442 BEPORT— 1889. 



much, or nearly as much, at the higher price as they did before, when it 

 is plain that the bulk of the tax falls on them. In general, however,, 

 demand will be reduced, and it might therefore be contended that in 

 such instances the whole tax would not fall on the consumer. This 

 introduces a further element — (2), the extent of demand otdside the 

 taxing nation. Foreign producers will not submit to the fall of price 

 that reduced demand will probably cause, so far as they are concerned, if 

 there is any mode of escape ; and this refuge they may have in their own 

 and other nations' markets. So that, in addition to the consideration of 

 the intensity of the demand in the taxing country, we have to see what 

 proportion it bears to the total demand. To maintain that an import 

 duty in the Channel Islands would have the same effect as one in the 

 United States is obviously incorrect. Should the taxing country be the 

 sole area of consumption, and should its demand be one easily checked by 

 higher price, it would be in a specially favourable position for levying an 

 import duty. It is not easy to find any actual case in which these con- 

 ditions are realised ; but many countries have a large proportion of the 

 demand, and so far they are advantageously placed. Thus it seems 

 likely that the import duties levied by France and Germany on cereals 

 have checked their demand, and in some degree lowered price. Again, 

 though a nation may have but a small proportion of the total demand 

 under its control, it may be able to affect some particular group of pro- 

 ducers, owing to situation or other causes ; e.g., England could, by an 

 import duty on Irish cattle, seriously affect that trade — a course which 

 would not be so easy with the American meat trade : so long as the 

 English market gave more advantage than any other to the Irish dealer 

 he would seek it notwithstanding the tax. (3) The existence of untaxed 

 substitutes for the commodity also tends to check demand ; but in prac- 

 tice this case would not be likely to occur, since it could be avoided by 

 the imposition of equivalent duties on the competing articles. Next, a 

 revenue import tax differs from a protective one, in that the latter, by 

 leaving the native sources of supply untaxed, will help to limit the rise 

 in price of the imported article, acting in the same manner as the exist- 

 ence of an untaxed substitute, but to the loss of the revenue to be 

 derived from the tax so far as the consumption of the imported part of 

 the commodity is reduced. Combining the foregoing elements, we arrive 

 at the conclusion that import duties are not easily shifted m toto to the 

 foreign producer, since, to accomplish this result, demand must be feeble, 

 and the taxing country must have a 'consumer's monopoly.' But though 

 this complete removal of the burden is not to be hoped for, yet, where a 

 large propoi'tion of the demand can be affected some of the tax will be 

 thrown on the producing country, and in almost every case it is likely 

 that some special classes of producers will be touched by duties imposed 

 at their best market. Speaking generally, values (or their simplest index 

 prices) will not be much lowered, but trade will be limited, a smaller 

 amount of the taxed articles being imported at nearly the same price 

 (duty apart) as before the introduction of the tax. 



Given, however, the conclusion that import duties tend to fall partly 

 on the producing countries, the question remains, What classes will endure 

 the loss ? If the industry be in its normal state, capital can only obtain 

 ordinary interest ; consequently the operation of the duty will tend to 

 reduce the capital invested in producing the taxed commodity, since other 

 employments will plainly be more advantageous. It is theoretically con- 



