HENRY CLAY AND THE PROTECTIVE TARIFF - Essay Example

Henry Clay and the Protective tariff Define tariff. What is a “protective tariff”? A tariff can be defined as tax imposed on imported goods. A protective tariff is a financial decision by a government to apply a tax on the importation of foreign goods. This tariff is used to inflate import prices in order to protect the value of domestic merchandise that can be produced in the home country. This type of tariff is considered a threat to free trade by some, but others claim its benefits are twofold.

The first is keeping domestic money within its own economy. The second benefit is preventing inexpensive imports from destroying local business by protecting domestic firms from import competition. Its core principal is to protect the domestic economy rather than to raise revenue. An example of a protective tariff is seen in the importation of oranges. Orange fruit does not grow everywhere, and South American countries often produce massive quantities for export. If a country can produce oranges but can import them from South America cheaper than growing them domestically, a protective tariff might be applied.

This tariff will inflate the price of the imported oranges so that they are equal to or higher than the price of domestic oranges. Tariffs for many years were primarily used to collect Federal revenue and protect start-up industries. The government largely restricted its activities to maintaining order and protecting property by imposing army, navy and courts tariffs in order to raise enough revenues to finance government programs. This made the government largely self supporting. During wars or in attempt to meet other needs, additional income was secured by raising the tariff and excercise tax rates.

Short term and unanticipated capital needs (budget deficits) were usually covered by borrowing.2. Who would support a protective tariff and why?  Who would be opposed to it and why? Those favoring protective tariffs mostly engage in manufacturing sector that would be negatively impacted by foreign competition. Exporting areas that would be severely hurt by retaliatory trade measures imposed by their trading partners. The exporting countries also feel as though protective tariffs deal them a double blow since they export cash crops to trading partners affected by protective tariffs and have to purchase foodstuffs and manufactured goods that might be more costly due to the imposition of protective tariffs.

  On the opposite end of the spectrum are two arguments in favor of protective tariffs. One is that it keeps money earned locally within the domestic economy. The idea being that if a man earns a paycheck from a local business, he should feed that money back into other local businesses, creating a support cycle and thus money is retained in local economy. By purchasing less expensive imported goods, that man is not giving his money to domestic business but straight to foreign economies. This, in theory, creates a hollow economy that supports foreign business and not local businesses.

The second argument in favor of a protective tariff is that it prevents unfair import competition. This viewpoint states that if South American oranges were imported without a tariff and at a much lower cost than domestic oranges, consumers would purchase those oranges expensively on domestic market. This would put a strain on domestic orange growers and possibly put them out of the business. In this case, a protective tariff is meant to level competition for domestic businesses. Protective tariffs are controversial plans that deal with the importation of goods.

Some see these import taxes as a necessary means of protecting domestic economy while others believe that it is a threat to free trade. 3. Does Henry Clay answer the criticism that a protective tariff helps some at the expense of others? Henry Clay propagates the fact that tariffs are a remedy that helps in modifying foreign policy in order to remove trade imbalance. In addition, he argues that, tariff act as an adequate protection against the otherwise overwhelming influence of foreigners. The sole object of the tariff, according to him, is to tax the produce of foreign industry, with the view of promoting American industry.

Tax is thus exclusively leveled at foreign industry. That according to Clay is the avowed and the direct purpose of the tariff. Trade has been treated as an imposition of unfairness to others while benefitting others in that funds are taken from one pocket and put in the pockets of others. This of course has been an unfair representation. But with the tariffs, no man pays the duty assessed on the foreign article by compulsion, but voluntarily; and this voluntary duty, if paid, goes into the common exchequer, for the common benefit of all.

Consumption has four objects of choice. For instance, it may abstain from the use of the foreign article, and thus avoid payment of tax. Secondly it may employ the rival American fabric. Thirdly, it may engage in the business of manufacturing, which this bill is designed to foster. And fourthly, it may supply itself from the household manufactures. Thus Clay, argues that we must naturalize the arts in our country by the imposition of these tariffs which regardless of the critics claiming that they favor some while discriminating against others, they actually serve as a guide to effective trade.

yet, Some argue that dealing with imports in this manner is unethical. They claim that the cost of shipping should be the only addition to an items price. Applying protective tariffs, the argument states, threatens the idea of having free trade. A higher tariff allows a local company to compete with foreign companies. Protective tariffs can be advantageous as they can help foster local economy, but sometimes, they can also make the price of the item so expensive that companies must charge higher prices in order to stay in the market.

Work CitedGraham, Frank. Protective Tariffs. Princeton: Princeton University Press, 1943. Print.