EFFECTS OF TARIFFS

Waikato Times, Volume 111, Issue 18661, 13 June 1932, Page 9

EFFECTS OF TARIFFS

(To the Editor.) Sir, —Tariffs, within the last year or two, have become very much a subject for discussion the world over, some sectional interests being insistent on gaining tariff 'protection, -at the same 'time justifying it to the best of their ability as -a broad national necessity, while others have equally decidedly condemned the incidence of all tariffs, imputing to them practically all the blame for current economic difficulties. So far as I can see, tariffs are certainly not a necessity under any circumstances, though I regard one effect of tariffs as valuable in certain Instances; I refer to the assistance gained by 'certain secondary industries which it is desirable from a national standpoint to establish on a good footing. However, as the same result can he very much more satisfactorily achieved by means of direct subsidies which arc bound -to mean closer observation and greater discrimination In regard to what help is given, I think it may be assumed that there is no real justification for tariffs. It is often argued in favour of tariffs, customs duties, etc., that they provide a very satisfactory and necessary source of Sta'e revenue. That they are -a source of revenue Which would otherwise have to he raised by direct taxation' Is nf course, a fact, and one which seems often to be overlooked by those who -ascribe trade depression and shortage of purrchasing power largely, if not wholly, to tariffs. Whether this revenue is derived from tariffs or direct taxation, obviously It must come out of -consumers’ pockets just the same, but tariffs undoubtedly are a potent sourco of evil in many ways. Putting aside for the moment the 'question of whether ioriffs are tho cause of our basic economic troubles —shortage of purchasing power to buy what is already on the market, and unemployment—let us consider anrdher aspect of tariffs. They undoubtedly give rise to sectional jealousies, and political corruption Induced by the striving for further sectional preferences; and there is no chance of anything iik,e equal justice -being done to all sections. Industries, once protected by tariffs, somehow see to It that protection is maintained indefinitely or if by any chance such protection is swept away by an unsympathetic party Government,. those industries whose very life depended on It are usually faced with uncompensated ruin. This points to the essential weakness in our financial economic system, as the result of which ail industrial activity is so precarious. If pursuits were tremendously profitable for all concerned, as they might lie expected lo he in this age of unlimiled assistance by machinery, industrial prolection would not be called for because Ihere would always he ample, scope for lucrative employment in those industries which were found suitable to the national life, and world-wide free trade would ho the natural outcome. The question, then, is: Are tariffs responsible for present day economic conditions, or is an artificial shortage of purchasing power responsible for the building up of tariff walls? An answer based upon a true analysis of the mat ter must affirm the .latter to he, true. What, in effect is the national ohjeelive Of lariffs? Will anyone deny that. America’s tariff policy, for instance, had in view tho. exporting of a greater value in goods than she imported? And for what purpose? To augment her money supplies, of course: otherwise tier economic system could not continue lo function with any degree of success because of Hie shortage of purchasing power inherent in the financial system operated by tho banks (he world over. The consumers of no one country have sufficient purchasing power to buy, at cost price, Hie whole product of their industry. America's object., like many another country,*was in secure, by excess of exports, sufficient money with whicii to balance her budget. For a while she had e. measure of success buL Ihq

moneylessness of the rest of the world has since rebounded on her and she is now able to 'dispose of but a greatlydecreased value in exports, so that internal troubles have seized her In earnest. The consequence of this is that she is rapidly losing faith in lariffs —still not seeing whore the root trouble lies. What America lias gone through is hut a clear instance of the world-wide process—a clear instance, because America’s troubles cannot be laid at tiie feet of w; other external debts, as confused thinking might lay I hem in New Zealand’s case, for example. Now if every country is groaning under a shortage of purchasing, power, how can free trade do much to remove trade restrictions? Take the whole world as one country, it is still unable to buy r-nre than a fraction of potential production, If a fair proportion of actual proi.uelion is unsaleable, as at present, it is obviously impossible lo explore much i’urllior into polenlial productive capacity. Another lest; consider New Zealand as an isolated world in herself ((tariffs isolate), she lias still sufficient resources to crealc a very very much higher standard ot living Ilian that endured by ihe many at present, if wo were paying 'fill cxl-ounl debt rapidly, a low standard of living would be understandable, but cerium..,' inn unemployment. Summing the position up. then, it must be admitted that while tariffs arc an evil, they arc in themselves lull one of the many symptoms of an evil and false industrial accountancy ■or financial economic system.— i am, etc.. It. E. IIAXSHN. Orini, Juno 10, 1932.