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It was the controversies that were surrounding the trade tariffs that George practically made up his decision to write a book entitled “Protection or free trade.” As part of his introductory statement in the book, George seeks out to explore in depth the underlying issues why protection was still held with high and great esteem despite a free society
Even after the introduction of the income tax as an additional way of revenue collection, the tariffs were still enforced by the government as a way of generating government’s revenue.
Right from the ancient times in the United States of America, tariffs or taxes imposed on imported goods acted as the main source of revenue for the Federal government. This practice of collection of tariffs lasted up to the year 1913 when the state started taxations on individual’s income commonly referred to as income tax in the business language.. There have been several fluctuations in tariff rates on varied products since then until the year 1933 when an Act on tariffs was constituted by by Smoot- Hawley whose act raised the tariff rate to 54% (George, 2006). The sole aim of tariffs is to generate government’s revenue therefore the idea of providing protection to local industries was viewed mainly as the aftermath but not primary cause. In his definition of the kind of protection, George argues it out as the kind of such trading activity that involves importation of commodities that are produced at the local level (George, 2006). In his book, George argues that the so called “ protectionists” build their rationale on the idea that the major way to ensure economic stability of every great nation is that policies should be put in place to restrict any importation of such products that could be produced from within the nation. This eventually bares the influx of such related goods so that much is produced at the local level rather that import from other nations. George further goes ahead and argues that to ensure the work force of a nation accumulate good wages they had to be protected by these duties related to tariffs so that those goods that might be produced from those countries of low wages do not find entry into the domestic market (George, 2006).
During the mid 70s and 80s tremendous increment was witnessed in the protection rights through quotas and the imposition of regulations through limiting of the trade agreements on importation of goods and products. This saw the above mentioned treaties being gotten rid of by the signing of a single treaty which comprised of not more than one hundred countries. During the initial stages of its development, the quotas were gotten rid of and the use of tariffs took over the whole process. Looking way back in the year 1997, the automobiles were subjected to tariff rates which was not more than 3% whereas the clothing were on a tax rate ranging from as low as 25% to 30%. (George, 2006). The most surprising bit of it is that even the tariffs are also being phased out so much so that prior to 1997, several commodities were imported into the United States with neither tariffs nor quotas imposed on them.
It is this Paradox he met that provoked George Henry’s thinking and reasoning that eventually led to his first book publication entitled “ progress and poverty” way back in 1879. It is this book that brought Henry George to lime light as it is considered one of his best selling books as of then. By the time he was exploring the American tariffs no formal research had been conducted on the topic whatsoever.
This kind of protection as is aimed at getting rid of “unnecessary” importations that would otherwise cause impairment in the production of such things (George, 2006). This in my own reasoning is a way of promoting the establishment of local industries and creativity among the citizens of that nation which in turn leads to creation of more job opportunities and sustenance of job security. The major argument for the tariff commonly called protective is that it is aimed at safeguarding the interest of the nation so that the overall individual wages of citizens, standards of living, local and upcoming industries and domestic local markets are secured (George, 2006).
The dilemma is that this kind of tariff known as protective is a double-edged knife in that as much as it is aimed at protecting others more especially those individuals who produce goods at local level, it is a disaster to others as well.This is because it hinders positive competition among goods and products thereby encouraging monopoly in business. This means that sub standard goods may be produced and cases of monopsony may arise as well not to mention counterfeit products due to lack of a reliable reference gold standard.