Remarks on the Reciprocal Tariff Agreement with Canada in New York City
The treaty provides for free trade in all agricultural products, and in rough lumber down to the point of planing. It reduces the duties on secondary food products by a very substantial percentage, and it makes such reductions on a number of manufactured articles that those engaged in making them have assured us that the reductions will substantially increase the already large Canadian demand for them.
We tendered to the Canadian commissioners absolutely free trade in all products of either country, manufactured or natural, but the Canadian commissioners did not feel justified in going so far. It is only reasonable to infer, therefore, that with respect to those articles upon which they refused free trade to us they felt that the profitable price at which they could be sold by our manufacturers in Canada was less than the price at which their manufacturers could afford to sell the same either to their own people or to us. Hence it follows that their refusal to agree to free trade in these articles, as we proposed, is the strongest kind of evidence that if we should take off the existing duty from such articles coming into the United States it would not affect in the slightest degree the price at which those articles could be furnished to the public here. In other words, the proposition to put on the free list for entrance into the United States all articles that Canada has declined to make free in. both countries would not lower the price to the consumer here. Thus the reason why meats were not put on the free list in this Canadian agreement was because Canada felt that the competition of our packers would injuriously affect the products of their packing houses. If that be true, how would it help our consumer or lower the price of meat in our markets if we let their meat in free while they retained a duty on our meat?
The same thing is true of flour. They would not consent to free trade in flour, because they knew that our flour mills could undersell their millers. If that were so, then how much competition and lowering of the price of flour could we expect from putting Canadian flour on the free list?
And yet gentlemen insist that the farmer has been unjustly treated because we have not put Canadian flour and meat on the free list. And it is proposed to satisfy the supposed grievance of the farmers by now doing so, without any compensating concession from Canada. This proposal would be legislation passed for political-platform uses, without accomplishing any real good.
In another aspect, however, the effect of the proposal might be serious. Of course a mere reduction of our tariff, or the putting of any article on our free list, without insisting on a corresponding change in the Canadian tariff, will not interfere with the contract as made with Canada. Canada cannot object to our giving her greater tariff concessions than we have agreed to give her under the contract. But if we do make such concessions, without any consideration on the part of Canada, without any quid pro quo, so to speak, after the contract has been tentatively agreed upon by those authorized to make contracts for ratification in both governments, then we are in danger of creating an obligation against us in favor of all other foreign countries with whom we have existing treaties containing what is called the "favored-nation" clause. By this clause we agree to give the same commercial privileges to the country with whom we have made the treaty as we give to any other nation. This clause has been construed by our statesmen not to involve us in an obligation to extend a privilege to all nations which we confer upon one nation in consideration of an equally valuable privilege received from that one nation. In other words, it has been held not to include special bargains or contracts where there is a consideration moving to each side for the obligation of the other.
But the serious question that would arise is whether if, now that the contract has been tentatively agreed upon and is about to be confirmed by Canada, we should grant to Canada more than the contract requires, we could claim that this extra concession was not a pure gratuity and one which was necessarily extended to all other nations under the "favored-nation" clause. There are two objections, therefore, to inserting in the bill confirming this Canadian contract additions to our free list from Canada. The first is that they are a concession that is of no value to those whom it is proposed to propitiate by adopting it, and the second is that it may involve us indirectly in a doubtful obligation in respect to trade with other countries. If we desire to put meat and flour and other commodities on the free list for the entire world, that is one thing; we can do it with our eyes open and with a knowledge of what it entails after an investigation, but to put such a provision in a Canadian treaty and then have it operate as a free list for the entire world is legislation necessarily ill considered.
More than this, those proposed gratuitous concessions are in the nature of an admission that in some way or other we have done an injury to a particular class by this Canadian reciprocity agreement I deny it. It is said that it injures the farmers. I deny it. It is strictly in accordance with the protective principle that we should only have a protective tariff between us and countries in which the conditions are so dissimilar as to make a difference in the cost of production. Now, it is known of all men that the general conditions that prevail in Canada are the same as those which obtain in the United States in the matter of agricultural products. Indeed, if there is any advantage, the advantage is largely on the side of the United States, because we have much greater variety of products, in view of the varieties of our climate, than they can have in Canada.
We raise cotton as no other country does. Of course they raise none in Canada.
We raise corn, and hogs and cattle fed on corn, and with the exception of a very small part of the acreage of Canada, in Ontario, it is not possible to raise com at all in the Dominion.
With respect to wheat and barley and oats, conditions differ in different parts of Canada and in different parts of the United States. Classing them together, and on the whole, the conditions are substantially the same. In prices of farm land the differences are no greater between Canada and the United States than between the different states in the United States. In the matter of farm wages, they differ in different parts of Canada as they do in the United States; but, on the whole, they are about the same—higher in Canada at some places than in the United States and less at others. But there is no pauper class of labor in either country, and the only difference between the two countries is that Canada is farther north than the United States, a difference which, as already said, gives the advantage agriculturally to our side of the border.
It is said that this is an agreement that affects agricultural products more than manufactures. That is true; but if we are to have an interchange of products between the two countries of any substantial amount the chief part of it must necessarily be in agricultural products. As it is we export to Canada more agricultural products than we receive from her, and so it will be afterwards. The effect is not going to lower, in my judgment, the specific prices of agricultural products in our country. It is going to steady them; it is going to reduce the rapid fluctuations, and it is going to produce an interchange of products at a profit which will be beneficial to both countries.
If objection can be made to the treaty on the ground that a particular class derive less benefit from it than other classes, then it is the manufacturer of the country who ought to object, because the treaty, in its nature, will not enlarge his market as much as it will that of the farmer.
I am quite aware that, from one motive or another, a great deal of effort and money have been spent in sending circulars to farmers to convince them that this Canadian treaty, if adopted, will do them injury. I do not know that it is possible to allay such fears by argument, pending the consideration of the treaty by the Senate. It usually takes a considerable time by argument to clarify erroneous economic views of this kind having no foundation in fact, but only in fear, stimulated by misrepresentation and exaggeration. But there is one way —and that a conclusive way—of demonstrating the fallacy and unfounded character of their fears to the farmers, or any other class that believes itself to be unjustly affected by this treaty, and that is to try it on. There is no obligation on either nation to continue the reciprocity arrangement any longer than it desires, and if it be found by actual practice that there is an injury, and a permanent injury, to the farmers of this country, everybody knows that they can sufficiently control legislation to bring about a change and a return to the old conditions. Those of us who are responsible for the Canadian treaty are willing and anxious to subject it to that kind of a test, and we have no doubt that when it is put in operation the ghosts which have been exhibited to frighten the agricultural classes will be laid forever.
Another and a very conclusive reason for closing the contract is the opportunity which it gives us to increase the supply of our natural resources which, with the wastefulness of children, we have wantonly exhausted. The timber resources of Canada, which will open themselves to us inevitably under the operation of this agreement, are now apparently inexhaustible. I say "apparently inexhaustible," for if the same procedure were to be adopted in respect to them that we have followed in respect to our own forests I presume that they, too, might be exhausted. But fortunately for Canada and for us we and they have learned much more than we realized two decades ago with respect to the necessity for proper methods of forestry and of lumber cutting. Hence, we may be safe in saying that under proper modem methods the timber resources open to us in Canada may be made inexhaustible and we may derive ample supplies of timber from Canadian sources, to the profit of Canada and for our own benefit.
There are other natural resources, which I need not stop to enumerate, that will become available to us as if our own if we adopt and maintain commercial union with Canada; and this is one of the chief reasons that ought to commend the Canadian agreement to the farseeing statesmanship of leaders of American public opinion.
But there are other, even broader, grounds than this that should lead to the adoption of the agreement. Canada's superficial area is greater than that of the United States between the oceans. Of course it has a good deal of waste land in the far north, but it has enormous tracts of unoccupied land, or land settled so sparsely as to be substantially unoccupied, which in the next two or three decades will rapidly acquire a substantial and valuable population. The Government is one entirely controlled by the people, and the bond uniting the Dominion with the mother country is light and almost imperceptible. There are no restrictions upon the trade or economic development of Canada which will interfere in the slightest with her carving out her independent future. The attitude of the people is that of affection toward the mother country, and of a sentimental loyalty toward her royal head. But for practical purposes the control exercised from England by Executive or Parliament is imponderable.
Canada has now between seven and eight millions of people. They are a hardy, temperate, persistent race, brave, intelligent, and enterprising, sharing or inheriting the good qualities of all their ancestors, and with a national pride in their Dominion that grows with the wonderful success and prosperity that have attended them in the last three decades. They are good neighbors; we could not have better neighbors. It is more than a hundred years since a hostile shot was fired across the border, and they are like us because our conditions are similar and because our traditions are similar.
They are more restrictive in their immigration laws than we, and perhaps they grow less rapidly; but they have before them a wonderful expansion in population, in agriculture, and in business, and they offer to any nation with whom they have sympathetic relations, and with whom it is profitable for them to deal, a constantly increasing market and an ever-expanding trade.
The question which we now have to answer is whether we propose to maintain an artificial wall across the country of 3,700 miles in length and of indefinite height to prevent the natural trade that would flow between two great nations of people of the same language, of similar character, tradition, business habits, and moral aspirations, when the removal of that wall would furnish to each country the economic advantage of its corresponding enlargement of prosperous population and territory without the added responsibility of government and political control.
Source: Presidential Addresses and State Papers of William Howard Taft
William Howard Taft, Remarks on the Reciprocal Tariff Agreement with Canada in New York City Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/363256