Message to the House of Representatives Returning Without Approval an Act Revising the Schedule of Duties on Wool and Wool Manufactures Contained in the Tariff Law of 1909

To the House of Representatives:

I return without my approval House bill No. 11,019 with a statement of my reasons for so doing.

The bill is an amendment of the existing tariff law, and readjusts the customs duties in what is known as Schedule K, embracing wool and the manufactures of wool.

I was elected to the Presidency as the candidate of a party which in its platform declared its aim and purpose to be to maintain a protective tariff by "the imposition of such duties as will equal the difference between the cost of production at home and abroad, together with a reasonable profit to American industries." I have always regarded this language as fixing the proper measure of protection at the ascertained difference between the cost of production at home and that abroad, and have construed the reference to the profit of American industries as intended, not to add a new element to the measure stated or to exclude from the cost of production abroad the element of a manufacturer's or producer's profit, but only to emphasize the importance of including in the American cost a manufacturer's or producer's profit reasonable according to the American standard.

In accordance with a promise made in the same platform I called an extra session of the Sixty-first Congress, at which a general revision of the tariff was made and adopted in the Payne bill. It was contended by those who opposed the Payne bill that the existing rates of the Dingley bill were excessive and that the rates adopted in the revising statute were not sufficiently reduced to conform to the promised measure.

The great difficulty, however, in discussing the new rates adopted was that there were no means available by which impartial persons could determine what, in fact, was the difference in cost of production between the products of this country and the same products abroad. The American public became deeply impressed with the conviction that, in order to secure a proper revision of the tariff in the future, exact information as to the effect of the new rates must be had, and that the evil of logrolling or a compromise between advocates of different protected industries in fixing duties could be avoided, and the interest of the consuming public could be properly guarded, only by revising the tariff one schedule at a time.

To help these reforms for the future, I took advantage of a clause in the Payne tariff bill enabling me to create a tariff board of three members and directed them to make a glossary and encyclopædia of the terms used in the tariff and to secure information as to the comparative cost of production of dutiable articles under the tariff at home and abroad. In my message to Congress of December 7, 1909, I asked a continuing annual appropriation for the support of the board and said:

I believe that the work of this board will be of prime utility and importance whenever Congress shall deem it wise again to readjust the customs duties. If the facts secured by the Tariff Board are of such a character as to show generally that the rates of duties imposed by the present tariff law are excessive under the principles of protection as described in the platform of the successful party at the late election, I shall not hesitate to invite the attention of Congress to this fact and to the necessity for action predicated thereon. Nothing, however, halts business and interferes with the course of prosperity so much as the threatened revision of the tariff, and until the facts are at hand, after careful and deliberate investigation, upon which such revision can properly be undertaken, it seems to me unwise to attempt it. The amount of misinformation that creeps into arguments pro and con in respect to tariff rates is such as to require the kind of investigation that I have directed the Tariff Board to make, an investigation undertaken by it wholly without respect to the effect which the facts may have in calling for a readjustment of the rates of duty.

A popular demand arose for the formal creation by law of a permanent nonpartisan tariff commission. Commercial bodies all over the country united in a movement to secure adequate legislation for this purpose and an association with a nation-wide constituency was organized to promote the cause. The public opinion in favor of such a commission was evidenced by resolutions adopted in 1909 and 1910 by Republican State conventions in at least twenty-eight States.

In addition, efforts were made to secure a change in the rules of procedure in the House and Senate with a view to preventing the consideration of tariff changes except schedule by schedule.

The business of the country rests on a protective-tariff basis. The public keenly realized that a disturbance of business by a change in the tariff and a threat of injury to the industries of the country ought to be avoided, and that nothing could help so much to minimize the fear of destructive changes as the known existence of a reliable source of information for legislative action. The deep interest in the matter of an impartial ascertainment of facts before any new revision, was evidenced by an effort to pass a tariff-commission bill in the short session of the Sixty-first Congress, in which many of both parties united. Such a bill passed both Houses. It provided a commission of five members, to be appointed by the President, not more than three of whom were to belong to the same party, and gave them the power and made it their duty to investigate the operation of the tariff, the comparative cost of production at home and abroad, and like matters of importance in fixing the terms of a revenue measure, and required them to report to the Executive and to Congress when directed. Several, not vital, amendments were made in the Senate, which necessitated a return of the bill to the House, where, because of the limited duration of the session, a comparatively small minority were able to prevent its becoming a law.

On the failure of this bill, I took such steps as I could to make the Tariff Board I had already appointed a satisfactory substitute for the proposed tariff commission. An appropriation of $225,000, to continue the work until June 30, 1912, had been granted by Congress in the alternative, to be applied to the board I had appointed, unless a tariff commission bill was passed. In this appropriation bill the nonpartisan tariff commission, if created and appointed, was directed to make a report on Schedule K by December 1, 1911. Accordingly I added two members to the Tariff Board from the opposition party, and directed the board to make report on Schedule K by December 1st next. The board differs in no way from the tariff commission as it would have been, except in its power to summon witnesses; and I am advised by the members of the board that, without this power, they have had no difficulty in securing the information they desire.

The board took some months to investigate the methods pursued in other countries in procuring information on tariff subjects and to organize its force. In October, 1910, its work of investigation began with a force of forty that has now increased to eighty. In addition to the "glossary," which is near completion, and other work connected with furnishing information in connection with the enforcement of the maximum and minimum clause of the Payne Tariff Act, and in respect to the Canadian reciprocity measure, its attention has been especially directed to comparative cost under Schedule K (wool and woolens), under Schedule M (paper and pulp), and under Schedule I (cotton manufactures). The report on Schedule M (pulp and paper) has already been sent to Congress. Full reports on wool and cotton will be submitted to Congress in December. I have also directed an investigation into the metal and leather schedules, the results of which it is hoped can be submitted to Congress at its first regular session in time to permit their consideration and legislative action, if necessary.

The organization known as the Tariff Commission Association, made up of representatives of substantially all the commercial bodies of the country, for the purpose of securing the establishment of a permanent tariff commission, applied to me for an opportunity to investigate the methods pursued by the Tariff Board. This I was glad to grant, and a very full report of the competent committee of that association concluded as follows:

In conclusion, our committee finds that the Tariff Board is composed of able, impartial, and earnest men, who are devoting their energies unreservedly to the work before them; that the staff has been carefully selected for the work in view, is efficiently organized and directed, and includes a number of exceptionally competent technical experts; * * * that the work of the board, vast and intricate in detail, is already highly organized, well systematized, and running smoothly; and that Congress and the people can now await the completion of that work with entire confidence, that it is progressing as rapidly as consistent with proper thoroughness, and that it will amply justify all of the time and expense which it entails. We believe that the value of the work when completed will be so great and so evident as to leave remaining no single doubt as to the expediency of maintaining it as a permanent function of the Government for the benefit of the people.

I have thus reviewed the history of the movement for the establishment of a tariff commission or board in order to show that the real advance and reform in tariff making are to be found in the acquiring of accurate and impartial information as to the effect of the proposed tariff changes under each schedule before they are adopted, and further to show that if delay in the passage of a bill to amend Schedule K can be had until December, Congress will then be in possession of a full and satisfactory report upon the whole schedule.

This brings me to the consideration of the terms of the bill presented for my approval. Schedule K is the most complicated schedule in the tariff. It classifies raw wool with different rates for different classes; it affords the manufacturer what is called a compensatory duty to make up for the increased price of the raw material he has to use due to the rate on raw wool, and for the shrinkage that takes place in scouring the wool for manufacture; and it gives him, in addition, an ad valorem duty to protect him against foreign competition with cheap labor. The usages which prevail in scouring the wool, in making the yarn, and in the manufacture of cloth present a complication of technical detail that prevents anyone, not especially informed concerning wool growing and manufacture, from understanding the schedule and the effect of changes in the various rates and percentages.

If there ever was a schedule that needed consideration and investigation and elaborate explanation by experts before its amendment, it is Schedule K. There is a widespread belief that many rates in the present schedule are too high and are in excess of any needed protection for the wool grower or manufacturer. I share this belief and have so stated in several public addresses. But I have no sufficient data upon which I can judge how Schedule K ought to be amended or how its rates ought to be reduced, in order that the new bill shall furnish the proper measure of protection and no more. Nor have I sources of information which satisfy me that the bill presented to me for signature will accomplish this result. The parliamentary history of the bill is not reassuring upon this point. It was introduced and passed in the House as providing a tariff for revenue only and with the avowed purpose of departing from a protective-tariff policy. The rate of duty on raw wools of all classes was changed from a specific duty of eleven cents a pound to 20 per cent ad valorem. On the average for the importations for the last two years this is a reduction from 47.24 per cent to 20 per cent. Rates on cloths were reduced in the bill from the present average duty of 97.27 per cent to 40 per cent, and on wearing apparel from 81.31 per cent to 45 per cent. The bill was defeated in the Senate, and so was a substitute introduced as a protection measure. The proposed substitute fixed the duty on raw wool, first class, at 40 per cent, and on a second class of carpet wools at 10 per cent, and on cloths at 60 per cent, and on wearing apparel at the same rate. On reconsideration, a compromise measure was passed by the Senate, which was a compromise between the House bill and the Senate substitute bill, and in which the rate on first-class wool was fixed at 35 per cent, on carpet wools 10 per cent, and on cloth and wearing apparel 55 per cent. In conference between the two Houses the rate on all classes of raw wool was fixed at 29 per cent, this being an increase on carpet wools of 9 per cent as fixed in the House bill and of 19 per cent as fixed in the Senate bill. The conference rate on cloths and wearing apparel was fixed at 49 per cent. No evidence as to the cost of production here or abroad was published, and the compromise amendment in the Senate was adopted without reference to or consideration by a committee.

I do not mention these facts to criticize the method of preparation of the bill; but I must needs refer to them to show that the congressional proceedings make available for me no accurate or scientifically acquired information which enables me to determine that the bill supplies the measure of protection promised in the platform on which I was elected.

Without any investigation of which the details are available, an avowed tariff-for-revenue and antiprotection bill is by compromise blended with a professed protection bill. Rates between those of the two bills are adopted and passed, except that, in some important instances, rates are fixed in the compromise at a figure higher, and in others at a figure lower, than were originally fixed in either House. The principle followed in adjusting the amendments of existing law is, therefore, not clear, and the effect of the bill is most uncertain.

The Wilson Tariff Act of 1894, while giving the manufacturer free wool, provided as high duties on leading manufactures of wool as does the present bill, which at the same time taxes the manufacturer's raw material at twenty-nine per cent. Thus the protection afforded to manufacturers under the Wilson bill was very considerably higher than under the present bill.

During the years in which the Wilson bill was in force the woolen manufacturers suffered. Many mills were compelled to shut down. These were abnormal years, and it is not necessary to attribute the hard times solely to the tariff act of 1894. But it was at least an addition to other factors operating to injure the woolen business. It is the only experience we have had for a generation of a radical revision of this schedule, and, without exaggerating its importance, one pledged to a moderate protection policy, may well hesitate before giving approval without full information to legislation which makes a more radical reduction in the protection actually afforded to manufacturers of wool than did the Wilson Act. Nor does this hesitation arise only for fear of injury to manufacturers. Unless manufacturers are able to continue their business and buy wool from domestic woolgrowers the latter will have no benefit from the tariff that is supposed to protect them, because they will have to sell in competition with foreign wools or send their sheep to the shambles. Hence the woolgrower is as much interested in the protection of the manufacturer as he is in his own.

It may well be that conditions of manufacture in this country have changed so as to require much less protection now for the manufacturers than at the time of the Wilson bill; but in view of the possible wide suffering involved by hasty action based on insufficient knowledge, the wise course, in my judgment, is to postpone any change for a few months needed to complete the pending inquiry.

When I have the accurate information which justifies such action, I shall recommend to Congress as great a reduction in Schedule K as the measure of protection, already stated, will permit. The failure of the present bill should not be regarded, therefore, as taking away the only chance for reduction by this Congress.

More than a million of our countrymen are engaged in the production of wool and the manufacture of woolens; more than a billion of the country's capital is invested in the industry. Large communities are almost wholly dependent upon the prosperity of the wool grower and the woolen manufacturer. Moderately estimated, 5,000,000 of the American people will be injuriously affected by any ill-advised impairment of the wool and woolen industries. Certainly we should proceed prudently in dealing with them upon the basis of ascertained facts rather than hastily and without knowledge to make a reduction of the tariff to satisfy a popular desire, which I fully recognize, for reduction of duties believed to be excessive. I have no doubt that if I were to sign this bill, I would receive the approval of very many persons who favor a reduction of duties in order to reduce the cost of living whatever the effect on our protected industries, and who fail to realize the disaster to business generally and to the people at large which may come from a radical disturbance of that part of business dependent for its life on the continuance of a protective tariff. If I fail to guard as far as I can the industries of the country to the extent of giving them the benefit of a living measure of protection, and business disaster ensues, I shall not be discharging my duty. If I fail to recommend the reduction of excessive duties to this extent, I shall fail in my duty to the consuming public.

There is no public exigency requiring the revision of Schedule K in August without adequate information, rather than in December next with such information. December was the time fixed by both parties in the last Congress for the submission of adequate information upon Schedule K with a view to its amendment. Certainly the public weal is better preserved by delaying ninety days in order to do justice, and make such a reduction as shall be proper, than now blindly to enact a law which may seriously injure the industries involved and the business of the country in general.

WILLIAM H. TAFT.

The White House, August 17, 1911.