favorable position from this point of view; but, if the article were of importance to the United States, there would be doubt whether its exclusion would be consistent with this. country's interests.

A discriminating country against which an additional duty or prohibition is proclaimed may, of course, retaliate with a still more flagrant discrimination. A tariff war of greater or less seriousness would then be in existence. Such "wars are destructive of commerce and business interests generally and seldom result in any compensating advantage to either country. Moreover the issue is usually uncertain; a country can not look with assurance upon its general superiority in economic strength as a guarantee of victory. Extensive use of the authority of Section 317 to prohibit the importation of goods from other countries does not, on the whole, seem probable.

9. DISCRIMINATIONS THAt benefit iNDUSTRIES OF A THIRD

COUNTRY

If the Federated Malay States produce so large a proportion of the world's supply of first-class tin ore as to have a partial monopoly, and if their government imposes a differential export duty upon that product, levying a higher duty on tin ore exported to the United States than, say, to Great Britain or Australia, the industries of the latter countries which use tin ore as a raw material would have, or would be likely to have, an advantage over similar industries in the United States.

The authors of Section 317 undertook to provide, in subdivision (e), a remedy for such discriminatory practices. By the terms of subdivision (e) the President, whenever he finds that “any new or additional .. rates of duty or any prohibition" already provided for in the Section, “do not effectively remove such imposition or discrimination", is directed, "when he finds that the public interest will be

served thereby ", to levy new or additional duties, sufficient to offset the benefits, upon articles wholly or in part the product of the benefited industry in the preferred third country. To follow the illustration, the President could levy additional duties upon the entry into the United States of articles manufactured in Great Britain or Australia out of tin ore imported from the Federated Malay States. The limitation of fifty per centum, and the other limitations upon the imposition of the defensive duties in general, are continued in subdivision (e). Its enforcement would be analogous to the imposition of a countervailing duty in order to equalize the special advantage of the particular foreign industry. American protective tariff laws have for a long time provided that offsetting duties shall be added to the regular import duties upon goods the exportation of which is stimulated by bounty or grant. The application of subdivision (e), while having the similar purpose of defending American industries,2 would usually have also the larger purpose of attempting to obtain for the United States a portion of the world's limited supply of essential raw materials on equal terms with any other country.

Another example of discrimination that would be likely to accrue to the advantage of an industry in a third country might be found in the event that a country, through which a raw product of a fourth country must pass to reach a sea

'Tariff Act of 1922, sec. 303; Tariff Act of 1913, sec. iv, E; Tariff Act of 1909, sec. vi. The 1922 act specifies manufacture and production bounties; the former acts referred to export bounties only. See also Sections 203 and 204 of the Act of May 27, 1921, in the Anti-dumping Act portion of the emergency tariff law.

'As industries which are already in existence are getting raw materials from some source, domestic or foreign, the levy, under subdivision (e), of new or additional duties upon competing manufactured products from other countries might result in unwarranted protection in the home market. Such incidental results are to be expected, of course, in any application of Section 317.

port, should charge higher transit dues, or higher freight rates on state-owned railways, upon such product when destined for the United States than when destined for some other foreign country.1

Differential import duties may also, apparently, become an element of advantage accruing to industries located in third countries. The fact that France imposes a lower duty upon canned salmon from Canada than upon the same article from the United States is certainly beneficial to the canned salmon industry of Canada. The preference largely eliminates competition by American canners in the French market. However, it is difficult to see how this competitive advantage in the French market would be lessened by imposing additional duties upon the Canadian product entering the American market. Hence the logical possibility of placing additional duties upon the products of countries that enjoy preferential advantages in the markets of third countries. seems of little practical importance.1

A somewhat different situation, however, is presented by a second example: Country A imports from the United States raw material, say crude dyestuffs, for manufacture into intermediates and re-exportation to the United States for conversion into finished products. It likewise imports crudes from Country B, which also receives back the intermediates for completion into finished dyes. If Country A makes the importation of crude dyestuffs from the United States dutiable and remits or reduces the duty on such dyestuffs from Country B, the producers of the finished product in Country B would be likely to obtain their intermediates at lower prices than their competitors in the United States. It is conceivable that this advantage might enable them to

1Bolivia, one of the chief tin-producing countries, has no seaport. 'There is a broad field for speculation here, but to traverse it would seem more tedious than useful.

undersell American producers even in the American market. The imposition by the United States of additional duties upon finished dyestuffs from Country B would be consistent with a policy of protecting home industry. The probability that such a step would result in a larger market for American crude dyestuffs is remote; but possibly there might follow a reduction of demand for Country A's intermediates sufficient to induce that country to abolish the discriminating duty. One of the problems here, as in the instance of the ¿ifferential export duties, is that of obtaining unfinished materials at prices that will enable American manufacturers to compete successfully in third countries with their rivals in the countries which are accorded preferential duties.

It is very improbable that the additional duties of subdivision (e) could be legally levied upon products of the industries of countries with which the United States has entered into treaties containing a most-favored-nation clause governing imports.

IO. SECTION 317 AS A FACTOR IN THE FLEXIBLE-TARIFF

POLICY

No analysis of Section 317 should fail to mention its setting in connection with sections 315 and 316 of the tariff law. The three sections, each one of which incorporates a separate policy, with a definite historical background, together constitute the principal new and distinctive feature of the Tariff Act of 1922. In them President Harding achieved the Flexible Tariff which he so earnestly sought in his address to the Congress on December 6, 1921, and so emphatically commended in these remarks on the occasion of the signing of the Act: ". . . if we succeed in making

'This possibility involves too many details for discussion here. It seems exceedingly unlikely that such a case will arise in practice.

'The policy expressed in Sec. 317 may likewise be distinguished from the connected policies expressed in the other two.

effective the elastic provisions of the measure it will make the greatest contribution to tariff-making in the nation's history." 1

(a) Section 315

The essential portion of Section 315 is found in subdivision (a), as follows:

That in order to regulate the foreign commerce of the United States and to put into force and effect the policy of the Congress by this Act intended, whenever the President, upon investigation of the differences in costs of production of articles wholly or in part the growth or product of the United States and of like or similar articles wholly or in part the growth or product of competing foreign countries, shall find it thereby shown that the duties fixed in this Act do not equalize the said differences in costs of production in the United States and the principal competing country he shall, by such investigation, ascertain said differences and determine and proclaim the changes in classifications or increases or decreases in any rate of duty provided in this Act shown by said ascertained differences in such costs of production necessary to equalize the same."

The alterations in duties provided for by Section 315 are not applicable to articles included in the free list and are not based, as in Section 317, upon the value of the article. The total increase or decrease must "not exceed 50 per centum of the rates specified" in the act. Thirty days' notice is to be given before bringing changes into effect.

If the President finds that the provisions of subdivision. (a) are inadequate "to regulate the foreign commerce of the United States and to put into force and effect the policy

1As quoted in a special dispatch to the New York Times, published Sept. 22, 1922, p. 1, column 1.

'Statutes of the United States of America Passed at the Second Session of the Sixty-seventh Congress, 1921-1922, pt. i, pp. 941 et seq. The full text of Section 315 is given in Appendix 8.