CHAPTER II

DOMESTIC MANUFACTURE.

SECTION 1. RAW MATERIALS AND THE TRADE IN THEM.

(A) SOURCES OF WOOL SUPPLY.1

With respect to the material of chief value, wool, the requirements of American carpet manufacturers in the matter of quality differ in no particular from the requirements of such producers the world over. The type of fiber desired is a strong, even if coarse, staple possessed of considerable resiliency and luster and available at a low price.

Wools of this character have never been produced to any appreciable extent in this country. As long ago as 1866 a brief prepared by American carpet manufacturers stated: "In the manufacture of carpets no domestic wools are used, for the reason that they are not only too costly but too fine to make a serviceable fabric." 2 In fact, from the time that the production of carpets on any considerable scale was launched in this country up to the present day the proportion of domestic wools normally consumed has been negligible. Even under the stimulus of a duty on carpet wools (Class III wools), which at times has amounted to as much as 40 per cent ad valorem, no domestic production of wool suitable for the carpet trade has developed, the reason being that the return from wools of superior quality, which could be produced with little greater cost, was much larger. Some small quantities of abnormally low-grade, coarse domestic wools, particularly from the Southwest, have been employed in this manufacture, and some noils and wastes from superior wools have been used in the production of filling yarns; but the ratio of these materials to total consumption of wool in the carpet industry has been so low that the statement of the carpet manufacturers in 1866 has always remained substantially true.

Some changes have occurred in the sources of supply from time to time. The chief sources during the years immediately preceding the World War were China, the United Kingdom, Russia, Turkey, and the Argentine. The British East Indies should perhaps also be mentioned as of some importance. The United Kingdom held the primary position from 1891 up to 1904, but China has come first in subsequent years, owing in part to the increase in direct shipments from China to the United States, but mainly to the change in preference among domestic consumers in favor of China wools. Furthermore, wool from other sources, such as the British East Indies and

1 See Appendix A for statistics of imports of carpet wool.

2 Statement of Facts on Carpet Manufacture, presented to United States Revenue Commission, 1866, p. 4. Italics as used in the original.

Turkey, which used to come almost wholly through the British markets, now comes direct.

The United Kingdom is the original source of a substantial quantity of carpet wool, chiefly the so-called black-face wool from the hills of Scotland. It has been estimated that some 9,000,000 pounds of this wool were exported annually to the United States during the years 1906–1915. It constitutes, therefore, somewhere between 40 and 50 per cent of the wools shipped from the United Kingdom to this country.

At the present time (1922), though to a less extent than during the war, there is being used in the American carpet industry a considerable quantity of low cross-bred wools, principally from South America. The abnormal condition of the market is in part due to the exchange situation which makes it difficult to procure carpet wools from China and India (though the decline in silver exchange since 1920 has brought an improvement in this situation); it is also due in part to the difficulty or impossibility of obtaining wools from southeastern Europe and Russia; and in part to the relative oversupply of low cross-bred wools in the market, wools which would normally go into the manufacture of wool cloths, overcoatings, and the like. For these reasons it has become temporarily advantageous to utilize River Plate and other South American wools of the character indicated in place of the wools usually consumed. It is generally admitted, however, in the carpet-manufacturing trade, that the cross-bred type of wool is not well suited to this use and that the quality of the fabric is adversely affected. It is believed that as soon as the normal supply of wools from China, Russia, and Turkey becomes available the trade will revert to them. Total imports from South American countries, such as Argentina and Chile, increased markedly during and immediately after the World War, but have declined somewhat since then. In the case of Argentina the increase followed almost immediately upon the outbreak of hostilities, rising from some 2,000,000 pounds in 1913 to over 10,000,000 pounds in 1915, and to more than 14,500,000 pounds in 1916. Even in 1921 (calendar year) imports were 10,181,420 pounds. The increase in the case of Chile was even more radical but did not reach its maximum as quickly. From 16,000 pounds in 1913 it rose to a level of over 3,000,000 pounds in 1916 and 1917, while by 1919 it had reached the figure of over 16,000,000 pounds, only to decline thereafter to a negligible quantity in 1921. These changes were chiefly due to the diversion to American ports of common as well as cross-bred wools, which had previously gone to Europe.

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(B) EFFECT OF THE TARIFF ON IMPORTATION OF CARPET WOOLS.

An examination of the statistics showing the imports of carpet wools indicates further that the tariffs upon such wools have had little effect upon the quantity brought into this country. The average importations under the several tariffs were as follows:

• In the case of China, indeed, this recovery appears already to have taken place. Domestic imports from China-which did not fall off during the war to the same extent as from Russia and Turkey-were larger during the calendar year 1920 (37,182,717 pounds) than during any other year since 1900.

Table 1, average imports for consumption, per year of 365 days, of Class III wool, under various tariff acts, are found to contrast as follows:1

1 This contrast of imports for consumption of Class III wools (including Class III camel hair) under five tariff acts covers the priod of 11,673 days from Oct. 6, 1890, to Sept. 21, 1922, inclusive.

2 Duties collected per year under the acts of 1890, 1897, and 1909 averaged $3,485,808, and the equivalent ad valorem rate during these three dutiable periods averaged 37.98 per cent ad valorem. Table 1 is a condensation of a more complete table, showing imports for each year, given in Appendix A.

It will be observed that the average annual importations under the free-wool provisions in the tariffs of 1894 and 1913 were little different from the imports under the so-called protective tariffs of 1890, 1897, and 1909.

The fluctuations in importations will be seen, if the imports year by year are examined, to follow more closely the movement in general economic conditions of the country than in tariff changes. After the economic crises of 1893, 1900, and 1907, there were marked drops in the total amounts of wool brought in.

One important conclusion may be drawn from the peculiar feature of the importations referred to-the failure of the inward movement to respond to a reduction in tariff rate, together with the known lack of a competitive source of supply in the United States; namely, that the duties levied in preceding tariffs on the imported material have been passed on by the domestic users to the ultimate consumers of the completed carpets. As a revenue measure, the duty on carpet wools no doubt has some points in its favor; but it may be noted that carpet manufacturers have to a limited extent been handicapped by the import duties on Class III wcol, through the necessity of carrying their stocks of wool in process of manufacture at the higher, duty-paid prices.

(C) ORGANIZATION OF THE WOOL TRADE.

The chief market for carpet wools in the United States is Philadelphia, although New York and Boston are centers of some importance. This localization follows that of the carpet manufacture. The latter is concentrated in a peculiar degree in and about Philadelphia, with scattered factories in the States of New York, Connecticut, and Massachusetts.

The firms dealing in carpet wools are to some extent specialized, handling wools from particular regions such as China and East India. Other firms are dealers in a wide variety of carpet wools and sometimes in wool of better quality. A few firms in the trade possess international connections, having agents and offices distributed over most of the wool-producing and wool-consuming countries of the world.

Importing dealers, except those with offices or agents in the woolproducing countries, purchase mainly from exporting merchants in

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China, Russia, Argentina, and the other carpet-wool areas. The latter collect the wool from the interior, through native dealers or through their own agents; sometimes grade it roughly and bale it, and direct its shipment to the consuming countries. Sales effected in this way are the result of private negotiations between the exporters and the importers. Auctions are another source of supply, especially of East India wools. These auctions, which regularly occur in Liverpool, have in the past been the chief means of distribution for the low-quality India wools to the wool-consuming countries of England, the Continent, and the United States. But in two respects the trade in wools through these auctions has been altered during recent years. The larger American carpet manufacturers have sent their own representatives to Liverpool and have thus purchased the wool directly instead of through American importing merchants. Again, shipments of Indian wool directly to American ports and American importing merchants have increased, and the Liverpool auctions are not likely to play the part in the carpet-wool trade which they have played in preceding decades. One effect of these changes should not escape attention. Under the earlier situation, the English manufacturers and merchants enjoyed certain appreciable advantages. Not only were they able to secure first choice in the wools put up at these auctions, but, by virtue of proximity to the sales, transportation charges to the British carpet factories were substantially less than the charges, including those for lading and transshipment, which American purchasers had to pay. Through direct dealings with Indian, Russian, or other merchants, as well as by agents located in the various carpet-wool countries, American importers are enabled to compete for such wools at their places of origin; while by transportation directly to this country there is a considerable saving in freightage and other costs. By representation at the Liverpool sales, American manufacturers, of course, avoid the payment of intermediate profits to merchants and brokers. In consequence of these changes in procedure, the competitive position of American carpet manufacturers has been materially strengthened, as far as the acquisition of wool supplies is concerned.

(D) TRADE IN OTHER RAW MATERIALS.

Raw materials other than wool are purchased by American carpet manufacturers, with hardly an exception, in the form of yarns already spun. The chief of these yarns, at least from the point of view of weight, is jute. The raw jute is produced wholly in India, whence it is imported to this country. Some small importation of yarns, chiefly from Scotland, has occurred in the past-for example, 1,338486 pounds were imported for consumption in 1914-but as the consumption of jute yarns in the domestic carpet industry in that year was approximately 59,000,000 pounds, the importation would not have played any considerable part had it all gone into the production of carpets. Obviously, therefore, the jute yarns used in the American carpet industry are, in the main, manufactured in this country.*

Cotton yarns, which are next in importance, are of domestic origin both with respect to the raw material and to the fabrication. Practically no cotton yarns for the carpet trade are imported.

* In the calendar year 1921, it is true, imports of jute yarn amounted to 9,391,090 pounds-an unprecedented importation--but even this was but a minor portion of the total consumption.

The flax employed in the manufacture of linen yarns, the only other material of major significance, is practically all produced abroad. Before the war, Russia was the principal source of supply, while lesser supplies, though generally of superior quality, came from Ireland and Belgium. It has been imported in the unmanufactured form, and worked up in domestic flax-spinning mills. There has, to be sure, been substantial importation of linen yarns, but not of the counts commonly employed in the carpet industry. Hemp yarns (generally of domestic manufacture, from Italian hemp) are also used to some extent.

This peculiar situation of the American carpet manufacture with respect to its materials should be noted; aside from perhaps a small amount of domestic hemp, only the cotton used in the industry is produced within the United States, and that forms probably less than 15 per cent of the total weight of materials consumed. Wool, jute, and flax are all of foreign origin.

SECTION 2. METHODS AND MECHANICAL EQUIPMENT.

(A) INVENTION OF MACHINERY.

The picture presented by a summary (necessarily omitted here) of the chief inventions in the carpet industry is extraordinary. Few American industries can show such a record of ingenuity and independent development; in some ways the most encouraging feature of the situation is the continued effort of the American manufacturers and machine builders and their continued success. They are not without competition from Great Britain, but apparently they are able to hold their own. With respect to the manufacture of the machines actually in use the situation is not so favorable.

(B) DEVELOPMENT OF WIDE LOOMS.5

The development of wide looms in the carpet industry forms a special feature in its history. It marks the definite ascendancy of the rug production, as contrasted with the carpet or roll-goods manufacture; and it has been the source of greatly increased expenditure by carpet mills for necessary equipment. To be sure, a majority of the looms used in the carpet industry, whether in the United States or in Great Britain, are still of the narrow type: but the wide type is spoken of throughout the trade as the "coming" loom. In the American industry, 3,286 "rug" or wide looms were reported in 1914, as compared with 6,423 "carpet" or narrow looms. In the mills from which the commission secured direct returns of equipment, 1,854 rug looms were reported, and 4,831 carpet looms. "