The New General Tariff

«The Economist», 16 luglio 1921, pp. 99-100

Turin, July 10

The most important measure enacted by the past Giolitti Cabinet on the eve of its fall was the hurried passing by Royal legislative decree of the new general tariff. The decree bears the date of June 9, 1921, and was published in the official Gazette of June 30, 1921. Professor Alessio, the former Minister of Industry, was evidently bent on leaving his mark on fiscal legislation. A new general tariff was necessary, for the existing tariff of 1887 was growing obsolete. The great problem was – more or less protection? No one dreamed of a return to the Free-trade era of Cavour and his immediate successors. A Royal Commission had studied the problem, and published over 30 large volumes of special and general reports. Its findings were decisively protectionist. They proposed that the old system of a general tariff and of subsequent treaties of commerce with foreign countries with lower binding duties should be discontinued, and that in place thereon should be substituted a system, akin to French or United States examples of a double tariff; a higher tariff to be applicable to some nations and a lower tariff to States giving us the benefit of lower duties, both duties to be variable at the pleasure of the Italian Government. The Protectionism in these proposals was too rampant to be acceptable to political parties. The present Alessio tariff maintains the old principle of a general tariff applicable to all countries which apply their general tariff to our goods, and of a lower tariff based on future treaties of commerce. Much will depend, therefore, on the stipulation of commercial treaties, but evidently the general tariff is to be a basis on which negotiations will be conducted. The general features of the new tariff are as follow: 1) The tariff is applicable as from July 1, 1921, to all goods which do not come from countries with which Italy has a treaty of commerce in force. 2) The duties are payable in gold, i.e., at a rate of exchange which is every week fixed by Government, on the basis, presumably, of a mean of the exchanges with France, Switzerland, Great Britain, and United States. 3) To the principal duty there is to be added, in the great majority of cases, an additional duty, called increment coefficient (coefficiente di maggiorazione). For instance, “Horses”, which bear the schedule number 1 of the new tariff, pay, if not less than 1.40 metres in height, 140 gold lire each. As, however, the increment coefficient is 0.5, we shall add another 70 lire, so that the whole duty will be 210 gold-lire, which, by the way, corresponds today to about 700 paper-lire. 4) The additional duty is variable at the will of the Government. If the Minister of Industry thinks that foreign competition is becoming too severe, he can put up the duty by a decree, and afterwards put the decree on the table of the House of Deputies, which, it is hoped, will accept the accomplished fact. 5) The new tariff includes 951 schedules, whereas the old tariff contained only 472. The increase is partly due to technical variations and progress in the industry between 1887 and 1921, but is also, unmistakably, an indication of the more Protectionist tendency of the new tariff. With more numerous and refined distinctions between goods and goods, the clause of the more favoured nation will not work at all smoothly. The refinement in the classification of goods is directed against the peril – from a Protectionist point of view – that a lowering of a duty on a given class of goods in favour of a given country may be used by another country for claiming a decrease on other goods which happen to be in the same class. With more detailed schedules this stretching of decreases will not be so easy as in the past. The change of classification makes an exact comparison between old and new tariff more difficult. If all schedules resembled the first already cited (“horses higher than 1.40 metres”), the prospect for Italian consumers would not be bright. In the old tariff horses paid 40 gold-lire. Now they pay 140 lire principal duty, 70 lire additional duty, in all 210 lire, all in gold, equivalent to about 700 paper-lire. The increase in paper-lire is about seventeenfold. Fortunately the increases are not everywhere so high. But the instance given is sufficient to point out a fundamental mistake in the new tariff. The compilers evidently adopted the “increment coefficient” to enable the Government to counteract the influence of increased costs of production of Italian goods in relation to the assumed lower cost of foreign goods. But the payment in gold-lire has already the very same aim and effect. The payment in gold and the additional duty are bound to overlap, and to constitute, in most cases, a double charge on Italian consumers.

The schedules are so varied as to give an impression of decrease in the lower grades of goods, but the decreases are few, and comparatively unimportant in comparison with the increases in the higher grades. If the “principal” duty may appear lowered in some cases, this impression is reversed if we take account of the additional duty. Italian consumers, moreover, who pay duties in paper-lire and whose incomes, in not a few cases, have not increased in proportion to the depreciation of the lira, are apt to be hit by the gold duties even more severely than foreign importers from relatively appreciated countries. The Government says that foreign States, as, for instance, Great Britain, France, Spain, Czecho-Slovakia, have increased their tariffs even more, but the contemplation of worse cases will be a scanty comfort to Italian consumers.