"We were divided and confused till our pockets were touched..."

[JohnTaylor]

Originally Posted by trice

For example, what makes you think the European manufacturers have the capacity to supply the Southern market in your example? Can they suddenly increase producttion to that extent? Or will they decide to ship to the Confederacy and not sell in their own home market? If so, won't that raise prices in England or France, etc.? If prices in Europe rise, won't it be more profitable for the English and French to sell in Europe, where margins would be better and shipping costs, etc. lower? Won't that in turn disrupt supply to the South and allow Yankees to raise prices?

Do you have some data that would indicate that European industry could not cover that shift in cotton cloth buying? That would seem to be a relatively straightforward thing to determine, or at least have an informed idea. What was the peak cotton cloth production year prior to the Civil War? Was that peak high enough to cover the consumption of Southern cotton cloth in 1860?
I suspect that, if secession had stood, with the Confederacy, there would have been some drop in the price Yankee producers got for their cotton, and increase in what European producers got for theirs. Just how much of each would depend on the elasticities of demand and supply. I don't have the macro data to determine the elasticities, and I doubt that secessionists did.
What is not in question, however, is this. None of the revenues raised by the Confederate tariff would go for internal improvements in Michigan or Boston. And any decrease in the amount of northern-made cotton cloth consumed in the South would be profits that would come out of the pockets of northerner manufacturers. That was at least part of the intent of the secessionists.

Originally Posted by trice

Worldwide supply pricing, assuming equal access and product quality, is like a lake: you drink from the edges and the level rises or falls over the entire surface and perimeter. But global trade is not like that in most cases. Tariffs, transportation and distribution costs create vast differences from one area to another. Europeans will sell to the Confederacy based on profit, not price, and if they can make more profit selling elsewhere, they will. The same for Americans.

An Australian recently told me that, according to the Aussie Trade Ministry, the majority of the total transportation cost of shipping wheat from Sydney to Manchester, England, were incurred in moving the wheat from Liverpool to Manchester by rail. It was cheaper to ship flour from Sydney to Liverpool than it was to transport it via rail from Liverpool to Manchester. Now, these are modern data, but the same might well be true of trans-Atlantic trade. I don't know. Perhaps you do.
What were the costs of freight from Liverpool to New York (or New Orleans) and how much might it cost to transport to final destinations in the US/CS?
Respectfully,
John Taylor

[JohnTaylor]

Originally Posted by trice

No offense, but I am feeling a bit cranky after your "Econ 101" crack. I have already told you I have an economics background and that I wrote software for arbitrage trading of commodities and financial instruments. I work with customers in distribution and manufacturing now, where deals are made daily on razor-thin margins. If you actually think global trade works in the cardboard-cutout closed-system way you describe, you need to go back and retake the course or get some practical experience. But then, so did the "King Cotton" believers of the secessionist South who thought they had an eternal money machine in a boom-and-bust commodity product, and that they could make the world bow down to their power.

Tim, apologies about the Econ 101 comment. I was honestly not trying to be insulting. I just didn't get what you were saying. You were comparing US 1857 and Morrill to Confederate May 1861 tariffs.
Yes, the Confederate tariff of May 1861 did put a tariff in place on tea and coffee. The original (pre-Sumter) tariff, did not tax tea or coffee (neither did the US tariffs of 1846, 1857, and Morrill, but onlywhen the tea and coffee was imported in an American vessel). In fact, the Confederate Congress initially just maintained the 1857 tariff rates, and later in February expanded the list of items to be imported free of duty. It wasn't until after Sumter and Lincoln's call for troops, when the Confederates realized that they had a war on their hands, that they expanded the list of dutiable items. If Lincoln had said that the Confederate States were free to go, I doubt whether the Confederates would have raised tariffs. They was no need: protectionism and centrally-funded internal improvements were expressly unconstitutional.
I still stand by my basic point, however, for the big money raisers (cotton manufactures, woolen manufactures, silk manufactures, etc.) Confederate (pre-Sumter, i.e. 1857) tariff rates were lower than the same US rates (Morrill). Confederate consumers would have benefited from lower commodity prices. But northerners just wouldn't let their captive market go.
And the war came...
Respectfully,
John Taylor

[unionblue]

John Taylor & Trice,

Gentlemen,

May I say how pleased I am at the discourse you both have presented here and that I consider this thread one of the more interesting ones at this board. I appreicate the sources and documentation and look forward to hearing from both of you here.

It has been very educational and interesting.

Thanks again,
Unionblue

[JohnTaylor]

Originally Posted by unionblue

John Taylor & Trice,

Gentlemen,

May I say how pleased I am at the discourse you both have presented here and that I consider this thread one of the more interesting ones at this board. I appreicate the sources and documentation and look forward to hearing from both of you here.

It has been very educational and interesting.

Thanks again,
Unionblue

Neil, thanks for the comment/compliment.
Respectfully,
John Taylor

[trice]

Originally Posted by JohnTaylor

Do you have some data that would indicate that European industry could not cover that shift in cotton cloth buying? That would seem to be a relatively straightforward thing to determine, or at least have an informed idea. What was the peak cotton cloth production year prior to the Civil War? Was that peak high enough to cover the consumption of Southern cotton cloth in 1860?

I have no idea. The point is that *you* have projected the Europeans will suddenly pick up a 14% of world-wide supply gap with no idea at all whether or not they COULD do what you say. This is a useful technique in debate: rather than explaining and justifying what you yourself say, you want to avoid the necessity of doing the work. Nice try, but *you* are the one who needs to supply the data to back up your claim.

Originally Posted by JohnTaylor

I suspect that, if secession had stood, with the Confederacy, there would have been some drop in the price Yankee producers got for their cotton, and increase in what European producers got for theirs. Just how much of each would depend on the elasticities of demand and supply. I don't have the macro data to determine the elasticities, and I doubt that secessionists did.

So, since you don't have the data, why propose something so large and assure us it will happen?

Since there is a very minor drop in European tariffs involved, and a 0-to15% INCREASE on US goods, why would you expect ANY overall drop in the prices Southern consumers pay?

Originally Posted by JohnTaylor

What is not in question, however, is this. None of the revenues raised by the Confederate tariff would go for internal improvements in Michigan or Boston. And any decrease in the amount of northern-made cotton cloth consumed in the South would be profits that would come out of the pockets of northerner manufacturers. That was at least part of the intent of the secessionists.

Economically, that would act to increase the cost of producing Northern goods, again increasing prices paid by Southern consumers. This is very bad economics for the South.

Originally Posted by JohnTaylor

An Australian recently told me that, according to the Aussie Trade Ministry, the majority of the total transportation cost of shipping wheat from Sydney to Manchester, England, were incurred in moving the wheat from Liverpool to Manchester by rail. It was cheaper to ship flour from Sydney to Liverpool than it was to transport it via rail from Liverpool to Manchester. Now, these are modern data, but the same might well be true of trans-Atlantic trade. I don't know. Perhaps you do.
What were the costs of freight from Liverpool to New York (or New Orleans) and how much might it cost to transport to final destinations in the US/CS?

That would take a lot of time and work to research, assuming it would be realistic to attempt.

Generally speaking, shipping rates are often part of a boom-and-bust cycle. Commercial building and residential housing markets are similar. They are also affected greatly by interest rates (very high in late 1860-early 1861) and insurance rates. As a result, there are often times of oversupply where rates drop like a rock and times of shortages where rates rise like a rocket.

Shipping rates boomed in the early 1850s because there was a shortage due to the California Gold Rush. That led to a ship-building boom in the early 1850s -- and the normal glut on the market that followed ran into the Panic of 1857. This led to a more than 50% drop in shipping rates in 1857 from the early 1850s. It also led to such an excess of ships that some were diverted into the African Slave Trade (and the Buchanan administration's efforts to protect US-flag slavers from British interference in 1857-58, followed by the reaction that made the US Slave Patrol effective in 1860-61). By 1860 the tide of ship supply had turned. As trade recovered/expanded and the newer steam ships rapidly made the ones built earlier obsolete, the ship glut was disappearing.

Changing the distribution system by avoiding New York actually requires more ship-bottoms. If it takes X ships to move the cotton from NY-England, it will take roughly 2X ships to move the same cotton from the Deep South to England in the same time due to the longer distances and inefficiencies introduced. That will bring a supply of now-idle ships from the coastal routes, but the less efficient nature of the distribution system will increase shipping costs. Turn-around times will mean fewer profitable voyages per ship, making owners want to increase rates to get the same ROI on their investment.

Also, it is easier for Europeans ships to trade with NY (or US ships to carry on the trade) because cotton is not the only thing they want. They still need to get goods from the North, so they won't divert their entire merchant capacity to the South. But meanwhile, the discount for goods on US-flag ships will be gone, raising real tariff rates charged to Southerner consumers -- unless the Confederate government plans to give the US ships a discount.

Regards,
Tim

[trice]

Originally Posted by JohnTaylor

Tim, apologies about the Econ 101 comment. I was honestly not trying to be insulting. I just didn't get what you were saying. You were comparing US 1857 and Morrill to Confederate May 1861 tariffs.
Yes, the Confederate tariff of May 1861 did put a tariff in place on tea and coffee. The original (pre-Sumter) tariff, did not tax tea or coffee (neither did the US tariffs of 1846, 1857, and Morrill, but onlywhen the tea and coffee was imported in an American vessel). In fact, the Confederate Congress initially just maintained the 1857 tariff rates, and later in February expanded the list of items to be imported free of duty.

Since the Confederates were in the middle of forming a government in February, it is not too surprising that they just imposed existing law before sitting down to see how they would like to change it. Montgomery in February-March of 1861 is described as having lobbyists on every corner for different sides of the tariffs -- and the Confederate government was being paid for with cash from the LA seizure of the US Customs House at New Orleans ($600,000 in specie) and tariffs being collected there. It isn't surprising that they put some items on the free list: they added foodstuffs and gunpowder, which they badly needed for the coming war. Then they started a war and moved the capital to Richmond -- and immediately bumped the tariffs to pay for their war.

Originally Posted by JohnTaylor

It wasn't until after Sumter and Lincoln's call for troops, when the Confederates realized that they had a war on their hands, that they expanded the list of dutiable items.

When "the Confederates realized that they had a war on their hands"? They didn't notice that when they raised an army more than double the size of the Federal force, or besieged Federal forts for week after week, or attacked Ft. Sumter? The 3,000+ rounds they fired into the fort didn't clue them in? One day they said "Hey, the Yankees are upset we shot at them! They're going to shoot back!" Is that what you want us to believe?

Originally Posted by JohnTaylor

If Lincoln had said that the Confederate States were free to go, I doubt whether the Confederates would have raised tariffs.

Putting an extra 15% tariff on goods from the North automatically raises the cost to Southern consumers. It is unlikely that Northern manufacturers will be able to just drop all that margin. It is likely that prices to Southerners go UP, not down.

Originally Posted by JohnTaylor

They was no need: protectionism and centrally-funded internal improvements were expressly unconstitutional.

Maybe yes, maybe no. Southerners had no problem with it when they benefit directly.

Originally Posted by JohnTaylor

I still stand by my basic point, however, for the big money raisers (cotton manufactures, woolen manufactures, silk manufactures, etc.) Confederate (pre-Sumter, i.e. 1857) tariff rates were lower than the same US rates (Morrill). Confederate consumers would have benefited from lower commodity prices. But northerners just wouldn't let their captive market go.

Nope. It just doesn't work that way. Most Northern manufacturers, for example, were against tariffs on wool (the raw material for woolen goods) and farmers/sheepherders in the western states wanted high tariffs on wool. Manufacturers would prefer low prices on raw materials.

This entire scheme depends upon Northern goods falling by more in price than the tariff raises them. I have no idea why they would, and you have shown no compelling reason they would.

Regards,
Tim

[JohnTaylor]

Originally Posted by trice

Since the Confederates were in the middle of forming a government in February, it is not too surprising that they just imposed existing law before sitting down to see how they would like to change it. Montgomery in February-March of 1861 is described as having lobbyists on every corner for different sides of the tariffs -- and the Confederate government was being paid for with cash from the LA seizure of the US Customs House at New Orleans ($600,000 in specie) and tariffs being collected there. It isn't surprising that they put some items on the free list: they added foodstuffs and gunpowder, which they badly needed for the coming war. Then they started a war and moved the capital to Richmond -- and immediately bumped the tariffs to pay for their war.

Until the possibility of peace was gone, Confederate tariffs were lower than US tariffs, except the period between February 9th and February 28th, 1861, when they were the same. Once the war came, the Confederate government had to relook its tariff policy.

Originally Posted by trice

When "the Confederates realized that they had a war on their hands"? They didn't notice that when they raised an army more than double the size of the Federal force

[sarcasm]I don’t know Tim, for some reason the Confederates had this crazy notion that the North might not let them go peacefully. Where they got that idea, I have no idea. [/sarcasm] Which other foreign countries, in your book, don’t have the right to raise an army? If Canada raises an army, does that give the US justification to invade Canada (Psst, don’t look now, but I believe the Canadians have done just that, better dust off War Plan Crimson).

Originally Posted by trice

Putting an extra 15% tariff on goods from the North automatically raises the cost to Southern consumers. It is unlikely that Northern manufacturers will be able to just drop all that margin. It is likely that prices to Southerners go UP, not down.

This is what prompted the Econ 101 quote. This is true only if the North is the only supplier of commodities consumed in the South. For commodities for which there are comparable European-made substitutes (e.g. iron, wool manufactures, cotton manufacturers), you are simply dead wrong.

Originally Posted by JohnTaylor
They was no need: protectionism and centrally-funded internal improvements were expressly unconstitutional.

Originally Posted by trice

Maybe yes, maybe no. Southerners had no problem with it when they benefit directly.

The Confederate Constitution, in repairing what the Confederate Founders saw as a defect in the US Constitution, made it expressly forbidden to tax imports in order to “promote or foster any branch of industry.” They also forbade “any internal improvement intended to facilitate commerce” except coastal and stipulated that any internal improvements must be paid for by those who benefited from them.

Originally Posted by JohnTaylor
I still stand by my basic point, however, for the big money raisers (cotton manufactures, woolen manufactures, silk manufactures, etc.) Confederate (pre-Sumter, i.e. 1857) tariff rates were lower than the same US rates (Morrill). Confederate consumers would have benefited from lower commodity prices. But northerners just wouldn't let their captive market go.

Originally Posted by trice

Nope. It just doesn't work that way. Most Northern manufacturers, for example, were against tariffs on wool (the raw material for woolen goods) and farmers/sheepherders in the western states wanted high tariffs on wool. Manufacturers would prefer low prices on raw materials.

Despite what you say, it would seem that the general trend in the north was to increase tariff rates. Left to there own devices, northerners raised tariff rates in March 1861. Or were southerners to blame for that as well?

Originally Posted by trice

This entire scheme depends upon Northern goods falling by more in price than the tariff raises them. I have no idea why they would, and you have shown no compelling reason they would.

Your understanding of international economics continues to amaze me. Southern consumers paying less post-secession does NOT rely on Northerners cutting their prices (although it probably would have that effect, desirable from the Southern perspective and undesirable from the Northern). You continue to act as if the Northern producers of Southern consumption items were the only suppliers in the world. That is demonstrably not true. If it were, there would be no need for protective tariffs, since there would have been no foreign competition against whom Northern manufacturers needed protection. And the pre-tariff prices for foreign-made competitive products had to be lower than the prices of comparable Northern-made products, if that were not the case, protective tariffs would have been unnecessary. If foreign-made commodity cost more (pre-tariff) than the US-made product, nobody would buy a foreign-made commodity that cost more. In the high grade wool example I used before, if the duty-free price of foreign made wool was $1.01/lb. The tariff was intended to increase the price that the domestic-made commodity can fetch, as well as cause American consumers to switch from buying foreign wool to domestically-made wool. The protective effect of a tariff is to raise prices and increase demand for domestic products (vis-à-vis foreign production). Thus, if pre-tariff foreign prices are lower than the price of the domestic product, the reduction of the tariff will make foreign-made wool cheaper than US-made wool. Allowing secession to stand would mean that northern manufacturers would lose southern market share, and probably have to lower their prices to compete successfully in the Confederate market against European-made wool. And, if the differential between US and CS tariffs was wide enough, smugglers would undermine the US Morrill tariff by importing through the CS ports and smuggling into the US along a long undefended US-CS border. Northerners at the time recognized this (the New York Post article I provided), even if you refuse to.

[unionblue]

John Taylor,

Just as an aside, Canada did prepare for a possible US invasion, in 1989!

When Ft. Drum, New York, was activated as a full-time, Regular US Army post with the 10th Mountain Division, Canada combined several brigades, then the largest element in its armed forces, into a division sized unit to counter a possible US threat.

Although I was with the 10th Mountain my last two year active service (1989-1991) and with Military Intelligence, I never came across any secret US plans to invade our friends to the North.

Sincerely,
Unionblue, US Army, Retired

[unionblue]

John Taylor,

Just as an aside, Canada did prepare for a possible US invasion, in 1989!

When Ft. Drum, New York, was activated as a full-time, Regular US Army post with the 10th Mountain Division, Canada combined several brigades, then the largest element in its armed forces, into a division sized unit to counter a possible US threat.

Although I was with the 10th Mountain my last two years active service (1989-1991) and with Military Intelligence, I never came across any secret US plans to invade our friends to the North.

Sincerely,
Unionblue, US Army, Retired

[JohnTaylor]

Originally Posted by unionblue

John Taylor,

Just as an aside, Canada did prepare for a possible US invasion, in 1989!

When Ft. Drum, New York, was activated as a full-time, Regular US Army post with the 10th Mountain Division, Canada combined several brigades, then the largest element in its armed forces, into a division sized unit to counter a possible US threat.

Although I was with the 10th Mountain my last two year active service (1989-1991) and with Military Intelligence, I never came across any secret US plans to invade our friends to the North.

Sincerely,
Unionblue, US Army, Retired

Neil, I was unaware of the 1989 incident, but the US maintained war plans for possible contingencies in the 1930's, some more far-fetched than others. Plan Orange (a war with japan) ended up happening. Green (Mexico) was less likely. Plan Red (Great Britain, with a associated plan called Crimson for Canada) was really unlikely, but not absolutely ludicrous. Since the US has only two neighbors, maintaining war plans in the event of war with them was not unreasonable.
Thank you for your service to the country.
Respectfully,
John Taylor