where it may exist in greater abundance. The amount of capital required for a large production is not enormous. The whole capital, for instance, employed in the establishment and support of iron works in England and in Wales, in 1847, has been estimated at less than one hundred millions of dollars; the annual production then being about one million two hundred thousand tons.

2d. The difference between the price of labour here and in Great Britain, is certainly great, and, it is to be hoped and expected, will never be diminished by a reduction of wages here. The difference has been estimated at an average of thirty-three per cent. Probably the average difference is much more than that: in some branches, such as the manufacture of iron, it is certainly much greater. This difference is in part compensated by the disadvantages under which the foreign manufacturer is placed by the necessity in some branches of procuring his raw material from a great distance, or transporting a heavy article of production (such as iron) to a distant market. In addition, he is pressed by a heavy burden of taxation. The greater efficiency of our labour is to some extent an additional compensatory element. This includes the greater capacity for aequiring skill, the superior general intelligence, the higher inventive faculty, the greater moral and physical energy, both of action and endurance, which our people possess in comparison with the foreign labourer.

Better fed, clothed, housed and educated-conscious of the ability to lay up some capital annually from his savings-encouraged to invest that capital in the enterprise in which his labour is engaged-enjoying practically greater civil and political liberty, looking forward to an indefinite future in which, through his own good conduct and example, he may expect each successive generation of his descendants to be better circumstanced than its predecessor, it cannot be doubted that these advantages add greatly to the efficiency of the American labourer. The precise extent to which they go towards compensating the difference in the price of labour, it is difficult to define. The efficiency of our labour may be expected to increase with the increase of reward to the labourer..

In many of the New England factories, the labourers are encouraged to invest their surplus earnings in the stock of the company by which they are employed, and are thus stimulated, by direct personal interest, to the greatest exertion. It may be expected that this system will be introduced into other branches in which it may be found practicable, tending, as it does, so powerfully to elevate the labourer, increase production, and practically instruct all men in the great truth of the essential harmony of capital and labour.

3d. Capital flows freely at home and abroad in every productive channel in which it can flow safely, and will even incur great hazards, if they be such as its owner may hope to meet by the care and circumspection of himself or others to whom he has confided its management. But if he knows that skill, industry, and economy cannot avail him, and that, in addition to all the contingencies of rivalry and markets, he is to be further exposed to dangers arising from causes quite beyond his control or counteraction, he will hold back. The vacillations which have occurred in our policy have no doubt deterred a large amount of capital from investment in industrial pursuits. The encouragement offered on one day, and on the faith of which fixed investments have been made, which are exposed to loss by the withdrawal of that encouragement on the next, is in fact substantial discouragement. And the insecurity resulting from the repetition of such acts has been seriously detrimental.

4th. The fluctuations in the foreign markets have, for many years, been such as seem to denote an unhealthy and feverish state of business. They are not in the natural course of a wholesome trade. They seem to betoken a change in existing arrangements, and the apprehension of such change is also evinced in the efforts now making in England to sustain the British manufacturer, by putting at hazard other important branches of industry. The competition of new establishments with very large ones already in existence

abroad, and in which the price of labour is lower, is evidently not an equal competition.

The capital fixed in machinery, furnaces, &c., cannot be changed, and the work of production will not cease until the price shall have been reduced to a point very little above the cost of materials, labour and repairs. Of course where the lower price is paid for labour there will be a larger margin for reduction by the sacrifice of part of the profit; and where a great accumulation is in hand of the avails of the business of former years, the owner may find it his interest for a while to sell his commodity at less than the actual cost, if by that means he can drive out his rival, looking, of course, to subsequent reimbursement (at least) when he shall again have the control of the market.

This known necessity of the position of foreign manufactures of course tends to discourage new, as well as to defeat the successful operation of existing investments of capital here, in similar enterprises.

To counteract the influence of these unfavourable circumstances, which, so long as they continue, must greatly retard our advancement, limit our foreign commerce, and prevent the due progress of industry, I propose that the duties on the staple commodities, (whether raw material or manufactured articles,) in which foreign nations compete with our own productions, be raised to a point at which they will afford substantial and sufficient encouragement to our domestic industry, provide for the necessary increase and due security of the revenue, and insure the permanence and stability of the system. Experience has, I think, shown this to be a wise, just, and effectual mode to promote new and revive languishing branches of industry, provided the selection of the objects be wisely made and limited to those productions for which the country is naturally adapted. We have been, perhaps, too long hesitating and vacillating on the threshold of a great career. The want of stability in the course of legislation, and other disturbing causes, have heretofore occasioned inconveniences. The short duration of some of the tariff acts-the great expansion of the currency which occurred during their operation-the Compromise act, (a result of what was believed to be a political necessity,) which, whatever its effects on existing establishments, undoubtedly discouraged new adventurers-and, finally, the unexpected repeal of the act of 1842; these circumstances have certainly been of a retarding cha

racter.

Yet it is impossible not to observe that, at every favourable moment, vast movements in advance have been made, and that the ground thus gained has not been entirely lost. It is believed that every article, the manufacture of which has been established here, has, after that establishment continued gradually to diminish in price, and that, without a corresponding reduction in the wages of labour, which, indeed, could not be diminished by reason of an increased demand for it. Statements are annexed, marked (L,) exhibiting some instances of this résult.

These facts lead irresistibly to the conclusion that our labour becomes so much more efficient by use, acquired skill, enlarged establishments, and new facilities derived from inventions, that the difference in price between it and the foreign labour, however serious an obstacle to successful competition, will become less so with every year of our activity in the same branches of industry; and that it by no means follows that labour must be worse paid because its products are sold cheaper; or, that because labour is better paid, its products must be sold dearer.

All that is wanting is a general determination that industry shall be encouraged and supported in the home production and manufacture of iron, wool, cotton, sugar, and our other staples, and that the legislation necessary to sustain it shall be firmly adopted and persevered in.

I will proceed to state the nature of the modifications which it appears expedient to make in the existing tariff, and, if required, will hereafter present a plan in detail.

1. The rates of duty are, in my opinion, too low, especially on articles similar to our own staples. I conceive that the revenue has suffered materially from this circumstance. Indeed, I am compelled to believe that it would have been greatly diminished but for the extraordinary demand for our bread-stuffs and provisions, produced by the famine in Europe in 1847, and to a great extent continued by the short crop abroad in 1848. (See statement marked M, hereto annexed.) Even under these favourable circumstances, the average revenue from woollens, cottons, hempen goods, iron, sugar, hemp unmanufactured, salt, and coal, has fallen under the act of 1846 from $14,162,607 to $13,392,624 50, taking the average from the receipts of 1845-6, and those of 1848-9; being an average diminution of $769,982 50, as will be seen by the table marked (N,) hereto annexed; the loss of annual revenue being as follows:

The very small increase on the staples of woollens, iron, and unmanufactured hemp, compared with the vast injury occasioned to our production, and the diminution thereby of our power of consumption, cannot fail to attract attention; while on the other articles named the revenue and productions have both suffered materially. It is believed that the revenue could be greatly increased by increasing the duties on these and other articles.

2. I propose a return to the system of specific duties on articles on which they can be conveniently laid. The effects of the present ad valorem system are twofold, viz. on the revenue and on our own productions. Experience has, I think, demonstrated that, looking exclusively to the revenue, a specific duty is more easily assessed, more favourable to commerce, more equal, and less exposed to frauds than any other system. Of course such a duty is not laid without reference to the average cost of the commodity. This system obviates the difficulties and controversies which attend an appraisement of the foreign market value of each invoice, and it imposes an equal duty on equal quantities of the same commodity. Under the ad valorem system, goods of the same kind and quality, and between which there cannot be a difference in value in the same market at any given time, nevertheless may often pay different amounts of duty. Thus the hazards of trade are unnecessarily increased.

To levy an ad valorem duty on a foreign valuation equably, at the different ports, is believed to be impossible. That the standard of value at any two ports is precisely the same at any given time is wholly improbable. The facilities afforded to frauds upon the revenue are very great, and it is apprehended that such frauds have been and are habitually and extensively practised. The statements annexed, (marked O,) to which I invite especial attention, exhibit in a strong light the dangers to which this system is necessarily exposed.

As the standard of value at every port must at least depend upon the average of the invoices that are passed there, every successful attempt at undervaluation renders more easy all that follow it. The consequences are, not only that the revenue suffers, that a certain sum is in effect annually given by the public

among dishonest importers as a premium for their dishonesty, but that fair American importers may be gradually driven out of the business, and their places supplied by unknown and unscrupulous foreign adventurers. As long ago as 1801, Mr. Gallatin urged the extension of specific duties on the ground now repeated-of the prevention of undervaluation. In his report of that year he used the following language: "Without any view to an increase of revenue, but in order to guard, as far as possible, against the value of goods being underrated in the invoices, it would be eligible to lay specific duties on all such articles now paying duties ad valorem, as may be susceptible of that operation." At that time specific duties were already laid on spirits and wines, sugar, molasses, tea, coffee, salt, pepper, steel, nails and spikes, hemp, coal, cordage, and several other articles.

The 8th section of the act of 30th July, 1846, made it the duty of the collector, within whose district merchandise may be imported or entered, to cause the dutiable value of such imports to be appraised, estimated, and ascertained in accordance with the provisions of existing laws.

By the 2d section of the act of 10th August, 1846, it is provided that, "in appraising all goods at any port of the United States heretofore subjected to specific duties, but upon which ad valorem duties are imposed by the act of the thirtieth July last, entitled 'an act reducing the duty on imports and for other purposes,' reference shall be had to values and invoices of similar goods imported during the last fiscal year, under such general and uniform regulations for the prevention of frauds or undervaluations as shall be prescribed by the secretary of the treasury."

It will be observed that these last recited provisions do not authorize the levying of duties on the value of similar merchandise in any preceding year, but merely a reference to such value and the invoices, for the purpose of aiding in the ascertainment of the value at the time fixed by existing laws. That time was, by circular issued by my predecessor, dated 6th July, 1847, determined to be the time of the shipment of the goods. My predecessor issued three circulars, calling the attention of the officers of the customs to the provisions of the 2d section of the act of the 10th August, 1846; one dated the 11th and one the 25th of November, 1846, and the last the 26th December, 1848, and there can be no doubt exhausted all practicable means for preventing undervaluations and frauds, so far as they could be checked by treasury instructions and regulations. These efforts have been continued by the department; but the radical faults of the system are such that no vigilance, sagacity, or regulations, it is believed, have been or can be found effectual for the purpose.

In England it is believed to have long been a settled point that specific or rated duties (which are ad valorem on an assumed value) are in every respect better for revenue and trade than any other system.

The effect of the existing system on production is also striking, (see documents marked-annexed.) It tends to aggravate the great fluctuations in price which are so injurious to trade as well as industry.

When prices abroad are very high, the duty is high also; and when prices fall to a very low point, the duty is low in proportion. It is a sliding scale of the worst kind. If the duty forms a part of the price, it renders the extremes of fluctuation more remote from each other by a per centage on the range equal to the rate of the duty. If the fluctuation abroad be from $50 to $20, the range is of course $30. A specific duty of $15 would leave the range still $30. But at an ad valorem of 30 per cent., the highest point would be $65 and the lowest $26, making a range of $39. On every account I strongly recommend a return to the system of specific duties on all articles to which they can be conveniently applied.

3. On those articles on which an ad valorem duty is retained, I recommend that it be levied on the market value in the principal markets of our own country

at the time of arrival. It would be easier to ascertain at our ports such market value, than it is to ascertain what was that of a foreign country at a past time. Every importer should declare the value of his goods, and by giving the option to the government to take them at the value thus declared, or levy the duty on the actual value, it is probable that comparatively few cases of undervaluation would occur. In connexion with this subject, and as a measure tending to the prevention of fraud, error, and want of uniformity of valuation at the various ports of our extended coast, I would recommend the appointment of appraisers at large, whose duty it shall be to visit, from time to time, the different customhouses, interchange views, superintend the mode of appraisals, and suggest such practical reforms as may be deemed necessary to a just and equal enforcement of the revenue laws. The provisions of the constitution, which require that all duties and imposts shall be uniform throughout the United States, cannot, even with a home valuation, be fully and effectually enforced in practice without some system of general supervision, more perfect in this respect than any that can be established under the existing provision of law, which merely gives to the secretary of the treasury authority to direct the appraisers for any collection district to attend in any other collection district for the purpose of appraising any goods, wares, and merchandise imported therein.

4. The laying a lower duty upon non-enumerated articles than is imposed upon those which are enumerated, leads to attempts at disguise, and to controversies and unnecessary litigation, which would be avoided by making the duty on nonenumerated articles higher than on the others.

Different rates of duty on manufactures of the same material are also inconvenient, and the same remark applies to the different rates imposed upon the manufactures of wool and manufactures of worsted.

The effect of laying the same or a higher rate of duty on the raw material than is imposed on the manufactured article, too evidently tends to injure our industry in competition with that of other countries, to require more than a passing observation.

WAREHOUSES.

A statement is herewith presented, (marked P.) showing the expenses incurred during the last fiscal year in the execution of the act of the 6th August, 1846, "to establish a warehousing system," from which it will be seen they amount to $194,634,66 beyond all the receipts from storage, &c. To this sum there are to be added many charges for rent, labour, clerk hire, stationery, &c., that do not appear in these accounts, but justly belong to them.

This subject is one of great embarrassment to the department. Congress has not made any provision for these expenses, unless they are embraced in the appropriation for the expenses of collecting the revenue from customs. To a large extent, they are incurred without the receipt of any revenue whatever; and, in order to meet the provisions of this act, and grant all its facilities to commerce in the several districts, it must continue to impose an annual charge upon the treasury. This act provides that, in all cases where the duties upon imported merchandise are not paid within the period allowed by law, or whenever the importer shall make entry for warehousing the same, the said merchandise shall be taken possession of by the collector and deposited in the public stores, or in other stores to be agreed on by the collector and the importer. It appears also to be contemplated by the act that the storage shall be at the usual rates at the port of importation.

The act of 3d March, 1841, requires "that all stores hereafter rented by the collector, naval officer, and surveyor, shall be on public account, and paid for by the collector as such."

These requirements of law have imposed upon this department the necessity of making ample provision for large quantities of merchandise in advance of