A Case for Lower Tariffs

After a three-year study of eight tariff-protected U.S. industries, Economist Percy W. Bidwell concluded last week that gradual but deep tariff cuts would not hurt U.S. industry as a whole and would damage only the marginal producers .in import-sensitive industries. "Most of these industries," he wrote, "have been in long-term declines and are characterized by weak financial situations, severe seasonal or cyclical unemployment and wages below the national levels." Bringing down the tariff walls could channel U.S. capital and labor into more productive endeavor.

Bidwell's book, What the Tariff Means to American Industries, was sponsored by the nonpartisan Council on Foreign Relations. To get the facts on both sides of the tariff story, Bidwell assembled a standing team of 28 top bankers, educators, editors, businessmen, government officials, and had them scrimmage in round-table discussions with leaders of the eight industries: iron and steel, synthetic chemicals, electrical equipment, watches, bicycles, chinaware, glassware, woolens. Represented were both ardent protectionists and advocates of free trade.

Foreign Scapegoats. Tariffs have been halved in the past generation, Bidwell acknowledged, and an increasing majority of U.S. businessmen favor still more slicing. However, Bidwell observed, "when business is bad, American firms are tempted to make a scapegoat of foreign competition, although their difficulties may have arisen principally from domestic causes."

Tariffs only encourage sliding, inefficient manufacturers to continue in uneconomic industries that require federal protection, says the study. In effect, they are subsidized by consumers. In the mass-production industries, where U.S. wages are far above world scales, Bidwell found that the U.S. worker usually so outproduces low-paid foreign workers that most tariffs and other import restrictions can be safely eliminated. Even in handwork industries, where the cost of labor makes up a large share of the product cost, he concluded that the tariff does little more than bail out the marginal producer.

In the U.S. china-tableware industry, Bidwell noted, labor is 60% of the wholesale price of the final product. Long protected by a high tariff, this industry never got even a 5% toehold in the domestic market until World War II blocked imports. Now it demands continuing protection to keep output at wartime levels.

Defense Dogma. What about the industry that insists that it is vital to national defense? The watch manufacturers won tariff increases up to 50% in 1954 on the argument that the U.S. has to maintain at least 4,000 watchmakers to turn out military timing devices in case of war. Yet Bidwell found that domestic production of sensitive jeweled watches continued to slump even after the tariff rise, and "it is doubtful whether the present level of import duties will guarantee that watches will be produced at a level which defense authorities would consider adequate." In any case, he said, a high tariff is not the best way to protect the industry. In its place the U.S. should choose the lesser evil of paying government subsidies to makers, just as some airlines and shipowners are subsidized as a defense necessity. Thus watch prices would drop to the world-market level, and the cost of supporting a defense industry would be placed where it belongs--with the taxpayers, not watch buyers.

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