mitted to bring his Cuban sugar into the United States at twenty per cent. reduction, that certainly would not show (unless at all events there was competition among refiners in the United States) that the Cuban planter would be able to get the whole of twenty per cent., if any part of it. It would be largely a question of bargaining power.

In summing up the situation with regard to Cuba, we cannot do better than to quote from a recent article in which our domestic sugar problem is very thoroughly considered.1

"In the case of Cuba there seems to be less danger than in Porto Rico of relatively large gains being obtained by dealers instead of producers. The much larger scale of production practiced in Cuba strengthens the economic position of the producers. It is the commercial custom there, as well as in Louisiana, for central factories to pay for each ton of cane purchased the quoted price of a fixed quantity of sugar. This method of payment tends to distribute any market advantage, even among the mere producers of cane [the colonos]. The planter and the factory, according to some of the testimony, gain about equally from an increase in price.

"The question of Cuban reciprocity involves the whole commercial policy of the United States towards its dependencies. It is not the simple question that it is painted either by its advocates, as necessary to keep faith with Cuba, or by its opponents, as disregard of the vested interests of domestic producers. * * * Under the free-sugar provision of the McKinley Act, Cuba was prosperous; by the repeal of that law, 'Cuban sugar was shut out of the American market,' and economic distress and the insurrection were the result. To remove the cause of the economic distress, it is argued, reciprocity must be re-established, in aid of which President McKinley promised his influence. The economic side of the argument is clearly at fault. The shipping price is not so much affected by the amount of the duty imposed—that directly increasing only domestic prices-as by its disscriminating features, which operate either as handicap or stimulus to the industry of particular countries. Under the act of 1890 Cuban sugar was on the same footing as European beet sugar, and at a disadvantage of two cents (bounty) per pound compared with domestic sugar. Under the Dingley Act Cuban sugar has an advantage of one-fourth

1 Quarterly Journal of Economics, Vol. XVII., Nov., 1902, pp. 77-9. "The Sugar Question in the United States," by F. R. Rutter.

more precisely .27 cent per pound over German beet sugar and a disadvantage of less than 1.7 cents compared with domestic sugar. The lower price obtained by Cuban shippers-1.8 cents in 1902 as compared with 3.1 cents in 1892-is the result of a general fall in sugar prices. The Hamburg prices of 88-analysis beet sugar show a still more marked decline-from 3.2 cents on January 7, 1892, to 1.4 cents on January 2, 1902. Cuban sugar under the act of 1890 had no special advantage whatever in the American market, under the act of 1897 it has the countervailing duty-and is at no disadvantage save with domestic and colonial sugar. American law can determine only relative prices and variations from the world price. It does not determine absolute prices except within the United States."

When we come to consider the question whether reciprocity in general is a policy to be desired by this country, the inquirer is obliged to recognize several aspects of the problem. The question at once arises-desirable for whom? Evidently in considering a tariff policy of this kind, it might be that the adoption of the policy would serve the interest of the whole. of the population, or of but a part of it. It might be worked out so as to assist specific classes only. Therefore, as a policy, it becomes necessary to recognize different aspects of reciprocity. It is evident that the only way in which it could be helpful to the consumers of the country, as a class, would be through a reduction in price of the commodities used by them in daily life. Were such results to be obtained from reciprocity, they would evidently differ in no material respect from the benefits alleged to come from tariff reform or from a reduction in protective duties. If this were to be the case, the reciprocity problem would be reduced to a decision whether it was desirable for us to adopt a general reduction of duties as a protective system against all countries, or whether we should adopt a reduction of some duties, as opposed to a protective system against those only which enforced protective duties against us. This at once opens the whole tariff problem. Into such a discussion it would be out of place to enter at this point. It is worth while, however, to note that, granting the

soundness of the free trade hypothesis, there is no reason for enforcing protective duties against those countries which enforce protective duties against us. Conceding that the doctrine of free trade is based primarily upon an economic motive, namely, that it is for our own interest to charge no duties upon foreign imports, we must conclude that it is foolish to advocate a retaliatory policy whereby we should enforce protective duties against those countries which tax our imports to them. To do so merely means that we sacrifice the benefits arising from following our own self-interest, since we injure our consumer by a system of taxation which results in higher prices to him. Of course, the answer made by many soi-disant tariff reformers and free traders is that the sacrifice involved in imposing these protective duties would be only temporary, inasmuch as we should soon persuade our foreign competitor to let down his tariff bars upon condition that we do the same. Thus, by a temporary sacrifice imposed upon the home consumer, we would be able to put our manufacturer on a better basis in foreign countries. Without going into the fallacious theory upon which this argument is based, it is enough to say that at all events the experience of the past does not warrant a belief in such an outcome. The result of duties levied by a free trade country in the way already described almost uniformly leads to the enforcement of similar duties in return, and a tariff war results. This may continue indefinitely. It would appear, · upon theoretical grounds, that one must conclude that the main use of countervailing duties is to put imports from all foreign countries upon the same basis; that is to say, to prevent any one foreign country from getting an advantage over another in our markets.

Discarding, therefore, this question concerning the use of tariffs as weapons to compel reciprocal concessions in international trade, we come back to the question whether reciprocity, as such, can benefit the consumer. Here at once we find ourselves compelled to recognize different kinds of reciprocity.

In doing so, it is necessary also to fall back upon certain well known economic principles. In the first place, it is clear that reciprocity cannot result in reducing prices to the consumer so long as the amount of goods imported into this country under any reciprocity agreement is less than the required supply. Nothing can be more certain than this, and nothing is more directly in harmony with the recognized economic principle that price is determined by the most expensive portion of the supply. As Professor Taussig puts it: 2

"It may be laid down that any remission of duty which does not apply to the total importations, but leaves a considerable amount still coming in under the duty, puts so much money into the pockets of the foreign producer."

Evidently, in such a case as this, reciprocity could not be justified on the ground of its relation to the consumer, but, if at all, only upon that of its effect upon some other class in the community.

Another case requires also to be recognized. Even if the total supply of any commodity should be imported into a country, although not in a form which was suitable for immediate use, it would not necessarily result that the consumer would benefit from the reduction of the tariff, if the intermediate process of manufacture required to fit the goods for his use was in the hands of so close a monopoly as to prevent any reduction of price. In such a case, the benefits of a reduction of duty would go into the hands of the manufacturers who conducted the intermediate process.

Finally, we may recognize a case where our reciprocity agreements are extended in such a way that the whole importations of any particular commodity are affected by the reduction of duty, and where processes of manufacture are competitive. Although it may happen that such an agreement would apply to only one country, or to a whole

2 Quarterly Journal of Economics, 1892-3, Vol. 7, p. 28.

group of countries, the main point is that it shall be effective over the whole of the required supply of the commodity, and that there shall be no monopoly in its manufacture. In such a case it is evident that the importing country gets its whole supply of the goods cheaper to the extent of the reduced duty. Manifestly, there is no difference so far as the consumer is concerned, between such a policy and a reduction of the tariff by law. It might be that, by such a process, we should have succeeded in buying similar concessions for some of our exports, but with this aspect of the case we have for the present nothing to do. The status of the consumer is the same in one case that it is in the other. At this point, therefore, the advocacy of reciprocity from the consumer's standpoint leads off into the same arguments upon which tariff reductions are based, save in so far as reciprocity represents an attempt to buy corresponding concessions from foreign countries for our manufactures-an attempt whose economic bearings will be presently discussed. To sum up, therefore, the case concerning reciprocity from the consumer's standpoint, it may be said that reciprocity, when it can produce a fall in the price of imported commodities, is not, in its relation to the consumer, different from tariff revision.

Let us now turn to a discussion of reciprocity from the standpoint of the producer. The usual argument for reciprocity proceeds on the assumption that if we grant a reduction in our duties on certain articles and thereby secure reductions in foreign countries on certain other articles exported by us, the producers of these latter articles will prosper. What has been said before with reference to the consumer may now be recalled, speaking this time of the consumer not as our home consumer, but as a consumer located in some foreign country which imports certain goods from us. Evidently if the tariff concessions granted us apply to some commodity in which we are able to furnish only a small portion of the supply required by a foreign country, the consumer in that country will not