Sec. 13. #The Underwood tariff, 1913#.  After President Wilson was inaugurated, March 4, 1913, the tariff was at once taken up by Congress.  The general features of the act that was passed were as follows: 

(a) Considerable additions to the free list of raw materials.

(b) Abolition of compensatory duties corresponding with the old rates on raw materials.

(c) Replacement of specific by ad valorem rates in many cases.

(d) Taxation of plain kinds of goods less than fancy kinds—­luxuries higher than necessities.

(e) Reduction of rates generally (most of the few increases being to correct some evident error in the old law).

(f) Application of the so-called competitive principle to rates intended to be protective, viz., to leave the rate just barely high enough to keep out foreign products.[11]

Articles placed on the free list were raw wool (which had borne a rate equivalent to about 44 per cent), metals, agricultural implements, raw sugar (the lower rate to go into effect gradually), coal, lumber, many agricultural products including live cattle, meats, wheat, corn, flax, tea, and hemp, and numerous manufactures including boots, shoes, gunpowder, wood pulp, and print paper.

Moderate reductions were made in the schedules for chemicals, earths, cotton goods, and sundries, while rates on various luxuries were either unchanged or raised.  Left almost unchanged were the schedules for tobacco, for spirits and wines, and for silks (already very high).

This act was signed October 3, 1913, and had been in operation about nine months when the great war broke out in August, 1914.  What its effects would have been under normal conditions we can judge little from the actual experience.  The first eight months that the act was in operation, the ad valorem rate on dutiable goods proved to be 36 per cent (about 4 per cent less than in the preceding year) and the rate on free and dutiable together about 14 per cent (over 3 per cent less than the preceding year).  The first complete fiscal year (that of 1915) under the act, the average rate on dutiable goods was 33.5 per cent and that on all imports was 12.5 per cent.  Evidently this is far from a “free trade tariff.”  The reduction in the average ad valorem rate is less than was expected.  Many of the reductions had little effect, the former rate having been much higher than was needed to exclude the goods.  In other cases the old rates were but nominal and inoperative because they were upon goods regularly exported, not imported (e.g., farm products, cotton goods, and some other manufactures).  But some of the reductions doubtless will force the less efficient plants in some industries touched to increase their efficiency or go out of business.  Time, in any normal period, is needed for adjustment, but an adjustment of a most abnormal kind is in progress during the war.  Imports from Europe have fallen greatly, while exports are enormously increased.  Old industrial establishments have been converted to different and temporary uses.  The conclusion of the war must bring a new readjustment that must cause a severe shock to some enterprises—­and this must have been so under any possible variety of tariff.[12]