1894 the duty is exclusively ad valorem, and therefore our whole attention may be directed to undervaluation; and is it not true that there has been an incentive to undervaluation which has resulted, in practice, in there being a smaller proportion of the duty collected than there was under the other law?

Mr. JUSTICE. Yes, sir; that is a correct statement of the facts.

The CHAIRMAN. And is not that a fact that you have to take into consideration?

Mr. JUSTICE. Yes; it is a very grave matter, involving the opening or closing of our mills, upon which we depend for a market for domestic wool.

I will quote in this connection from a pamphlet which I shall hand in, marked Appendix A, to which I now allude, and which bears directly and forcibly on that point. It is entitled "Prophesy and Experience," and is from the September number of the bulletin of the National Association of Woolen Manufacturers. It is a most comprehensive and clear statement of this part of the subject, and as well a most earnest plea for the woolgrower from the standpoint of the manufacturer, as well as for the factory operative, and for the man who employs him. For conciseness and clearness I have seen nothing like it, and for this reason I desire to have it included in my argument. On page 14 of Exhibit A you will find that the average importation of cloth under the first three years of the McKinley law was about 13,000,000 pounds or a total of 41,700,000 for the whole period. The average value of these importations was about $12,300,000 per year, or a total of $37,019,000. Comparing the year 1895 with the whole period of the McKinley law, or rather the years 1891, 1892, and 1893 (for everyone admits that the law was a dead letter after March 1, 1893, and that the Wilson law was discounted after that date, and what happened between March 1 of that year and the time when the Wilson law went into effect is of no value for a basis for estimating its utility), we find that the importations amounted to over 40,000,000 pounds, with a custom-house value of about $25,000,000, which was an increase of 200 per cent in pounds over the annual average of the first three years of the McKinley law, but the value is only doubled or increased 100 per cent.

The CHAIRMAN. And wools had not fallen abroad?

Mr. JUSTICE. No, sir. On the other hand, they had advanced in price abroad. As already shown Port Phillip fine advanced in London 5 cents per pound between the first and the last of the year 1895, when the effects of the opening of our markets was fully felt abroad, as you will see by tables appended.

[Justice, Bateman & Co., circular, August 1, 1896.]

THE EFFECTS OF FREE WOOL.

In Table A is a schedule of twelve leading grades of American wool, with the prices in the markets of Philadelphia, Boston, and New York, on August 1, 1892, during the second year of the McKinley law, when that law was in full and undisturbed operation. In the next column are the prices in the same markets at this date, the second year of the Wilson-Gorman law. In the third column is the number of cents per pound decline caused by the removal of the McKinley duties. The average decline by the substitution of free trade for McKinley protection on wool has already been 424 per cent, and prices are still falling. The average price of wool in London, for wool of the same kind and quality, from 1868 to 1894, was 51 per cent lower than in the protected markets of the United States during that time. This difference has now been overcome by the domestic decline and the foreign

advance. The removal of protection, which caused American prices to fall, stimulated the London wool market, and the latter has been advancing during the period that American markets have been declining. The London prices for foreign wool of the same kind and quality as the domestic are shown in Table B. If it was not the removal of the McKinley duties which caused this decline in American wools when the markets of the world were advancing, what was it?

TABLE A.-American wool, Philadelphia and Boston prices.

The CHAIRMAN. Is not that fact a demonstration that under exclusively the ad valorem system there have been enormous undervaluations, to an extent unknown before?

Mr. JUSTICE. This fact alone would indicate an undervaluation of about 33 per cent, because here is evidence that the quantity has increased three times, or thribbled, and the values have only doubled. That will be found on page 14 of Exhibit A, which I submit, and to which I again call your attention as most important, as showing where the Government is losing its revenue.

There is just one more point about which I wish to speak, and then I will close, thanking the committee for its indulgence, and apologizing to it for having taken up so much more time than was originally assigned to me for the discussion of this subject. However, this is an important matter, and if it were printed only without any oral explanation, a good deal of its force would be lost.

In making a new tariff law there seems to be a general impression among the public that you must make a conservative bill, which means low taxation, but they lose sight of the fact that the increase in the national debt under President Cleveland's Administration will

require higher taxation per capita than was necessary under the McKinley period. By the time the new revenue law goes into operation the increase in the national debt threatens to approach $600,000,000. I arrive at these figures in this way: There were $260,000,000 of bonds sold. The interest on those bonds up to the time they mature will be over $240,000,000. This interest has to be paid out of taxes before the bonds are paid, which makes over $500,000,000 increase in the national debt without adding the deficit. Now, at the rate of the increasing deficit which is going on (you know better than I how much a month) that deficit will bring the total debt up to near $600,000,000 by the time the new law can be framed and passed. The people will therefore have to submit to a higher per capita taxation than under the McKinley law, whether they like it or not. That is the price they pay for the experiment of a tariff for revenue only, and that kind of policy.

Mr. GROSVENOR. If they have a luxury they must pay for it.

Mr. MCMILLIN. You do not take into account that between $100,000,000 and $200,000,000 of the proceeds of the bonds are on hand now to be used in any way the Government sees proper.

Mr. JUSTICE. I append herewith my suggestion of the proper sort of a tariff law. It provides at the start for 2 cents per pound less duty on wool of the first class, and 8 cents per pound less duty on cloth than was imposed by the McKinley law. As the foreign wool supply is rapidly increasing foreign prices must fall. They will undoubtedly go lower than ever before soon after a duty is imposed, when our demand ceases, for in order to avoid the duties our importers and foreign consignors will have shipped in the better part of a two years' supply in advance of the new law. As wool advanced 5 cents per pound in six months after our duties fell and we began to buy freely of them, it will decline at least this much when we cease for a period to buy. Before we again begin to import the price, in my judgment, will be more than 5 cents lower than it is to day, so that more than half of the 9 cents duty provided will then be lost in the increase in the domestic price. The increase in the price of wool to the domestic grower will then be only 4 cents above its present value. When this occurs he will be disappointed, and will not be satisfied to permit the new law to be permanent. There must therefore be provided an annual increase of 1 cent per pound for each fiscal year ending June 30 for four years to come, as is indicated in the wool bill which I herewith suggest. This plan makes the cost to the consumer, landed in New York of imported wool and imported cloth with duty paid, less than the average cost of the same articles for the ten years ending with the McKinley law in 1894, when the duty on wool was 11 cents per pound and the duty on cloth 44 cents per pound.

The following table, based on the proposed graduated duty and also based on the average London price for ten years ending with 1894, with the probable price at the end of each subsequent fiscal year, will show that the cost to the American consumer at the end of the fiscal year 1898 on imported wool, in comparison with the McKinley period, will be 2 cents per pound less on wool and 8 cents per pound less on cloth; in 1899 it will be 3 cents per pound less than the McKinley period on wool and 12 cents per pound less on cloth; and at the end of the fiscal year 1900 it will be 4 cents per pound less than the McKinley period on wool and 16 cents per pound less on cloth; and at the end of the fiscal year 1901, when the duty will continue without change, the cost to the consumer will be 5 cents per pound less than in the McKinley period on wool and 20 cents per pound less on cloth.

SUGGESTED WOOL SCHEDULE.

All wools, hair of the camel, goat, alpaca, and other like animals shall be divided for the purpose of fixing the duties to be charged thereon into the three following classes:

Class one, that is to say, merino, mestiza, metz, or metis wools, or other wools of Merino blood, immediate or remote, Down clothing wools, and wools of like character with any of the preceding, including such as have been heretofore usually imported into the United States from Buenos Ayres, New Zealand, Australia, Cape of Good Hope, Russia, Great Britain, Canada, and elsewhere, and also including all wools not hereinafter described or designated in classes two and three.

Class two, that is to say, Leicester, Cotswold, Lincolnshire, Down combing wools, Canada long wools, or other like combing wools of English blood, and usually known by the terms herein used, and also hair of the camel, goat, alpaca, and other like animals.

Class three, that is to say, Donskoi, native South American, Cordova, Valparaiso, native Smyrna, Russian camel's hair, and including all such wools of like character as have been heretofore usually imported into the United States from Turkey, Greece, Egypt, Syria, and elsewhere, excepting improved wools hereinafter provided for. The standard samples of all wools which are now or may hereafter be deposited in the principal custom-houses of the United States, under the authority of the Secretary of the Treasury, shall be the standards for the classification of wools under this act, and the Secretary of the Treasury shall have the authority to renew these standards and to make such additions to them from time to time as may be required, and he shall cause to be deposited like standards in other custom-houses of the United States when they may be needed.

Whenever wools of class three shall have been improved by the admixture of Merino or English blood from their present character as represented by the standard samples now or hereafter to be deposited in the principal custom-houses of the United States, such improved wools shall be classified for duty either as class one or as class two, as the case may be.

The duty on wools of the first class which shall be imported washed shall be twice the amount of the duty to which they would be subjected if imported unwashed; and the duty on wools of all classes which shall be imported scoured shall be three times the duty to which they would be subjected if imported unwashed.

Unwashed wools shall be considered such as shall have been shorn from the sheep without any cleansing; that is, in their natural condition. Washed wools shall be considered such as have been washed with water on the sheep's back. Wool washed

in any other manner than on the sheep's back shall be considered as scoured wool. The duty upon wool of the sheep or hair of the camel, goat, alpaca, and other like animals which shall be imported in any other than ordinary condition, or which shall be changed in its character or condition for the purpose of evading the duty, or which shall be reduced in value by the admixture of dirt, or any other foreign substance, or which has been sorted or increased in value by the rejection of any part of the original fleece, shall be twice the duty to which it would be otherwise subject: Provided, That skirted wools as now imported are hereby excepted. Wools on which a duty is assessed amounting to three times or more than that which would be assessed if said wool was imported unwashed, such duty shall not be doubled on account of its being sorted. If any bale or package of wool or hair specified in this act imported as of any specified class, or claimed by the importer to be dutiable as of any specified class, shall contain any wool or hair subject to a higher rate of duty than the class so specified, the whole bale or package shall be subject to the highest rate of duty chargeable on wool of the class subject to such higher rate of duty, and if any bale or package be claimed by the importer to be shoddy, mungo, flocks, wool, hair, or other material of any class specified in this act, and such bale contain any admixture of any one or more of said materials, or of any other material, the whole bale or package shall be subject to duty at the highest rate imposed upon any article in said bale or package.

The duty upon all wools and hair of the first class shall be 9 cents per pound until June 30, 1898, then 10 cents per pound until June 30, 1899, then 11 cents per pound until June 30, 1900, and 12 cents per pound thereafter, and the duty upon all wools or hair of the second class shall be 12 cents per pound.

On wools of the third class and on camel's hair of the third class the value whereof shall be ten cents or less per pound, including charges, the duty shall be four cents per pound.

On wools of the third class and on camel's hair of the third class, the value whereof shall exceed ten cents per pound, including charges, the duty shall be eight cents per pound.

Wools on the skin shall pay the same rate as other wools, the quantity and value to be ascertained under such rules as the Secretary of the Treasury may prescribe.