Customs war
Encyclopedia
A Customs war, also known as a toll war or tariff war, is a type of economical conflict between two or more states. In order to pressure one of the states, the other raises taxes or tariff
s for some of the products of that state. As a reprisal, the latter state may also increase the tariffs.
One of the latest toll wars happened in the 1920s and 1930s between the Weimar Republic
and Poland
. The earlier state, led by Gustav Stresemann
wanted to force Poland by creating an economic crisis to give up its territory and increased the tolls for coal and steel products developed there. As a reprisal, the Poles increased toll rates for many German products. This led to fast development of the port of Gdynia
, which was the only way Poland could export its goods to Western Europe without having to transport them through Germany.
In September 1922 the Fordney-McCumber Tariff
(named after Joseph Fordney, chair of the House Ways and Means Committee, and Porter McCumber, chair of the Senate Finance Committee) was signed by President Warren Harding. In the end, the tariff law raised the average American ad valorem tariff rate to 38 percent.
Trading partners complained immediately. Those injured by World War I said that, without access by their exports to the American market, they would not be able to make payments to America on war loans. But others saw that this tariff increase would have broader deleterious effects. Democratic Representative Cordell Hall said, "Our foreign markets depend both on the efficiency of our production and the tariffs of countries in which we would sell. Our own [high] tariffs are an important factor in each. They injure the former and invite the latter."
Five years after the passage of the tariff, American trading partners had raised their own tariffs by a significant degree. France
raised its tariffs on automobile
s from 45 % to 100 %, Spain
raised tariffs on American goods by 40 %, and Germany
and Italy
raised tariffs on wheat.. This customs war is often cited as one of the main causes of the Great Depression
.
To avoid customs wars which are considered harmful to the world's economy, the World Trade Organization
was created.
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s for some of the products of that state. As a reprisal, the latter state may also increase the tariffs.
One of the latest toll wars happened in the 1920s and 1930s between the Weimar Republic
Weimar Republic
The Weimar Republic is the name given by historians to the parliamentary republic established in 1919 in Germany to replace the imperial form of government...
and Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
. The earlier state, led by Gustav Stresemann
Gustav Stresemann
was a German politician and statesman who served as Chancellor and Foreign Minister during the Weimar Republic. He was co-laureate of the Nobel Peace Prize in 1926.Stresemann's politics defy easy categorization...
wanted to force Poland by creating an economic crisis to give up its territory and increased the tolls for coal and steel products developed there. As a reprisal, the Poles increased toll rates for many German products. This led to fast development of the port of Gdynia
Gdynia
Gdynia is a city in the Pomeranian Voivodeship of Poland and an important seaport of Gdańsk Bay on the south coast of the Baltic Sea.Located in Kashubia in Eastern Pomerania, Gdynia is part of a conurbation with the spa town of Sopot, the city of Gdańsk and suburban communities, which together...
, which was the only way Poland could export its goods to Western Europe without having to transport them through Germany.
In September 1922 the Fordney-McCumber Tariff
Fordney-McCumber Tariff
The Fordney–McCumber Tariff of 1922 raised American tariffs in order to protect factories and farms. Congress displayed a pro-business attitude in passing the ad valorem tariff and in promoting foreign trade through providing huge loans to Europe, which in turn bought more American goods...
(named after Joseph Fordney, chair of the House Ways and Means Committee, and Porter McCumber, chair of the Senate Finance Committee) was signed by President Warren Harding. In the end, the tariff law raised the average American ad valorem tariff rate to 38 percent.
Trading partners complained immediately. Those injured by World War I said that, without access by their exports to the American market, they would not be able to make payments to America on war loans. But others saw that this tariff increase would have broader deleterious effects. Democratic Representative Cordell Hall said, "Our foreign markets depend both on the efficiency of our production and the tariffs of countries in which we would sell. Our own [high] tariffs are an important factor in each. They injure the former and invite the latter."
Five years after the passage of the tariff, American trading partners had raised their own tariffs by a significant degree. France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
raised its tariffs on automobile
Automobile
An automobile, autocar, motor car or car is a wheeled motor vehicle used for transporting passengers, which also carries its own engine or motor...
s from 45 % to 100 %, Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
raised tariffs on American goods by 40 %, and Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
and Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
raised tariffs on wheat.. This customs war is often cited as one of the main causes of the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
.
To avoid customs wars which are considered harmful to the world's economy, the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
was created.