FREE TRADE AND PROTECTION

however, and kept the organization alive until See COMPROMISE OF 1850; DEMOCRATIC PARin 1854 it was absorbed by the Republican TY; LIBERTY PARTY; REPUBLICAN PARTY; party. In the campaign of 1852, John P. Hale SLAVERY CONTROVERSY; Wilmor PROVISO. was the candidate and drew 156,667 votes References: H. Wilson, Rise and Fall of the but did not affect the outcome of the election. Slave Power (1874), II; T. C. Smith, Liberty The Free Soil party, considered as a political and Free Soil Parties in the Northwest organization, failed to gain its ends but it (1897), Parties and Slavery (in American Naplayed a part in Congress altogether out of tion, 1906); E. L. Pierce, Charles Sumner proportion to its strength, owing to the ability (1893), III; A. B. Hart, Salmon Portland of Chase, Sumner, Hale in the Senate, Gid-Chase (1899), 96–150; E. Stanwood, Hist. of dings (see), Julian and others in the House, the Presidency (1898); E. M. Shepard, Martin and it served as the training school for many Van Buren (1899), ch. xi. of the strongest Republican leaders.

THEODORE CLARKE SMITH.

FREE TRADE AND PROTECTION

What Free Trade Means.-Free trade means | vision of labor obviously tends to bring about that exchange between countries shall take cheaper and more abundant production and place without measures that cause the domestic so to be of advantage to both of the exchangproduction of articles which in the absence ing regions. of restriction would be imported. It does not The Principle of Comparative Costs.-In inmean that there shall be no duties and no ternational trade one phase of the division restrictions. The imposition of revenue duties, of labor becomes conspicuous, resting on what on articles that would not be made at home are called “comparative costs." Though not peeven after the duties have been imposed (on culiar to international trade, the principle of tea and coffee, for example), is not inconsist. comparative costs is there of wide application; ent with the principle of free trade. Neither and it is of special importance in that trade is the imposition of duties on other articles, between the United States and European counif an internal tax at precisely the same rate tries with which the protective controversy is levied on those articles when made within has been chiefly concerned. Briefly stated, it the country. Protection means that in conse is that a country (or region within a country) quence of duties on competing foreign prod gains by confining itself to those industries uets, or of other similar measures, commodities in which it has the greater efficiency. The are produced within the country which would case of California illustrates the principle in not otherwise be produced. This end might domestic exchanges. California's soil and clibe accomplished by direct bounties to the do- mate, while suited for grain raising, are pemestic producers, or by tonnage duties on ves culiarly fitted for fruits; and her people found, sels bringing in foreign goods. In practice, when transportation of fruit to distant marthe only method of protection followed in the kets became possible, that, though they might United States (with no exceptions of great with considerable efficiency give their labor importance) has been that of levying duties and capital to grain-raising, they gained still on competing foreign products.

more by devoting themselves chiefly to fruit. The Prima Facie Case in Favor of Free The United States as a whole, during the first Trade.-- The principle that trade between coun-century of national history, was under no distries is most advantageous when unfettered is advantage, as compared with European coun. a simple corollary from the proposition that tries, in manufactures; but she had a marked gain comes from the geographical division of advantage in agriculture. Her labor and caplabor. Prima facie, it is clear that productive ital were applied with more advantage in ag. efficiency is increased when iron is made in riculture; hence manufactured articles, unless the Pittsburg region with cheap coal, and fur- affected by heavy transportation expenses or niture in Michigan with cheap lumber; when produced under conditions exceptionally favorcotton is raised in the South, and corn in the able, tended to be imported. The doctrine of corn belt; and when these several regions ex- comparative costs remains important for this change their products. Similarly, productive country, even though in recent years our adefficiency is increased when England digs coal vantages in agriculture have ceased to be as and makes iron, and sends these articles to marked as they formerly were. It bears on Italy, getting thence wines and oranges and the development of the various branches of lemons; likewise, if the United States digs and manufacture. To some manufactures our rerefines copper from her rich mines and gets in sources and industrial talents are better adaptexchange from Germany potash from Ger-ed than to others. The cause of special effectmany's great deposits. Whether within a coun- iveness among these more advantageous manutry or between countries, the geographical di- factures may be the possession of great natural FREE TRADE AND PROTECTION

resources, such as coal and iron ore, or it may ports are paid for by exports; international be special skill, such as Americans seem to trade means in essentials just this and nothing possess where intricate machinery is used or else. If imports are cut off, exports in correstandardized products are turned out on a sponding volume must cease. The process by large scale. In manufactures having no nat- which the exports are made to cease is not ural advantages, or using machinery less, or always a simple one, but it is none the less turning out specialized products in small lots, effective. Protection means that labor and we have no special superiority, even though we capital, which might be given to producing are in no way inferior. Between different sorts exportable commodities and getting imports of manufactures, just as between manufactures in exchange for them, are devoted directly to and agriculture, a country gains most by giv. producing at home the importable commodities. ing its labor and capital to those industries This shift may or may not be to the country's in which efficiency is greatest.

advantage; prima facie it is not; but domestic Such are the main principles applicable to industry and domestic labor are called on in the geographical division of labor and so to either case. international trade. On them rests the pre- Does Protection Cause High Wages?—It is sumption in favor of free trade. But there said that protection causes wages to be high, are considerations which, under some circum- or at least keeps them high in the United stances, rebut this presumption. In the fol- States. This argument was not used in the lowing paragraphs the arguments most often earlier days of the American protective controurged in the United States in favor of pro- versy. Until the middle of the nineteenth tection will be taken up. Though some of the century higher wages usually supplied an armore familiar arguments are fallacious, others gument to the free-traders, not to the prohave weight, and at least call for discrimi-tectionists. The free-traders maintained that nation before a conclusion can be reached. high wages caused the expenses of production

Imports Are not per se a Cause of Loss.- to be so great in manufactures that it was Protection has often been advocated on the hopeless to try to carry them on at all. In crudest mercantilist grounds (sce Economic any case, since the high wages were already Theory). Imports, it is said, take money out there, before any system of heavy tariff duties of the country; therefore they cause loss. had been adopted, it would have been absurd Exports, on the other hand, are supposed to to say that they were the result of protection. bring gain, because they draw money into the But after a protective system had been for country. The domestic production of a com- some time in operation, and it had been formodity, after the imposition of a duty, is gotten that wages were high before its adopspoken of as if it were per se a good thing, tion, the pauper labor argument became plaussince the previous importation had been a ible. Since 1850, it has been by far the most cause of loss. The countr. is said to "save widely-used and most effective popular argumoney” by making the article at home. The ment for protection.' constant repetition of such long-exploded fal. None the less, it is unso’ind. The general lacies (examples in plenty can be found in rate of wages in the United States is not made the Congressional Record during the debates higher or kept higher by tariff duties. Wages on any recent tariff bill) is the result of mere are high because the general productiveness of ignorance of the most settled principles of industry is great; or, to put it in other words, economics. Imports are not ordinarily paid because there is great general effectiveness of for by the transmission of money; they are labor. This is the explanation of the variapaid for (through the mechanism of bills of tions in wages which appear among different exchange) by the exports. Money flows from countries, irrespective of their tariff policy. country to country chiefly in settlement of Wages are higher (not much higher, but clear. temporary balances, which some times cause a ly somewhat higher) in England, a free trade flow one way, sometimes another. There are country, than in Germany, a protectionist some really difficult and debatable questions country; they are about the same in Germany connected with the possible continued inflow of as in adjoining Holland—the one free-trade, specie into a country. But these have nothing the other protectionist; they are higher in Gerto do with the common fallacies about "saving many than in Russia, both protectionist. The money” or “keeping money at home" or "spend fundamental cause of these differences, to reing your money at home instead of sending it peat, is in the varying productiveness of labor. abroad."

So far as protection turns labor into less adIs Domestic Industry Encouraged ?-Different vantageous directions--and the presumption is in form, but very similar in substance, is the that it does so—it lessens productiveness. But argument that domestic industry is encouraged other causes, such as natural resources, inteland domestic labor employed, by making at ligence and education, effective industrial leadhome a commodity which had before been im- ership, have a much larger effect on general ported. The real question is in what way do- productiveness and so on general wages. Promestic labor shall be employed; what kind of tection is far from being the dominant factor; domestic industry shall be encouraged. Im- ' and so far as its operation goes, it tends by

FREE TRADE AND PROTECTION

lowering productiveness to lower general wag. | stimulus. The patent system rests on analoes, not to raise them.

gous reasoning; men are stimulated to find But in a limited set of American occupa- new ways of production by being granted a tions—in those called into existence by a pro- temporary privilege, restricting their compettective tariff—it is true that high wages cannot itors. Lack of experience, the risks of expericontinue to be paid unless protection is main-ment, uncertainty as to the extent of natural tained. This obvious though limited phenome- resources, the inevitable weakness of beginners non gives color to the widespread fear of pau- as compared with those long engaged in an per labor competition. The protected indus- industry-circumstances of this kind may pretries, so far as they really need tariff support, vent an industry from being carried on in a are ipso jacto industries in which the country country, even though the permanent conditions has not a comparative advantage. In indus- be favorable and even though in the end it tries where the country does possess a com- may prove able to maintain itself unaided. parative advantage, high wages will be paid The following conditions for success in the in any case, protection or no protection; be application of protection to young industries cause there productiveness is great. If it is have been suggested: (1) The duties should thought good for the country to possess the not be too high. List, one of the most conother industries, not so advantageously car. spicuous of the advocates for such protection, ried on, laborers in them must be paid the suggested they should not exceed 30 per cent; going higher rates of wages fixed by the gen. if higher rates are needed even at the start, the erally advantageous conditions; employers can- presumption is strong against eventual success. not afford to pay such higher wages unless (2) After a limited period, say twenty-five or they can get higher prices; and they cannot thirty years, the duties should be removed; get higher prices, unless protected against the since the object is the eventual procurement competition of cheaper foreign goods. The of the articles as cheaply as by importation. whole subject of wages, protection, domestic The only sure test of such cheapness is ability industry, productiveness of labor, is closely to meet foreign competition without aid. (3) connected with the principle of comparative Agriculture and extractive industries should costs.

not be protected; since in such industries it The Tariff and Equalization of Cost of Pro- is generally clear enough in advance what are duction.—Closely connected, again, with the the possibilities at home, and since the advanarguments that protection promotes domestic tages in competing countries from experience industry and keeps wages high, is the argu- and habituation count for less. Probably it is ment that the tariff should equalize cost of true that agriculture offers little scope for production. This is a modern "principle” of protection to young industries. The best way protection; it has been urged only since the of promoting good agriculture is by schools, opening of the twentieth century. Carried experiment stations, and the like. But mining to its logical outcome, it would lead to the is not outside its scope, since it involves great entire prohibition of international trade, by the risks and large investment in fixed capital. imposition of duties sufficient to equalize all Manufacturing industries offer the most promcosts and to prohibit all importation. “Cost ising field of all. (4) A period of transition of production” means what must be paid out in industry is most favorable for this applicaby the employer or capitalist; his main outlay tion of protection. It has been most often is for wages; wages being higher in the United urged for a "young" country, i. e., a country States, his cost is said to be greater. But his emerging from a simple agricultural stage to cost obviously is greater in proportion to the one more complex. Such was the United States quantity of labor he must employ at the higher from the close of the War of 1812 to the midFages. The more disadvantageous an industry dle of the nineteenth century. Then the arguis-i. e., the less the productiveness of labor-ment was urged with effect and validity. So the more labor must be employed per unit of it was in Germany during the second third of output, and the higher the employer's outlay. the century—after the establishment of the If the principle of equalization is to be con-Zollverein in 1834. But any transition period, sistently applied, it means that for extremely even though not in a "young” country, supplies disadvantageous industries, extremely high du- conditions under which nascent industries may ties are to be imposed. The principle really be stimulated with eventual good results. In assumes that it is always better to produce any | the United States the period after the Civil article at home than to import it, and that War was one of extraordinary change, partly sufficient obstacles should be placed in the way induced by the tariff itself but largely the of importation to make sure of domestic pro- consequence of general causes of development.

The high duties of this period probably had in Protection to Young Industries. The strong some cases the effect of stimulating industries est economic argument is that for protection that proved able to sustain themselves. The to young or nascent industries. Its essence protectionists have hesitated in applying the is that advantageous industries are not neces- phrase "young industries” to the giant estabsarily resorted to without some sort of public I lishments of modern times. But they maintain

duction.

FREE TRADE AND SAILORS' RIGHTS

that protection has had the effect of eventu-, view was set forth by Hamilton in his Report ally lowering domestic prices—and this is in on Manufactures (1791) and underlay much of effect the young-industries argument. Though the advocacy of protection by Henry C. Carey protection has in many cases caused the diver- in the middle of the nineteenth century. Dursion of industry into disadvantageous channels, ing very recent years there has been a swing it has also caused it to turn to some channels again toward eulogy of agriculture. The Gerthat proved eventually advantageous.

man advocates of protection say that agriThe Home Market. The young-industries cultural industry is the sound core of the argument indicates to what extent the home- social structure, and that a nation predomimarket argument has validity. Strictly, the nantly manufacturing is in an evil state; they argument that protection creates a home mar- hold up Great Britain as an object lesson of ket is as fallacious as the argument that it a tendency to be avoided. In the United States fosters domestic industry. No additional mar. also there is fear by many persons of the ket is created when protection causes manu- social effects of great manufactures—urban factures to arise in an agricultural country; concentration, large fortunes and accentuation there is simply substitution of a home market of inequality, a working class proletariat. for a foreign market. The substitution is ad- These are matters on which no judgment can vantageous only if the substituted home mar- be pronounced on merely economic grounds. ket is better; and it is better only if the Moreover, they are matters on which the verconditions exist for successful aid to young dict on social grounds seems to be uncertain. industries. In the United States during the The truth probably is that the kind of industry period from 1815 to 1850 there seems to have is less important than the kind of people. A been this interaction of young industries and manufacturing population may be sound and home market. The foreign market then was healthy; an agricultural population may be shrinking or at least was failing to expand; demoralized. No doubt it is true that manumanufactures were certain to develop sooner factures, being conducted to most advantage or later; protection probably served to facili-on a large scale, conduce to greater inequality tate the process of transition.

in the distribution of wealth. But this does Political and Social Considerations. Politi- not necessarily involve a down-trodden working cal and social arguments are urged in favor class or a pauper proletariat. Manufactures of protection. (1) To consolidate a distracted bring social problems, but need not cause soor divided country, it may be expedient to cial degradation. Under present conditions in encourage exchange within its borders rather the United States, it cannot be said that pothan exchange with foreign countries. Thus litical or social considerations tell unmistakin the United States after 1815, when national ably either for protection or for free trade. feeling was still undeveloped, it may have been The decision must rest chiefly on economic desirable on political grounds that North grounds. These grounds are almost conclusive should trade with South and East with West, against a system of very high protection; and even though economically the country as a strong against a system of even moderate prowhole might have gained more by trade with tection. Great Britain. Similarly Germany established See BALANCE OF TRADE; Cost, ECONOMIC; free trade within her borders in 1834 (by the DUTIES, FOREIGN VALUATIONS FOR; EXCHANGE, Zollverein) and imposed some restrictions on PRINCIPLES OF; LAISSEZ FAIRE; PRODUCTION; trade between Germany and foreign countries; TAXATION RAW MATERIAL; and under a policy which undoubtedly fostered national | TARIFF. feeling. (2) It is urged sometimes that agri- References: Books arguing in the main for culture is an industry to be encouraged on so- free trade: H. Fawcett, Free Trade and Procial grounds, sometimes that manufactures are teotion (3d ed., 1879); C. F. Bastable, Theory socially advantageous. In the early stages of of International Trade (4th ed., 1903); A. C. the United States, it was often said that manu. Pigou, Protective and Preferential Duties factures were of evil effect by causing crowd. (1906); H. George, Protection and Free Trade ing, bad health, employment of women and (1886); F. W. Taussig, Principles of Economchildren, inequality of wealth; a simple agri- ics (1911), Bk. V. Books arguing in the main cultural state was the best. This was the for protection: F. List, The National System earlier attitude of Jefferson and the Republic of Political Economy (1st German ed., 1840,

(see DEMOCRATIC-REPUBLICAN PARTY), translation 1856); J. P. Young, Protection and and then that of the Federalists (see FEDER- Progress (1900); II. M. Hoyt, Protection vs. ALIST PARTY), when these, being opposed to em- Free Trade (1886).

F. W. TAUSSIG. bargo and war, favored shipping and agriculture. At a later stage, there was advocacy of

FREE TRADE AND SAILORS' RIGHTS. A protection on the ground that a people engaged phrase used in the period preceding the War solely in agriculture was likely to be monot. of 1812, to designate two combined claims of onous and unprogressive. Diversified indus- the United States. The first was the right tries, it was said, conduce to intelligence, in- of a neutral to trade with any belligerent withvention, stimulus to every kind of talent. This out liability to capture by another belligerent,

OF

cans

FREEDMEN'S BUREAU-FREEDOM OF SPEECH AND OF THE PRESS

a

except for causes recognized in international | lege of purchase. After the surrender of the law; such as carrying contraband, and viola- southern forces the bureau became of great im. tion of a real blockade. The words "free portance in the conquered territory. It was trade” therefore have no reference to freedom clearly a necessary and proper war measure. of import of goods from foreign countries. In 1866 it was changed in character by an act "Sailors' rights” refers to the right of a citizen of July 16, which gave it the duty of protectof the United States born within the bound-ing, by military authority, the civil rights of aries of the United States or naturalized pre- the freedmen in the southern states until their rious to 1783, to be free from any obligation constitutional relations to the Government to the British Government, particularly to be should be restored. The bureau now became impressed to serve on an British man of war. the agency by which the southern state governThe United States claimed the same privilege ments, reconstructed under Lincoln and Johnfor persons naturalized after 1783, but with son, were prevented from exercising any conless insistence. See CITIZENSHIP; EXPATRIA-trol over the negroes until the congressional TION; NEUTRAL TRADE; NEUTRALITY, PRINCI- plan of reconstruction was carried through. PLES OF. Reference: J. B. Moore, Digest of It was finally terminated January 1, 1869. In Int. Law (1906).

A. B. H. spite of its active efforts at philanthropic as

sistance, the bureau is uniformly condemned FREEDMEN'S BUREAU. After the pass. by southern authorities as having prevented age of the Thirteenth Amendment (see) abol- a harmonious adjustment of the relations beishing slavery, Congress assumed temporary tween the races after the war. See RECONresponsibility for the negroes freed by the STRUCTION. References: P. S. Peirce, The war, who had hitherto been aided by voluntary Freedmen’s Bureau (1904); W. L. Fleming, philanthropic organizations. By an act of Documentary Hist. of Reconstruction (1906), March 3, 1865, a Bureau of Refugees, Freed. I. ch. v; 0. 0. Howard, Autobiography, II, ch. men and Abandoned Lands was established, to xlvi-lxi (1907).

T. C. S. continue one year after the close of the war. It was empowered to issue supplies to destitute FREEDOM OF CONTRACT. See CONTRACT, freedmen and to rent them forty acres of FREEDOM OF; DARTMOUTH COLLEGE CASE; abandoned or confiscated land with the privi- | LABOR CONTRACTS; LABOR, HOURS OF.

FREEDOM OF SPEECH AND OF THE PRESS

Constitutional Provisions. In the various | erty, person and reputation, and by express bills of rights (see) in state constitutions are legislation in the exercise of the police power found provisions of the same general purport for the general welfare. These regulations and as that embodied in the Federal Constitution, restrictions consist in: (1) civil liability to in the First Amendment, that no law shall damages for injuries caused by slander, that be made “abridging the freedom of speech or is, the speaking of false and malicious words of the press.” These guaranties do not estab-concerning another resulting in injury to his lish any new right but simply preserve an es- business or reputation; (2y both civil and sential feature of personal liberty long recog- criminal liability for libel, which is the publinized in the constitution of England; although cation by writing or printing of matter calin fact liberty in speaking and publishing one's culated to injure the business of another or opinions is subject to fewer restrictions in the his character by bringing him into ridicule, l'nited States than even at the present time hatred or contempt, under circumstances renin England. The essential right guaranteed is dering such publication unjustifiable and withthe liberty of speaking and publishing the out lawful excuse; (3) criminal punishment truth with good motives and for justifiable for the speaking or publishing of blasphemous, ends whether it respects the government or obscene, indecent or scandalous matter. officers or individuals. In the United States Civil Liability for Slander and Libel.-Deit is understood to exclude censorship of the famatory statements made maliciously or withpress, that is, a prior determination on public out proper occasion to the injury of another authority whether a proposed publication shall constitute the basis for recovery of damages be permitted.

in a civil suit. The truth of the statements Legal Restrictions. It is not intended by may be pleaded by way of justification as a such constitutional provisions that freedom complete defence; but unless the truth is thus of speaking and publishing shall be free from established, defamatory words spoken or writresponsibility and not subject to regulation. ten are presumed to be false, and they are There may be both civil and criminal liability also presumed to be malicious unless the ocfor improper speech and publication as deter- casion of their being spoken or published is mined by general law in the protection of prop- such as to render them privileged. A privi