The rule is, however, fallacious.  “Costs of production” mean here the monetary costs of the enterpriser.  Now a first difficulty is that costs are not uniform for all establishments in any one industry, and a tariff high enough to protect some is entirely too low to protect others.  As long as a tariff rate is too low to exclude every unit of the foreign product its importation is conclusive proof that for some home producers the tariff rates fall short of the “true principle” (better proof, indeed, than the most elaborate investigation by any tariff board could be).  The indubitable truth is that no trade ever can take place (in a monetary regime) unless the monetary price is lower in the exporting than it is in the importing country.  This virtually means that the product cannot be profitably exported unless the monetary costs of production ("together with a fair profit”) of the article exported are for each party less than those of the other party in the other country.[9] The so-called “true principle” would lead thus to absolute prohibition of every article to which it was applied.

Sec. 12. #The Payne-Aldrich tariff, 1909-1913#.  In the campaign of 1908 the Republicans admitted that the protective tariff needed to be revised, but they declared that it should be revised by its friends.  It was doubtless the general understanding that “revision” in this promise meant revision downward, tho this was left somewhat unclear in a campaign wherein the tariff played a somewhat minor part.  The tariff act of 1909 (the Payne-Aldrich act) was the attempt of the successful party to redeem its promise in this regard.  Many changes of rates were made, both downwards and upwards.  It was estimated that rates were reduced in 584 instances, affecting 20 per cent of imports.  These changes included placing hides upon the free list (before taxed 15 per cent), and cutting down the rate on leather, shoes, coal, lumber, iron ore, pig iron, and steel-rails.  But on the other hand rates were increased in 300 instances (including many items in the cotton schedule).  The general belief that little reduction was effected, on the whole, was confirmed by the experience under the act.  As compared with the last two years (1908-1909) of the Dingley tariff the first two years of the Payne-Aldrich tariff showed a decline of 1.5 per cent, and on free and dutiable a decline of less than 3 per cent.  These reductions in the statistical results are no greater than occurred within like periods while the Dingley act continued in operation without change.[10]

No other tariff since “the act of abominations” in 1828 has called forth such widespread criticism as this one, and the tariff became a leading issue in the campaign of 1912.  After 1910, the House being Democratic, many bills to reduce duties were presented, and some were passed by both houses, but all were vetoed by President Taft mainly on the ground that it would be best to await the report of the tariff board which had been authorized and appointed for the purpose of ascertaining the cost of production referred to in the “true principle of protection.”