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Russian Political Economy from Utopia to Social Engineering, part I

Memorandum on Tariff Reform in Russia (1867)

Edited by Vincent Barnett
Mikhail Kh. Reutern
p. 29-34

Notes de la rédaction

This article presents an original Memorandum on Tariff Reform in Russia by M. Reutern, which was a translation prepared for use by the British government in policy background briefings at the behest of the British Foreign Office not long after its first composition in 1867. It was found in a Foreign Office (FO) file at The National Archives in London. It is possible that other versions of this document have survived, but, as far as is known, it has never previously been published, at least in English.

In the following section presenting the Memorandum, square brackets indicate that an obvious typing error found in the original text has been corrected. Round brackets indicate that a portion of the text present in the original document is missing from the Foreign Office translation, probably because it was thought to be less important.

Vincent Barnett

Texte intégral

1The experience of the ten years which have elapsed since the enactment of the present Tariff demonstrates the necessity of a revision, with the view to an augmentation of the revenue, and in order to promote a more regular trade. It is, however, necessary to proceed with much caution, for changes in Customs duties strongly affect industries which have been created under a highly protective system.

2The results of former legislation on this subject afford very important data. By the Tariff of 1850, the Government passed from the prohibitive system, introduced in 1822, to one of protection, having become convinced, by experience, that excessive duties and a long list of prohibited articles only encourage smuggling without affording any real benefit to national industry, particularly when, as in many cases, the protection was in excess of what was actually required. It soon appeared, however, that although some of the duties were very much reduced in 1850 they still remained too high in the case of many articles. The Tariff of 1850 could have no perceptible influence on a decrease of smuggling or on the promotion of trade, principally because many of the duties exceeded in amount the value of the goods on which they were imposed, for between 1822 and 1850, the prices of manufactures fell to such an extent that duties which were 30 to 40 per cent ad valorem between 1820 and 1840, represented 40 to 100 per cent between 1840 and 1850. This proved the necessity of a further reduction of duties on articles which were thus being fraudulently imported. It likewise became necessary to remove the differential duties in favour of the land frontier, for the Tariff of 1854, enacted during the blockage of the Russian ports, by reducing the duties on the land frontier, inflicted great injury on the maritime trade of Russia when peace was restored. In 1856, therefore, a revision of the Tariff of 1850 was commenced on the principle previously observed, viz., that of a gradual transition from prohibition to protection.

3In accordance with that principle, the articles most in use were traced according to their value to the highest possible degree, in order fully to protect those branches of national industry which gave employment to a great number of hands, and which were intended for the consumption of the masses, while, on the other hand, more moderate duties were imposed on foreign goods with which Russia did not compete.

4The duties on raw materials, and generally on articles used in manufacturing processes, were reduced; and those on wine, coffee, fruit, etc, were lowered, in order to obtain an increase of revenue. The Tariff of 1857, moreover, abolished some of the differential duties in favour of the land frontier. The changes made in 1850 and 1857 were accompanied by an augmentation of the Customs revenue from almost all articles on which reductions had been effected; but taken together, the amount of revenue derived from the Customs remained unsatisfactory. (…)

  • 1 1 pud = 0.01638 metric tons.

5On the other hand, the alterations made had no prejudicial influence, but were, on contrary, accompanied by a very rapid development of national industry. Notwithstanding also the monetary crisis, the emancipation of the serfs, and the American war—all [of] which events have occurred since the Tariff of 1857—the natural development of national industry, far from being arrested, has made very remarkable strides. Thus, for instance, the cotton and woollen industries have during the last fifteen years doubled their production (severally from 15,500,000 and 23,000,000 to 40,000,000 and 40,500,000 roubles). During the same period the mechanical spinning of wool was introduced, while the mechanical weaving of flax increased three-and-a-half fold since 1863 (from 200,000 to 700,000 puds), owing to [the] dearness of cotton.1

6These figures, which are taken from statements made by the manufacturers themselves, are fully proved by the official returns of trade, from which it is evident that the importation of materials used in manufactures has increased 50 per cent since 1850, while that of cotton yarn has decreased from 280,000 to 72,000 puds, and that of combed wool from 90,000 to 67,000 puds, or one-third.

7The action of the Government in the matter of the Customs Tariff has, therefore, had the following result, viz., the development of the manufacturing industry of the country has been constantly on the increase, while the revenue derived from Customs has been stationary. At the same time, the heavy burdens which the Imperial Treasury is called upon to bear render it incumbent on the Minister of Finance to discover new means of meeting the increasing revenue of the State.

8An increase of revenue from Customs therefore merits the particular attention of His Imperial Majestys Government. In the present state of manufacturing industry in Russia, requiring, as it still does, a somewhat considerable amount of protection, the revenue from Customs cannot be raised to the level attained in other countries in Europe, where industry has reached its full and independent development. Nevertheless, while preserving even the measure of protection established in 1857, it is possible, in the opinion of the Minister of Finance, to obtain a certain increase of revenue by such changes in the Tariff as may be considered useful, with a view both to counteract the extensive contraband trade which has been produced by the excessiveness of the duties, and to promote the regular trade of the country.

9The development of smuggling may be partly arrested by increasing vigilance, and measures that have been adopted with that object have evidently had a beneficial effect; but the immense extent of the land frontier of Russia renders it impossible to increase that vigilance to an extent that will entirely prevent smuggling, and it is therefore requisite, in order to attain that object, to make certain alterations in the Tariff.

  • 2 The original document gives the date 1827 at this point, but this is clearly a misprint, as no Russ (...)

10It has already been stated that the principle adopted in [1857]2 was that of protecting native industry from foreign competition in articles of most general use, and, with that object, the duties on goods of little value were purposely made high or almost prohibitory, while the higher classes of goods were imposed but moderately, if not very lightly.

11In consequence of this, it is only the latter class of goods that are honestly imported into Russia, while the other class, on which the duties fall too heavily, are almost wholly introduced surreptitiously and in large quantities over the land frontier. If, in order to counteract this smuggling, a reduction of the excessive duties imposed on cheap goods were effected to an extent that would not inflict any injury on native industry, the measure would benefit not only the Exchequer but the manufacturers also; for effectual protection is only afforded by those duties which permit the existence of a regular trade, and not by those which merely afford a premium to smuggling and are subversive of all regular commerce. The proposed object can be affected by establishing a [more just] proportion between the value of an article and the duty imposed on it. On the other hand, this measure is necessary in respect to certain high-class articles which are not sufficiently taxed, to the prejudice of the revenue, viz., articles of luxury destined for the consumption of the wealthier classes.

12As regards the fixed duties which have no protective mission, and which are imposed on articles of food and on a few raw materials, it is necessary to observe that it is scarcely possible to expect any increase of revenue from them; for the most important articles, such as salt, sugar, spirits, and tobacco, are in connection with the Excise duties, and cannot be altered without the latter. The duties levied on articles that are not raised, or at all events not sufficiently produced in Russia, are mostly moderate, and their further reduction can only be admitted with the view of promoting national industry by rendering raw materials less costly.

13Lastly, such articles as wine and colonial goods are taxed to an extent which probably limits their consumption; but an increased revenue from such articles can only be obtained in the future by such a reduction as will greatly promote their sale. Such a measure would inevitably at first, have the effect of decreasing the revenue, and would therefore fall heavily on the resources of the Imperial Treasury. It should not at the same time be lost sight of, that the greater part of the fiscal duties are imposed on articles of luxury consumed by the well-to-do classes, viz., articles of which the consumption cannot be much increased by a reduction of duties, as might have been the case in articles of more general use. With the view to a simplification of the Tariff, it is also necessary to take the following points into consideration:

141. At the present time, when the Empire and the Kingdom of Poland are connected with foreign countries by means of railways, it is necessary to equalize the duties by sea and land, in order to prevent a further artificial deflection of maritime trade to the prejudice of the ports of the Empire, more especially since such a deflection necessarily increases the number of vessels that come in ballast, and raises the rate of outward freight to the detriment of the export trade.

152. The difficulties which are frequently encountered by merchants in declaring their goods, according to the nomenclature adopted in the Tariff, renders it necessary to make such changes in the classification of the Tariff as experience may have shown to be necessary, and thus to lessen, as far as possible, the liability of fines for mistakes which is produced by a mere misunderstanding of the Tariff; and

163. Since the enactment of the Tariff of 1857, two additional taxes of 5 per cent each on the amount of duty leviable according to that Tariff have been imposed on all foreign goods (except sugar), while at St. Petersburg and Moscow a special charge of 2 per cent on existing duties is levied to cover a loan made for the construction of the Nicholas Bridge. These special taxes complicate the accounts of the Customs, and the bridge tax is not [infrequently] avoided by clearing goods destined for St. Petersburg and Moscow at Custom-houses on the land frontier. The duties should be made inclusive of these taxes, which should be abolished in the case of those articles which are already sufficiently [burdened].

17For these reasons, the reform of the Tariff, which it is necessary at present to effect, should be limited to an endeavour to arrive at the utmost possible increase of the revenue, and to promote at the same time the regular trade of the country, by the following improvements in the present Tariff, viz.:

181. With a view to decrease smuggling, the establishment of a [more just] proportion between Customs duties and the prices of such goods as are at present not imported regularly, but almost entirely introduced by smugglers, owing to the excessiveness of the duties, which, without protecting national industry, and while inflicting a loss on the Imperial Treasury, almost exclusively benefits the contraband trade.

192. The simplification of the Tariff classification and of the process of clearing goods at Custom-houses.

203. The equalization of the duties on their importation by sea and by land; and

214. The reduction of duties on materials used in manufactures, as far as the means of the Treasury will admit it.

22The alterations contemplated in the present Tariff may, without disturbing the basis of a protective system, promote a more prosperous development of trade, and at the same time yield a certain increase of revenue.

  • 3 Two short paragraphs on Councils have been omitted.

23The preparation of a preliminary Report on a revision of the Tariff has been entrusted to M. Kolesoff, Vice-Director of the Department of Customs, whose exhaustive work, containing, as it does, a minute review of each article of the Tariff, and considerations for proposed alterations, has been printed, together with a short review of the principal branches of industry in Russia, with the addition of data indispensable to an examination of the Tariff question…3

24The Minister of Finance would further recommend the publication of the materials prepared by M. Kolesoff, with a view to obviate the prejudicial influence which mere rumours of impending changes might have on the industry of the country, were it deprived of information respecting the extent and nature of the contemplated changes.

25The Tariff Commission would therefore be charged:

261. To examine, with the cooperation of deputies from manufacturers and merchants, and likewise of experts, should it be necessary to invite such for the solution of technical questions, both the preliminary Report on the revision of the Tariff and such observations as may be supplied by commercial bodies and private individuals; and

272. To prepare the draft of a Customs tariff, which shall be submitted to the Council of the Empire, with a Report by the Minister of Finance.

28The Minister of Finance will resent a special Report on the composition of the Tariff Commission, and on the time when it will be necessary to open it. Lastly, the Minister of Finance cannot but express his conviction that the Tariff can only be improved on the basis of an independent commercial policy, in harmony with the interests of national industry and trade, as well as with the financial condition of the Empire, and that, in the present position of Russia, the Tariff question should not be subjected to the conditions of Commercial Treaties.

29The Minister of Finance considers it his duty humbly to submit the above proposals to the favourable consideration of His Imperial Majesty.

30Reutern, Secretary of State

31June 20/July 11, 1867

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1 1 pud = 0.01638 metric tons.

2 The original document gives the date 1827 at this point, but this is clearly a misprint, as no Russian tariff reform conducted in 1827 is mentioned anywhere else in the Memorandum, and the associated text is discussing the period of the 1850s.

3 Two short paragraphs on Councils have been omitted.

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Mikhail Kh. Reutern, « Memorandum on Tariff Reform in Russia (1867) »Œconomia, 4-1 | 2014, 29-34.

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