Only those ships are entitled to a subvention which have been built in the United States, which are owned and officered by American citizens, and which are manned by crews of whom Americans constitute a certain proportion varying from one-quarter to one-half of the total crew.

The effects of the Mail Subsidy Act upon the upbuilding of the American merchant marine and the development of American shipping have been disappointing.

The Panama Canal Act of 1912.-An important step toward increasing American tonnage in foreign carrying trade was made with the passage of the Panama Canal Act in 1912. This Act permitted the admission to American registry of foreign-built ships not more than five years old and a free entry into the United States of foreign materials for the construction and equipment of ships without making any conditions as to the use of the vessels built of such materials.

The Shipping Act of 1914.-After the outbreak of the War, the Shipping Act of 1914 was passed; this Act went much farther than the Panama Canal Act in its provisions for the upbuilding of the American merchant marine. It removed the age limit from ships which could be admitted to American registry; it also authorized the President to suspend certain provisions of law requiring survey and measurements of vessels admitted to American registry by the officers of the United States.

Various Aids to Shipbuilding and Shipping.-The most important forms of assistance to shipbuilding and shipping, outside of the granting of subsidies and subventions, are the following:

1. Loans to shipbuilders at a rate of interest below that prevailing in the open market.

2. Reservation of coastwise trade to native ships.

3. Exemption of native ships from port dues, canal dues, and other charges.

4. Free admission of shipbuilding materials and supplies.

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5. Granting of preferential customs duties on goods imported in native vessels.

6. Establishment of preferential railway rates.

Export Bounties.-Export bounties are direct payments of money made by a government to exporters when they ship certain goods out of the country. Such payments are now seldom made. They were common under the mercantile system when every device likely to promote, through increased exports, a favorable balance of trade was eagerly made use of. In keeping with the general policy pursued by the mercantilists, bounties were granted mainly on manufactured goods, as it was the exportation of such goods that was considered most desirable. An example of a bounty on a raw material was that contributed by Great Britain in 1689 on wheat; the bounty was paid to exporters provided the domestic price was not above a certain figure. This export bounty remained in force until 1814.

The general effect of an export bounty is to raise the price of the bounty-fed article in the domestic market and to lower it abroad. The danger of granting bounties is that their granting by one country leads to the adoption of a similar device by other countries and to an all-round artificial stimulation of production in order to supply foreign markets.

One of the most conspicuous recent examples of the effect of export bounties was that produced by the payments made to exporters of beet sugar by a number of European countries, namely Germany, France, Russia, Austria-Hungary, Belgium, and Holland. The commercial rivalry between these beet-sugar producing nations led to the granting of all kinds of premiums, open and concealed, with subsequent overproduction, depression of prices, and losses to many producers of sugar beets. The nations that were the recipients of the bounty-fed sugar, though it meant lower prices of this commodity to their consumers, were not disposed to consider this as an unalloyed blessing. The importations of large quantities of cheap beet sugar meant

the driving out of business of the sugar-refining industry in Great Britain and the ruin of the cane-sugar production in British India, in the British West Indies and in other canesugar raising lands. Countervailing duties were promulgated against bounty-fed sugar; such duties were levied notably by the United States and by British India. England threatened the imposition of similar duties and the situation became so complicated that an International Sugar Conference was called. It convened in 1903 at Brussels and resulted in the virtual abandonment of bounties by most of the European nations.

Classification of Bounties.-Export bounties may be either direct and open, or indirect and concealed. The indirect bounty is usually the result of a law which provides for a refund of an internal tax when the product subjected to taxation is exported. It occurs when the tax is levied on the raw or semi-manufactured commodity and the article exported is a finished product. The exporter receives in the remission of the internal tax an amount greater than that which he had originally paid to the government. The difficulty of correctly estimating the amount of material necessary for the production of a finished article makes the granting of a concealed bounty a comparatively easy matter. For a number of years Germany was paying such a bounty upon the exportation of refined beet sugar; the indirect bounty arose because when the remission of the internal tax was established it took twenty pounds of beets to make one pound of sugar; due to improvements both in agricultural and manufacturing methods, fewer and fewer beets were necessary for the extraction of one pound of sugar; although the government was taking cognizance of this fact by continually reducing the ratio, the reduction did not keep pace with the changes in the technique of sugar raising and sugar extraction. The refunds to the exporters of refined sugar were thus always greater than the taxes which they had paid on the raw materials.

The German government, in granting the refund, was

fully aware of what it was doing; the purpose was the encouragement of exports and the stimulation of improvements in the industry. In 1891 Germany replaced the indirect bounty with a direct one. The law stipulated the lowering of this bounty in 1895 and its entire abandonment in 1896. However, the prevalence of bounties in other countries, the drop in the price of sugar and the pressure on the part of sugar producers led to the doubling of duty in 1896.

A remnant of direct bounties on exports may be found in the French premiums on the exportation of cured fish; the premiums are combined with the bounties on fisheries; their main purpose is the fostering of the French merchant marine.

Premiums on production and bounties, although they found an advocate in Alexander Hamilton, who in his Report on Manufactures recommended them as being in certain respects superior to customs duties, have been little used in American commercial policies.

REFERENCES

BROWN, H. G. Principles of Commerce. Part II. Chap. VII.
CUSTOM HOUSE GUIDE and the United States Customs Tariff, edition 1923.
FISK, G. M. International Commercial Policies, Chaps. V, VI.

FORDNEY, J. W. American Valuation versus Importers. American Indus

tries. March, 1922.

GREGORY, T. E. G. Tariffs: A Study in Method.

GRUNZEL, J. Economic Protectionism.

HIGGINSON, J. H. Tariffs at Work, Chap. III.

HOBSON, J. International Trade, Chap. X.

NATIONAL COUNCIL OF AMERICAN IMPORTERS AND TRADERS. Various Publications Presenting Reasons for Rejecting the "American" Valuation Plan.

PIGOU, A. C. Preferential and Protective Import Duties.
PLEHN, C. Introduction to Public Finance. Pp. 218-245.
ROBERTSON, J. M. Trade and Tariffs, Chap. XVII.

SMART, W. Return to Protection, Chaps. XVI and XVII.

VINER, J. Prevalence of Dumping in International Trade. Journal of Political Economy. Oct.-Dec., 1922. Vol. 30, pp. 655–680; 796–826. UNITED STATES TARIFF COMMISSION. Information concerning American Valuation as the Basis for Assessing Duties Ad Valorem.

UNITED STATES TARIFF COMMISSION. Information concerning Dumping and Unfair Foreign Competition in the United States. Canada's AntiDumping Law.

CHAPTER VII

THE TARIFF AND TARIFF SYSTEMS

Tariff Construction.-A customs tariff is a list or table of duties levied on goods when they pass the frontiers of a territory included within a tariff jurisdiction. Industrially advanced countries usually have a systematically arranged tariff divided into schedules, each schedule consisting of a group of allied articles.

The divisions of the United States tariff contain such schedules as the following: chemicals, oils and paints; earth, earthenware and glassware; pulp, paper and books. As a rule, the schedules in a tariff are subdivided into sections, and duties are indicated for each section.

The structure of a tariff designed for fiscal purposes is much simpler than the structure of a tariff whose principal aim is the protection of home industries and the provision of an instrument for bargaining purposes.

The most conspicuous example of a simple fiscal measure was the pre-war tariff of Great Britain; it contained a very small number of commodities alphabetically arranged; a duty was indicated in the case of each commodity. The number of dutiable commodities was reduced in the British tariff from 1163 in 1874 to 44 in 1862; the fiscal purpose of the tariff is shown by the amount of customs revenue, which rose during the same period from £21,899,000 to £24,036,000. Not all tariffs designed primarily for revenue purposes are as simple as the tariff of Great Britain was and as it still is. The revenue tariffs of some of the South American republics are long and complicated measures, and expert knowledge is required in order to pass merchandise without difficulty through the custom houses at which they are in force.