IMPORT DUTIES AND TERMS OF TRADE 145 
tax. The consideration of such possibilities is not germane to the 
matter in hand. A tax of this kind, or any particular tax, has 
in itself no tendency to promote misapplication of the public 
funds. It is the general state of a country’s government that 
determines whether its tax revenue shall be well or ill used. So 
far as concerns the effects of international trade, it matters not 
what the government does with the proceeds of the tax; we may 
assume they are as well applied as the proceeds of other taxes. 
Proceed now to a further set of possible consequences. So far 
it has been tacitly assumed that the duty is imposed for revenue 
purposes only. Suppose now that the duty is not merely for 
revenue, but is for protection. Its object then is to promote the 
production within the country of a part or the whole of the goods 
previously imported. In so far as it achieves this object, the 
results just indicated still ensue, and will be accentuated. Im- 
ports are cut down, not only because price rises and consumption 
becomes less, but because articles which before had been imported 
are made within the country. Specie flows into the country to a 
greater degree than under a revenue duty. Prices and money 
incomes rise more within its borders, and the barter terms of trade 
come to be altered even more to its advantage. Such imports 
as continue to come in — and, as will presently be explained, by 
no means all are likely to be shut out — will be procured at better 
terms. 
In the case of protective duties, however, something more 
happens. There arises a real offset to the gain from better terms 
of trade. In so far as the taxed goods are produced within the 
country, there is loss, not gain. The price of these goods also is 
raised to consumers by the amount of the duty; that is, they are 
higher in price within the country than without. The enhance- 
ment of price, tho a tax in precisely the same sense as in the case 
of articles which continue to be imported, brings no revenue to 
the government. It goes to the domestic producers. And to 
them it represents no gain — that is, no special gain. It is 
in the nature of a bonus which makes it possible for them to 
conduct an industry in which the country has no sufficient ad-