Chapter 22

In the year ending June 30, 1905, there entered the port of Rio de Janeiro steamers and sailing vessels flying the flag of Austria-Hungary, 120; of Norway, 142; of Italy, 165; of Argentina, 264; of France, 349; of Germany, 657; of Great Britain, 1785; of the United States,--no steamers and seven sailing vessels, two of which were in distress!

An English firm runs a small steamer monthly between New York and Rio de Janeiro; the Panama Railroad Company runs steamers between New York and the Isthmus of Panama; the Brazilians are starting for themselves a line between Rio and New York; there are two or three foreign concerns running slow cargo boats, and there are some foreign tramp steamers. That is the sum total of American communication with South America beyond the Caribbean Sea. Not one American steamship runs to any South American port beyond the Caribbean. During the past summer, I entered the ports of Pará, Pernambuco, Bahia, Rio de Janeiro, Santos, Montevideo, Buenos Ayres, Bahia Blanca, Punta Arenas, Lota, Valparaiso, Coquimbo, Tocopilla, Callao, and Cartagena--all of the great ports and a large proportion of the secondary ports of the southern continent. I saw only one ship, besides the cruiser that carried me, flying the American flag.

The mails between South America and Europe are swift, regular, and certain; between South America and the United States they are slow, irregular, and uncertain. Six weeks is not an uncommon time for a letter to take between Buenos Ayres or Valparaiso and New York. The merchant who wishes to order American goods cannot know when his order will be received nor when it will be filled. The freight charges between the South American cities and American cities are generally and substantially higher than between the same cities and Europe; at many points the deliveries of freight are uncertain and its condition upon arrival doubtful. The passenger accommodations are such as to make a journey to the United States a trial to be endured and a journey to Europe a pleasure to be enjoyed. The best way to travel between the United States and both the southwest coast and the east coast of South America is to go by way of Europe, crossing the Atlantic twice. It is impossible that trade should prosper or intercourse increase or mutual knowledge grow to any great degree under such circumstances. The communication is worse now than it was twenty-five years ago. So long as it is left in the hands of our foreign competitors in business, we cannot reasonably look for any improvement. It is only reasonable to expect that European steamship lines shall be so managed as to promote European trade in South America, rather than to promote the trade of the United States in South America.

This woeful deficiency in the means to carry on and enlarge our South American trade is but a part of the general decline and feebleness of the American merchant marine, which has reduced us from carrying over ninety per cent of our export trade in our own ships to the carriage of nine per cent of that trade in our own ships and dependence upon foreign shipowners for the carriage of ninety-one per cent. The true remedy and the only remedy is the establishment of American lines of steamships between the United States and the great ports of South America, adequate to render fully as good service as is now afforded by the European lines between those ports and Europe. The substantial underlying fact was well stated in the resolution of this Trans-Mississippi Congress three years ago:

That every ship is a missionary of trade; that steamship lines work for their own countries just as railroad lines work for their terminal points, and that it is as absurd for the United States to depend upon foreign ships to distribute its products as it would be for a department store to depend upon the wagons of a competing house to deliver its goods.

How can this defect be remedied? The answer to this question must be found by ascertaining the cause of the decline of our merchant marine. Why is it that Americans have substantially retired from the foreign transport service? We are a nation of maritime traditions and facility; we are a nation of constructive capacity, competent to build ships; we are eminent, if not preëminent, in the construction of machinery; we have abundant capital seeking investment; we have courage and enterprise shrinking from no competition in any field which we choose to enter. Why, then, have we retired from this field in which we were once conspicuously successful?

I think the answer is twofold.

1. The higher wages and the greater cost of maintenance of American officers and crews make it impossible to compete on equal terms with foreign ships. The scale of living and the scale of pay of American sailors are fixed by the standard of wages and of living in the United States, and those are maintained at a high level by the protective tariff. The moment the American passes beyond the limits of his country and engages in ocean transportation, he comes into competition with the lower foreign scale of wages and of living. Mr. Joseph L. Bristow, in his report upon trade conditions affecting the Panama Railroad, dated June 14, 1905, gives in detail the cost of operating an American steamship with a tonnage of approximately thirty-five hundred tons as compared with the cost of operating a specified German steamship of the same tonnage, and the differences aggregate $15,315 per annum greater cost for the American steamship than for the German; that is $4.37 per ton. He gives also in detail the cost of maintaining another American steamship with a tonnage of approximately twenty-five hundred tons as compared with the cost of operating a specified British steamship of the same tonnage, and the differences aggregate $18,289.68 per annum greater cost for the American steamship than for the British; that is $7.31 per ton. It is manifest that if the German steamship were content with a profit of less than $15,000 per annum, and the British with a profit of less than $18,000 per annum, the American ships would have to go out of business.

2. The principal maritime nations of the world, anxious to develop their trade, to promote their shipbuilding industry, to have at hand transports and auxiliary cruisers in case of war, are fostering their steamship lines by the payment of subsidies. England is paying to her steamship lines between six and seven million dollars a year; it is estimated that since 1840 she has paid to them between two hundred and fifty and three hundred millions. The enormous development of her commerce, her preponderant share of the carrying trade of the world, and her shipyards crowded with construction orders from every part of the earth indicate the success of her policy. France is paying about eight million dollars a year; Italy and Japan, between three and four million each; Germany, upon the initiative of Bismarck, is building up her trade with wonderful rapidity by heavy subventions to her steamship lines and by giving special differential rates of carriage over her railroads for merchandise shipped by those lines. Spain, Norway, Austria-Hungary, Canada, all subsidize their own lines. It is estimated that about $28,000,000 a year are paid by our commercial competitors to their steamship lines.

Against these advantages of his competitor the American shipowner has to contend; and it is manifest that the subsidized ship can afford to carry freight at cost for a period long enough to drive him out of business.

We are living in a world not of natural competition, but of subsidized competition. State aid to steamship lines is as much a part of the commercial system of our day as state employment of consuls to promote business.

It will be observed that both of these disadvantages under which the American shipowner labors are artificial; they are created by governmental action--one by our own Government in raising the standard of wages and living, by the protective tariff; the other by foreign governments in paying subsidies to their ships for the promotion of their own trade. For the American shipowner it is not a contest of intelligence, skill, industry, and thrift against similar qualities in his competitor; it is a contest against his competitors and his competitors' governments and his own government also.

Plainly, these disadvantages created by governmental action can be neutralized only by governmental action, and should be neutralized by such action.

What action ought our Government to take for the accomplishment of this just purpose? Three kinds of action have been advocated.

1. A law providing for free ships--that is, permitting Americans to buy ships in other countries and bring them under the American flag. Plainly, this would not at all meet the difficulties which I have described. The only thing it would accomplish would be to overcome the excess in cost of building a ship in an American shipyard over the cost of building it in a foreign shipyard; but since all the materials which enter into an American ship are entirely relieved of duty, the difference in cost of construction is so slight as to be practically a negligible quantity, and to afford no substantial obstacle to the revival of American shipping. The expedient of free ships, therefore, would be merely to sacrifice our American shipbuilding industry, which ought to be revived and enlarged with American shipping, and to sacrifice it without receiving any substantial benefit. It is to be observed that Germany, France, and Italy all have attempted to build up their own shipping by adopting the policy of free ships, have failed in the experiment, have abandoned it, and have adopted in its place the policy of subsidy.

2. It has been proposed to establish a discriminating tariff duty in favor of goods imported in American ships--that is to say, to impose higher duties upon goods imported in foreign ships than are imposed on goods imported in American ships. We tried that once many years ago and abandoned it. In its place we have entered into treaties of commerce and navigation with the principal countries of the world, expressly agreeing that no such discrimination shall be made between their vessels and ours. To sweep away all those treaties and enter upon a war of commercial retaliation and reprisal for the sake of accomplishing indirectly what can be done directly should not be seriously considered.

3. There remains the third and obvious method: to neutralize the artificial disadvantages imposed upon American shipping through the action of our own government and foreign governments by an equivalent advantage in the form of a subsidy or subvention. In my opinion this is what should be done; it is the sensible and fair thing to do. It is what must be done if we would have a revival of our shipping and the desired development of our foreign trade. We cannot repeal the protective tariff; no political party dreams of repealing it; we do not wish to lower the standard of American living or American wages. We should give back to the shipowner what we take away from him for the purpose of maintaining that standard; and unless we do give it back we shall continue to go without ships. How can the expenditure of public money for the improvement of rivers and harbors to promote trade be justified upon any grounds which do not also sustain this proposal? Would any one reverse the policy that granted aid to the Pacific railroads, the pioneers of our enormous internal commerce, the agencies that built up the great traffic which has enabled half a dozen other roads to be built in later years without assistance? Such subventions would not be gifts. They would be at once compensation for injuries inflicted upon American shipping by American laws and the consideration for benefits received by the whole American people--not the shippers or the shipbuilders or the sailors alone, but by every manufacturer, every miner, every farmer, every merchant whose prosperity depends upon a market for his products.

The provision for such just compensation should be carefully shaped and directed so that it will go to individual advantage only so far as the individual is enabled by it to earn a reasonable profit by building up the business of the country.

A bill is now pending in Congress which contains such provisions; it has passed the Senate and is now before the House Committee on Merchant Marine and Fisheries; it is known as Senate bill No. 529, Fifty-ninth Congress, First Session. It provides specifically that the Postmaster-General may pay to American steamships, of specified rates of speed, carrying mails upon a regular service, compensation not to exceed the following amounts: For a line from an Atlantic port to Brazil, monthly, $150,000 a year; for a line from an Atlantic port to Uruguay and Argentina, monthly, $187,500 a year; for a line from a Gulf port to Brazil, monthly, $137,500 a year; for a line from each of two Gulf ports and from New Orleans to Central America and the Isthmus of Panama, weekly, $75,000 a year; for a line from a Gulf port to Mexico, weekly, $50,000 a year; for a line from a Pacific coast port to Mexico, Central America, and the Isthmus of Panama, fortnightly, $120,000 a year. For these six regular lines a total of $720,000. The payments provided are no more than enough to give the American ships a fair living chance in the competition.

There are other wise and reasonable provisions in the bill relating to trade with the Orient, to tramp steamers, and to a naval reserve, but I am now concerned with the provisions for trade to the south. The hope of such a trade lies chiefly in the passage of that bill.

Postmaster-General Cortelyou, in his report for 1905, said:

Congress has authorized the Postmaster-General, by the act of 1891, to contract with the owners of American steamships for ocean mail service and has realized the impracticability of commanding suitable steamships in the interest of the postal service alone by requiring that such steamers shall be of a size, class, and equipment which will promote commerce and become available as auxiliary cruisers of the navy in case of need. The compensation allowed to such steamers is found to be wholly inadequate to secure the proposals contemplated; hence, advertisements from time to time have failed to develop any bids for much-needed service. This is especially true in regard to several of the countries of South America, with which we have cordial relations and which, for manifest reasons, should have direct mail connections with us. I refer to Brazil and countries south of it. Complaints of serious delay to mails for these countries have become frequent and emphatic, leading to the suggestion on the part of certain officials of the government that for the present and until more satisfactory direct communication can be established, important mails should be dispatched to South America by way of European ports and on European steamers, which would not only involve the United States in the payment of double transit rates to a foreign country for the dispatch of its mails to countries of our own hemisphere, but might seriously embarrass the government in the exchange of important official and diplomatic correspondence.

The fact that the government claims exclusive control of the transmission of letter mail throughout its own territory would seem to imply that it should secure and maintain the exclusive jurisdiction when necessary, of its mails on the high seas. The unprecedented expansion of trade and foreign commerce justifies prompt consideration of an adequate foreign mail service.

It is difficult to believe, but it is true, that out of this faulty ocean mail service the government of the United States is making a large profit. The actual cost to the government last year of the ocean mail service to foreign countries other than Canada and Mexico was $2,965,624.21, while the proceeds realized by the government from postage between the United States and foreign countries other than Canada and Mexico was $6,008,807.53, leaving the profit to the United States of $3,043,183.32; that is to say, under existing law the government of the United States, having assumed the monopoly of carrying the mails for the people of the country, is making a profit of $3,000,000 per annum by rendering cheap and inefficient service. Every dollar of that three millions is made at the expense of the commerce of the United States. What can be plainer than that the government ought to expend at least the profits that it gets from the ocean mail service in making the ocean mail service efficient. One quarter of those profits would establish all these lines which I have described between the United States and South and Central America, and give us, besides a good mail service, enlarged markets for the producers and merchants of the United States who pay the postage from which the profits come.[12]

In his last message to Congress, President Roosevelt said:

To the spread of our trade in peace and the defense of our flag in war a great and prosperous merchant marine is indispensable. We should have ships of our own and seamen of our own to convey our goods to neutral markets, and in case of need to reënforce our battle line. It cannot but be a source of regret and uneasiness to us that the lines of communication with our sister republics of South America should be chiefly under foreign control. It is not a good thing that American merchants and manufacturers should have to send their goods and letters to South America via Europe if they wish security and dispatch. Even on the Pacific, where our ships have held their own better than on the Atlantic, our merchant flag is now threatened through the liberal aid bestowed by other governments on their own steam lines. I ask your earnest consideration of the report with which the Merchant Marine Commission has followed its long and careful inquiry.

The bill now pending in the House is a bill framed upon the report of that Merchant Marine Commission. The question whether it shall become a law depends upon your Representatives in the House. You have the judgment of the Postmaster-General, you have the judgment of the Senate, you have the judgment of the President; if you agree with these judgments and wish the bill which embodies them to become a law, say so to your Representatives. Say it to them individually and directly, for it is your right to advise them and it will be their pleasure to hear from you what legislation the interests of their constituents demand.

The great body of Congressmen are always sincerely desirous to meet the just wishes of their constituents and to do what is for the public interest; but in this great country they are continually assailed by innumerable expressions of private opinion and by innumerable demands for the expenditure of public money; they come to discriminate very clearly between private opinion and public opinion, and between real public opinion and the manufactured appearance of public opinion; they know that when there is a real demand for any kind of legislation it will make itself known to them through a multitude of individual voices. Resolutions of commercial bodies frequently indicate nothing except that the proposer of the resolution has a positive opinion and that no one else has interest enough in the subject to oppose it. Such resolutions by themselves, therefore, have comparatively little effect; they are effective only when the support of individual expressions shows that they really represent a genuine and general opinion.

It is for you and the business men all over the country whom you represent to show to the Representatives in Congress that the producing and commercial interests of the country really desire a practical measure to enlarge the markets and increase the foreign trade of the United States, by enabling American shipping to overcome the disadvantages imposed upon it by foreign governments for the benefit of their trade, and by our government for the benefit of our home industry.

FOOTNOTES:

[12] There would be some modification of these figures if the cost of getting the mails to and from the exchange offices were charged against the account; but this is not separable from the general domestic cost and would not materially change the result.

SOUTH AMERICAN COMMERCE

ADDRESS AT THE NATIONAL CONVENTION FOR THE EXTENSION OF THE FOREIGN COMMERCE OF THE UNITED STATES, WASHINGTON, D. C., JANUARY 14, 1907

I thank you for your cordial greeting, and I thank you, Mr. Chairman, for the very kind terms which you have used regarding myself. I have come here with pleasure, not to make a prepared address, or to attempt oratory, but to talk a few minutes about subjects of common interest to us all.

I wish first to express the satisfaction that I feel in the existence of this convention. The process of discussion, consideration, mutual information, and comparison of opinion among the people who are not in office, is the process that puts under the forms of representative government the reality of freedom and of a self-governing people. The discussion which takes place in such meetings as this, and which is stimulated by such meetings as this, in the club, in all the local associations and places where men meet throughout the country, is at once far removed from the secret and selfish devices of the lobbyist and from the stolid indifference which characterizes a people willing to be governed without themselves having a voice in government.

I congratulate you that you have come here to the nation's capital to discuss and consider subjects which are properly of national concern; that you have not come to ask the national government to do anything which you ought to do yourselves at home in your separate states, but to consider the exercise of the great commerce power of the nation, the power which from the beginning of our government has been fittingly placed in the hands of the national administration.

To my view we are advancing, and the whole world is advancing, in the opportunities and in the spirit and method which create opportunities for that kind of commerce which is profitable and beneficial to both parties the world over. Our relations continually grow more reasonable, more sensible and kindly with Europe and all the powers of Europe, with our vigorous and growing neighbor to the north, with our rapidly advancing and developing neighbors to the south, and with the nations that face us on the other side of the Pacific. Little occasions for controversy, little causes for irritation, little incidents of conflicting interests continually arise, as they do among friends and neighbors in the same town, but the general trend of international relations is a trend towards mutual respect, mutual consideration, and substantial good understanding.