Mr. Winser to Mr. Seward.
Sonneberg, September 5, 1877. (Received Sept. 27.)
Sir: I have the honor to acknowledge the receipt of the separate circular of the Department, which was issued during the month of August last, referring to existing instructions under the Revised Statutes and the Consular Regulations on the subject of transmitting commercial information and statistics, and inviting attention to another and more specific line of inquiry in the same direction, with the view of enlarging the trade of the United States with this country.
Many of the suggestions of the circular as to the present favorable conjuncture of circumstances, growing out of the prevailing stagnation in business, for making an effort to increase the market for American productions and manufactures in Germany had already presented themselves to my mind, and, for some time past, I have been pursuing the line of investigation which has been indicated. But I must say at the outset that my endeavors to procure information of the kind demanded by the Department are beset with special difficulties and my opportunities of doing efficient work of the sort are comparatively slender. This consular district covers a large extent of territory, and comprises within its limits all of the Thüringian States, which consist of ten small duchies and principalities, having an area of about 3,300 square miles (English) and a population of rather more than one million.
There are, however, no large centers of trade and population within my district. Sonneberg, one of the busiest of the manufacturing towns in the whole region, has only 7,300 inhabitants, as shown by the census of 1875, and Coburg, the third town in point of size within the territory of my consulate, has a population numbering between 14,000 and 15,000. The manufactures of china, glass, toys, and other wares which are exported hence to the United States are carried on in the small towns and isolated villages, which are situated in what is known as the Thüringian Forest, and the intercommunication of the entire region depends mainly upon the well-organized mail-coach service. The intercourse of the people with the consulate is therefore principally conducted through the post; and this circumstance makes it difficult to obtain complete information upon many pointy which it is likely that personal inquiry would enable me to secure.
From recent conversations with the more prominent merchants and manufacturers in the immediate neighborhood, I have obtained, however, some facts which bear upon that point of the Department’s circular which instructs me to make an investigation as to whether the trade of the United States with Germany might be increased by legislative action; and, in acknowledging the receipt of the circular, I avail myself of the occasion to lay before the Department at once the result of my inquiry under this branch of the subject, as affording an indication [Page 63] of the conditions upon which, in part, an enlarged trade between the two countries might be fostered and gradually made more profitable.
There appears to be no question now in Germany as to the excellence of various kinds of American productions, mechanism, and manufactures, and as to the advantages which they possess over all others in the German markets. The latest important public witness to this fact is a profusely-illustrated volume of nearly 400 pages, which has only during the present week been published at Berlin. Its author is Dr. Hermann Grothe, of that city, a political economist of repute. The book is entitled “Die Industrie Amerikas (Vereinigten Staaten von Nord Amerika), ihre Geschichte, Entwickelung und Lage, unter besonderer Berücksichtigung der Volkswirthschaft und Handelspolitik, der Erfindungen und Fortschritte des Maschinenwesens, etc., und die Weltausstellung zu Philadelphia.” From the preface to this interesting work I take the liberty of translating the following paragraphs, which, in my opinion, very truly express the views of all intelligent observers regarding the present condition of the industries of the United States. Dr. Grothe says:
The descriptions, reports, and notices which filled the publications of every European nation shortly before the opening of the Philadelphia exhibition drew public attention more than ever before to the state of the industries of America. It was acknowledged that a development must have taken place on the other side of the ocean, of the magnitude of which Europe had been hitherto sadly ignorant, and of the value and peculiarities of which reports had suddenly appeared which sounded almost fabulous. Accustomed to connect American performances with the character of swindles, or, at least, to regard them as eccentricities, and to undervalue the intrinsic high worth of the American inventive faculty, the industrial states of Europe have now to confess that their previous suppositions in this regard were false, that their opinions were unfounded, and that their real knowledge of American industries was grossly inexact. The world’s exhibition at Philadelphia was an event of the highest advantage to Europe, inasmuch as it was calculated to draw energetic and expert men over the ocean to obtain by personal observation correct views of the condition of the industries of the United States and of their subsidiary aids. That most of the reports of these men sound as though they had discovered a new world is well known, and there is, indeed, spread out in America before the eyes of the observing European a new world of industry, with new forms, new methods of work and traffic, new auxiliaries, and under new aspects and conditions.
To me, also, this world on the other side of the ocean appeared new, although I was perfectly informed before my visit to the United States upon many branches of their industry and its development. I-was particularly induced to make the visit in order to study the principles which had operated so powerfully in bringing about this rapid and high development, and from a firm conviction that without a prompt and honest exposition of the condition and results of American industrial relations our German industries in future would suffer still more. As friendly to a moderate tariff, I was offered in America, the land of protection, the broadest field for investigation and study; and, with a grateful heart, I publish here the letter of recommendation which opened for me all the manufactories and workshops, and afforded me the opportunity of examining most thoroughly into the relations of employers and employed, as well as into their social and family life. * * * This journey through the industrial districts of America belongs to the most agreeable remembrances of my life.
Perhaps in the face of this exposition of my views it may be charged that my work has been written in the interest of the protectionist class; but the imputation would be wide of the truth. All American industrialists, with few exceptions indeed, are protectionists; but, for myself, I am far from indorsing the too high protective system of the United States, and I cherish the conviction that the system must be modified in accordance with the conditions of progress. Moreover, I rejoice to be able to say that this modification is already intended by the Americans themselves, who are taking the preliminary steps to this end. And I assert with emphasis that I have come to the same conclusions with regard to the development of American industry which have been reached by other German, Austrian, French, and Belgian commissioners who have formed a judgment in part from another politico-economical stand-point.
The object of Dr. Grothe’s book is to give a clear insight into the wide field of American industries, in order that Europe may profit by our experience. In the first part of the volume the history of the country is [Page 64] sketched, the various influences which have affected its development are indicated, and its present real strength and industrial condition are explained. Long chapters are devoted to the auxiliaries which aid the industries of the United States, and among these great importance is attached to the stimulating effect of the patent laws, to the results of the protective tariff, and to the advantages which grow out of our rich natural productions and vast material resources. In the second part of the book each prominent branch of industry is treated separately and thoroughly, and the principal labor saving machines and inventions which have contributed so greatly to the progress of the United States in all the avenues of business are carefully described and illustrated.
But not by Dr. Grothe alone, but also by every person of observation and practical experience, is the excellence of American wares, in a wide range of manufactures, confessed. The superiority of our textile fabrics, our hardware, our agricultural implements, our craftsmen’s tools, our machinery, and of many classes of our useful and ornamental fancy goods, is generally acknowledged. Their perfection in finish, their durability, their ingenuity, their practical character, are some of the qualities which commend them and which place them in favorable contrast to the productions of other lands. Moreover, owing to the use of labor-saving machinery and well-adapted tools, the cost of manufacture, in spite of higher wages at home, is lessened to the point where competition with other nations in supplying foreign markets may fairly be tried; and there can be no doubt that a great many lines of American wares will eventually find ready sale in the German market, in some cases to the exclusion of the same classes of goods of English, French, and even of home manufacture. All this is granted.
But it is the unanimous opinion of every one with whom I have conversed on this subject that, before any great and profitable trade between the two countries can be developed, the United States must take measures to overcome an existing prejudice against the introduction of American goods into Germany—a prejudice against these goods simply because they are American goods, and in spite of the merits which they possess, and which are freely admitted.
This prejudice undoubtedly exists, and, from all that I can learn, grows stronger every day. It is caused by our high tariff, which, while it has fostered our own industries, has had the effect, it is argued, of closing our own markets to many lines of German manufactured goods. I am informed that, as a matter of principle, some merchants have absolutely determined to use every influence at their command against the introduction of American manufactures at present and until such time as an active disposition shall be manifested by ourselves toward some sort of reciprocity in tariff matters.
This question of getting us to reduce our tariff, or else of bringing so great pressure to bear upon the imperial government that the tariff of Germany shall be so revised as to discriminate against us, as France does, is now, I am told, and has been for some time past, receiving attention in the various chambers of commerce throughout the country. Certainly it is a fruitful theme of discussion at every center of trade, and the proper measures for securing some sort of relief are often excitedly canvassed. I have myself heard many arguments on the subject, the tenor of which was that while we might well be excused as a nation for having fourteen years ago adopted a high protective tariff in order, that the exigencies resulting from our civil war might be met, yet we were now in a position to show some degree of comity toward other countries, by reducing our tariff on certain articles the import of which [Page 65] under the improved conditions of our home industries would benefit others without injuring ourselves. I think there can be no doubt that this feeling of dissatisfaction with our tariff is wide-spread, and that at this juncture it works strongly against the proper introduction of American goods to the German markets, and, perhaps, to the markets of other European countries.
In conversation a few days since with a gentleman here who is at the head of one of the largest toy-importing and general commission houses in New York, and who, as purchasing-partner for his firm and seller of many lines of American manufactures all over Europe, has the very best opportunity in his wide journeys, of learning mercantile opinion fully, the foregoing general views upon this question were amply corroborated. He said that the feeling at present in Germany against dealing in goods of American manufacture was quite pronounced. Nobody pretended that the wares were not superior of their kind, and well calculated, in times of business prosperity, to win a market; but the continual argument is that America is persistent in her ill-treatment of Germany in the matter of tariff reciprocity, and no merchant will make a willing effort to push an import trade with us as long as he can avoid it and until we show an inclination to revise our tariff, and not persist in the gradual shutting out of German goods from our markets. This is the report of a merchant of great experience, and who has had fair success heretofore in selling American goods in Germany and elsewhere in Europe.
It is likely enough that, if the condition of German industry in almost every branch was not so depressed as it certainly is at present, the unpleasant feeling which I have described would not exist, or, at any rate, would not manifest itself so openly and so generally. But the prospects of the manufacturing classes here seem to grow drearier every year. No market can be found for goods of home production; there is scarcity of profitable work; poverty increases, and there are many signs of decadence which occasion lively concern.
Take the toy trade, with which this consulate has more particularly to deal, as an example. One article after another which has heretofore found ready sale in the United States totally disappears from the invoices, because, under the nurturing influence of an import duty of 50 per cent. ad valorem, the production at home of certain grades of toys has been so stimulated that” the manufacturers of this region can no longer compete with it. All the cheaper sorts of wooden, tin, and mechanical toys which formerly were sent hence to the United States in large quantities are now made in America, and the market is now closed to this kind of Sonneberg merchandise. And the same may likewise be said of another important industry of this neighborhood, glass ornaments for Christmas-trees. The duty of 40 per cent. has destroyed the trade with the United States. It is said that goods of this grade can now be manufactured cheaper and better in America than here. But this assertion is denied by the producers at Sonneberg, who say that they were compelled by the high tariff to make flimsy and unsubstantial toys in order to get them into the American markets at all.
The people in this consular district are striving in every direction to place their trade upon a more satisfactory basis, and as one means to this end industrial exhibitions on a small scale are held from time to time in different places. At these exhibitions not only are the productions of the immediate neighborhood displayed, but also anything and everything new which may serve to stimulate the inventive faculties of the artisan class. At Sonnebarg, Ruhla, Waltershausen, and at other [Page 66] towns, exhibitions of this character have been held within a few weeks past.
As bearing upon the question of the disadvantage under which the German toy trade labors in connection with our own tariff, I have to make mention of the proceedings which took place at Sonneberg last week, under the auspices of the chamber of commerce of that town, in relation to the threatened blow at this industry on the part of France. By the terms of the commercial treaty between the two nations, which; is about to expire, the duty upon German toys entering France is fixed at 10 per cent. ad valorem. Under the new convention a specific duty is proposed by France upon German toys at the rate of 30 francs per 100 kilograms (220 pounds) upon common grades, and 60 francs per 100 kilograms upon the better qualities; and France further proposes to increase the ad valorem duty on glass and china marbles from 10 per cent. to 20 per cent., and to exact a specific duty of 20 francs per 100 kilograms on painted or decorated china-ware. Now, the lowest rate of duty proposed by France on toys, 30 francs per 100 kilograms, is nearly four times greater than heretofore. To avert the conclusion of a commercial treaty on terms which would prove so disastrous to the German toy trade this meeting was held at Sonneberg. About one hundred leading manufacturers from all the region round assembled, and there were delegates present also from the chambers of commerce of Chemnitz, Dresden, Nuremberg, and Fürth. The impending danger to the trade was fully discussed, and I gather from the speeches that prior to the existing treaty which is now about to expire it was impossible for Germany to do a lively business with France on account of the enormous specific duty of from 80 to 88 francs per 100 kilograms. Since the conclusion of the present treaty a satisfactory trade had been carried on, and the exports had increased from 106,000,000 marks in 1859 to 315,000,000 marks in 1874, while the imports during the same period had augmented from 147,000,000 marks to 413,000,000 marks And now France was preparing a total revolution in this favorable state of affairs, having taken the preliminary steps in this direction in 1875. In that year the French minister for agriculture and commerce issued a circular, in which the views of fifty-five chambers of commerce and twenty-four other industrial and artistic corporations were invited upon the question of making new commercial treaties. The replies were almost unanimously in favor of renewing the treaties and retaining the existing tariffs, with certain modifications, but to substitute a specific for an ad valorem duty, as far as this might be possible. It was said by the French chambers of commerce that the benefits of commercial treaties were in the guarantees of stability (which is a necessary condition of development and progress) which they secured for both domestic and foreign industries, and that for better obtaining this stability it was deemed advisable the “most-favored-nation” clause, should be omitted from the new treaties. To ad valorem duties the chambers raised the objection that they offer a wider field for capricious valuation and actual fraud, and so are injurious to honest business, and render impossible any degree of safety in commercial calculations. In general, the existing tariff rates were approved; and, although the chambers favored specific duties, they did not ask that the present rates should be changed, but simply that another method of collecting them should be adopted.
Now that the matter is under discussion between the two governments, it has seemed an appropriate time for German industrialists to urge that the most favorable provisions in the new treaty shall be incorporated. That the manufacturers of this consular district are alive to their interests in this regard, the Sonneberg meeting was an evidence. It was [Page 67] alleged by the speakers that the duties proposed by the French would be two or three times higher on the average than heretofore, and perhaps even heavier, as nothing was mentioned by the French Government in its propositions as to whether duties were to be levied on gross or on net weight, which alone would cause a variance of from 33 to 50 percent. It was also argued that the gradation of goods into classes would admit of no end of chicanery, which would probably result in finding that the duties upon the commoner grades of toys would only exist upon paper.
One of the speakers, a member of the Imperial Parliament, said that before 1870, and more particularly before 1866, the polymorphic character of the German states, and the jealousy which existed between Prussia and Austria, were a great hinderance to a sound customs policy, but that now the united empire was in a condition to champion the wishes of every branch of domestic industry when so doing would conduce to the common weal. He animadverted upon the sharp conduct of the French Government in having arranged its new tariff before it had given notice of its desire to make a new commercial treaty with Germany. This course had placed the latter country at a disadvantage in leaving it little time for investigation and discussion of the proposed changes-He advocated earnest appeals to the various state governments, the Imperial Parliament, and the imperial chancery on the subject.
The proceedings closed with the passage of a series of resolutions in substance as follows:
- The renewal of a treaty of commerce with France is the unanimous desire of both nations.
- The existing tariff shall not be changed; its principles were originally laid down by the French, and the Germans only wish to abide by their consequences.
- It is of the utmost importance that the ad valorem duty on toys shall be retained; should this principle, however, meet so much opposition as to be impossible, then the specific duty shall not be higher than the present ad valorem duty.
- The classification of toys into common and superior grades is to be avoided.
- Should a specific duty be eventually adopted, provision shall be made that the duty is to be levied only upon the weight of the goods and not upon the packing, and that in case a specific rate shall be allowed for tare, it must be fixed at not less than 40 per cent.
- These resolutions shall be sent to the imperial chancery, accompanied with exhaustive statistical materials; and also to the different state governments, which are particularly interested in the subject.
The further prosecution of the matter was intrusted to a special committee, composed of members of the chambers of commerce of Chemnitz, Nuremberg, and Sonneberg, with instructions to be vigilant and energetic in securing the ends proposed.
It seems to me that what I have written relates in a general way to the subject of the Department’s circular, and especially to that part of it which asks for suggestions as to the method by which trade between the two countries may be increased by legislation.
In subsequent communications I hope to enter more into detail, not only upon this point, but upon the others which the Department has brought to my attention.
I shall continue to examine into the-subject, and shall acquaint the Department from time to time with the result of my inquiries.
I am, &c.,