400
T H E J O U R N A L OF I N D U S T R I A L A N D E N G I N E E R I N G C H E M I S T R Y
It does not stand alone, but is part of a larger question, namely, whether ours shall be a government “of the people, by the people, and for the people” or something sadly different. For many years, there has been a feeling, shared by a small but respectable minority, that the manufacture and sale of all alcoholic beverages should be prohibited. Suddenly, and to the surprise of the country, our Constitution has been amended t o that effect, and whether it be the will of the majority or not, prohibition is in sight. This is no place to discuss the morals of that question, or whether light wines and beer should be excepted. It is the place, however, to point out that alcohol has many uses of great importance entirely aside from its occurrence in beverages. It is essential in so many of the arts and manufactures that a list of them here would be tiresome, even iE it were not already well known to you. To any one not familiar, I recommend a study of an excellent chart prepared by the Industrial Alcohol Company. I hope that in the reconstruction period, no legislature can be fooled into forgetting this fact, or making it more difficult for the chemist and manufacturer to obtain a t reasonable cost this highly important raw material. We have heard much in recent years on the general subject of conservation of natural resources, including the utilization of our water powers. This has had the effect of bringing the importance of this question more or less to the attention of a great many people, but it has not yet led to a thorough appreciation of the vital importance of close attention t o making the most of what we have left, after the extravagant uses t o which we and our forebears have made of these resources. Petroleum, natural gas, anthracite coal, forest products, and ores of all kinds, hitherto considered t o be inexhaustible, we now realize have very decided limits. Most of these when once taken from the ground can never be replaced, but this is not true a t least of our forests or our water powers. Yet what have we done to replace the tremendous waste which our utilization of our forests has witnessed? In our reconstruction of the future, we should not only see to it that we use no ores or fuels wastefully, but that our forests should be regularly and methodically replanted and thus, climatic changes prevented, while forest products are produced sufficient for all needs. Particular attention should be paid our magnificent stores of sulfur which, in spite of apparent abundance and cheap production, should be conserved to the extent that they shouldnot be used where any other form of the element, such as pyrites, blende, etc., can fulfil its functions. At this stage of knowledge, the world should be too intelligent to wait until it has used up its resources before it awakens to the fact that the damage has been done, and nothing is left but to mourn. The reconstruction period will see a great deal done in lines of conservation, and it is on these lines in particular that the chemist will find his opportunity. We hear a great deal about the unrest of the masses which comprise many of the workers, and much fear is entertained about what this will lead to. There are various reasons for this unrest, and some of these point to unfairness of certain employers of labor, particularly in the past. There is something in this, but not as muoh as many suppose. The condition of the worker and his reward have been steadily inproving for as long as I can remember, and yet we hear of unrest. You ask why, if the present system results in continuous improvement, should it be changed for something which, as far as evidence shows, produces nothing but sorrow and destruction? I think the answer to the question will be found in the propaganda of men and women who can make an easier living by talking than by working. During the reconstruction period, we must learn how t o prove conclusively that our present civilization is based on justice and equity for all and thereby nullify much of the eloquence of the professional agitator.
V O ~11, . NO.j
There are many conditions, not enumerated, that have been quietly developing during the past fifty years, but I have cited enough to indicate the size of the task before us. It is a man’s job. All can help who will, by the practice of very old virtues, which never need reconstruction, such as thrift, prudence, and regard for the rights of others. But the chemist can do all of these and much more, which no one else can do. Let him think of the factories t o be run on constantly improved methods, the farms and enterprises of all kinds to be made more productive, the wonders to be unbarred by research, the future of the whole world t o be ameliorated and broadened by his discoveries, and he may well feel proud of his profession. Joined in a great society like this, with twelve thousand of his fellows, no task should daunt him. He has not failed hitherto; he will not fail in performing his unique and absolutely essential part in solving the problems facing the world.
AMERICAN CHEMICAL INDUSTRIES AND THE TARIFF COMMISSION By WILLIAM SMITHCULBRRTSON
Member, United States Tariff Commission, Washington, D. C.
The two outstanding general forces that operated during the war t o modify and, in some branches, revolutionize the American chemical industries were the isolation of the Central European Powers which cut off their overseas trade and the enormous demand for chemical products in the prosecution of the war. How far-reaching these influences were I need not discuss in detail before this learned society. You are more familiar with them than I, and ‘your work has been a determining factor in assisting our industries to meet the crises through which we have passed. The American public now realizes as never before that the chemical industries are in many particulars essential in the pursuits of both war and peace. Of the industries affected by the war conditions, the coaltar dye industry is the most familiar to the general public. The months of famine which followed the last direct shipment of dyes from Germany in March 1915 were more potent arguments for the diversification of American industrial life than a flood of oratory. An infant industry came into being and thrived under the protecting influences of the restrictions on the commerce of foreign competitors. The new industry has shown some of the failings of youth, but it cannot be gainsaid that it has met the situation and that to-day the production of intermediates and dyes represents an important American industry. Not so spectacular but nevertheless significant was the development under the war influences of many other chemical products-potash, synthetic nitric acid and ammonia, barium salts, synthetic phenol, thorium nitrate, phosphorus, oxalic acid, and chlorine and its products. The natural disadvantage under which some of these products-potash, for example-are produced, makes their production in the United States in the future highly problematical. Others, however, will remain a permanent and important part of our industrial life. Thorium nitrate represents an interesting case of the effect of the removal of German competition. With the exception of the thorium nitrate produced by one large-sale manufacturer of incandescent gas mantles for his own use, our supply formerly came from Germany. But a t the present time the monazite sand of Brazil, which before the war was shipped to Germany and there by complicated processes converted into thorium nitrate, is now shipped direct t o this country and is being consumed by our own enlarged industry. Such changes as these had taken place in our industrial structure before April 1917. Our entrance into the war brought added complications. War restrictions in some lines delayed development or diverted energy. The progress of the new dye industry was, for example, hampered
T H E J O U R N A L OF I N D U S T R I A L A N D E N G I N E E R I N G C H E M I S T R Y
May, 1919
by scarcity and high prices of raw materials; especially was this true in the case of toluol. I n other lines, there was an unprecedented stimulus of production. The Government demand for explosives and other chemical products was heavy. Old industries expanded t o meet the emergency. New plants were erected by private companies and by the Government. Nitric and sulfuric acids, acetic acid and acetone, phosphorus, and chlorine and chlorine products were produced in enormous quantities. ADJUSTMENT
TO NORMAL TIMES
No industries, taking the world over, have been as profoundly modified by the war as have the chemical industries. Changes have taken place not only in the United States but in foreign countries. German chemical industries have been drawn into an even closer business combination than existed before the war, and they have doubtless made progress in technical research and mechanical processes. Although they will suffer from the crisis through which Germany is passing, they will adjust themselves more readily t o normal times than the German textile and steel industries. In other countries the same influences which established new and expanded old industries in the United States were operating. Norway, Japan, Canada, and particularly Great Britain have made great progress in many chemical lines and, now that the war demand has ceased, are seeking new markets for their increased productive capacity. The same forces, therefore, which have affected our chemical industries constructively have raised up competing firms in other countries and an era of severe competition is unquestionably ahead. This situation requires, in the first place, a reconsideration of measures of commercial policy, and in the second, a careful investigation of the facts. MEASURES OF COMMERCIAL POLICY
Let me turn your attention then t o some aspects of commercial policy as they relate to our chemical industries. So fundamental were the changes wrought by the war that a measure entirely adequate t o pre-war conditions cannot be assumed to meet our present needs I n the field of chemistry the war solved some problems, modzed others, and created still others. It is peculiarly our task to face the new situation squarely and to consider the proper answers to the pressing questions before us. I am sure that you realize better than anyone else that the future of the chemical industries of the United States depends primarily upon the research work of chemists, the designs of engineers, and the organizing skill of business men. Industries which do not show vitality and growth in these respects should not be maintained by legislation. With this qualification, however, national policy warrants the enactment of tariff and unfair competition laws which will enable essential and desirable industries t o become a n effective, permanent part of our industrial life. The laissez-faire attitude has no place in the reconstruction period. THE
TARIFF O N CHEMICAL PRODUCTS
Among the most-perhaps the most-urgent tariff problems which Congress will be called upon to consider fall within the chemical schedule. The reason for this is obvious. The war’s effect was, as I have suggested, more revolutionary among the chemical industries than elsewhere. I wish it were possible for me t o discuss a number of chemical products worthy of consideration but this cannot be done within the limits of this address. Not all the items in the chemical schedule have an equal claim t o legislative assistance. A few have none. Each should be considered on its own merits, keeping in mind the advantages of production, the availability of foreign supply, the needs of the American consumer, and the diversification and development of the structure of our industrial life. I shall speak specifically of the industry producing coal-tar products, for I regard it as a clear case deserving of legislative help.
40 1
Before hostilities ceased, Great Britain had declared the industry producing synthetic dyes essential to her national wellbeing. For its protection she has made a radical departure from her traditional policy of laissez faire in trade. She has provided state aid for the dye industry in the form of loans and grants for buildings and research. The importation of all dyes is prohibited except under license granted by a licensing committee. No dye is to be imported which the domestic industry is able to supply or for which an adequate substitute is made in the country. I believe that such a plan has been suggested as desirable for this country. For my part, I cannot regard it with favor. I n Great Britain the plan is in the early stages of experimentation. There the firms are comparatively few and the government is closely associated with them in the enterprise. I n the United States our industry is too diversified and varied, the problems of administration too vast, the political considerations too uncertain to warrant meeting the dye problem with prohibition, importation licenses, and direct federal supervision. The alternative is a tariff which will equalize, with a fair margin, the conditions of competition between this country and abroad. The rise of the dye industry has given a new significance to the “infant-industry’’ argument for the tariff. I n many phases of research and engineering, this industry in the United States is in the experimental stage. The selling of the German patents to the Chemical Foundation, Inc., by the Alien Property Custodian is of great assistance but we are not as yet in a position to compete on an equality with the old well-established concerns abroad. It is first necessary to determine by tireless and expensive experiment the best conditions for the manufacture OF each product and to train a staff to put into effect the results of such experimentation. Although American chemists deserve congratulations on their success in making so many varieties of dyes, nevertheless, many important and much-needed dyes are not yet being made in the United States An encouraging sign is that the American dye industry is not slavishly following the methods of Europe. Already American chemical engineers are installing larger units than were ever used abroad. Mechanical stirrers are replacing hand stirrers and pipe lines are replacing buckets. I n the end American mechanical genius will surely bring supremacy in the design and operation of equipment. An insight into the structure of the molecule, such as comes t o a chemist only after long training, is necessary to make new dyes which which will surpass the products of nature in quality. The rapid progress of this new dye industry is sufficient proof that America possesses chemists of a caliber t o win success in this more difficult field. The American industry, however, cannot be expected to do in four years what Germany has done in forty years. During its development even the advocate of free trade would admit that the new industry is entitled t o legislative consideration. Assistance t o the dye industry may also be justified, from a national standpoint, on the ground that the industry is essential to both our military and industrial organization. It is well known that the preliminary processes for making certain dyes and high explosives are identical and that the machinery and technical staff of a dye plant may with comparative ease be turned t o the production of explosives. The war has taught us also that i t is not a wise policy to have our great textile and other dye-using industries rely wholly on foreign sources for their dyes. Finally, I regard the dye industry as necessary t o the normal development of our industrial life. Diversification of industry develops the productive power of our nation. It awakens the spirit of invention and enterprise. It calls into play latent talents. The progress of the dye industry has demonstrated how these conditions come about, and I believe that we should recognize and maintain the industry as a desirable and permanent part of our industrial structure.
’
40 2
T H E J O U R N A L OF I N D U S T R I A L A N D E N G I N E E R I N G C H E M I S T R Y UNFAIR METHODS OF
COMPETlTloN
A tariff designed to maintain American industries-not only the dye industry, but others equally entitled to considerationshould be supplemented with laws carefully devised to prevent unfair attacks on them against which a tariff, unless it is prohibitive, affords no safeguard. A reasonable tariff and adequate legislation against dumping and other unfair practices go together. Unfair competition-commercial bribery, deceptive labeling, full-line-forcing, and other practices-can be prevented by our courts and particularly by the Federal Trade Commission in all cases where the offending parties can be reached by legal process It is not these cases which are grounds for concern. It is those directed by individuals in foreign countries beyond the jurisdiction of our domestic tribunals. Dumping, that is, selling in this country a t a price less than that which prevails in the country from which the goods are exported, and similar practices can often be dealt with only by means of additional tariff duties or prohibition. For years our law has provided for countervailing duties to be levied on bounty-fed products which are imported into the United States. These afford protection against one form of dumping In the Act of September 8, 1916, a provision for a double duty, to be assessed against goods improved under a full-line-forcing agreement, was enacted. At the same time an attempt was made to deal with the dumping evil. It was declaied criminal t o dump goods systematically into the United States with the intent of destroying, injuring, or preventing the establishment of an American industry. But some additional measures are needed. Canada was a pioneer in the, enactment of anti-dumping legislation. Her act provides that in the case of articles exported to Canada of a.kind made or produced in Canada, if the export or actual selling price t o an importer in Canada be less than the fair market value of the same article when sold for consumption in the country whence exported, there shall, in addition to the regular duties, be levied, collected, and paid a special duty. I%ffective administrative machinery has been devised for enforcing this law. It is comparatively simple and in Canada has proved effective. It is, however, inflexible and tends to increase the burden on the Canadian consumer beyond the point necessary to protect the Canadian producer. Another method for handling dumping is suggested by the inadequate American legislation of 1916. In order to be effective this law should be modified both in substance and procedure. A t the present time it prevents only those fornis of dumping wherein the intent of the foreigner is to destroy or injure, or prevent the establishment of an American industry. I t should cover, however, not only such intentional unfair acts of foreign competitors but also all selling in the United States a t prices below those that prevail generally abroad. When an American producer is injured it makes no difference to him what the intent of the foreign rival is. The result only is significant. In procedure, also, this law of 1916 should be more flexible. At the present time the law makes criminal the type of dumping which it prohibits and places its administration under the Department of Justice. There are objectionable cases of dumping, however, which cannot be proved under the strict procedure of criminal law. Nor is it always possible to bring the offending party before our courts as he may be in another country. The criminal provisions of the law should be supplemented by a law which would authorize the President to levy by proclamation additional duties on goods which are being systematically dumped into the United States, or to prohibit their importation, in case he has reason to believe that the result will be to injure, destroy, or prevent the establishment of an American industry. The law might also be made to cover other unfair practices, such as full-line-forcing and deceptive labeling,
Vol.
11,
No. 5
which are only partially provided against now. The United States Tariff Commission, already authorized to investigate dumping, should be designated to hear and consider complaints and to report its findings to the President for his consideration and action. A law containing these provisions would be more flexible than the Canadian method. It could be adapted in its administration t o meet effectively every objectionable case. This power t o prevent unfair practice by proclamation a t the discretion of the President, together with the power of the Federal Trade Commission to prevent all unfair methods of competition done by persons who can be reached by its legal processes, should provide sufficient security for American industry and prevent effectively all unfair attacks upon it. INVESTIGATlONS OP THE TARIFF CONMISSION
The new conditions in the chemical industries which confront us require not only a consideration of policy but, as I have said, an investigation of the facts. The Tariff Commission has undertaken this task. We are collecting and analyzing data on the chemical industries in so far as such information bears on tariff and kindred subjects. We nced the codperation of you and of every manufacturer and chemist. Conditions in the couatry-both political and economic-led the Tariff Commission, soon after it was established, to give an important place to the investigation of coal-tar products. Our reports, already published, have dealt with two aspects of the problem arising out of the dyestuffs tariff act of 1916. We were directed by the President to take the census of intermediates and dyes which will assist him in determining whether the special rates provided in the present dyestuffs tariff are to continue in effect after the expiration of the five-year period (September 8, 1921). Our investigations were then directed toward improving the classification and making more effective the dyestuffs tariff act of 1916. Our report on this subject is now before Congress. It discloses many ways in which the obvious intent of Congress in passing the act of 1916 can be evaded. It suggests forty-five amendments to the law which we believe will improve the classification, prevent evasions and assist in curbing unfair methods of competition. When Congress takes up the revision of the tariff on intermediates and dyes, fhis report will provide the structure of the law framed with scientific and technical accuracy. The chemical investigations of the Tariff Commission, however, have not been confined to coal-tar products. The wider problem of the reclassification and revision of the whole chemical schedule of the tariff act in order to meet the conditions of the reconstruction period has been constantly before us. We have in our files, available for the use of Congress, valuable information on many branches of the chemical industries We have prepared for early publication reviews of different phases of the chemical tariff. One of these reports, for example, dealing with a group of acids covered by paragraph I of the tariff act is practically ready for the printer. It contains discussions of boric, formic, oxalic, citric, lactic, tartaric, tannic, gallic and pyrogallic acids. In the case of each commodity or group of closely allied commodities, we have prepared an industrial survey. These constitute the chemical section of our tariff information catalog. In each of the encyclopedic units we have attempted to assemble and to edit carefully the available information which is pertinent in tariff making. Statistics on imports, exports, production, and prices are, of course, being arranged in a readily usable form. The nature and sources of raw materials, a brief nontechnical discussion of the processes of manufacture, and the uses of the commodity are stated. I n addition, there is a review of the competitive conditions in international trade, a discussion of the tariff history, and a compilation of the rreasury and
T H E J O U R N A L OF I N D U S T R I A L A N D ENGINEERING C H E M I S T R Y court decisions relating to each article. A large number of these surveys are completed or in process of preparation, but much remains to be done. Completed surveys include most of the heavy chemicals, chlorine products, fertilizer materials, wood distillation products, sulfur, barium salts, thorium nitrate, and many drugs. PROJECTBD INVESTIGATIONS
403
materials. In many cases, such as the manufacture of caustic soda and chlorine, joint products are secured from the same raw materials and operations. The ratio to be used in subdividing the joint costs to the different products is largely arbitrary. We have found that different companies use different ratios, If one of the joint products is sharply competitive in the international markets and the other is not, the ratio used in determining the cost of each becomes of great significance in tariff making. Still another perplexing problem is the best way t o bring the results of our investigations to the attention of Congress without disclosing publicly the cost data of individual manufacturers. We hope to work out a plan of stating the unit costs in the form of averages or ranges without disclosing the figures of individual companies., A general statement may also be made showing the fraction of the total cost chargeable to labor, materials, and overhead. The selection of the products to be investigated constitutes another problem. We are agreed that a representative list of intermediates and dyes should be studied but which particular intermediates and dyes are to be selected is still an open question. Other products for detailed investigation will probably be chosen from this list: barium salts, thorium nitrate and incandescent mantles, citric acid, caustic soda, and chlorine and chlorine products. The Tariff Commission is fully conscious of the difficulties which lie in the path of the proposed investigations of costs and prices. I have suggested only a few of the industrial and accounting questions involved. We need-we invite-the cooperation and active assistance of the chemists and manufacturers whose closeness t o the problems makes their advice invaluable.
For many articles these industrial surveys will provide adequate information for the tariff maker. Policy and sometimes the amount of tariff, if any is to be levied, can be determined from the careful analysis of the chief facts of production, trade, and consumption. I n the case of other articles, however, these surveys are not sufficient. A more detailed investigation is necessary, particularly on contentious articles. The Tariff Commission is, therefore, taking steps to investigate domestic costs and domestic and foreign prices of certain chemical products. We realize that the problem of coal-tar products-to take a specific case-is not completely solved by showing, as we have done, how the present law may be made more effective. Congress may think that conditions require a revision of the tariff rates. Costs and prices have played a large part in American tariff controversies. I consider the comparison of domestic and foreign costs or of domestic costs with foreign prices of primary value in tariff making, for they enable the rates to be made to equalize effectively conditions of competition between the United States and abroad. The investigation of domestic costs alone, even, has its value. It did not seem wise to the Tariff Commission to undertake during the war extensive cost investigations. Conditions were abnormal and the results would have been of doubtful significance. We are now, however, beginning t o make plans for analyzing the basic facts of certain A PROBLEM OF THE PRESENT industries by studying costs and prices. Unfortunately, it Let me, in conclusion, emphasize the pressing importance will not be possible, except in rare instances, to ascertain foreign of the situation in which the war has left the American chemical costs. Although desirable, foreign costs are not indispensable. If we have domestic costs properly subdivided into raw materials, industries. That it be met promptly and adequately is neceslabor, and overhead expenses, including depreciation, they and sary not only because men have invested, chemists have inknown prices of raw material, wages, and other expenses in vestigated, and labor forces have been assembled and trained, foreign countries may be used as a basis for estimating foreign but also because many of these industries are essential, vital costs. Then, too, the value in tariff making of a comparison parts of our industrial life. I have endeavored to make clear of domestic costs with foreign prices must not be overlooked. the measures of commercial policy which should be adopted It is the foreign price not the foreign cost with which the domestic and the lines of investigation which should be pursued. The manufacturer has to compete. But we must know the domestic determination of the former, I need hardly state, rests with Congress; the latter is the peculiar task of the Tariff Commission. cost in order to know what tariff is necessary to enable the domesYou may be assured that so far as we can we shall do our part tic industry t o compete on an equality and stay in business. A study of domestic costs will also be valuable in determining in this important work of reconstruction. the proper relationship of tariff duties on allied products. For example, a cost study will assist in determining the relation GERMAN METHODS AND OUR PRESENT SITUATION between the duties on intermediates and dyes, and it may disB y JOSEPH H. CHOATE,JR. close the necessity of dividing these products into subgroups Alien Property Custodian O 5 c e , Washington, D. C. carrying different rates of duties. I come before this formidable gathering to-day with trepiThe appropriation of the Tariff Commission is at present on a wartime basis. We hope and expect that after July first dation. It is a bold and brazen man, in this day of specializafunds will be available which will enable us to begin cost and tion and division of labor, who brings coal to Newcastle, and price investigations on a fairly comprehensive scale. Much that is what you have asked me todo. There can hardly be preliminary work, however, may be done in the meantime. one among you who does not know from personal and often It is here we need your counsel and cooperation. You will, bitter experience, more about German methods in the Amerof course, appreciate that it is not sufficient to secure merely ican chemical industry than I do. All that I can offer is a total costs. It is essential to subdivide material, labor, and sketch of the general view obtained by us in the Alien Property overhead costs. Considerable detail even in the cost of materials Custodian's office, with the hope that though each of you knows is essential in many cases where the raw material is an imported some of the facts better than we, each will still find in it something article, in order to determine the proper relationship between unfamiliar. the duty on the raw material and the finished product. Citric At the outset we were in a state of lamentable ignorance. acid is a case in point. Citrate of lime from which the acid is None of us knew dyes from inks, or sulfo-acids from sulfuric made comes almost entirely from abroad. The tariff duties acid. We know little more now of the technical side of the on these two related products can be determined satisfactorily industry, but thanks to the patriotic labors of many of you only when we know the yields of citric acid from a unit of citrate gentlemen (notably your past president, Dr. Herty) who sacriof lime and also the portion of the total cost charged to raw ficed no end of time and toil in the Herculean task of educating
