recognized in the tariffs, but was effected by certain carriers through a system of rebates from the published rates.

Things appear to have gone peacefully for the next few years. The only serious competition which the railroads met by water was that of the Southern Pacific-Sunset line from New York, which apparently applied from New York whatever the all-rail rates were from Chicago. Of course during this period, or any other period until recently, it is impossible to say just what the rates actually paid were. We are dealing, however, with the "paper rates."

A MERCHANT'S LINE.

Live ocean competition being out of the way, and the railroads having come to an understanding as between each other, matters went smoothly, until the San Francisco merchants, in 1892, being roused to activity by a recent increase in the transcontinental rates, instituted a boat line of their own. This brought on another rate war, in which the merchants lost heavily, and rates were reduced by the rail lines to absurdly low figures. The lines east of Chicago and those west fell out over the division of the joint through rates, and for a time there were no joint rates extending from points farther east than Chicago, and blanket rates were made by the western carriers from Chicago, Mississippi River, and Missouri River points. After the railroad lines had killed off the San Francisco merchants' steamship line, losing thereby several million dollars, they came to an agreement with their eastern connections as to a new basis of divisions and a new scheme of rate making.

Thus we come to the year 1896, at which time the blanket system at present obtaining was first authoritatively announced. This blanket extended from the Mississippi River to the Atlantic seaboard. We hear very little of water competition for the next three or four years. In 1900, however, the American-Hawaiian Steamship Co. established its first steamer line through the Straits of Magellan. In 1900 also, as we have already seen, control of the Pacific Mail was purchased by the Southern Pacific Co. Neither one of these facts seems to have disturbed transcontinental rates.

In 1906 another step forward was made in the matter of water competition by the opening of the Tehuantepec route. The American-Hawaii Co., under an arrangement made with the Mexican Government and with the sugar planters in the Hawaiian Islands, instituted the most satisfactory service which up to that time had obtained between the Atlantic and Pacific seaboards by water. East-bound tonnage was furnished by Hawaiian sugar, and west-bound tonnage was gathered at the Atlantic seaboard.

In 1907 the volume of west-bound business carried to Pacific-coast terminals via this route was 112,395 tons; in 1908, 117,203 tons; in 1909, 204,000 tons; in 1910, 239,500 tons. The total volume of transcontinental tonnage was, two years ago, estimated by the carriers at 3,000,000 tons per annum, while the total water-borne traffic is about 10 per cent of this figure. Inasmuch as the traffic of the country increases at the rate of nearly 10 per cent per year, it would appear that in nearly four years ocean competitors of the transcontinental rail lines have been enabled to secure a total tonnage of approximately the normal increase in west-bound transcontinental freight for a single year. In giving this figure we are allowing to the AmericanHawaiian line all the advantage of the accumulated business of the six years preceding 1906, in which it had in operation its steamship line through the Straits of Magellan. Considering that this carrier has reduced its time of movement between the Atlantic and Pacific to an average of a little more than 25 days and gives a service that never before has been equaled by an ocean line, the slight increase in its tonnage either evidences that all-rail rates are more attractive for the great volume of business or that the water rates are maintained at a figure so nearly approximating those extended by the rail lines as not to overcome the difference in the service.

THE OCEAN "NEUTRALIZED.”

We have thus traced the history of this protracted struggle between the ocean and the land that we might clearly appreciate the strategy of the railroads and its effect upon the ocean-borne traffic. One water route after another has been rendered innocuous. To meet the competition of the railroads, the tendency of the ocean carriers has been to shorten the time consumed in passing by water from coast to coast. The clipper ship has been forced to give way to the steamship, and the steamship has been compelled to transship by rail a portion of the distance. The routes by way of Cape Horn and the Straits of Magellan have been virtually abandoned. For nearly 40 years the Panama route has been under railroad control. When an attempt was made to reestablish this route as a vital competitor, the railroads used their own

ocean-and-rail line to eliminate it from the field. So that for several years there has been but one ocean line which apparently has no railroad connection, that of the American-Hawaiian Steamship Co., and this line lives upon sufferance, its rates being made with the knowledge of the railroad company and with a more or less definite relation to the transcontinental rail rates. Within the past few months another water competitor has entered the field, the California-Atlantic line, which has done an extensive business both eastbound and westbound for the short time that it has been in existence, but the prophecy made by the railroad witnesses is that it will not last long.

In the light of this history it is not to be gainsaid that the transcontinental lines must give consideration to sea competition. For 30 years and more their effort has been to "neutralize and control" such competition, in the phrase of Mr. Stubbs, vice president of the Southern Pacific system. While they have subsidized, bought, and controlled the water carriers, there has always been present to the mind of the traffic manager of the transcontinental railroad the existence of the ocean and the possibility of its use. Without a ship upon it the ocean has the power to restrain in some degree the upward tendency of rail rates. A railroad may not safely indulge its desire to impose all the traffic will bear between two ocean ports, and it may truly be said that the least poetical of railroad traffic managers never looks upon the ocean without a sense of awe.

The railroads, moreover, must soon meet with a competition by water more intense than any that they have heretofore suffered, for within three years another route, one more important, searching, and determinative in its effect upon railroad rates than any other, will be opened--a route all water by way of the Panama Canal. The cutting of this canal will in effect bring the Straits of Magellan 3,500 miles to the northward, and with modern steamships it is estimated that San Francisco will by water be removed from New York but 14 days.

There have been two periods of intense water competition since the year 1887, when the act to regulate commerce went into effect-one following the establishment of the Merchant's line via the Panama route, the other immediately following the establishment of the Tehuantepec route in 1906. The effect on commodity rates out of New York of the establishment of the Merchant's line of steamships has already been adverted to in the testimony given by Mr. Luce, of the Southern Pacific. In order to ascertain the effect upon commodity rates of the establishment of the AmericanHawaiian line, we have secured from the carriers a statement of the fluctuations in their rates since the year 1906, from which it appears that notwithstanding the presence of what purports to be active water competition, commodity rates by the rail carriers have been increased rather than lowered during that period. Out of 1,535 commodity rates compared by the carriers, it appears that no change has taken place since December 1, 1906, as to 696 of such commodities; reductions have been effected in 287, advances and reductions as to 132, and advances as to 418. Of the items increased, the rates on 318 commodities were increased from the whole eastern blanket. The reductions in the greater part were effected by taking single articles from the classifications and giving to them commodity rates from all points of origin.

I think that is all I desire to read into the record. covers the ground.

I think that

Gentlemen, before closing, it is to be borne in mind that the vice president and general manager of the Pacific Mail Steamship Co. on February 29 last, finding the unwavering attitude of the representative of the San Francisco Chamber of Commerce, went to the trouble to write at considerable length to the president of that chamber, and the vice president and general manager has seen fit, I am very glad to say, to introduce this letter into the record. It is found on page 373 of part 7 of the hearings. In that letter the vice president and general manager of the Pacific Mail Steamship Co. sets forth at great length and detail his New York-Oriental-San Franciscoincidental-steamship scheme, and suggests that it does not come under the resolutions of the San Francisco Chamber of Commerce, under which its representative was acting in Washington. I am very glad to state that the gentleman has also introduced the reply which was wired to him by the San Francisco Chamber of Commerce, after holding two meetings upon the subject and listening to the

personal representative in San Francisco of the vice president and general manager of the Pacific Mail Steamship Co. They gave an exhaustive hearing, and gave the matter careful consideration. All the matters that have been stated before you were substantially set before the chamber. The board of directors of the chamber of commerce is composed of active, forceful, long-headed, able business men, every man a master of the business in which he is engaged, not theorists, not dreamers, not idealists, but practical, hard-headed, everyday business men.

And what was the reply that the vice president and general manager of the Pacific Mail Steamship Co. received from the San Francisco Chamber of Commerce? In order to remove any doubts from his mind as to the scope of the resolutions of the San Francisco Chamber of Commerce with regard to the operation of railroad companies of steamship lines in mock competition with themselves, they made this reply:

It is found on page 376 of part 7, and reads as follows:

R. P. SCHWERIN,

New Willard Hotel, Washington, D. C.:

SAN FRANCISCO, March 11, 1912.

Board of directors San Francisco Chamber of Commerce to-day after careful consideration unanimously passed following resolution:

"Resolved, That this chamber is unalterably opposed to the operation through the Panama Canal of any railroad owned or controlled ship engaging wholly or partly in coastwise traffic. We also reiterate our position formerly expressed that we favor and strongly urge upon Congress the enactment of laws that will exempt from canal tolls all ships sailing under the American flag engaged in coastwise traffic."

This was done after consideration of your recent letter to me. We regret that you were of the impression that our attitude as expressed by our former resolutions, or as maintained by our representatives in Washington, called for any amendment of the law prohibiting railroads from owning or controlling ships engaged in trade through the canal other than coastwise trade. Our objection all along has been and still is only to allowing railroad owned or controlled ships engaged wholly or partly in coastwise trade from passing through the canal. Our position on this subject rests upon a matter of principle and in no way upon any hostility to any particular steamship

company.

M. H. ROBBINS, JR., President San Francisco Chamber of Commerce.

I am very glad that my good friend, Mr. R. "Patriot" Schwerin, has introduced this into the evidence, because it clearly sets forth the attitude of the San Francisco Chamber of Commerce more strongly than I could myself have set it forth here.

Mr. Chairman, I should like to introduce into the record an extract from the Congressional Record of May 16, 1912, which is a compilation of some of the resolutions-by no means all of them-but the minority of the House committee took occasion to have these printed, and it puts them into a compact form.

The CHAIRMAN. They do not appear in the views of the minority of the House committee, do they?

Mr. WHEELER. Not as a whole. They may, some of them. I have not sought to differentiate as between them, because these were a larger number of resolutions than in the other.

The CHAIRMAN. They may be inserted.

The resolutions are as follows:

[Extract from Congressional Record, May 16, 1912.]

RESOLUTIONS AND TELEGRAMS INDICATING PUBLIC SENTIMENT THROUGHOUT THE COUNTRY IN FAVOR OF FREE TOLLS THROUGH THE PANAMA CANAL FOR AMERICAN SHIPS ENGAGED IN COASTWISE TRADE AND AGAINST THE USE OF THE CANAL BY STEAMSHIP LINES ENGAGED IN INTERSTATE COMMERCE WHICH ARE OWNED OR CONTROLLED BY RAILROADS WITH WHICH THEY COMPETE FOR TRAFFIC.

Resolutions unanimously adopted by the Lakes-to-the-Gulf Deep Waterways Association at the sixth annual convention, Chicago, Ill., October 12, 13, 14, 1911:

"The policy of free waterways is fundamental with the American people, and hence this association declares that this principle should be extended to our coast wise trade through the Panama Canal.”

Resolutions unanimously adopted by the National Rivers and Harbors Congress which convened in Washington in December, 1911, consisting of over 1,200 delegates. representing every State in the Union:

We submit that waterways improved or created by the Federal Government by the use of money contributed by the whole people of the United States should be free for the use of American ships in fair and open competition and on equal terms, without the payment of tolls, but we contend that a water carrier owned, controlled, or operated by a competing land carrier is unfair competition, and in order to preserve to the whole people the benefits of continued fair competition so that the beneficent influence of open waterways shall not be nullified by hostile interests, we recommend the enlargement of the powers of the Interstate Commerce Commission, to the end that the commission may more effectually regulate competing land and water carriers and competing water carriers and provide for the interchange of traffic.' Resolutions adopted at a meeting held in Washington, December 6, 1911, composed of delegates representing civic and commercial bodies of the Pacific coast, cities on the Gulf of Mexico and the Atlantic coast, and the cities of Philadelphia, Newark, Trenton, Richmond, Buffalo, St. Louis, Cincinnati, and Pittsburgh:

"Whereas the Government of the United States is constructing, entirely at its own cost, the Panama Canal for the benefit of its own people as a military measure for the naval protection of either coast in time of war, and for the facilitation of its domestic commerce as well as for the furtherance of the commerce of the world; "Whereas the coastwise commerce between ports of the United States is confined by law to vessels registered under the American flag, so that regulations established by the Government of the United States for the use of the canal by such vessels will not conflict in any way with the treaty obligations of the United States with other nations, and particularly with Great Britain;

"Whereas there is a great and growing demand for cheaper and freer interchange of commodities between the States of the Pacific slope, on the one hand, and those bordering on and tributary to the Atlantic and Gulf coasts, including all the States along the Mississippi and its navigable branches, on the other;

"Whereas the opening of the canal, through the continuous and direct water transportation it will afford, will give the people of this country opportunities to interchange commodities of the different districts to an extent never dreamed of before, and thus will reduce the cost of a large number of articles of daily use and necessity to the consumer;

"Whereas ample precedents exist for exempting the domestic commerce of the United States from the payment of tolls for passage through the canal; and

"Whereas the operation of the canal under this condition will greatly stimulate and increase American shipping:

"Resolved, That the conference for Panama Canal free tolls for American coastwise commerce strongly and urgently recommends that vessels engaged in domestic commerce between ports of the United States shall be granted free passage through the Panama Canal."

The Boston Chamber of Commerce adopted resolutions similar to the above. Resolutions passed by delegates representing the various chambers of commerce of the Pacific coast held in San Francisco, Cal., October 2, 1911:

"Whereas the building of the Panama Canal was undertaken by the people of the United States in pursuance of a great national policy, amongst other things of providing for the national defense, of opening up the shortest possible water route between the respective coasts of the United States and foreign countries, to provide through natural methods and to prevent monopoly of transportation means for transportation between the various sections of the Union at the lowest possible cost, to build

up and expand our commerce with foreign nations, and, incidentally, to encourage the upbuilding of a now decadent merchant marine: Be it

"Resolved, That it is the sense of this meeting that there should be no tolls charged through the canal to vessels coastwise flying the American flag; and be it further

"Resolved, That we heartily approve of the legislation recommended by President Taft in his message to Congress of December 6, 1910, reading as follows: 'I can not close this reference to the canal without suggesting as a wise amendment to the interstate-commerce law a provision prohibiting interstate-commerce railroads from owning or controlling ships engaged in the trade through the Panama Canal. I believe such a provision may be needed to save to the people of the United States the benefits of the competition in trade between the eastern and western seaboards which this canal was constructed to secure.

Resolutions adopted at the forty-second annual meeting of the National Board of Trade, Washington, D. C., January 18, 1912:

"Whereas the Government of the United States is constructing, entirely at its own cost, the Panama Canal, for the benefit of its own people, as a military measure for the naval protection of either coast in time of war, and for facilitating its domestic and foreign commerce, as well as for the furtherance of the commerce of the world; "Whereas the coastwise commerce between ports of the United States is confined by law to vessels registered under the American flag, so that regulations established by the Government of the United States for the use of the canal by such vessels will not conflict in any way with the treaty obligations of the United States with other nations; "Whereas there is a great and growing demand for cheaper and freer interchange of commodities between the States of the Pacific slope on the one hand and those bordering on and tributary to the Atlantic and Gulf coasts, including all the States along the Mississippi and its navigable branches, on the other; "Whereas the opening of the canal, through the continuous and direct water transportation it will afford, will give the people of this country opportunities to interchange commodities of the different districts to an extent heretofore found impossible and thus will reduce the cost of a large number of articles of daily use and necessity; "Resolved, That the national board of trade urgently recommends that vessels engaged in domestic commerce between ports of the United States shall be granted preferential tolls in passing through the Panama Canal: Provided, That when such vessels are owned, controlled, or operated, directly or indirectly, by any land transportation line or lines, no preferential tolls shall be granted to the vessels so owned, operated, or controlled."

Resolutions adopted by the Navy League of the United States at convention held in city of Washington, Fel ruary 23, 1912 :

"Whereas the building of the Panama Canal was undertaken by the people of the United States in pursuance of a great national policy-amongst other things of providing for the national defense; of opening up the shortest possible water route between the respective coasts of the United States and foreign countries; and of encouraging the upbuilding of our merchant marine, which has practically disappeared from the foreign trade: Be it

"Resolved, That although it is the sense of this meeting that the question of tolls through the Panama Canal is one beyond the scope of this league's present activities, yet be it further

"Resolved, That as we believe the war-time efficiency of our Navy will depend, in part, on the existence of a fleet of merchant vessels available as naval auxiliaries, we heartily approve of any legislation directly or indirectly aiding in building up the American merchant marine, and we believe that if Congress in its wisdom deems it advisable to levy tolls, that these tolls should be returned to the ships, either in the coastwise or foreign trade, for the purpose of assisting in rehabilitating that merchant marine."

Resolution adopted by Philadelphia Chamber of Commerce, December 14, 1911: "Whereas the Government of the United States is constructing, entirely at its own cost, the Panama Canal for the benefit of its own people as a military measure for the naval protection of either coast in the time of war and for the facilitation of its domestic commerce as well as for the furtherance of the commerce of the world; "Whereas the coastwise commerce between the ports of the United States is confined by law to vessels registered under the American flag, so that regulations established by the Government of the United States for the use of the canal by such vessels will not conflict in any way with the treaty obligations of the United States with other nations;

"Whereas there is a great and growing demand for cheaper and freer interchange of commodities between the States of the Pacific slope on the one hand and those