Fordney-McCumber Act, 1922 with its "scientific tariff" tied to the wages in the country of export [View all]

[pampango]

"Woodrow Wilson believed in low tariffs. He had reduced tariffs in 1913, and refused to increase them.

If ever there was a time when Americans had anything to fear from foreign competition, that time has passed. If we wish to have Europe settle her debts, governmental or commercial, we must be prepared to buy from her.

Woodrow Wilson, speaking in March 1921. Wilson had just vetoed the Emergency Tariff Bill, just before he handed over the Presidency to Harding.

As soon as he became President, Warren Harding passed an Emergency Tariff (May 1921) to increase duties on food imports, and in 1922 Congress passed the Fordney-McCumber Tariff. This had two principles:

a. 'Scientific tariff': this linked tariffs to the wages in the country of export. If wages in, say Italy, were very low, then Italian goods were given a proportionately higher tariff. This negated the effect of lower wages in competitor countries.

b. 'American Selling Price': this linked tariffs to the price of American goods, not to the cost of production. A German company might be able to produce, say, a certain chemical for $60, but if the selling price in America was $80, and the US tariff was 50%, the tariff would be $40. This meant that foreign imports were ALWAYS more expensive than American-produced goods, however cheaply they had been made.

The Fordney-McCumber Act established the highest tariffs in history, with some duties up to 400% and an average of 40%."

http://www.johndclare.net/America3.htm

The Fordney-McCumber Tariff was familiar but this is the first explanation of the "scientific tariff" in it that I have read.