Message to the House of Representatives Returning Without Approval "An Act to Reduce the Duties on Wool and the Manufactures of Wool"

To the House of Representatives:

On December 20, 1911, I sent a message to the Congress, recommending a prompt revision of the tariff on wool and woolens. I urged a reduction of duties which should remove all the excesses and inequalities of the schedule, but should leave a degree of protection adequate to maintain the continued employment of machinery and labor already established in that great industry. With that message I transmitted a report of the Tariff Board, which furnished for the first time the information needed to frame a revision bill of this character, and recommended that legislation should be at once undertaken in the light of this information.

Despite the efforts which have been made to discredit the work of the Tariff Board, their report on this schedule has been accepted, with scarcely a dissenting voice, by all those familiar with the problems discussed, including active representatives of organizations formed in the interest of the public and the consumer. Importers and merchants, as well as producers and manufacturers, have testified to the accuracy and impartiality of these findings of fact. For the first time in the history of American tariffs the opportunity has been afforded of securing a revision based on established facts, independent both of the ex parte statements of interested persons and the guesswork of political theorists.

My position has been made perfectly plain. I shall stand by my pledges to maintain a degree of protection necessary to offset the difference in cost of production here and abroad, and will heartily approve of any bill reducing duties to this level. Bills have been introduced into Congress, carefully framed and based on the findings of the Tariff Board, which, while maintaining the principle of protection, have provided for sweeping reductions. Such a bill was presented by the minority members of the Ways and Means Committee, which, while providing protection to the woolgrower, reduces the duty on most wools 20 per cent, and the duties on manufactures by from 20 to more than 50 per cent, and gives in many instances less net protection to the manufacturer than was granted by the Gorman-Wilson free-wool act of 1894.

Instead of such a measure of thorough and genuine revision, based on full information of the facts, and with rates properly adjusted to all the different stages of the industry, there is now presented for my approval H. R. 22195, "An act to reduce the duties on wool and the manufactures of wool," a bill identical with the one which I vetoed in August, 1911, before the report of the Tariff Board had been made. The Tariff Board's report fully and completely justifies my veto of that date. The amount of ad valorem duty necessary to offset the difference in the cost of production of raw wool here and abroad varies with every grade of wool. Consequently, an ad valorem rate of duty adjusted to meet the difference in the cost of production of high-priced wools is not protective to low-priced wools. In any case, the report of the Tariff Board shows that the ad valorem duty of 29 per cent on raw wool, imposed in the bill now submitted to me, is inadequate to meet this difference in cost in the case of four-fifths of our total wool dip. The disastrous effect upon the business of our farmers engaged in wool raising can not be more clearly stated. To maintain the status quo in the wool-growing industry, the minimum ad valorem rate necessary, even for high-grade wool in years of high prices, would be 35 per cent.

The rate provided in this bill on cloths of all kinds is 49 per cent. The amount of net protection given by this rate, in addition to proper compensation for the duty on wool, depends on the ratio between the cost of the raw material and the cost of making the cloth. The cost of the raw material in woolen and worsted fabrics varies in general from 50 per cent to 70 per cent of the total value of the fabric. Consequently, the net protective duty, with wool at 29 per cent, would vary from 28.7 per cent to 34.5 per cent. In the great majority of cases these rates are inadequate to equalize the difference in the cost of manufacture here and abroad. This is especially true of the finest goods involving a high proportion of labor cost. One of the striking developments of the last few years has been the growth in this country of a fine goods industry. The rates provided in this bill, inadequate as they are for most of the cloths produced in this country, would make the continuance here of the manufacture of fine goods an impossibility.

Even more dangerous in their effects are the rates proposed on tops and yams. Tops are the result of the first stage in the making of raw wool into cloth. Yarn is the result of the second stage. Taken in connection with a rate of 29 per cent on wool, and 49 per cent on cloths, the rates of 32 per cent on tops and 35 per cent on yarn, fixed in this bill, seem impossible of justification. They would disrupt, and to no purpose, the existing adjustment, within the industry, of all its different branches. It is improbable in the highest degree that raw wool would be imported in great quantities when the cloth maker can import his tops at a duty of 32 per cent and yarns at a duty of 35 per cent. The report of the Tariff Board shows the difference in relative costs to be uniformly greater than the amount of protection on yarns given by this bill. In a year of low prices, the net protection granted by the proposed rates would not be more than half the difference in costs. The free wool act of 1894 gave a protective rate of 40 per cent on all yarns over 40 cents a pound in value, with free raw material. The present bill gives only 35 per cent on such yarns with a duty of 29 per cent on the raw material. The great increase in the imports of tops and yams which would result from the rates in the bill now submitted to me, would destroy the effect of the protection to raw wool and at the same time would be at the cost of widespread disaster to the wool-combing and spinning branches of the industry. The last 15 years has witnessed a great growth of top making and worsted spinning in this country, and the capacity of the plants is now equal to domestic requirements. Under the rates proposed such plants could be continued, if at all, only by writing off most of the investment as a net loss and by a reduction of wages. To sum up, then, most of the rates in the submitted bill are so low in themselves that if enacted into law the inevitable result would be the irretrievable injury to the wool-growing industry, the enforced idleness of much of our wool-combing and spinning machinery, and of thousands of looms, and the consequent throwing out of employment of thousands of workmen.

In view of these facts, in view of the platform upon which I was elected, in view of my promise to follow and maintain the protective policy, no course is open to me but to withhold my approval from this bill. I am very much disappointed that such a bill is a second time presented to me. I have inferred from the speeches made in both the House and the Senate that the members of the majority in both Houses are deeply impressed with the necessity of reducing the tariff under the present act on wool and woolens; that they do not propose to stand on the question of the amount of reduction or to insist that it must be enough necessarily to satisfy the principle of tariff for revenue only, but that they are willing to accept a substantial reduction in the present rates in order that the people might be relieved from the possibility of oppressive prices due to excessive rates. I strongly desire to reduce duties, provided only the protection system be maintained, and that industries now established be not destroyed. It now appears from the Tariff Board's report, and from bills which have been introduced into the House and the Senate, that a bill may be drawn so as to be within the requirements of protection and still offer a reduction of 20 per cent on most wool and of from 20 per cent to 50 per cent on cloths. I can not act upon the assumption that the controlling majority in either House will refuse to pass a bill of this kind, if in fact it accomplishes so substantial a reduction, merely because members of the opposing party and the Executive unite in its approval. I, therefore, urge upon Congress that it do not adjourn without taking advantage of the plain opportunity thus substantially to reduce unnecessary existing duties. I appeal to Congress to reconsider the measure, which I now return, without my approval, and to adopt a substitute therefor making substantial reductions below the rates of the present act, which the Tariff Board shows possible, without destroying any established industry or throwing any wage earners out of employment, and which I will promptly approve.

WM. H. TAFT.

The White House, August 9, 1912.