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fostering a highly-protected domestic spinning industry sufficient for most needs.

For comparison with the American tariff, therefore, the provisions of the 25 countries analyzed in the tabulation are not all of equal value. Regarding first the 15 principal yarn importing countries in the last prewar year, among which the United States ranked ninth in value of imports, the low duties or absence of all duties in the case of 7 out of the 15 is worthy of note. Thus, the Netherlands and British India admit cotton yarn free of duty; Roumania and Argentina impose a nominal duty of a fraction of a cent per pound on yarns of all counts; while China and Turkey collect a flat ad valorem duty on most imported articles, limited by agreement with the great powers to approximately 5 per cent in the case of China and 11 per cent in the case of Turkey. While three of the last four may be described as countries whose domestic spinning industries are comparatively undeveloped, it is notable that the United Kingdom, the most highly developed cotton manufacturing country in the world, likewise imposes no duty on such cotton yarns as are imported.

With the elimination of the above countries from the discussion, there remain among the leading yarn importing countries, whose tariff policies and provisions are of interest for the United States, the following: Germany, France, Russia, Austria-Hungary, Switzerland, and Belgium. Were Italy and Holland added, this list would be seen to comprise, with the United States, the principal importers of fine and processed yarns, and the very group of countries whose tariff policies are of most interest for each other, and therefore most fairly comparable. Certain other countries of lesser importance as importers-their annual imports in 1913 amounting to less than $2,000,000 in value-are also included in the study, in order to secure a more comprehensive survey of foreign tariffs. These are Italy, Spain, Serbia, and the Scandinavian countries, in Europe; Japan, in Asia; Canada, in North America; and Brazil and Chile, in South America.

METHOD OF ASSESSMENT-SPECIFIC OR AD VALOREM.

It appears from Table 29 that in 17 of the 22 countries which provide for any duty on cotton yarn-and these are all advanced countries-the duty is purely specific: so many cents per pound on yarn of such a description. Of the other five, those of Argentina and Turkey are ad valorem in form only, being expressed as a certain percentage of a fixed or agreed value, which renders the duty in effect definite and specific. The Chinese duty is now specific for gray and bleached yarns, which make up the bulk of the imports, and

according to the schedule recommended by the China tariff revision commission, all duties will be specific, although based upon past average market prices so as to approximate 5 per cent of normal value.

The United States and Canada are alone among important countries in collecting a duty on cotton yarn according to value, actual or declared. It is important to note, however, that the total imports into Canada are comparatively small-averaging in the five-year period 1913-1917 roughly, 3,500,000 pounds annually, valued at $1,500,000, of which less than one-fourth was subject to any duty. All yarns of count 40 or finer, which make up three-fourths in value of the total Canadian imports, and a small quantity of glazed yarns for shoe laces, are admitted free of duty. All other yarns under 40s count are subject to a general rate of 25 per cent ad valorem, with goods of British origin paying a preferential rate of 17 per cent. The total amount collected from the imports of cotton yarn into Canada in the last prewar year, 1914, was only $53,000, which was equivalent to 4 per cent of the value of all yarns imported. The amount of duty collected on American yarn imports during the same year averaged 23 per cent, all yarns imported being subject to duty.

The United States is thus seen to be the only country normally importing any considerable quantity of cotton yarn subject to duty, which assesses the imports on an ad valorem basis. The goods are appraised at the current value at time of shipment in the principal markets of origin, and it is the belief of customs officials that the practice of undervaluation is prevented through the activity of a special group of men composing the C. V. R. (Comparative Valuation Report) Bureau, who keep in constant close touch with price changes in foreign markets.

Ad valorem duties possess the merit of always representing the same proportion of the current market value of the goods but, since the amount of duty changes with fluctuations in the value of the goods, complaint has been made by importers that in actual practice ad valorem duties on cotton yarn are inequitable and tend to introduce uncertainty in long-time transactions. The raw material in cotton yarn making up in most cases the larger part of the total cost, any duties which change with fluctuation in total cost would perforce not maintain any constant relation to the conversion or spinning costs, which constitute the basis of competition between the foreign and domestic producers. Under normal conditions actual conversion or manufacturing costs do not change materially either here or abroad, except over a long period of time. During the latter years of the war, the rising price of raw cotton, the war time difficulties of production, and the scarcity of supplies caused market prices on all cotton goods

to advance from day to day without regard to cost of production. The market value at time of shipment, upon which the duty was assessed, was often much higher than the purchase price, and the amount of duty then collected constituted a larger percentage of the actual buying price than the rate of duty would indicate, and not only afforded the domestic producer an increased margin of protection all out of proportion to any change in conversion costs, but was greater by an amount that could not be forecast by the importer at the time orders were placed.

Even under more stable conditions of trade and narrower margins of profit, the likelihood of an increase in the amount of duty because of a rising market at the time of delivery, and the inability to figure at the time of contract on a definite landed cost of the goods, duty paid, introduces an element of uncertainty into all transactions and not infrequently causes loss to the importer, with instability in his selling quotations, and possibly higher prices to domestic purchasers to cover the contingency of higher duties.

There is no intention here to minimize the difficulties attendant upon the adjustment of a scale of specific duties that will not bear unfairly upon particular lines of imports, and that will approximate some fairly predicable percentage of cost or value on all classes of goods which it is desired to treat equally. The gain in fairness on long-time contracts-and a large part of the yarns imported, being specially processed, are contracted for several months ahead of needand in certainty as to the amount to be charged off to duty on a particular purchase, have been urged upon the Commission by the trade, and seem worthy of consideration, in addition to the general question of the advantage of specific over ad valorem duties, on articles of this character, suggested above. The situation seems particularly worthy of note, in view of the fact that practically all other countries collect the duty on cotton yarns as a specific amount per pound on yarns of such a fineness or character, instead of as a percentage of value.

COMPARATIVE HEIGHT OF BASIC DUTIES OF PRINCIPAL COUNTRIES.

Next in importance to the manner of its assessment is that of the comparative height of the duties, and the method of adjustment according to fineness and condition. As the great bulk of the yarns in international trade is in the crude state as spun, without being twisted or further processed, the duties on gray carded single 3s yarns are taken as the "basic duties" for the purpose of this comparison of duties in various countries. Column (a) of Table 29 summarizes the basic duties, or range of duties, where they are graduated according to fineness, and indicates the counts set as the dividing points of the groups subject to progressive duties. For convenience in com

parison, Chart I presents the various basic duties graphically, in terms of cents per pound, for the full range of counts up to 140s, above which the trade is fairly small and no differentiation of duty is made except by one country (France). The basic rates being the lowest, and all other yarns being subject to an additional amount or percentage, according to condition, this chart constitutes as representative a comparison of the various tariff systems as is possible.

Where the basic rates are assessed ad valorem, i. e., in the United States, Canada, and Turkey, they were converted for the purposes of this comparison into equivalent specific duties on the basis of the import values obtaining in 1914. For the United States the average duties paid for each range of yarn counts were computed for the fiscal year 1918 as well, to show the change in amount of duties under the increased level of prices.

Taking 1914 as representing normal conditions, the striking fact brought out by Chart I is that the duties levied upon yarn imported into the United States, even under the prewar level of prices, were decidedly higher than those of any other advanced industrial country, being exceeded only by Russia, Spain, and Brazil, and on fine yarns exceeding even Brazil. These three countries are noted for their very high import duties on almost all commodities. In the case of cotton yarn in particular, the height of the duties—ranging from a flat rate of 13.5 cents per pound for Brazil, to graduated duties reaching in the case of Spain 24 cents per pound, and Russia 384 cents per pound-seem calculated to be practically prohibitive of the importation of any yarns at all obtainable within the country, are entirely out of proportion to possible differences in costs of production, and show little relation to any other basis on which a tariff schedule is normally framed.

The American tariff is graduated into eight classes, according to fineness, the average amount of duty advancing sharply from one group to another. On coarse and medium yarns, that is, under 40s count, the American duties in 1914 were almost as low as those of most European nations, which, with India, China, and Japan, constitute also the chief cotton manufacturing nations of the world. The duties on such imports into the United States ranged from 1 to 34 cents per pound, while the corresponding rates of the chief European countries, excluding those mentioned above as imposing very high duties, were in most instances between 1 and 2 cents per pound. American imports of coarse and medium yarns are slight, in fact negligible, in comparison with the vast annual output of the domestic cotton mills. Moreover, as has been pointed out in Chapter V, the height of the duty on imports of yarns under 40s, which American spinners are exporting in increasing quantities, is, from a protective viewpoint, of little consequence.