stood as follows: Machine finish, 14 cents per pound; sized and supercalendered, 15 cents per pound; coated and enameled, 18 cents per pound. The high level lasted through October, but with the coming of the business depression prices decreased rapidly. The decrease continued slowly during 1921 and the first part of 1922 until in April, 1922, they stood as follows: Machine finish, 6 cents per pound; sized and supercalendered, 6.7 cents per pound; coated and enameled, 8 cents per pound. After April, 1922, prices began to increase slowly. In the latter part of the summer of 1922 all prices were withdrawn in anticipation of a considerable increase. TARIFF HISTORY. Tariff acts, 1883 to 1913.-Until 1897 the tariff laws did not distinguish newsprint from book paper. The acts of 1883 and 1890 both subjected unsized printing paper to a 15 per cent ad valorem duty and sized or glued printing paper to a 20 per cent ad valorem rate. The act of 1894 made this rate 15 per cent for all printing paper, unsized, sized, or glued. The act of 1897 introduced an elaborate sliding scale, newsprint being included mainly under printing paper valued at not above 2 cents per pound. Specific duties were placed on all classes except printing paper valued at above 5 cents per pound, on which the old rate of 15 per cent ad valorem was continued. The actual average equivalent ad valorem duty collected on printing paper under the 1897 tariff in the fiscal years 1907 to 1909 was slightly over 16 per cent in the case of newsprint paper and slightly over 15 per cent in the case of book paper. Thus the act of 1897 made practically no change in the actual average rate of duty collected. The changes since 1897 have been downward. The act of 1909 lowered the duties on newsprint paper and the cheaper grades of book paper, valued not over 4 cents per pound. The Canadian reciprocity act of July 26, 1911, admitted these grades free from Canada. The benefit of this act was extended by court construction to certain European nations under most-favored-nation agreements. Both of these acts, however, retained the 1897 rates on paper valued over 4 cents per pound. The act of October 3, 1913, removed the duties on all printing paper valued up to 23 cents per pound, in which class practically all newsprint was included, and fowered the duty on printing paper worth more than 2 cents per pound, which comprised book paper, to 12 per cent ad valorem. Since then the maximum nondutiable value has been raised twice because of the increasing price of newsprint-once to 5 cents on September 8, 1916, and again to 8 cents on April 23, 1920, with the proviso that in two years it return to 5 cents. Beginning with 1897, each tariff act has contained a provision for countervailing or additional duties or both on printing paper from any country placing duties or restrictions on exports of newsprint or its raw materials. This has been due to the agitation begun in Canada about 1897 to impose an export duty on or otherwise restrict pulpwood shipments to the United States." 8 For the causes of this rise see p. 18. • See Tariff Information Survey, Wood Pulp, for detailed treatment of Canadian provincial pulpwood embargoes. The act of 1897 imposed a countervailing duty on printing paper only in the event of an export duty placed by some other country on pulpwood shipped to the United States. The countervailing duty was one-tenth of 1 cent per pound of paper for every dollar of export duty per cord of wood. The act of 1909 imposed an additional duty of one-tenth of 1 cent per pound on all printing paper valued at not more than 3 cents per pound (newsprint) when imported from a country placing any duty or restriction of any kind on exports of printing paper, wood pulp, or pulpwood. The amount of the export duty placed by the foreign government was added to the United States additional import duty of one-tenth of 1 cent per pound. These extra duties applied only to newsprint. The act of 1913, however, removed the extra duties on newsprint and placed a countervailing duty on printing paper valued above 2 cents per pound (book paper) when imported from any country placing a duty or restriction on exports of printing paper, wood pulp, or pulpwood. The countervailing duty was fixed as the highest export duty placed by the Government in question on newsprint or on an equivalent amount of wood pulp or pulpwood. Effect of the tariff. The placing on the free list of Canadian newsprint in 1911 and of all newsprint in 1913 has unquestionably been a factor in the great expansion of the Canadian newsprint industry in the last decade, and consequently in the rapid increase of our newsprint imports, for it was almost equivalent to providing territory for extending the domestic industry. As shown on page 3 imports increased from 11 per cent of domestic production in 1913 to 65 per cent in 1921. There is no evidence that the tariff on book paper has affected the amount of imports. The slight reduction in 1913 came shortly before the war, during which the already insignificant book-paper imports dropped to almost nothing. CONDITIONS OF FOREIGN AND DOMESTIC COMPETITION. NEWSPRINT. World situation. In the year 1920 consumers throughout the world competed for newsprint paper. The shortage was felt wherever newspaper printing was an important industry. In certain European countries the sizes of newspapers were drastically cut and Government rationing was resorted to. Under conditions like these the newsprint producers of one country need not fear competition from other countries, for every producer, even though his cost of production be relatively high, has a ready market at a profitable price. Consequently, in 1920 the American newsprint industry, aside from its relations with Canada, was practically free from foreign competition. Since the latter part of 1920, however, world demand has not been large enough to absorb the full capacity production of the world's newsprint industry. Particularly in Europe has the decreased demand been felt. As a result, toward the end of 1920, Germany and the Scandinavian countries, in order to keep their mills running, had to look to the United States and to the export markets of the United States. The American newsprint industry quickly felt the effect of foreign competition. Whereas in 1919 imports of newsprint from Europe equaled less than one-hundredth of 1 per cent of domes tic production, in 1921 newsprint imports from Europe equaled 17 per cent of domestic production. Newsprint exports decreased from 8 per cent of production in 1919 to 1.4 per cent in 1921. It was imports from Europe in combination with decreased exports that in the spring of 1922 prevented the unprecedented domestic demand from bringing about a market shortage similar to that of 1920. With newsprint remaining on the free list it is highly probable that imports from Europe will continue. A corporation has recently been formed in New York for the purpose of marketing in the United States the product of certain Scandinavian newsprint mills. As closer contacts between European producers and United States consumers are established, European mills will become better able to suit the exact requirements of United States newspapers. The North American newsprint industry must henceforth reckon on competing in its domestic market with substantial shipments of European newsprint. More important in the long run than the question of the distribution of sales of newsprint among the different countries of the world are the questions: (1) Whether or not the demand of the world as a whole for newsprint is to increase or decrease, and (2) how the world's supply is going to adjust itself to the demand. So far as demand goes, the future seems assured. It may be assumed that as the masses of people in the world become more educated, newspaper reading will steadily expand. The experience the selling world has had with large-scale advertising is such as to make likely an extensive newspaper advertising in the future. The decline in demand for newsprint, although unquestionably taking place in the early part of 1921, was less bound up in the general business depression, which at the start of 1921 had already been prevailing for some months, than was the case with the majority of commodities. It came much later than the fall in general prices and was small in comparison. The adjustment of the industry to the decrease in demand was accomplished with none of the throes experienced in many other industries. At the time the first important decreases in the price of contract newsprint in the United States were announced (late February and early March, 1921) the American industry was reported to be working at practically full capacity. American consumption of newsprint in 1921 was very little less than in 1920, and amounted to considerably more in the first eight months of 1922 than in the corresponding period of 1920. In April, 1922, there was recorded the greatest consumption of any month in the history of the United States up to that time. The demand for newsprint is based on factors somewhat different from those which influence the demand for most other commodities. The average man's purchase of newspapers is perhaps as great in time of business depression as in time of business prosperity, for he ordinarily does not consider decreasing the amount of news he reads as a means of financial retrenchment. In other words, the purchasing power of the eventual consumers of newsprint is a more or less stable affair, influenced more by such factors as an improvement in public education or an awakening of interest in the affairs of the world than by the factors contributing to cycles of business prosperity and depression. Also the demand for advertising space, although intimately connected with business competition, does not necessarily vary with the volume of business being transacted by the advertisers. The expense of advertising is part of the total cost of the production and marketing of a commodity, just as is the cost of raw materials or of labor. However, a depression in the demand for that commodity reacts quickly on the demand for the raw materials and labor entering into that commodity, while the amount of advertising done is not necessarily decreased. It is likely to be large during a period of prosperity, as it was in the spring and summer of 1920, especially when, as then, producers and distributors think they see a buyers' strike on the horizon, yet a business man may find it desirable to advertise most heavily at a time when it is hardest to dispose of his wares. For instance, the record consumption of the spring of 1922 in the United States took place at a time when industrial conditions in general were still depressed. This peculiar position of newsprint paper in relation to demand is reflected in the movement of contract newsprint prices in the United States from July, 1920, to March, 1921, compared with the movements of the prices of other important grades of wood-pulp paper during the same period. Inasmuch as the conditions of supply of raw materials and processes of production are almost the same for the various kinds of paper using new wood pulp as a raw material, the influences reflected by the comparative price movements are almost entirely on the side of demand. The figure above portrays these movements in graphic form. The prices for grades other than newsprint are, in each case, those charged by some particular company for some particular grade made by it, and are used here as representative of the trend of the market for manila and kraft wrapping paper, wood-pulp blotting and tissue paper, and wood-pulp boards during the period concerned. The prices indicated are not in any way to be taken as indicative of the relative values of the different kinds of paper as classes. The price for contract newsprint is the weighted average price of contract standard rolls actually paid by American publishers during the whole of each month concerned. The diagram shows the strength of the newsprint market in comparison with the market for most other grades of wood-pulp paper. Where, in general, the latter sagged deeply and a large number of the mills producing these kinds of paper were forced temporarily to shut down, the price of contract newsprint from domestic mills increased steadily up to January. It decreased a trifle in February and March. However, the average price of Canadian deliveries of contract newsprint to the United States (not shown on the diagram) continued to increase steadily to a peak in March. The fact that the spot price of newsprint in March, 1921, was only about half what it was in the summer of 1920 indicated that the large newspapers had ceased buying in the open market and that the small newspapers, consuming 10 per cent of the newsprint used in the United States, could easily buy their necessary supplies. The decline in the spot price beneath the contract price forecasted a small decrease in the latter, for it naturally initiated a tendency to rely on the spot market for a part of the supply previously purchased on contract. However, it is evident that the amount of additional demand which the spot market can supply without an immediate increase in price, far beyond the level of the contract price, is severely limited; the case is analogous to the movement that would take place between two containers filled with water, one nine times as large as the other, connected by a pipe, the level of water in the smaller being 1 inch or so lower than the level in the larger one. The flow of water resulting would add an inch to the level in the smaller container, but the level in the larger container would fall only one-ninth of an inch. Thus, as far as we can forecast, the world demand for newsprint paper, although not likely soon again to produce such a shortage as in 1919-20, when in a great many lines producers and distributors alike throughout the world were selling on a highly speculative market, is likely to be stable and dependable. The question of supply is perhaps more difficult to forecast. A suddenly increased demand for a commodity with its resulting high prices and abnormal profits, ordinarily calls forth an increase in production. Under this new condition we have manufacturers whose cost of production, had they produced in the days of the older, smaller demand, would have meant producing at a loss. Then, if the demand recedes, these marginal producers are forced out of business, there is an oversupply, and cutthroat competition prevails between domestic producers within a country and between different countries. So goes frequently the course of a shortage in a commodity. In the newsprint industry, however, as we have seen, the transition to a less extraordinary basis was accomplished, at least in the United States, with little temporary maladjustment. One reason is that it takes practically two years to put a new newsprint mill into operation, so that there had not been much opportunity for the expansion of plant capacity to meet the increased demand. Another reason is that when the demand was heaviest certain paper machines normally manufacturing other grades of paper were diverted to newsprint making, although making it often at a relatively high cost. When the demand declined these machines could again be used to make the paper they originally made. There was to this extent flexibility of plant capacity to accord with demand. A more fundamental reason is that the wood-pulp and paper industry of the world has reached a point where it is much harder than in |