… is from page 170 of Gordon Wood’s superb 2009 book, Empire of Liberty: A History of the Early Republic, 1789-1815:
Congress’s first tariff act of 1789 listed a number of goods for protection, including beer, carriages, cordage, shoes, sugars, snuff, and tobacco products. Yet most of the manufacturers soon became dissatisfied with the government’s measures, believing that the duties levied on foreign imports were too low and not sufficiently protective of their businesses. Secretary of the Treasury Hamilton seemed more interested in producing revenue to finance the federal debt than in offering protection to mechanics and manufacturers.
DBx: Keep this passage from Wood in mind whenever you hear from protectionists – as you will, if you pay attention to debates in the U.S. over trade – that the tariff of 1789 was the first major statute enacted by Congress and signed by the president (by George Washington!) under the new Constitution. Protectionists want you to believe that no sooner did the new U.S. government get going that it got going right to protectionism. Except that it didn’t. It got going into raising revenue, and it chose tariffs as a chief source of that revenue.
Again, while all revenue tariffs have some incidental protective effect, this protective effect is a bug rather than a feature or the purpose of such tariffs. Because no revenue is raised on imports that do not enter the country, revenue tariffs work better the fewer are the imports they keep out of the country – that is, the less are these tariffs’ protective effect. Likewise, all protective tariffs that aren’t utterly prohibitive raise some revenue. But this revenue is incidental. While not exactly a bug of protective tariffs, this revenue is certainly not the chief feature or purpose of such tariffs.
Today’s debate over trade and trade policy would be more productive if participants in this debate were more aware of the distinction between revenue tariffs and protective tariffs.
