No. 63.
Mr. Partridge to Mr. Fish.
Rio de Janeiro, December 22, 1874. (Received Jan. 21, 1875.)
Sir: We learn by the telegraph that the President has proposed to Congress that, in view of the needs of the Treasury, the duty on coffee be re-imposed. Naturally very great interest is felt here in respect of such [Page 100] duty; and frequent inquiries are made of me in regard to the probability of its re-establishment.
The minister of foreign affairs asked me in regard to it on the 14th, and then inquired what had been thought in Washington of the diminution, under the present Brazilian tariff, of the duties on some (he said all) articles imported from the United States. (See my No. 182.*)
I replied that those reductions upon two important articles (kerosene and lard) had not been at all in accordance with our just expectations; but that the Government at Washington supposed they were such as the demands of the Brazilian treasury permitted at present; and that if a duty were imposed now on coffee, it would not be in any way as a retaliatory proceeding against Brazil, but simply because an increased revenue was needed just now in the United States in consequence of the crisis of September, 1873, which had caused a diminution of receipts from other regular sources. And that nothing was more natural or to be more readily expected than that such new revenues should be sought from articles of universal use, and which had been perhaps unduly freed from all contribution. I have also just received a note from the Visconde Caravellas again asking that the reductions made by Brazil on our products be duly considered. As the large exporters here seem to think it likely that such duty will be imposed, they have within the last fortnight sent forward very unusual quantities, and in case no duty should be established shortly, it is very probable that there will be a heavy loss to them. While, if, in accordance with their fears at firsthand with their hopes now, a duty should be imposed, and be operative at once, they look for large profits, to the extent of such duty, and the heavy supplies, until consumed, would of course delay receipts from any such duty. In view of these facts, I have thought it would be acceptable to the Department if I shortly restated the effects on prices here of the former impositions of duty on coffee in the United States, and referred to former dispatches in this connection. In these (noted below) it has been shown that the repeal of the duty on coffee in July, 1872, inured to the benefit of the Brazilian coffee-growers (and others) alone; and not at all to the advantage of consumers in the United States. When the news was known here of the abolition of the coffee duty in the United States, the price here went up immediately, and if I recollect, the price in the United States suffered no abatement. In the tables A and B appended to my No. 101 will be found a statement of the monthly average prices here (cost on board) of coffee during 1872, from which it will be seen that the price rose here in consequence of such repeal in the United States. It was supposed, and intended of course in the United States, that the consumers of coffee in the United States, and especially of Brazil coffee, chiefly the inhabitants of the Western States, would and should receive their coffee diminished in price by the amount of the duty withdrawn. The consequence of that repeal, however, was entirely different from that expectation.
In the same way, when the duty was first imposed, and afterward increased, during our civil war, the effect was felt here, even more in fact than in the United States.
The price here suddenly declined and heavily, and business was paralyzed, for it was feared that a diminished consumption abroad would allow supplies to accumulate here; and since the demand in the United States may be said to regulate prices of coffee in Brazil, (three-fifths of whose coffee goes to the United States,) it was thought there would be [Page 101] a permanent depreciation here. The consumption, however, was not very much lessened comparatively in the United States, and was compensated by the great purchases for the use of the Army, and by the greater ability of large classes of consumers, in consequence of large gains during the war. The establishment of a duty on coffee, then, in the United States would seem (if a moderate duty) not greatly to lessen consumption, and the weight or effect of that duty is greatly lessened to consumers by the fact that it causes a great reduction in the price of the article in the ports of shipment. I think, therefore, that it may now be expected, in case Congress should think it necessary to establish a duty on coffee, that the greater part of the effect of such duty (if moderate) would be felt here, in the lowered cost; and that the rise in cost to the consumer in the United States would not be at all to the extent of such moderate duty. In support of this view may be mentioned the fact that Brazil levies an export duty on all exports of 13 per cent, ad valorem, of which 9 per cent, goes to the national and 4 per cent, to the provincial treasury. The minister of finance, Viscount do Bio Branco, maintains that this tax is in fact paid by the consumer in foreign countries, and that thus the Brazilian treasury levies a contribution on its consumption abroad. If Brazil, besides being the larger by far, prove also the only producer of coffee, and had a monopoly of supply, this might be true; but as long as coffee from other countries, already great and rapidly increasing producers, can be brought into competition with Brazilian coffee in foreign markets, it is evident that the price of Brazilian coffee depends upon the supply elsewhere, and that, consequently, the price obtained here by the grower is and must be less by the amount of such export duty than it would be if that did not exist. In fact were it not for the mode of payment (by the shipper on clearance) of such tax, the imposition is so heavy that it could not be maintained. Being thus indirect, it is not so much felt. I believe that the United States is the only country in which such articles of universal consumption as tea and coffee are now admitted free of duty. In all others those articles (though sugar is now free in England) are charged with duty, from a moderate one in England and in Germany and the north of Europe, where the consumption of better grades than Brazil is very large, to the very heavy (250 francs per 100 kilograms, or 220 pounds) duty in France, and where the duty is more than 100 per cent. ad valorem. It would seem that such articles of general use are the most proper to contribute to the general charge; and if a moderate duty-—say of 2 or 2½ cents per pound—were imposed in the United States, the effect would be, first, not to lessen to any appreciable extent the consumption; while, secondly, the effect on price would be felt here more than in the United States. Such a duty (2½ cents) would, on an N import of 295,000,000 of pounds, as in 1873–’74, yield a revenue of more than seven millions of dollars, without being sensibly felt by the consumer at home—the effect resulting chiefly in Brazil, whence comes 76 per cent, of our supply. In my previous dispatches 92, 101, 102, (as corrected in 102,) and 108,* I have given facts and statistics connected with this subject.
I am, &c.,
- Report on Commercial Relations for 1874, p. 157.↩
- See Foreign Relations for 1873. Part I.↩