Protective Tariff

Principle 11

Maintenance of a Protective Tariff

One of the most persistent themes in American foreign policy history is the debate over protective tariffs. A tariff is a charge or "tax" levied on goods coming into the U.S. from abroad. It makes foreign products more expensive to buy, thus, hopefully, decreases consumption demand for those products.

Mercantilist economics rely heavily on tariffs to limit the quantity and value of products coming into a country in order to limit the quantity and value of the specie-- mostly gold and silver-- flowing out of the country to pay for those products. Mercantilist nations of the Sixteenth, Seventeenth, and Eighteenth Centuries measure their success in international affairs and their national strength and power in terms of the excess of gold and silver hoarded in their national treasuries. Whenever national monopolies or merchants sell products abroad, gold and silver flows into the country from abroad to pay for the product. But, whenever foreign products are purchased, gold and silver flows out of the country to pay for the product. The secret to national success and power is to sell more abroad than is purchased from abroad.

Capitalist economies also rely on protective tariffs, but they are interested in protecting domestic manufacturers by insuring those manufacturers have a domestic market for their product, even if foreign producers can manufacture the product at a lower cost and sell it for a price cheaper than domestic products of similar quality.

Domestic governments rely on tariffs as an important source of revenue, especially during the Eighteenth and Nineteenth Centuries. Prior to the American Civil War, the U.S. government is largely funded by tariffs. This means, of course, the costs of government are largely borne by that segment of the population which relies most heavily on foreign manufacture for the goods they consume. Many people, and political leaders, in the American South believe they consume a higher proportion of imported goods than do people in the North and believe, therefore, the tariffs are especially burdensome on the South. There is even an attempt by southern states to "nullify" federal-government enacted tariffs. The protective tariff issue plays a key role as a cause of the American Civil War.

Throughout most of the Nineteenth Century and the early Twentieth Century, Democrats oppose protective tariffs; Whigs and Republicans support protective tariffs.

The Democratic Party platform of 1848 likens American industrial monopolies, created largely by the effect of tariffs, and special interest legislation to the despotism of the Old World. In 1856, Democrats again attack monopolies and special interests and declare themselves to be in favor of progressive free trade throughout the world. The 1860 Republican platform declares Republican support for using tariffs for protectionist purposes but also appears to acknowledge that the current tariffs may benefit only a portion of the nation.

"That, while providing revenue for the support of the general government by duties on imports, sound policy requires such an adjustment of those imports as to encourage the development of the industrial interests of the whole country..." (1860 Republican Party Platform)

In the 1880s, the tariff issue is again an important feature in the major party platforms as American manufacturing continues to expand. The 1884 Democratic platform calls for removal of the tariff, but Republicans defend the tariff, saying "the imposition of duties on foreign imports shall be made, not 'for revenue only,' (but) shall be so levied as to afford security and protection to the rights and wages of the laborer" and condemn "the so-called economic system of the Democratic party, which would degrade our labor to the foreign standard" through wage competition. Republicans believe American manufacturers will be forced to lower domestic wages if they are forced to compete with goods made abroad in low-wage countries. By using tariffs to keep the cost of foreign goods high, Republicans are protecting the relatively high American wage rates. In the 1884 platform, Republicans identify "sheep husbandry" as an industry needing protection; in future platforms, they identify more industries in need of protection. What Republicans tend to ignore, and Democrats begin to recognize, is the impact of foreign tariffs enacted in retaliation against American tariffs. These foreign tariffs are especially burdensome on those American industries that are at a comparative cost advantage in world trade and could sell substantially more goods abroad in a free market without tariffs. Reciprocity agreements with foreign nations help to remove these retalitatory tariffs.

Democrats argue that tariffs harm consumers and create privileged industries. In their 1884 platform they call for tariff reduction to a level that does "not exceed the needs of the Government (to pay for) pensions, interest, and the principle on the public debt." The Democrat's 1888 platform again stresses the need for tariff reductions so American industry can export abroad and workers can purchase the necessities of life imported from abroad.

"A fair and careful revision of our tax laws, with due allowance for the differences between the wages of American and foreign labor, must promote and encourage... industries and enterprises by giving them assurance of an extended market and steady and continuous operations." (1888 Democratic Party Platform)

Republicans remain "uncompromisingly in favor of the American system of protection; we protest against its destruction." in their 1888 platform. The Republicans are running against an incumbent Democrat president who successfully rolls back some tariffs. Republicans claim the President and his party "serve the interests of Europe" in demands for tariff reduction. When a Republican president assumes the office, tariffs are restored. In their 1892 platform, Republicans explain their continued support for tariffs.

"All articles which cannot be produced in the United States, except luxuries, should be admitted duty free, and that on all imports coming into competition with the products of American labor there should be levied duties equal to the difference between wages abroad and at home. We assert that the prices of manufactured articles of general consumption have been reduced under the operations of the tariff act of 1890." (1892 Republican Party Platform)

Democrats, in 1892, call for tariff reduction and genuine free trade "on the basis of reciprocal advantages to the countries participating." In 1896, Democrats renew their call for lower tariffs and the break up of domestic monopolies and trusts, many of them supported by tariff protection. Republicans, in their 1892 platform, again explain their support for protective tariffs.

"Protectionism and Reciprocity are twin measures of American policy and go hand in hand. Democratic rule has recklessly struck down both, and must be re-established. Protection for what we produce; free from admission for the necessities of life which we do not produce; reciprocal agreement of mutual interests, which gain open markets to us in return for our open markets for others. Protection builds up domestic industry and trade and secures our own markets for ourselves; reciprocity builds up foreign trade and finds an outlet for our surplus." (1892 Republican Party Platform)

The domestic political debate over tariffs continues throughout the next decades. Tariffs are temporarily reduced during Democratic administrations and restored during Republican administrations.

The Democratic Party platform of 1924 brags about President Wilson's earlier tariff reductions and condemns the newly enacted tariff laws of the new Republican administration, claiming those tariffs force Americans "to buy manufactured goods at sustained high domestic levels" and damage the American agricultural export market; Republicans claim the tariffs protect and promote American industry and labor.

The debate over tariffs continues to the beginning of the Twenty-first Century, with many of the same arguments in support of tariffs and in opposition to tariffs used in the Twentieth Century as are used in the Nineteenth Century. The globe is moving toward a system of free exchange and a system of free markets unencumbered by tariffs. The European Common Market, the North Atlantic Free Trade Agreement (NAFTA) and numerous other international compacts gradually remove most tariff burdens to international trade and commerce. The tariff restrictions that remain are largely used in diplomacy and as a tool of foreign policy negotiations and are used to protect a few specific domestic industries from "unfair" foreign competition.

Principle 11

Maintenance of a Protective Tariff

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