Letter to the Secretary of the Treasury [microform]

Letter the Tr MASTER NEGATIVE # COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD American Iron and Steel Association. Letter to the Secretary of Treasury [microform] [Philadelphia : American Iron and Steel Association, 1885] [MICROFILM] OCLC: 38251415 I RESTRICTIONS ON USE: Reproductions may not be made without permission from Columbia University Libraries. TECHNICAL MICROFORM DATA FILM SIZE: REDUCTION RATIO: /2.V IMAGE PLACEMENT: lA I I ' DATE FILMED: INITIALS: Wi TRACKING # : 3tfCu FILMED BY PRESERVATION RESOURCES, BETHLEHEM, PA. I ? ( i IB IIB PM-MGP METRIC GENERAL PURPOSE TARGET PHOTOGRAPHIC ^gaD >-f^ X v£) PRECISION®” RESOLUTION TARGETS A&P International 2715 Upper Afton Road, St- Paul. MN 551 19-4760 612/738-9329 FAX 612/738-1496 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijkimnopqrstuvwxyz 2.5 mm 1234567890 ' 7 I (:> iu ‘I LETTER TO THE SECRETARY OF THE TREASURY. Office of The American Iron and Steel Association, No. 261 South Fourth street, Philadelphia, November 10, 1885. Hon. Daniel Manning, Secretary of the Treasury, Sir: This Association has already acknowledged the receipt of your circular letter, dated July 17, 1885, in relation to the collec- tion of information concerning customs duties on foreign products ; also your personal communication of the 21st of the same month, requesting the co-ojieration of the Association in collecting so much of this information as is desired from the iron and steel manufac- turers of the country. In our replies to the communications referred to we have expressed our entire Avillingness to aid in the collection of information from these manufacturers. At the same time we expressed the opinion that the value of our work Mould be impair- ed if the Department should also address its inquiries directly to individual manufacturers. We noM^ regret to say that the infor- mation we have obtained is not so full or so comprehensive as M'e have desired that it should be. The American Iron and Steel Association embraced on the 1st of January of the present year 171 companies, 77 firms, and 22 indi- viduals, or a total of 270 members. This membership M^as directly identified with the manufacture of iron and steel in every form in every State of the Union that contains an iron or steel industry. Besides this absolute membership the Association regularly corre- sponds with all other iron and steel manufacturers in the United States. Suitable interrogatories were promptly prepared, and application for the desired information M'as made early in August last to all iron and steel manufacturers. (In the phrase “iron and steel manufacturers we include the owners or operators of blast fur- naces, rolling mills, and steel works, and the producers of ham- mered iron blooms.) Early in September we again addressed all 2 LETTER TO THE SECRETARY OF THE TREASURY, manufacturers who had not responded to our first communication. Copies of the interrogatories referred to and of the circular letters accompanying them were promptly transmitted to the Treasury Department. Of the more than 550 companies, firms, and indi- viduals addressed by the Association less than one-fourth have re- sponded in writing ; of this number several have refused to give anv information whatever and many others have given very imper- feet iuforniatiou. Some have doubtless addressed the Department directly, and we understand that replies will also be made by a few organizations representing special iron or steel interests. Of the large number who have not formally responded to the interrog- atories of the Association many have personally given reasons for not responding which were similar to those assigned by others in writing. This unwillingness or refusal to resjiond to a call for in- formation from the ofhcei’S of, this Association is an experience to which we are entirely unaccustomed. The inquiry naturally suggests itself, Why has the information been withheld by so many manufacturers? Various reasons for this action may be assigned. Many manufacturers do not keep their accounts with sufficient minuteness to enable them to give the in- formation requested ; others naturally shrink from exposing the de- tails of their business to any person, fearing that they might even by accident be seen by their rivals ; others do not care to take the trouble to compile the details ; others believe that the details if given would fall into the hands of Government officials who are not experts, and who would, therefore, be liable to misunderstand or misconstrue them ; while others again decline to give information because they are earnestly opposed to any further revision of the tariff, and think that if they would give the details requested they would thereby be committing themselves to the support of a policy which they do not believe in. Whether or not all these reasons can be accepted as satisfactory we must resj)ect the bookkeeping difficulties, the earnest convictions, and even the timidity of busi- ness men who represent large interests and have much at stake. THE CIRCULAR LETTER CONSII>ERED. The circular letter from the Department to manufacturers deals with tAvo important subjects : first, the question of substituting spe- cific for ad valorem duties as a remedy for frauds on the revenue. LETTER TO THE SECRETARY OF THE TREASURY. 3 and, second, the comparative cost of production of manufactured articles in this country and in other countries. In connection with the first of these subjects suggestions are requested concerning the feasibility of simplifying the tariff by the general substitution of specific rates of duty. We will consider these subjects in order. SPECIFIC AND AD VALOREM DUTIES. The Department’s circular letter says : “ Investigations of the methods of entry and appraisement of imported merchandise have shown that the tariff laws are largely evaded by undervaluation wherever the duties are levied ad valorem. A remedy suggested for this evil is the adoption of sjiecific duties.” We give our hearty assent to this remedy so far as its adoption is possible without det- riment to the revenues of the Government or injury to domestic industries. Specific duties are certain, constant, and easily ascer- tained ; ad valorem duties are uncertain, variable, fruitful of con- troversy, and exceedingly liable to fraudulent evasion. One very common method of evasion Avas clearly explained by the Ncav York Times in its issue for September 25, 1885. A concern in France, for instance, may ship a lot of goods to its representative here. The goods may be of a special quality to Avhich no common standard of value can be applied by the Appraiser. Under such circumstances it is not easy for the Appraiser to get at the real ‘ value. Frequently in instances of this kind the invoices are made out at a very Ioav figure to enable the consignee to eA'ade the payment of the full amount of duties that would be imposed on an honest A’alua- tion. This sy.s’tematic undervaluation not only cheats the Govern- ment but it is rapidly driving the domestic importer to the Avail. The latter, not being in collusion Avith the foreign manufacturer, of course gains no advantage. We note Avith pleasure the vigorous efforts that are noAv being made by the Treasury Department to check all undervaluations of foreign merchandise that is imported into the United States. As protectionists, anxious for the prosperity of our whole country and of all its industries, Ave are especially thankful that a policy has been adopted and adhered to in the management of our custom houses that insists upon the full measure of protection for these industries that is contemplated by our tariff laws. Duties lev- ied for protection as aacII as for revenue are of little avail as a shield against foreign competition if they are not strictly enforced. 4 LETTER TO THE SECRETARY OF THE TREASURY. Many domestic industries have been credited with possessing a de- gree of protection which they have not really enjoyed because of the lax administration of the law which has been made possible by ad valorem duties. The British Government now levies only spe- cific duties, with one exception, and for years before it abandoned protective duties its policy was largely the same. Our own con- spicuously ad valorem tariffs of 1846 and 1857 had no precedent in the modern historv of Great Britain. It must be added, how- ever, that British duties, whether they have been specific or ad va- lorem, have always been most rigorously enforced. But ad valorem duties can not be wholly dispensed with, even if the risk of undervaluations must continue. In justice to the rev- enue, the domestic manufacturer, and the domestic consumer there are many articles which can not wisely be subjected solely to spe- cific duties. Gloves and hosiery, watches and jewelry, cutlery and fire-arms, machinery, silks, velvets, and satins, clothing, cloths, and fine carpets, for instance, having varying values, could not properly be subjected to specific duties alone at so much per pound or per yard. Such articles must continue to be subjected to ad valorem duties, and some of them to both specific and ad valorem rates. The duties which are now imposed on iron and steel and manu- factures thereof are chiefly specific. We do not recommend any change from specific to ad valorem rates in any of these duties. The few articles of iron and steel that are subject to ad valorem rates alone are as follows. The paragraphs are given as number- ed in the Indexed Tariff of the Treasury Department. 148. Bar iron, rolled or hammered, and all iron in slabs, blooms, loops, or other forms less finished than iron in bars, and more ad- vanced than pig iron, except castings, shall pay a duty of thirty-five per centum ad valorem whenever the specific rates provided for these articles would not yield this proportion of their invoice value. 151. Sheet iron thinner than number twenty-nine wire gauge, and all iron commercially known as common or black taggers iron, wheth- er put up in boxes or bundles, or not, thirty per centum ad valorem. 155. Iron and steel cotton-ties, or hoops for baling purposes, not thinner than number twenty wire gauge, thirty-five per centum ad va- lorem. 174. Circular saws, thirty per centum ad valorem, 175. Hand, back, and all other saw's, not specially enumerated or provided for, forty per centum ad valorem. LETTER TO THE SECRETARY OF THE TREASURY. 5 177. Steel ingots, cogged ingots, blooms, and slabs, by whatever pro- cess made; die blocks or blanks; billets and bars and tapered or bev- eled bars; bands, hoops, strips, and sheets of all gauges and widths; plates of all thicknesses and widths; steamer, crank, and other shafts; W'rist or crank pins ; connecting-rods and piston-rods ; j^ressed, shear- ‘ ed, or stamped shapes, or blanks of sheet or plate steel, or combina- tion of steel and iron, punched or not punched ; hammer-moulds or swaged steel; gun-moulds, not in bars; alloys used as substitutes for steel tools; all descriptions and shapes of dry sand, loam, or iron- moulded steel castings, all of the above classes of steel not otherwise specially provided for, valued at four cents a pound or less, forty-jive per centum ad valorem. 183. Steel, not specially enumerated or provided for, forty-jive per centum ad valorem. 197. Cutlery, not specially enumerated or provided for, thirty-five per centum ad valorem. 199. Steel plates, engraved, twenty-jive per centum ad valorem, 202. Muskets, rifles, and other fire-arms, not specially enumerated or provided for, twenty-five per centum ad valorem, 203. All sporting breecli-loading shot-guns, and pistols of all kinds, thirty-five per centum ad valorem. 204. Forged shot-gun barrels, rougli-bored, ten per ce^Uum ad vtdorem. 205. Needles for knitting or sewing machines, thirty-five per centum ad valorem. 20G. Needles, sewing, darning, knitting, and all others not specially ► enumerated or provided for, twenty-five prr centum ad valorem. 207. Pen-knives, pocket-knives, of all kinds, and razors, fifty per centum ad valorem; sw'ords, sw^ord-blades, and side-arms, thirty-five per centum ad valorem. 208. Pen-holder-tips and pen-holders, or parts thereof, thirty per cent- 117)1 ad valorem. 214. Chromate of iron, or chromic ore, fijteoi p>er centum ad valorem. 215. Mineral substances in a crude state and metals un wrought, not specially enumerated or provided for, twenty per centum ad valoran. 216. jManufactures, articles, or w^ares, not speciallv enumerated or provided for, composed wholly or in part of iron, steel, copper, lead, nickel, i)ewter, tin, zinc, gold, silver, platinum, or any other metal, and whether partly or wholly manufactured, forty-five per centum. We do not suggest any changes in the rates of duty named in any of these paragraphs except in those numbered 151, 155, 177, and 183. Ad valorem rates in all these paragraphs except those named appear to us to be absolutely necessary to secure to the Government the revenue to which it is justly entitled and to guard 6 LETTER TO THE SECRETARY OF THE TREASURY. the domestic manufacturer against destructive foreign competition. The character of the articles mentioned in these paragraphs will show at a glance that duties levied by weight could not equitably to any interest be imposed on any of them. There remain then for our consideration the duties imposed in paragraphs 151, 155, 1^7, and 183. In paragraph No. 151 the duty on common or black sheet iron thinner than number 29 wire gauge and on common or black tag- gers iron is stated to be 30 per cent, ad valorem. Experience has shown that this duty is too low to be j)rotective of our sheet iron manufacturers who are prepared to manufacture the finer quali- ties of sheet iron and taggers iron, the latter being the thinnest sheet iron that is made. The duty is entirely out of harmony with the duties on thicker sheet iron. The thinner the sheet iron the more labor is employed upon it and the more valuable it is ; hence the duty imposed upon it should be higher than on thicker sheet iron. But the duty of 30 per cent, on sheet iron thinner than number 29 and on taggers iron is really much less than that which Congress has imposed on the thicker forms of sheet iron. The specific duty on sheet iron thicker than number 29 ranges . from l-j\j- cents to H cents per pound. An examination of the Government statistics shows that in the fiscal year 1884, which was the first under the tariff of 1883, there were entered for immedi- ate consumption and Avithdrawn from warehouse 1834 tons of tag- gers iron, valued at $119,759, the ad valortm duty upon which amounted to $35,927.70, or $19.60 per ton, which is less than one cent per pound. In the same fiscal year 10 tons of sheet iron thinner than number 29 Avere entered and AvithdraAAm, valued at $717, upon aaEIcIi an ad valorem duty of $215.10 AA^as paid, or $21.51 per ton, Avhich also is less than one cent per pound. The probability is that a large portion of the 1834 tons of “taggers iron” AA'as really sheet iron of sizes near to but thicker than num- ber 29, and it should therefore have paid a specific duty. It is no AA'onder that the manufacture of taggers iron is not to-day an Amer- ican industrA", and that the manufacture of thin sheet iron is a sicklv industry. The duty on the thinnest forms of sheet iron up to taggers iron gauges, Avhich begin Avith number 36, should cer- tainly be as hi"h as that on number 25 to number 29, A\hich is 1^ V O cents per pound, Av^hile taggers iron should pay a still higher duty. LETTER TO THE SECRETARY OF THE TREASURY. 7 In paragraph No. 155 the duty on cotton-ties is stated to be 35 per cent, ad valorem. This duty has been found to be inadequate for the protection of our cotton-tie manufacturers, very feAA' cotton- ties being noAV made in this country. In the fiscal year already referred to there Avere entered and AvithdraAvn for consum})tion 16,182 tons of foreign-made cotton-ties, aggregating in value at the places of manufacture $540,240.57, and paying a duty amount- ing to $189,190.78, or $11.70 per ton, Avhich is but little more than ^ cent per pound. The inadequacy of the 35 per cent, ad valorem duty as a check to foreign competition is seen in the very large importations of the last feAV years, and its absurdity and injustice Avill be made strikingly apparent Avhen it is compar- ed Avith the higher duties on bar iron. Cotton-ties require very much more labor than bar iron, and their cost is therefore much greater. The action of Congress in imposing an ad valorem rate Avdiich yields but little more than i cent per pound is one of those obvious errors in legislation AA'hich should be speedily cor- rected. Of course there is good ground for the suspicion that the foreign cost is undervalued. The duty should be made specific, and should not be less than that Avhich is charged on the smallest sizes of bar iron, namely, 1-^^ cents per pound. In paragraph No. 177 the duty on various enumerated forms of steel, valued at 4 cents per pound or less, is stated to be 45 per cent, ad valorem. A valid objection to this duty is that it opens the door to undervaluations upon a large class of miscellaneous steel products. In the fiscal year 1884 there Avere entered and Avithdrawn from consumption, under the ad valorem rate of duty, 12,786 tons of steel bars and billets, valued at $370,879, upon Avhich the duty amounted to $167,470.76, or $13.10 per ton ; also 5,156 tons of steel ingots, blooms, and slabs, valued at $120,560, upon Avhich the duty amounted to $54,252, or $10.52 per ton. The average duty collected on all these articles Avas a very small fraction more than 2 cent per pound. There AA^ould appear to be no sufficient check upon the obvious temptation to enter for duty steel Avorth 2 and 3 cents a pound at one cent or e\'en less per pound. Apart from this consideration there is a manifest impro- priety in subjecting steel valued at 4 cents per pound or less to an ad valorem duty Avhich realizes only about i cent per pound, while steel valued above 4 cents per pound and less than 7 cents 8 LETTER TO THE SECRETARY OF THE TREASURY. is made dutiable at 2 cents per pound. A classification of this kind is sure to invite fraud in entering steel in the 4-cent clause which should be invoiced above 4 cents. The 45 per cent, ad va- lorem duty on steel valued at 4 cents per pound or less should be changed if possible to a specific duty approximating that which is imposed on steel valued above 4 cents. This would tend to prevent frauds and aftbrd more adequate protection to domestic steel manufacturers. If it be objected that much of the steel that is imported under the 45 j)er cent, duty is worth very much less than 4 cents per pound, we reply that the cheapness of foreign products is the feature of foreign competition against which pro- tective duties are required. If duties are made sufficiently high to be adequately protective home competition may be depended upon to keep home prices within reasonable limits. In paragraph No. 183 the duty on steel not specially enumerat- ed or provided for is also given at 45 per cent, ad valorem. This provision can not be objected to per se, but objection may proper- ly be made to its covering articles wdiich should have been spe- cifically enumerated. We mention one conspicuous illustration, namely, steel wire rods lighter than number 5 wire gauge, and valued at 31 cents or less per pound. They are nowhere provided for by name, but both iron and steel wire rods above number 5 are enumerated. Why should the finer and more valuable product be placed in an omnibus clause, and subjected to an ad valorem rate which may be evaded, while the coarser forms of the same article are carefully enumerated and subjected to a specific rate? Con- siderable quantities of wire rods lighter than number 5 are im- ported, and although the Government does not advise us of the quantity and value of these importations we are informed that the foreign invoice yields to the revenue about 811.50 per ton, which is less than the duty of cent per pound, or 813.44 per ton, Avhich is imposed on the less valuable wire rods not lighter than number 5. By making the duty cent per pound on wire rods lighter than number 5, and valued at 3i cents or less per pound, it would har- monize with that on the larger gauges, and our wire-rod manufac- turers would not be subjected to unfair competition, of the injurious effects of which they justly complain. In dismissing that part of the circular letter which relates to the substitution of specific for ad valorem duties we call special * LETTER TO THE SECRETARY OF THE TREASURY. 9 attention to the fact that, even if it were possible always to secure honest valuations, ad valorem duties do not afford protection to domestic manufacturers when it is most needed. A\ hen foreign products are entered at low prices ad valorem rates yield corre- spondingly low duties, and this happens when the imported prod- ucts by their cheapness most dangerously menace the home man- ufacture of like products. If pig iron, for instance, were subject to an ad valorem rate of 50 per cent, the duty would be 85 per ton when the foreign value is 810, and it would be 87.50 per ton when the foreign value is 815. It will readily be seen that the domestic manufacturer would need the 87.50 duty more when for- eign pig iron is 810 per ton than he would need 85 duty when it is 815 per ton. AVe believe, therefore, that, whenever it is prac- ticable, and not positively injurious to any American interest, spe- cific duties should be substituted for ad valorem rates. SPECIFIC DUTIES WHICH ARE TOO LOW. In this connection it seems proper that due consideration should also be given to certain specific duties in the metal schedule which are nominally imposed for the protection of domestic manufac- turers but which really protect only their foreign rivals. AA^e al- lude to the duty of one cent per pound on tin plates and to the duty of y% cent per pound on iron and steel wire rods not lighter than number 5. That these duties are not adequately protective is shown by the most significant facts. This country does not manufacture one box of tin plates. Great Britain supplying our entire demand. Our iron wire-rod industry is practically an ex- tinct industry, Sweden and Germany now making nearly all the iron wire rods we need. Our steel wire-rod industry is subjected to the severest competition with the same industry in Germany and Great Britain. The following statement of our importations of tin plates and iron and steel wire rods in the fiscal year 1884 is compiled from the Government statistics, but it must be borne in mind that more steel wire rods are imported than these figures indicate, owing to the grouping of rods lighter than No. 5 with “steel not specially enumerated or provided for.” Articles. Gross tons. Value. Duty collected. Tin plates 235,661 818,931,072.70 85,278,848.25 Iron wire rods 35,839 1,569,397.52 481,671.04 Steel “ “ not lighter than No. 5, 50,158 1,812,957.71 674,162..55 10 LETTER TO THE SECRETARY OF THE TREASURY. The magnitude of the importations of tin plates is yet more sig- nificantly shown in the following table of the total importations and withdrawals from warehouse for consumption of iron and steel and iron ore in the fiscal year above mentioned. Articles. Per cent. Value. of Duty Average ad whole value. collected. vaXorem. Tin plates §18,931,072.70 44 $5,278,848.25 27.88 All other iron and steel.... 23,986,674.66 56 9,531,213.07 39.69 Total $42,917,747.36 100 114,810,061.32 34.48 From this table it will be seen that 44 per cent, of the total importations of iron and steel entered and withdrawn from ware- house for consumption in the fiscal year 1884 consisted of tin plates, the specific duty of one cent per pound on which was equivalent to about 28 per cent, of their foreign value. That the importations of tin plates in the fiscal year 1884 were not excep- tionally large is shown by a further reference to the Government statistics. The importations of tin plates in the last five calendar years were as follows : Calendar Years. Gross tons. Value. 1880 $16,478,110 1881 183 005 14,886,907 17,975,161 18,156,773 1882 213 987 1883 221,233 1884 216,181 16,858,650 Total $84,3.55,601 These figures show that in five years we have imported nearly a million tons of tin plates, for which we paid the British manu- facturers nearly $85,000,000. If there had existed any necessity for this large importation, as in the case of articles that this country is not capable of producing, its magnitude might be worthy of only a passing thought; but it is a most serious matter to send $17,000,000 annually out of the country to pay for an article Avhich we could ourselves produce if the Government would foster its manufacture as it has fostered and is still fostering other useful industries. Tin plates are only sheet iron or sheet steel coated with tin, or with a mixture of tin and lead, and it will not be contended by any intelligent person that we could not make them as easily as they are made in England and Wales. Our skill as iron and steel manufacturers is equal to that ol* any other people ; 1 LETTER TO THE SECRETARY OF THE TREASURY. 11 we produce our own lead, and we can obtain tin from the same countries which supply Great Britain. The only reason why we do not make the tin plates that we need is the insufficiency of the duty, which is not equal to the difference in the cost of pro- duction in this country and in Great Britain. The duty should be at least doubled ; instead of being one cent per pound it should be at least two cents. The present duty is a purely revenue duty ; it protects no American interest, but gives to British manufactur- ers the monopoly of supplying our markets with tin plates. Tin plates are a highly-finished metallurgical product, and much labor and skill are required in the final stages of their manufac- ture. But it is well to consider also the vast quantities of raw materials and the vast amount of labor that enter into the primary and intermediate stages of the production of so large a quantity of foreign-made tin plates as this country annually consumes. Why should we not utilize our own resources for the manufacture of the tin plates we need ? Why not employ our own labor instead of the labor of another country in supplying this want ? Establish in this country a tin-plate industry through the agency of a ])rotect- ive dutv, and the same beneficial results to consumers that have followed the establishment of our steel-rail industry may confi- dently be looked for. No American industry that has been ade- quately protected has ever increased to consumers the cost of its products. If we had a thoroughly protected tin-plate industry it would form no exception to this rule. The duty on iron wire rods under the tarift which was in force prior to the 30th of June, 1883, was II cents per pound, and that on steel wire rods was 30 per cent, ad valorem. The present duty of cent per pound on iron wire rods has greatly increas- ed their importation and correspondingly decreased their domestic production. Many of our iron wire-rod mills were compulsorily closed soon after the new duty went into operation, and they re- main closed to-day. The old duty of II cents per pound should be restored. The duty on steel wire rods not lighter than number 5 wire gauge and valued at 31 cents or less per pound was changed by the act of March 3, 1883, from 30 per cent, ad valorem to y% cent per pound. The new duty is not so protective as it should be, importations still being large, as the statistics we have given will show. 12 LETTER TO THE SECRETARY OF THE TREASURY. The demand for iron and steel wire rods has greatly increased in this country in recent years, chiefly because they are the raw materials for telegraph and telephone wire and wire fencing, as well as for other purposes. It is a matter of importance, therefore, that w'e should properly encourage the manufacture of both these products, which in the primary, intermediate, and finished processes of their manufacture require much labor and consume large quan- tities of the raw materials which enter into all iron and steel prod- ucts. No consuming interest can suffer by the manufacture at home of all, or nearly all, these articles that are needed to supply the domestic demand. Such protection as has been given to our steel wire-rod industry has certainly not increased the cost of wire fencing to the American farmer. It never was so cheap as it has been during the past twelve months. FURTHER CONSIDERATIOX OF THE DUTIES ON IRON AND STEEL. The value of all the iron and steel and manufactures thereof and iron ore that was entered and withdrawn from warehouse for consumption in the fiscal year 1884 was $42,917,747.36. The duty collected on these iron and steel commoilities was $14,810,- 061.32. The average ad valorem rate on the whole importation of iron and steel and manufactures thereof and also on iron ore was 34.48 per cent. This average is low notwithstanding the fact that the fiscal year 1884 was a year of low prices, which had the effect of advancing the ad valorem equivalents of specific duties. The average is also low when compared with the average duty collect- ed on all dutiable goods entered for consumption and withdrawn from warehouse in the fiscal year 1884, which was 41.61 per cent. These statistics are presented to show that our iron and steel indus- tries enjoy no undue advantage in the present tariff over other in- dustries. On the contrary, we have pointed out some of the disad- vantages which have been imjiosed on them by the new tariff. There are certain theorists who contend that, because jiig iron can be cheaply made in some Southern States, a protective duty on this article is not needed by the country at large, and that the South should be permitted to make all the pig iron that the country requires. This is a very short-sighted view, even if it were possible for the South to supply so large a quantity of pig iron. Because there is natural gas at Pittsburgh shall all the bar iron LETTER TO THE SECRETARY OF THE TREASURY. 13 and all the nails and all the glass that the country needs be made there ? Because cotton goods can be cheaply manufactured in New England shall no other section of the country build cotton factories ? Because the valleys are fertile shall the hillsides not be cultivated ? We rejoice at the rapid growth of the pig-iron industry of the South, but the best friends of this industry see clearly that its prosperity could not have been achieved without the help of a protective duty. The principal market for Southern pig iron is in the North, and to reach this market from $3 to $4 per ton must be paid for freight. This freight brings the cost of Southern pig iron at the places where it is consumed in line with the cost of Northern pig iron. If a purely revenue duty, in oth- er words, a low duty, had been imposed on foreign pig iron in re- cent years Southern pig iron would have been compelled to meet a more active foreign competition and lower prices in tbe North than it has encountered, and if it had met with this opposition its manufacture certainly could not have prospered. Reduce the duty on ])ig iron to-day and the Southern pig iron that is now sold in the North would largely be replaced by the still cheaper foreign pig iron. We prefer to see Southern pig iron coming North in increasing quantities rather than to see an increase in our con- sumption of foreign pig iron ; we jiut the prosperity of every sec- tion of our own country before that of any other country. Objection is sometimes made to the imposition of any duty on iron ore because it is a raw material, a free gift of nature. There are honest differences of opinion among believers in the pro- tective policy concerning the amount of the duty which should be imposed on this article, but there can be no difference of opinion among tbem concerning the duty of the Government to shield from injurious foreign competition every American industry that is in need of its fostering care. Our iron-ore industry is unquestionably such an industry. We have iron ore in abundance in many States. The unrestricted importation, that is to say, the free importation, of foreign iron ore would have a strong tendency to close many of our own iron- ore mines and to reduce the wages of the workingmen who would be employed in operating the remainder. We protest against the adoption of this policy, which is based upon the theory that iron ore is a raw material. When taken from the mine and marketed it is the product of labor ; its value is almost entirely due i 14 LETTER TO THE SECRETARY OF THE TREASURY. to the labor that is employed in its development. Ignore the claims to protection of the American iron-ore industry, because iron ore is a raw material, and with as much reason the claims to pro- tection of almost every other American industry could be ignored. Pig iron is a raw material to the bai’-iron manufacturer, and bar iron is a raw material to the car builder and the wagon and car- riage manufacturer. The principle involved in the protection of the iron-ore producer is precisely the same as that which is involved in the protection of the pig-iron manufacturer and the bar-iron manufacturer. Protectionists could not consistently or justly as- sent to a policy which would shield from injurious foreign competi- tion the domestic capital and labor that are enlisted in some indus- tries and at the same time expose to this competition another indus- try which also employs home capital and home labor. Protection to American industry is a principle and not an expedient. Iron and steel manufacturers therefore do not wish to see iron ore placed in the free list, or bituminous coal and coke. THE COST OF PRODUCING IRON AND STEEL. We now come to consider that part of the circular letter which relates to the comparative cost of production of manufactured articles in this country and in other countries. Owing to circum- stances which have already been explained we are unable to pre- sent detailed statistics of the cost of 2>roduction of iron and steel in this country. Only fragmentary information has been received. Such information as we may give will not pretend to embody per- fect averages of cost of production for the whole country. With regard to the cost of producing iron and steel in compet- ing countries we have not believed it to be necessary to attempt to ascertain the elements of this cost, assuming that for all practical purposes the prices at which these products have recently been sold may be accepted as an approximation to their actual and usual cost. Foreign iron and steel markets have not recently been excited from any cause, while it may truthfully be said that low prices are the rule rather than the exception in all European countries. Economic conditions are more circumscribed and exact- ing and therefore more stable in those countries than in our own ; labor is more at the mercy of capital ; foreign markets are more sought after ; hence prices and cost of production are always low- LETTER TO THE SECRETARY OF THE TREASURY. 15 er and more uniform than with us. In such illustrative references as we may make to foreign competiticAi with our own people in the manufacture of iron and steel we shall assume, therefoie, that the foreign price to-day approximates the usual foreign cost. The returns which we have received of the average cost of pro- duction of pig iron at a number of blast furnaces in 1882, 1883, and 1884, while possibly varying from a true average of this cost for the country at large, enable us to reach the true relation of the cost of the labor employed in producing a ton of pig iron to the cost of all the other elements entering into its production. Of these furnaces some used anthracite and bituminous coal and oth- ers used charcoal. The returns show that the total average cost of producing a gross ton of pig iron at these furnaces in the years mentioned was as follows : Anthracite and Labor in producing raw materials Labor in transporting raw materials Labor at furnace, including repairs Total cost of labor Taxes, iirsnrance, commissions, office expenses, i terest, freight, traveling expenses, royalties, etc.... Total cost of a ton of pig iron Percentage of labor cost to total cost The anthracite and bituminous furnaces referred to above used an av'^erage of 2.08 tons of iron ore, 1.54 tons of fuel, and 1.04 tons of limestone in making a ton of pig iron, and the charcoal furnaces used an average of 2.3 tons of iron ore, 137 bushels of charcoal, and .29 ton of limestone. The furnaces which supply the foregoing av'erages are widely separated, some are old-fash- ioned in construction, and few of them use the rich ores of Lake Superior. All are, however, among our good and well-managed furnaces, but only a few are among the newest and best equipped. We have taken the average of the years 1882, 1883, and 1884, instead of the present year, for the reason that labor in tbe iron in- dustry in this country is paid less in 1885 than it should receive, and less than it has been accustomed to receive. The average wa- ges paid in 1882, 1883, and 1884, which, taken together, were years of fair prosperity for this country, can not be taken exception to. The foregoing details show that 73 per cent, of the cost of pro- ducing a ton of pig iron with anthracite or bituminous coal in the bituminous. Charcoal. ... $10.26 §9.62 ,.. 1.78 3.17 ... 1.91 2.44 ... $13.95 $15.23 n- ... 5.22 5.18 ... ^;i9.i7 $20.41 73 74 16 LETTER TO THE SECRETARY OF THE TREASURY. years mentioned was paid in wages to labor, and that 74 j)er cent, of the cost of producing *a ton of charcoal j)ig iron in the same years was similarly paid. Taking these percentages, and assuming, as we may correctly assume, that the same pi'oportions hold good from rear to vear, we find that labor — the labor which toils hard with its hands and with bent back — receives very nearly three- fourths of the cost of prodiudng a ton of pig iron in this country. This calculation excludes clerical labor, and the labor of the tax- gatherer, the insurance agent, the commission merchant, and all others. The workingman, tlierefore, has the greatest stake in the duty which protects our pig-iron industry against the competition of tlie foreign producer of pig iron. Wh at is the measure of this competition? Primarily, and for j>resent i)urposes of comparison, it is the price at which foreign j)ig iron is sold for shipment to our market. As we have already ex- plained, the present prices of iron and steel abroad may be regard- ed as approximating the usual prices of these articles, and pig iron forms no exception to this rule. AVe find by reference to tlie for- eign market reports for October last that the prices of English and Scotch pig iron were then as follow*s : Nos. 1, 2, and 3 AVest Coast hematite (Bessemer) f. o. b., 43s. (kl. ($10.58) No. 1 Aliddlesbrougli (Cleveland cold-short) f. o b. ship, 37s. Od. ($9.00) No. 1 Eglinton (Scotch) alongside ship 43s. Od. ($10.45) No. 1 Coltness (Scotch) alongside ship 48s. Od. ($11.80) It will be seen from a comparison of these figures with those given above that the price per ton at which foreign pig iron can be put on board vessels for shi])ment to the Uniti d States is several dollars less than the labor cost of a ton of pig iron in this country when the wages paid are an average of those which prevailed in 1882, 1883, and 1884. The highest price above quoted for foreign pig iron is $11.80, wdiile the lowest average labor cost of a ton of pig iron in this country in the years named w'as $13.95. This cost was, however, only 73 per cent, of the total cost, and if allow- ance be made for the remaining 27 per cent, of this total cost it will be seen at a glance that the present duty of $6.72 per ton on pig iron is not equal to the difference between the total cost at home and the price abroad. The cost of transporting pig iron from European to American seaports is no liindrance to its sale in our markets. The freight on pig iron from Glasgow to New York wits LETTER TO THE SECRETARY OF THE TREASURY. 17 only 50 cents per ton in October of the ])resent year, whereas the freight on pig iron from the Lehigh A'^alley to New York, a dis- tance of less than a liundred miles, averaged $1.00. The next illustration wliich we shall give of the comparative cost of producing iron and steel in this country and in Europe relates to bar iron. The figures tve will (juote for our own country will comprise only the cost of the labor employed in all the stages ne- cessary to j)rodiice from the raw* materials a ton of best refined bar iron. The period to which these ligures refer is the early }>art of 1882. AA"e prefer the figures W(‘ are al)out to give to those Ave have ourselves recently collected l)ecause they are from the hand « % of one of the most eminent, painstaking, and capal>le of American ironmasters, Mr. John Griiien, now decease*!, but for many years the Superintendent of the Pluenix Iron AA'orks, at Plioenixville, Pennsylvania. In Aj)ril, 1882, Mr. Grifien compiled for the Amer- ican Iron and Steel Association from the books of the Pluvnix Iron Company the following statement of tlie labor cost to that com- pany of a ton of liest bar iron, wliich cost was undoubtedly a fair average for the country at large. ]. rio iiiox. AVaj^es earned in mining enoujzh ore for one ton piy iron $5.18 AV a^es earned in minin<r enoujrh limestone for one ton iron.... .33 AA’ ages earned in mining enough antliracite for one ton ]>ig iron... 1.71 AAhiges earned in making enough coke for one ton pig iron.. 28 AA' ages earned in trans]>orting above ore 56 AA'ages earned in transporting above limestone 06 AV ages earned in transi>orting above anthracite 45 AA'ages earned in transi>orting above coke 22 AAhiges earned by furnace hands in making one ton pig iron... 2.75 Total Avages earned in making one gross ton pig iron $11.54 2. MUCK BAK. It requires EYo tons of }>ig iron to make one gross ton of muck bar. If there are $11.54 labor earnings in one ton of pig iron, in tons of pig iron, or one ton of muck bar, there are $13.04. The Avhole labor earnings in one gross ton of muck bar are as folloAVs; AA'ages earned in making 1 tons pig iron $13.04 AA'ages earned in mining coal used in jmddling one ton muck bar, 1.71 AA'ages earned in mining ore used in fettling one ton of muck ]>ar, .90 AA'ages earned in transi>orting the above coal .50 18 LETTER TO THE SEC’RETARY OF THE TREASURY. AVages eariicnl in transporting the above ore A\ ages earned l>y mill hands in making one ton of muck bar Total wages (‘arned in making one gross ton muck bar .20 7.44 §23.So o o. FINISHED BAK. It requires gross tons of muck bar to make one gross ton of lin- ished bar, ready for the market. If there are J^2:l.45 laljor earnings in one ton of muck bar, in tons of muck bar, or one ton of finished bar, there are 828.62. The whole labor earnings in one gross ton of fin- ished bar are as follows : Wages earned in making tons muck bar 828.62 Wages earned in mining coal used in heating one ton finished bar 89 Wages earned in mining sand use<l to one ton of finished bar 20 Wages earned in transporting above coal 25 Wages earned by mill hands in making one ton finished bar 6.61 Total wages earned in making one gross ton of finished bar iron, $6().27 4. SUMMARY. The three preceding statements represent the suc*cessive steps in the transformation of iron ore, liim^stone, and fuel into bar iron. The fol- lowing statement summarizes the whole operation, giving the (juantities of raw materials used in making a ton of bar iron and the total earnings of the labor emj>loyetl. Wages earned in preparing 3fVd gross tons iron ore 88.10 Wages earned in preparing gross ton limestone 45 Wages earned in preparing 4^0^-,- gross tons coal and <‘oke 5.64 Wages earned in preparing gross ton saml 20 Wages earned in transporting above materials 2.91 Wages earned at blast furnace and in mill 18.97 Total M'ages earned in making one gross ton of finished bar iron, 866.27 The total cost of making a ton of bar iron embraces, a number of other elements, including the cost of materials additional to their labor cost, freight charges above Avages earned in transportation, in- surance, taxes, commissions, interest, office expenses, etc. This total cost in the early part of 1882 was not given by Mr. Griffeu, but it was about $50, Avhich would make the labor cost of a ton of bar iron at the period mentioned 72 per cent, of the total cost. Substantially the same proportion of labor cost to total cost in the manufacture of bar iron undoubtedly exists in our rolling mills lo-day. The work- ingman, therefore, has the largest stake in the duty on bar iron. I LETTER TO THE SECRETARY OF THE TREASURY. 19 It is ])rop(‘r to explain that tlie low labor cost (?11.54) of pro- ducing a ton of pig iron bv the Pluenix Iron Company in 1882 was duo to the fact that the company drew its supply of iron ore mainly from its own ore mines, which were near at hand, and also to the fact that its supply of coal was mainly drawn from near-by sources, the wages j)aid for the transportation of these products l)cing there- fore exceptionally small. The tigures which have just been given have been used solely to show the relation of the labor cost to the total cost of a ton of bar iron. But they have another significance. The j)rcsent excep- tionally low price of American bar iron of best quality is alvmt 839 per ton ; the present price of best Welsh bar iron at ship})ing ports is £5, or about 825 ; Belgian bar iron can be bought at even lower prices; the duty is 817.92. A slight advance in the price at home if accompanied by a slight reduction of the duty would bring foreign bar iron into our markets in large quantities. We need not multiply these illustrations. What has been shown of the labor cost of j)ig iron and bar iron might be shown substantially of all other iron and steel products. Labor consti- tutes the principal element in the cost of these products. Wages are higher, very much higher, in this country than in competing European countries, and hence not a tariff for revenue but a tariff for protection is needed to enable our manufacturers to })ay these higher wages. We regard it as wholly unnecessary to present sta- tistics showing the difference between the wages paid in this country and in European countries. That the gulf between the labor sys- tems of this country and Europe is very wide re(piires no demon- stration at this late day. If our j)reseut protective tariff should be reduced one of two possible results would certainly happen : either the wages of American workingmen would also have to be reduced, or our markets would become the prey of foreign manufacturers. This proposition is so self-evident that we wonder that any advocate t)f lower duties should affect to ignore it. We respectfully submit, however, that the cost of production is not the only subject that deserves consideration in the framing of a tariff law. Our mauufacturei-s should be protected against the possible unloading on our markets, at :i loss, of the surplus prod- ucts of other countries which can not be sold at a proft. They should be protected against the low ocean freights on European r I.KTTER TO THE SECRETARY OF THE TREASURY. comiiiodities ^vhich usually prevail, anti which are always much lower than our own railroad freights, low as the latter now are. The difference in the cost of transporting manufactured products by railroad from our own manufacturing cenlres to points of dis- tribution or consumption on or near tlie sea-coast, or in the Gulf States, and the cost of transporting the same articles by water from Euro])C to the same markets is invariably in favor of the foreign manufacturer. Then, again, our manufacturers are re- quired to pay higher rates of interest than tlieir European com- petitors for the money that they may find it necessary to bori’ow in the ordinarv conduct of their business or to carrv them through periods of depression. They require higher ]»rofits, too, than the })eople of Eiiro])ean countries. Owing to our Iiiglier wages and the higher cost of all our building materials much more capital is needed to establish a manufacturing enterprise in this country than in Europe. It may safely be assumed, for instance, that a blast furnace of given capacity which would cost §100,000 in Eu- rope would cost §200,000 in our own country. To yield the same interest on the capital invested it will readily be seen tliat, if the two furnaces produce precisely the same quantity of pig iron an- nually, a profit of SI per ton in Europe would call for a larger profit in this country. Nor should it be forgotten that the profits of manufacturing in this country are nearly always invested in new manufacturing enterprises, which employ additional labor. Still another subject deserving of serious consideration in the framing of a tariff* law is the depreciation in the value of the plants of manufacturing establishments. Improvements in pro- cesses are constantly taking place, many of which require the complete substitution of new machinery for old ; even improved machinery wears out and must be replaced. The capital that is invested in a plant that must be in large part renewed or give wav wholly to a more modern process of manufacture would be lost if provision were not made in a surplus fund for this class of contingencies, which fund must be suppli<;d from profits that are independent of all considerations of cost of production. If our manufacturei'S are to keep abreast of the