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Sao Thomé and Principé, however, while the municipal taxes generally increase the differentials in favor of Portuguese goods, on a few items the discrimination is against Portuguese products and somewhat reduces the total preference.

Valuation of merchandise. There have been found in a few cases open discriminations in the valuation of merchandise, in payment of duties, and in customs formalities. The Canadian anti-dumping law contains both open and concealed discriminations in favor of British trade. It requires that merchandise dutiable at ad valorem rates be valued at the price for which it is commonly sold in the foreign country whence directly imported into Canada. This rule discriminates against indirect importations, and therefore, in the natu, of the case, against the transit trade of the United States. For instance, spices sent from the East Indiees directly to Canada are dutiable according to their export price in the Orient. But the same spices, reshipped from the United States to Canada, are dutiable according to the American market price, which is higher by the inclusion of pofits and other charges. Spices enter the United States free of duty, but on many articles the market prices used in Canadian customs valuations include a duty or excise paid on the article or some component part. The foreign countries which levy these charges, in order to prevent them from constituting a burden upon the export or reexport trade, usually grant drawbacks upon exports, and to that extent the reexported articles may be sold abroad at a price lower than that prevailing in the country of export-but in such cases the Canadian duties are assessed according to the higher (domestic consumption) price, not the lower (export) price. This provision of the law operates to the advantage of free-trade Great Britain. Thus the law confers upon British trade an advantage not at first apparent; it includes also an open preference in its provision that sugar refined in the United Kingdom and all articles upon which excise duties have been paid in any part of the Empire entitled to preference shall be valued at the market price of the place of origin, less the drawback allowed on sugar, or less the amount of the excise duty.

An unusual discrimination was in force in Portugal in 19031912, in the tare allowance on sugar imported in sacks. The allowance was: On colonial sugar, 2 per cent; on foreign sugar, 21 per cent if imported in double sacks and 14 per cent if in single sacks.

Depreciated currencies and exchange rates. Since the armistice, exchange rates have had an important effect upon trade. Countries whose currencies had depreciated have not only, for that reason, afforded poor makets in which to sell, but they have imposed many restrictions upon imports, in the effort to raise the exchange value of their currencies by decreasing their adverse trade balances. On the other hand, these countries have been at an advantage in selling, in spite of the fact that their price levels (in terms of their own currencies) have risen more rapidly than those of other countries.

Most colonies use the currency system of the mother country, or, at least, currencies whose value is fixed in terms of that of the mother country (e. g., Egypt and the Straits Settlements). This fact, combined with the intimate relation which usually exists between the financial systems of colonies and mother countries, generally

causes exchange values of the currency of mother country and colony to fluctuate together. By exception, independent currency systems are found in Canada and the British West Indies, and during the war the rupee-used in India, Ceylon, Mauritius, the Seychelles, British East Africa, and Zanzibar-broke from its moorings and pursued a course independent of that of the pound sterling.1

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Owing to the intimate connection and the tendency of the two currencies to rise and fall together, fluctuations of exchange are less likely to disturb the trade between colony and mother country than the trade of either with foreign countries. The fall in the international value of the currency of a colonial power makes it easier for foreign countries to buy both from the mother country and from the colonies, and harder to sell to them. It thus enhances the effectiveness of differential import duties in the colonies.150 But this effect has been partially offset by changes in methods of assessing duties in some of the countries or colonies which employ ad valorem duties, and assess the article upon its price in the principal markets of the country whence directly imported, a price which is necessarily 151 expressed originally in the currency of that country. Before the war these countries in making these assessments converted at par the currencies of the major European countries, ignoring the fluctuations, which were always small. But since the war Canada, Australia, and New Zealand have adopted rules for conversion at approximate market rates, though Canada does not recognize depreciation in excess of 50 per cent. In Canada and New Zealand the rule for conversion at market rates was not at first applied to currencies which stood at a premium. This operated to the advantage of American trade. But a much more important advantage accrued to the United States in its trade with Canada before the change in the conversion rule; and because of the importance of this trade and of Canada's numerous and high ad valorem rates, the condition during the maintenance of the rule of conversion at par may receive some consideration.

The Canadian currency system is quite independent of the British, and the depreciation of the Canadian dollar has been only about onehalf that of the pound sterling, but has none the less been sufficient to stimulate American purchases and hinder American sales in that country. On the other hand, the greater relative fall of the pound sterling has enabled Canadians to buy to advantage in Great Britain. Until July 22, 1920, the Canadian customs, in making valuations, ignored the dislocation of exchange rates and converted foreign market values into Canadian dollars at par. Thus, when sterling stood at a discount of 25 per cent, the customs still assessed at $48.66 (Canadian) an article sold in Great Britain for £10, though the Canadian purchaser had paid only $36.50 (Canadian) for it. On the other hand, an American article which sold in the United States for $100, but which cost $110 (Canadian) to $115 (Canadian), was valued by the Canadian customs only at $100 (Canadian). In so far, therefore,

15 See p. 331 fn. In the latter part of 1920 it became difficult to finance the exports of Great Britain to Australia, and the British pound commanded a premium in Australia. 15 And lessens the effectiveness of differential colonial export duties: but of course specific import or export duties lose their effectiveness as the value of the currency declines.

151 Of course, the prices of contract saies may be expressed in any currency. The American law requires that invoices give the value in the currency of the country of export, leaving it to the customs officers to make the proper conversion.

as the duties were ad valorem, the exchange rates, in conjunction with the rule of valuation, operated to decrease by 10 per cent or more the duties payable upon imports from the United States, and to increase by 20 per cent or more those payable upon imports from Grea Britain, and by 100 per cent or more those upon imports directly from France or Italy.153

These decreases to the advantage of American, and increases to the disadvantage of British trade perceptibly lessened the advantag conferred by the preferential schedules and at certain rates of ex change wiped out altogether some of the preferences. For instance with the United States dollars at 10 per cent above and British sterling at 20 per cent below Canadian par-not an extreme caseCanadian purchases from the United States of articles formally dutiable at 35 per cent paid in effect 31.8 per cent, while the same article bought in Great Britain, and dutiable at a preferential rate of, say, 25 per cent, paid in effect 31.25 per cent.154 In July, 1920, the rule was adopted of converting foreign prices at current rates of exchange in so far as they were expressed in depreciated currencies. This removed the disadvantage under which British and other European goods had suffered, and on May 3, 1921, the application to appreciated currencies of the rule of conversion at current rates removed the advantage previously enjoyed by American products. 155

In the customs system of Mozambique, the requirement that payment of customs duty be made in gold at a normal (mint) rate of exchange has operated in recent years largely to increase the differentials against foreign goods. The requirement is restricted to payments of duties on non-Portuguese goods assessed on an ad valorem basis. Most of the duties, however, are ad valorem, and since gold stood at a premium of at least 40 per cent through several years, the rule has largely increased the discrimination against foreign goods.

152 By the percentage by which Canadian dollars stood below par in the United States. 153 When duties of 20 to 35 per cent, such as are common in the Canadian tariff, were doubled, trebled, or quadrupled by the operation of this method of valuation they obvi ously became prohibitive. This effect upon the trade of a country whose currency was greatly depreciated was avoided by buying through Great Britain or from New York importers; the valuation in the latter case became that of the market value in the United States, since that was the country whence directly imported into Canada. But the ad vantage of this indirect importation was considerably lessened by American duties and by the operation of the Canadian "antidumping" duty, since the value for assessment in Canada is the value in the open markets of the country whence directly imported and not the value in bond. French goods from New York (even though they went through the United States in bond) were assessed at the selling price in that city, which included American duties and profits as well as freight and other charges, and on the amount by which this price exceeded the value of the article as landed in bond the "antidumping* duty was levied. The maximum rate of this duty is 15 per cent ad valorem.

This illustration shows the equalization of certain rates upon British and American products, and it follows that when sterling was at its lowest the British preference in this instance gave place to a slight preference upon the American article. But it must be noted that this result is dependent upon the fact that the illustration used a preferential rate in which the preference was only a small fraction (two-sevenths) of the total duty. The same absolute amount of preference (10 per cent ad valorem) upon articles dutiable at lower rates was not wiped out with exchange at the rates specified. Thus the effective rates levied upon goods formerly dutiable at 25 and 15 per cent were, with exchange at the rates indicated, 22.73 and 18.75 per cent, leaving a preference of nearly 4 per cent ad valorem to the British. In the extreme case of goods dutiable when im ported from the United States, but free when imported from Great Britain, the amount of the preference was scarcely affected by the most extreme variations in exchange rates. 15 The situation in Australia has been somewhat similar to that in Canada, but the differences should be noted. Australia uses the pound sterling, and ordinarily settles all its transactions through London, so that a divergence in the exchange rates of Australian and British sterling is rare. In applying the rule for the assessment of ad valorem duties, therefore, instead of a disadvantage to British importers and an advantage to American importers, as in Canada, there was a relatively larger advantage to the Americans, while there was nothing abnormal in the way the rule operated upon imports from Great Britain. In October, 1920, Australia followed Canada and New Zealand in adopting the rule of converting depreciated currencies at current rates of exchange, and at about the same time, as the result of a judicial decision, the same rule was applied to appreciated currencies.

Formalities. The formalities required in entering and clearing goods are often vexatious and cause complaints from time to time, complaints which sometimes allege that the treatment received is not equal as between foreigners and nationals. The published regulations, however, show few or no open discriminations, except the requirement in the very forefront of the rules that all documents must be made out in the national language. This can hardly be put down as an unfair discrimination, and it operates against foreign traders, importers, and agents rather than directly against foreign goods.

Concealed preferences.-A concealed preference may be defined as any classification or phraseology which avoids such terms as “ national" and "foreign," thus establishing a general and seemingly impartial rule, but which none the less operates to the disadvantage of the foreigner. The discriminatory effect may have been unforeseen; if devised and intended to discriminate the clause may be called a "joker." The discrimination may be concealed in intricate phraseology or the subtlety may lie in the fact that different regulations must be compared in order to discover the effect. Concealed preferences may exist also in broad classifications and simple phraseology. Frequently the discrimination is discoverable only by a comparison of the law or regulations with the sources or destinations of the trade involved. Finally, concealed preferences may exist by administrative action either as part of an established and public policy, or by secret order, or by fraud.

In general, any method of classification of articles and any manner of assessment of duties operates unevenly upon portions of the trade concerned. Specific duties fall with relatively greater force upon the cheaper varieties of an article, while ad valorem duties tend to restrict the market rather of the better qualities. In addition, specific duties may be levied by units of sale 156 or by weight or other characteristics; and either specific or ad valorem duties may be levied upon goods as classified according to any of the differentia of the product. In every case in which similar products of different countries have different characteristics the tariff classifications and the manner of assessment become of importance to traders. Since there is no general agreement and no established standards based either upon convenience of administration or upon equitableness as between manufacturers, any classification or manner of assessment is apt to raise complaints, from some source or other, that the duties are inequitable. For instance, under the Spanish tariff cottons were dutiable in the Philippine Islands according to the weight of samples from which had been washed the minerals added by the manufacturers to give body to the goods. American manufacturers considered this unjust. In 1902 the basis of assessment was changed to that of the weight of the goods as imported. The change operated to the advantage of American manufacturers almost exclusively, for they are not accustomed to weight their cottons. Again, in 1906 a classification was introduced by which there was imposed upon cotton piece goods produced on double width looms and then split a heavier duty than that upon similar cloth of the same width produced on single-width looms. This change operated to the disadvantage of British manufacturers, as it offset the economy of production on

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se By the piece or head, yards of cloth, boxes of matches, etc.

their wider looms. Both these classifications were made in general language and the effects were obvious only to those familiar with the technical processes of the textile industries. It is evident that neither of the changes made in 1902 and in 1906 violated the SpanishAmerican treaty of 1899, which established no standards and guaranteed the continuance of no classifications; the earlier change discriminated against a trade practice which may be characterized as none too reputable from the consumer's standpoint; the latter change was a protective measure based upon the theory of equalizing costs. In 1907 the tariff regulations of Somalia changed the basis of valuation by requiring the addition of only 20 per cent instead of 40 per cent to the invoice value of goods whose valuation was not given in the official schedules of valuations. At that time and for at least some years thereafter these schedules omitted valuations for certain Italian products where the same foreign products were evaluated, and the change thus reduced by one-seventh the amount of the duty payable on Italian cottons and some other items, with no corresponding reduction on the foreign articles.

Administration of the regulations.-Two cases of discrimination in the administration of laws or regulations, apparently impartial, may be given. In Libia Italian goods have been systematically undervalued to the extent of 50 per cent, more or less. This undervaluation rests on nothing to be found in the laws or in the regulations, so far as they are available here, but the practice can hardly have escaped the attention of the Italian Government.

During the war trade and shipping were controlled very largely by administrative bodies guided only by most general grants of power by the legislative bodies. Since the cessation of hostilities this control has been considerably relaxed but in certain cases has been even extended. Thus at different periods since the armistice the importation of dyestuffs into India and other British colonies has been prohibited,157 except as licensed. Some of the orders to this effect contain no evidence of any intention to discriminate between British and foreign dyes, but the press in each case was able to state that "it was understood" that licenses would always be given for the shipment of British products. The preference here is obvious, though the amount is uncertain and likely to vary from time to time. Under a licensing system the future uncertainty is itself a factor considerably adverse to the foreign product, even though at any given time foreign dyes are being freely licensed.

XIII. EFFECTS OF PREFERENTIAL TARIFFS.

The effects of preferential tariffs upon the trade between the colony and the mother country can not with any certainty be separated from the effects of other factors which determine the course of trade. These other factors will be discussed below with particular reference to colonial trade.158 The more intangible factors, however, are relatively constant,159 and, except where trade is affected by abnormal circumstances-wars, crop failures, rapid

157 Some of the prohibitions have been suspended. 185 See p. 72.

159 Most subject to variation, perhaps, is the expenditure upon public improvements. These expenditures are often sufficiently great to increase noticeably colonial imports from the mother country in a given year or series of years. Investments, improved shipping connections, and banking facilities may also lead to comparatively sudden increases of de.

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