H.—2B.

These considerations are summarized in. the following passage " The higher cost of production in the importing country may be due to any of several distinct causes or a combination of them —to the higher wages of the workman, to the greater cost of materials, to heavier taxation, to the lesser suitability of climate, geographical position or other physical conditions, or to lower efficiency of management in relation to technical appliances, organization, and half a dozen other matters." (Beveridge and others, " Tariffs : The Case Examined," p. 48.) On many of these points adequate statistical material is not available, and from the nature of the case could not in any circumstances be available. These difficulties, however, are not collectively as formidable as they appear, but they prevent anv recommendations made on the basis of comparative costs of economical and efficient production from possessing an approach to mathematical accuracy. It is not considered, however, that a very high degree of exactitude is necessary to permit their useful application to the problems we have had to consider. There is a further difficulty, that even if the statistical difficulties above referred to could be overcome, the position that would be created as a result of a tariff based on the information required would not remain static, in that the relative share of the market going respectively to locally made and imported commodities would almost certainly vary, in consequence of varying costs of manufacture, transport and distribution. If that happened, the economies of mass production would from a competitive point of view exert themselves powerfully for the time being in favour of that class of commodities which was expanding its share of the market. But this difficulty is inevitable, and there appears no method of overcoming it. It should be noticed, however, that locally made and imported commodities are not as closely competitive as they may prima facie appear to be. In many cases they are of different qualities and price levels, and appeal to different types of consumer because of variations in taste or sentiment. The more expensive market will take the better and therefore the dearer goods, so that where there are considerable differences in quality, get-up, finish, and so on, the commodities are not really fully competitive. This circumstance should go a long way in assuring to each class of goods a reasonably stable market. The result of this discussion is to show that a high degree of mathematical accuracy cannot be expected or attained m the actual calculation of tariff rates based on comparisons of the relative costs of economical and efficient production. Still this drawback must be put up with, since there seems no alternative principle capable of application, and we have undertaken by treaty to adopt it. All practical tariff framing must be to some extent approximate, and cannot make an exact allowance for imponderable factors or for the reactions which a tariff will bring about upon demand and supply, owing to the complex interrelations of various industries. (e) Schedule op Duties. AVe recommend that the schedule of duties set out m Appendix B to this report be adopted, subject to the qualifications therein contained. (/') Miscellaneous Recommendations and Observations. In the course of taking evidence and overhauling the tariff schedules a number of subsidiary matters were raised on which we desire to record an opinion. " 1 Wherever possible, the principle of simplicity in tariff construction should be followed. For this reason we are of opinion that except for temporary revenue requirements the levying of additional duties by way of percentual or fractional surtaxes on existing duties is undesirable in that it necessitates increased calculations, and so complicates the administration from the point of view of the public and the "Department. Our view is that this system should be abolished as soon as circumstances will permit. . 2 As a general rule ad valorem duties are preferable to specific duties. lUe main objection to specific duties is that they vary in weight, automatically increasing in weight as prices fall, and decreasing in weight as prices rise. In periods of marked, price fluctuation this may effect very serious alterations m the real rates

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