "lowering excessive tariffs." The very implication of calling other nations into conference with view to changing our tariff duties is to subject our tariffs to international agreement.

For myself I hold that any inequalities or excessive duties in the American tariff can be corrected through the flexible provisions of the present tariff law. If other nations should adopt this principle and such an instrumentality it would automatically remove excessive duties and unequal treatment throughout the world without interference with domestic control of tariff policies.

If the meaning of the Congress is that such a conference should discover and negotiate the elimination of particular excessive duties throughout the world, then I do not need to elaborate upon the direction in which such action leads for it means simply attempting the futility of negotiating a world tariff amongst 60 or 70 nations subject to confirmation of their legislative bodies. If on the other hand what the Congress means is to undertake a general lowering of American tariffs in exchange for lowering of tariffs elsewhere in the world, and if the Congress proposes to make such a radical change in our historic policies by international negotiation affecting the whole of American tariffs, then it is the duty of the Congress to state so frankly and indicate the extent to which it is prepared to go.

I am fully alive to the effect on our own and world commerce of the many arbitrary restrictions now in existence. The Departments of State and Commerce are actively engaged in protecting our export trade from unfair discriminations and infractions. If at any time circumstances are such as to permit the hope that such barriers to international trade and commerce may be removed through the medium of an international conference without sacrificing American interests or departing from the historic policies followed by our country, I shall not hesitate to take the lead in calling such a conference.

If this measure is intended to do more than this, then the new policy should be clearly indicated for clarity to the American people and for the guidance and judgment of the Executive. An established national policy should not be changed by implication.

My fourth objection to the bill lies in the further request that I should "negotiate with foreign governments reciprocal trade agreements under a policy of mutual tariff concessions." This proposal is in direct conflict with the other proposals "to eliminate discriminatory tariffs; prevent economic wars; and promote fair, equal, and friendly trade," all of which latter are desirable.

A firmly established principle of the American tariff policy is the uniform and equal treatment of all nations without preferences, concessions, or discriminations (with the sole exception of certain concessions to Cuba). No reform is required in the United States in this matter, but we should have at once abandoned this principle when we enter upon reciprocal concessions with any other nation. That is at once unequal treatment to all other governments not parties thereto. That is the very breeding ground for trade wars. This type of preferential tariff agreement which exists abroad to-day is one of the primary causes of trade wars between other countries at the present moment.

It has been the policy of our Government for many years to advance "most-favored-nation" treaties with view to extinguishing these very processes, preferences and trade frictions and to secure equal treatment to us by the other nations in all their tariff and economic arrangements. We have such treaties or executive agreements with 31 nations. If we adopted this complete reversal of policies and now negotiated reciprocal tariff agreements we should either under our "most-favored-nation" obligations need extend these rights to all nations having such treaties with us, or to denounce such treaties.

The struggle for special privileges by reciprocal agreements abroad has produced not only trade wars but has become the basis of political concessions and alliances which lead to international entanglements of the first order. These very processes are adding instability to the world to-day, and I am unwilling to enter upon any course which would result in the United States being involved in such complexities and such entanglements.

Of high importance to us, also in consideration of these matters is that the principal interest of a majority of the 60 or 70 other nations which might be approached for mutual tariff concessions would be to reduce the American agricultural tariffs. No concessions otherwise than those related to agricultural products would be of any importance to those particular nations. The effect of such a shift in the basis of our agricultural tariffs would be to make us large importers of food products, to demoralize our agricultural industry and render us more and more dependent upon foreign countries for food supply; to drive our farmers into the towns and factories, and thus demoralize our whole national economic and social stability.

Moreover, the futility of the Executive negotiating such treaties as reciprocal tariffs has been often demonstrated in our past. Before we definitely adopted the policy of equal treatment to all nations the Congress had from time to time authorized such treaties. Out of some 22 such treaties providing for reciprocal tariff concessions, the Congress either refused to confirm or failed to act in 16, and 2 of the remaining 6 failed of confirmation by other governments. On another occasion the Congress conferred upon the Executive a limited authority to conclude reciprocal or preferential tariffs without confirmation. Twenty-two such agreements were entered upon, all of which were repealed in subsequent tariff acts. The experience would not seem to be encouraging for this type of action.

There are other objections which might well be taken to this bill. It is enough, however, that this bill would destroy the effectiveness of the flexible tariff which for the first time gives protection against excessive or inadequate tariffs, prevents a system of frozen tariffs upon the country irrespective of economic change and gives relief from log rolling and politics in tariff making. It would surrender our own control of an important part of our domestic affairs to the influence of other nations or alternatively would lead us into futilities in international negotiations. It would start our country upon the road of a system of preferential tariffs between nations with all the trade wars, international entanglements, etc., which our country has sought to avoid by extending equal treatment to all of them.

HERBERT HOOVER

The White House,

May 11, 1932.