that the opinion of the trade must be resorted to. It seems to be recognized that the cost of top making is 50 per cent greater than of combing and this percentage has been used in determining the costs in this article. For the purpose of this discussion the costs of combing with English combs has been adopted and allowance has been made for the fluctuations in costs due to fluctuations in output. Table 4 presents the costs of the Tariff Board 19 which seem most nearly to represent the board's conclusions. TABLE 4. THE CONVERSION COST OF COMBING AND TOP MAKING PER POUND IN THE UNITED STATES statistics on the cost But it felt able, upon The Tariff Board gave no elaborate of combing and top making abroad. the basis of its information, to state the relative positions of the industry in this country and in England. "In view of the facts related," it says in conclusion, "it seems a fair statement that the cost of making tops in the United States is about 80 per cent greater than abroad."20 For a given product in England, therefore, with a cost of 100 units there would be in the United States a cost of 180 units. The foregoing conclusions are adhered to in subsequent calculation on the costs of producing tops. In Table 5 the effect of the top duties in the La Follette, Underwood, and Compromise bills are compared with the Tariff Board costs. The conclusions of the table, it should be noted, consider only the differences in conversion costs. In constructing this table English prices were taken for standard qualities of tops. The total English cost (column 2) 20 Ibid., pp. 644-645. TABLE 5. THE NET PROTECTION GIVEN TO TOPS BY Compensatory Duty THE La Fol (1911) conver-1 pound Cost sion of top lette Under- bill cost Compromise bill (29 per cent)1 cent)1 cent) 1 $0.261 $0.2486 $0.0374 $0.2112 $0.0739 $0.0422 $0.0612 was computed by subtracting from the price an assumed distribution expense and profit of 5 per cent. An objection will be made to this method on the ground that it is "unscientific," but for the purpose of this discussion it is likely to be more accurate than the computation of the total English cost from the prices of raw wool. The English top-making conversion costs are computed from the statistics of the Tariff Board, and by subtracting them from the total English cost the cost of the wool in 1 pound of top is determined. The compensatory duty in cents under each of the bills is computed by multiplying the figures in column 4 by the ad valorem rate imposed by the respective bills upon raw wool. The English price is then multiplied by the ad valorem rate fixed by each. bill on tops, and from the result is subtracted the correspond ing compensatory duties. This gives the net amount of protection under each bill and is to be compared with the difference in conversion costs between this country and England, as determined by the Tariff Board (column 11). If the prices used in Table 5 had been for a low-price year, the net protection given by each of the bills would have been less than shown. This is, from the point of view of protection, one of the unavoidable disadvantages of ad valorem duties. A given ad valorem rate may be protective when prices are at one level and not protective when they are at another. In the La Follette, Underwood, and Compromise bills, where the duty on tops was a flat ad valorem rate, it was possible to compute the net protection separately from the compensatory duty. In studying the Penrose and Hill bills, where the duty on the tops was a specific and a compound duty, respectively, a different method must be followed. Table 6 is a comparison of the total protection and compensation given on tops by the Penrose and Hill bills with the total protection and compensation required according to the Tariff Board. TABLE 6. THE DUTIES ON TOPS IN THE PENROSE AND HILL BILLS COMPARED WITH THE TARIFF BOARD COSTS The Penrose bill levies a flat specific rate of 28 cents on tops, and the rate under the Hill bill is 20 cents per pound and 5 per cent ad valorem. From these rates the duty in cents per pound is arrived at. In computing the total protection and compensation required according to the Tariff Board, 18 cents is adopted as the duty on the clean content of wool, and, making allowance for waste, 212 cents was taken as a fair compensatory duty; that is, the duty which must be assessed in order simply to compensate the domestic top maker for the rise in the price of his raw material due to the 18-cent duty on raw wool. To this compensatory duty was added the difference in conversion cost between here and abroad as set forth in column 11 of Table 5. The last three columns in Table 6 are the preceding three expressed in percentages. One of the noticeable features of the percentages in Table 6 is the fact that the tops of low quality receive or require a larger duty than the tops of a higher quality. Such a difficulty arises inevitably from a flat specific compensatory duty. In theory, if the rate of duty on raw wool is the same on all grades of wool, the compensatory duty on the manufactured product should be the same on all qualities. In practice, however, a flat specific compensatory duty bears more heavily on the lower than on the higher qualities of product, and it results in a higher ad valorem equivalent on the lower qualities. Apparently, the practical thing to do is to grade the compensatory duties in order to retain, from the point of view of protection, the advantages of specific duties and still eliminate the excessive duties on the lower qualities. On the basis of the premises of this article, then, what is a fair rate on tops? Table 5 shows that 40 per cent ad valorem is adequate, in most cases, if the duty on raw wool is 35 per cent ad valorem, but a somewhat higher rate is defensible, as I will be observed from Table 6. A decline in price would, of course, make the calculations of this table useless. From the standpoint of protection, if the duty on raw wool is specific, the duty on tops should also be specific. The conversion cost of tops is, as compared with the material cost, relatively small and their price is affected directly by the price of raw wool. For the protectionist the most desirable method for levying the duty on tops would seem to be a carefully graded specific duty. If this be conceded and if the duty on raw wool be 18 cents on the clean pound, a duty of 26 or 27 cents per pound of tops of 60s quality, graded both up and down, would undoubtedly be a fair duty granted, of course, the premises on which the calculations have been made. WORSTED YARNS The conversion costs of converting tops into worsted yarns in the United States, as found in the report of the Tariff Board, are summarized in Table 7. TABLE 7. CONVERSION COST PER POUND OF PRODUCING WORSTED YARNS FROM TOPS IN THE UNITED STATES 21 After discussing the American costs and comparing them with English costs, the Tariff Board sums up the relative competitive positions of the two countries in the following words: In view of the fact that the figures as given for the United States have been put at what may be considered a low figure when compared with the large number of mills from which figures were received, it may be said that, making due allowance for variations on account of quality, etc., the actual manufacturing cost in the United States for turning tops into yarn is about twice what it is in England.22 The conversion cost of converting tops into yarns in England, then, may be taken as substantially one-half the costs presented in Table 7. The costs here discussed include those of drawing, spinning, twisting, and spooling, and do not include those of sorting, carding, and combing, which were considered under the cost of making tops. It is necessary, therefore, in order to determine the cost of converting raw wool into worsted yarns, to add to the costs of converting tops into yarn the costs of combing. This has been done in making the subsequent tables on yarns. To one who analyzes carefully the figures of these tables it will be evident that the cost of combing alone, not 21 Ibid., p. 649. 22 Ibid., p. 650. |