WELLINGTON NEWS

Hokitika Guardian, 5 August 1929, Page 3

WELLINGTON NEWS

BUILDING TARIFF WALLS. (Special Correspondent.) WELLINGTON, August- 3. The question of raising tariffs or lowering them is being hotly discussed almost everywhere. Certainly it has received a good deal of consideration m i-he Dominion and that recently, for last week it formed an important topic with the Fawners! Union. Mr W. J. Poison, the Dominion President, spoke interestingly on the subject and pointed out that farmers were the victims of circumstances. . The, .primary producers: themsolves demand some form Of protection either by. way of subsidy or a direct tariff: protection, and: manufacturers certainly make use of the fact and appeal for tariff proLcc r tion. . It is comparatively a simple matter to lower that wall, but vested interests are created; and vested interests- are troublesome to get rid of. The woollen industry of New Zealand has had tariff protection for more than forty years and the industry wants more protection now, and that can be said of all the' sheltered industries. It- is- the same in Australia- and the same-in the United States and .Canada, friz Australia industries protected by the tariff-have beem'in a very, favourable position compared .industries whicli have to compete in the open markets without any protection; In the spring df' 1927 the Prime Minister of the Commonwealth -set-up an "important committee consisting of two professors of economics, two statisticians, a member of the Melbourne Stock Exchange to examine and report on the workings of the tariff in Australia. This committee in its report, which has been- issued m book form, points out that under normal conditions protected industries depend upon the tariff; Given protection goods are produced which cost more than they will realise in a fair market. The difference betweenrthe protected local price and the price of free imports is due to local higher costs, and it is inevitable that these higher costs are borne by the community. The higher costs may be‘due to small-scale: production, to higher cost of raw material, to higher Wages, to inefficiency of management or of labour or to some combination of these or other causes.

While the excess payments, on imported goods go into-the • public funds and relieve other taxation, the excess payment on locally .produced goods are absorbed by-, the increased cost of production. They are in effect bounties paid -by the consumer;: The more effective the protection, the less the Customs duties, but unless the.margin between ■ the importspeosts and the- produced: costs are reduced; the ..greater will, be the burden.on .consumers, and on 'oth'qrtpredurtiq'n.y ,<. , !. '• :

Can the tariff increase production and employment? One part of the answer.is lo be fouud. m .the .increasing number of factories where the benefits of protection is concentrated. But this is only one part of the answer. The committee points out that if the creation of new employment was I the net result it would pay fo prohibit all exchange and. return to primitive conditions. A firm increases employment, but it ultimately diminishes it by reducing the income available. The introduction of machinery- may decrease employment for a time, but it 'increases income. The income is spent on othei things, and the demand for these things increases employment. It is the ultimate effects which must be looked.to. The excess costs of protected'goods, though they “stick” lie'ro and there, are passed on until they can be passed on no further. The tendency of protection is to cause the area of Government assistance to extended. Protection may begin with industries 'wliich are reasonably appropriate, and the excess costs of the goods produced may be well within the country’s capacity to bear them. But unless a bounty is paid by the Government, they impose costs on other industries. Unprotected industries seek-some protection, until at length the natural industries Which sprang:- frdm thd" comparative advantage of the country are included, andi apparently dependent on the tariff. In: Australia demands are now made by the primary industries for assistance specifically on account-of the tariff.