Chapter 13

THE UNITED STATES

While a navigation code founded in 1790 and 1792, and developed in 1816, 1817, and 1820, after the model of the then existing English code,[FS] has been retained in modified form through enactments in subsequent years, a system of general ship-subsidies, though repeatedly proposed, has never been adopted by the United States. From 1793 to 1866 bounties were given to fishing vessels and men employed in the bank and other deep-sea fisheries,[FT] but no subsidies to the merchant marine were granted till 1845, and these were only postal subsidies--payments in excess of an equivalent for services to be rendered in ocean mail-carriage. The law enacted that year had for its declared purpose the encouragement of American ocean steamship-building and running. With this act, therefore, the real history of Government aid to domestic shipping in this country begins.

At the time of the adoption of this policy America was still leading the world in ocean sailing-ships with her splendid fleets of fast-sailing packets and "clippers", while England had taken the lead in steamships. The law of 1845 was the culmination of a move begun in Congress in 1841, the year after the first Cunarder had crossed from Liverpool to Halifax and Boston. Its aim was to parry England's bold stroke for maritime supremacy with her State-aided steamship lines, and directly to "protect our merchant shipping from this new and strange menace."[FU] The first move of 1841 was for an appropriation of a million dollars annually for foreign-mails carriage in American-owned ships.[FU]

The law of 1845 (March 3) authorized the postmaster-general to contract with American ship-owners exclusively for this service to be performed in American vessels, steamships preferred, and by American citizens, for a period of from four to ten years, with the proviso that Congress by joint resolve might at any time terminate a contract. The subsidy was embodied in the rates of postage thus fixed: upon all letters and packets not exceeding a half-ounce in weight, between any ports of the United States and any foreign ports not less than three thousand miles distant, twenty-four cents, with the inland postage added; upon letters and packets over one half-ounce in weight, and not exceeding one ounce, forty-eight cents, and for every additional half-ounce or fraction of an ounce, fifteen cents; to any of the West India Islands, or islands in the Gulf of Mexico, ten cents, twenty cents, and five cents, respectively; upon each newspaper, pamphlet, and price-current to any of the ports and places above enumerated, three cents: inland postage to be added in all cases. The postmaster-general was to give the preference to such bidder as should propose to carry the mails in a steamship rather than a sailing-ship. Contractors were to turn their ships over to the Government upon demand for conversion into ships of war, the Government to pay therefor the fair full value, as ascertained by appraisers. The postmaster-general was further authorized to make ten-years' contracts for mail carriage from place to place in the United States in steamboats by sea, or on the Gulf of Mexico, or on the Mississippi River up to New Orleans, on the same conditions regarding the transfer of the ships to the Government when required for use as war ships.[FV]

The next year, 1846, in the annual post-office appropriations act (June 19), provision was made for the application of twenty-five thousand dollars toward the establishment of a line of mail steamers between the United States and Bremen; and early in 1847 (February 3) a contract was duly concluded for a Bremen and Havre service, the first under the law of 1845.

This was a five years' contract entered into with the Ocean Steam Navigation Company, upon the basis of an earlier agreement (February 1846) with Edward Mills of New York, which Mr. Mills had transferred to the new organization. The subsidy was fixed at one hundred thousand dollars a year for each ship going by Cowes to Bremen and back to New York once in two months a year, and seventy-five thousand dollars a year for each ship going by Cowes to Havre and back to New York. The contractors were to build within a year's time four first-class steamships of not less than 1400 tons, nor less than a thousand horsepower; and were to run their line "with greater speed to the distance than is performed by the Cunard Line between Boston and Liverpool and back."[FW] Provision for the subsidy thus called for was promptly made in this item in the post-office appropriation bill for the ensuing year, approved March 2: "for transportation by steam-ships between New York and Bremen according to the contract with Edward Mills, $258,609."[FX]

The next step was the enactment of a law which had for its declared objects "to provide efficient mail services, to encourage navigation and commerce, and to build up a powerful fleet in case of war."[FY] This measure, approved March 3, 1847, entitled "An act to provide for the building and equipment of four naval steamships," made provision for the construction, with Government aid, of merchant mail-steamships under the supervision of the Navy Department that they might be rendered suitable if needed for war service.

The act directed the secretary of the navy to accept on the part of the Government certain proposals that had been made for the carriage of the United States mails to foreign ports in American-built and American-owned steamships. These proposals had been submitted to the postmaster-general (March 6, 1846) by Edward K. Collins and associates (James Brown and Stewart Brown) of New York, and A.G. Sloo of Cincinnati: one for mail transportation by steamship between New York and Liverpool, semimonthly, the other between New York and New Orleans, Havana, and Chagres, twice a month. The secretary was directed to contract with Messrs. Collins and Sloo in accordance with the provisions laid down in this act. These required that the steamers be built under the inspection of naval constructors and be acceptable to the Navy Department; that each ship carry four passed midshipmen of the navy to serve as watch-officers, and a mail agent approved by the postmaster-general. Mr. Sloo's ships for his West India service were to be commanded by officers of the navy not below the grade of lieutenant. The secretary was further directed to contract for mail-carriage beyond the Isthmus,--from Panama up the Pacific coast to some point in the Territory of Oregon, once a month each way; but this service could be performed in either steam or sailing ships, as should be deemed more expedient.[FZ]

All the contracts thus provided for were concluded the same year. Each was to run for ten years. The first executed was that with Mr. Sloo. It called for five steamships of not less than 1500 tons, and a semi-monthly service. The line was to touch at Charleston, if practicable, and at Savannah. The ships were to have engines by direct action; and each ship was to be sheathed with copper. The subsidy was fixed at two hundred and ninety thousand dollars a year, a rate of $1.83-1/2 per mile, the distance to be sailed out and back being 158,000 miles.[GA] Mr. Sloo immediately set over his contract to George Law, Marshall O. Roberts, and Bowes McIlvaine, of New York.[GB] The second contract was for the Pacific service, connecting with the mail by the Sloo line across the Isthmus. This was made with Arnold Harris of Arkansas. It provided for a monthly service between Panama and Astoria, Oregon, calling at San Diego, Monterey, and San Francisco, with a subsidy of one hundred and ninety-nine thousand dollars per annum. Three steamers were to be furnished, two of not less than a thousand tons each. Upon receiving the contract Mr. Harris immediately transferred it to W.H. Aspinwall of New York, representing the newly formed Pacific Mail Steamship Company.[GC] The third was the Collins contract. This stipulated for a semi-monthly service between New York and Liverpool during the eight open months of the year, and a monthly service through the four winter months, with five steamers, each of not less than 2000 tons and engines of a thousand horsepower. The first ship was to be ready for service in eighteen months after the date of the contract, November 1, 1847. The subsidy was fixed at $19,250 per twenty round trips, or three hundred and eighty-five thousand dollars a year, a rate of $3.11 a mile for sailing about 124,000 miles.[GD]

By subsequent acts the secretary of the navy was authorized to advance twenty-five thousand dollars a month on each of the ships called for by these several contracts from the time of their launching to their finish; and the date of the completion of the first Collins steamer and the opening of the New York and Liverpool service was extended to June 1, 1850.[GE]

At the same time that the secretary of the navy was executing these contracts the postmaster-general under the authority of an act "to establish certain Post Routes and for other purposes," also approved March 3, 1847,[GF] was contracting for a steamship mail-service between Charleston and Havana, with a subsidy of forty-five thousand dollars per annum. This contract was entered into with M.C. Mordecai of Charleston, who agreed to furnish steamships suitable for war purposes, and to perform a monthly service.[GG] Several other propositions for steamship service to various foreign countries were made to the postmaster-general at this time, but none was accepted.[GH]

The pioneer Bremen-Havre line began its service on the first day of June 1847, with two steamers. These were the _Washington_ and the _Hermann_, built in New York, strong and large, of 1640 tons and 1734 tons, respectively, side-wheelers, bark-rigged. At first they made the run to Bremen in from twelve to seventeen days, much better time than the average clipper.[GI] But up to 1851 they had no regular schedule of sailings, and, their speed being unsatisfactory, few mails were sent by them. The subsidy payments, therefore, were made for each voyage separately.[GJ] They had also ceased to command the patronage of travellers. Nevertheless, as a committee of the Senate in 1850 reported, they were believed to have been "profitable to their owners as freight vessels, and of essential service in promoting the interests of American commerce."[GK] The full service, with twelve trips to Bremen and twelve to Havre, was finally begun in 1851, when two more, and larger ships,--the _Franklin_ and the _Humboldt_, each of 2184 tons, were added to the Havre line. Four years before, the original company, because of financial difficulties, had organized a separate corporation for the Havre service. In 1852 Congress extended the contract to 1857;[GJ] and Southampton was made the point of shifting the mails.

The New York and Chagres, the Charleston and Havana, and the Pacific line, were all under way before the close of 1848. The Pacific line was the first in operation. The service began with the three steamers called for by the contract, the first sailing from New York on the sixth of October, the other two early in December. They were the _California_, 1050 tons, the _Panama_, 1087 tons, the _Oregon_, 1099 tons, all built in New York. The New York and Chagres line was started also in December with the sailing of the _Falcon_, 1000 tons, a purchased steamer which the Navy Department accepted temporarily, while the new ships were building, that the service might be immediately begun. The opening of the new territory south of Oregon acquired through the Mexican War, and the beginning of the rush of the "Argonauts" to the newly discovered gold fields of California, had made all concerned anxious to get these connecting steamship lines a-going.

At first the service was halting because of unavoidable circumstances. The Pacific Company were unable at once to meet the demands. Sufficient or competent crews could not be obtained on the California coast during the gold excitement,[GL] at fever heat in 1849. But it was not long before more ships were put on, and the service improved and prospered. By September, 1849, the Chagres company had their first completed ship in commission. This was the _Ohio_, 2432 tons, built in New York. By June, 1850, the second, the _Georgia_ (and the third of the line, for the _Falcon_ was retained) was running. Soon afterwards the _Illinois_ was added. At about the same time the Pacific company had added two more to their fleet--the _Columbia_ and the _Tennessee_. In 1851 the postmaster-general was authorized to increase the Pacific trips to semi-monthly; and the subsidy was increased. An additional contract (March 13) was then made with Mr. Aspinwall, as president of the Pacific Mail.[GM] This called for the enlargement of the line within a year, to six steamers; and for semi-monthly trips from Panama to Oregon and back, with stops and mail delivery at named points in California; and increased the company's subsidy by one hundred and forty-nine thousand two hundred and fifty dollars per annum. Thus the yearly total became three hundred and forty-eight thousand two hundred and fifty dollars. Before the semi-monthly trips were begun, San Diego and Monterey were dropped for the regular service, to be served by a slower line.[GN] Also this year (1851) two more steamers were added to the fleet.

By this time on the Atlantic side the Collins Line was in promising operation. The service had auspiciously begun in 1850 with four of the five steamships called for by the contract. These were the _Atlantic_, 2845 tons, the _Arctic_, 2856 tons, the _Baltic_, 2723 tons, and the _Pacific_, 2707 tons, each some seven hundred tons larger than the measurement stipulated--"at least 2000 tons." All were built in New York ship-yards; were especially designed for fast sailing; and in size, model, finish, and fittings were pronounced to be "such steamers as the world had never seen."[GO] In all respects they were superior to the Cunarders with which they were aggressively to compete; and it was the boast of the Americans that they would "beat the English in steam navigation, as they had beaten them in fast sailing." All associated with the enterprise were of large experience in maritime affairs. Mr. Collins, a native of Truro, Cape Cod, and long a shipping merchant of New York, had been at the head of fast clipper-ship lines--the New Orleans and Vera Cruz packet line, and the more famous "Dramatic line" (the ships named for plays and players) of transatlantic sailers. The commanders of the steamers were all tried clipper captains.

The _Atlantic_ made the initial voyage, steaming gallantly out of New York harbor on the twenty-seventh of April, a month before the contract time for the beginning of the service. The _Pacific_ followed in June, the _Baltic_ in November, the _Arctic_ in December. They beat the Cunarders' time on the average by a day. Their popularity was immediately established. Their passenger traffic rapidly increased. But the severe condition of the mail contract, with their quick sailings allowing only short stays in port, made it impossible for the company to secure a profitable share of the freight business without a heavy outlay for slower cargo boats. Within a few months after the start of the line the Cunard Company had cut freight rates from seven pounds ten shillings per ton to four pounds. So, while the Collins ships continued steadily to outsail the Cunarders and got the bulk of the passenger traffic, the Cunarders got most of the freighting. Moreover, the Collins ships were far more expensive to run. Indeed, the cost of the rapid service was enormous. Mr. Collins stated before a committee of Congress that to save a day or a day and a half in the run between New York and Liverpool cost the company nearly a million dollars annually.

Accordingly more subsidy was asked for. This was granted in 1852, the act being stimulated by England's move late in 1851 in raising the Cunards' subsidy to £173,340 ($843,000), for forty-four trips a year: about nineteen thousand dollars per voyage. The extra allowance lifted the Collins subsidy to $853,000 for twenty-six trips a year, thirty-three thousand dollars per voyage, a rate of upward of five dollars a mile.[GP]

The competition now became sharper. Still the Collins Line maintained its record sailings, and continued to beat the English. Then it was sharply checked by a grave disaster. On the twenty-fourth of September, 1854, the _Arctic_, when forty miles off Cape Race, rushing through a fog, was rammed by a French steamer, and sunk with three hundred and seven souls. This calamity had a depressing effect on the company's affairs. Two years later, in 1856, Congress determined to reduce the subsidy, and notice of the discontinuance of the extra allowance of 1852 was ordered.[GQ] Only a few weeks after this action another disaster, even more appalling than the first one, befell the company. On September 23 the _Pacific_ sailed from Liverpool for her homeward voyage with a full complement of passengers; passed to sea out of sight; and was never more heard of. She was replaced by the _Adriatic_, the fifth ship called for by the contract, which was launched the year before, the largest, finest, swiftest, and most luxurious then afloat; and the company struggled on against accumulating odds.

At length, in 1858, Congress abandoned the subsidy system and returned to the method of payment for foreign mail-carriage according to the actual service rendered, with a proviso, however, favoring American ships, such to receive the inland-postage plus the sea postage, while foreign ships were to have the sea postage only.[GR]

This was the final blow. The last voyage of the Collins Line was made in January, 1859. Then it perished. In April following, the ships were seized by the mortgagees and sold. So closed the career of the pioneer United States ship company in the transatlantic service. The splendid _Adriatic_ passed to English ownership and the American flag gave way to the British. For several years this ship "held the transatlantic record with a passage of five days nineteen hours from Galway to St. John's."[GS]

Of the other subsidized lines, the ships of the Bremen service were withdrawn and laid up after the subsidy ceased. The Havre line continued a while longer with two ships that had replaced the _Humboldt_ and the _Franklin_, both of which had been lost,--the _Humboldt_ wrecked at Halifax on December 5, 1853; the _Franklin_ stranded on Montauk Point on July 17, 1854. Then with the charter of the two new steamers by the Government in 1861 for use in the Civil War, the Havre line also disappeared.

The cost to the Government of this first steamship subsidy venture, covering the thirteen years between 1845 and 1858, was approximately fourteen and a half million dollars.[GT]

Meanwhile, within this period, the American wooden sailing-ships continued to be the glory of the seas, and the American clippers reached their highest development. The appearance of steamships on the North Atlantic and the Pacific had inspired the producers of the "wonderful American sailing-ships" to greater efforts for their perfection; and the clipper, surpassing all other types of sailers in size, sea-qualities, and speed, was the result of the intensified rivalry of canvas and steam.[GU] The American clipper-ship era fairly opened with the advent of the Collins Steamship Line.[GV] Between 1850 and 1855 clipper-ships were built for nearly every trade,[GW] and they were on every sea. Some of the first were employed in the transatlantic packet service. More became engaged particularly in the "booming" trade to California, in the long-voyage traffic to China and India.[GX] "When John Bull came floating into San Francisco, or Sydney, or Melbourne, he used to find Uncle Sam sitting carelessly, with his legs dangling over the wharf, smoking his pipe, with his cargo sold and his pockets full of money."[GY] The Crimean War, 1853-56, opened a new and prosperous market for American fast sailing-ships, as transports. To meet the demand American ship-yards produced in 1855 more tonnage than they had ever built before.[GZ] The sailing-ship interests strenuously opposed the subsidy system. They denounced it as class legislation unjustly favoring the few, and urged its abolishment.[HA] How strong this influence was in bringing about the change in policy is a mooted question.

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No further move for fostering the American merchant marine with State aid directly or indirectly, was made till 1864. Then the steamship-subsidizing policy was revived, first with a proposition for the establishment of an American mail-line to Brazil. A subsidy of two hundred and fifty thousand dollars per year was proposed, one hundred and fifty thousand to be paid by the United States and one hundred thousand by the Brazilian Government. Congress endorsed the scheme. The act embodying it (May 28)[HB] authorized the postmaster-general to contract for a monthly service between the two countries, touching at St. Thomas, W.I., by first-class American sea-going steamships of not less than 2000 tons. The steamers were to be built under naval inspection, and to be subject to taking for war service. Bids were to be openly advertised for. The contract was to run for ten years. Thus was established the pioneer American line between Philadelphia and Rio de Janeiro, which continued from 1865 to 1876, and was then abandoned.

In the same session of Congress a bill was introduced, authorizing an annual subsidy of five hundred thousand dollars for an ocean mail-steamship service to Japan and China via Hawaii. This also received favorable consideration, and was passed February 17, 1865. The service was to be monthly, performed by American-built ships of not less than 3000 tons, also constructed under naval inspection. Tenders for the contract were to be advertised for, but bids only from United States citizens were to be entertained. The contract was to run for ten years. Only one bidder appeared (as was evidently expected)--the Pacific Mail Steamship Company. The contract went to that company, and under it, in 1867, their prosperous Asiatic service began. At the outset they were released from the obligation of stopping at Hawaii, and Congress voted another subsidy--seventy five thousand dollars per annum--for a distinct Hawaiian service.[HC] The contract for this service, also advertised for, went to the California, Oregon, and Mexican Line.

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Thus far the granting of postal subsidies for the establishment of steamship lines alone had engaged the advocates of State aid to American shipping. Now was agitated the institution of a general subsidy system as a means of fostering the rehabilitation of the merchant marine of all classes in ocean service, sailing-ships as well as steamers. The situation had become acute. Through the great loss of tonnage in the Civil War, and through the steadily advancing change from wood to iron in ship construction and from sail to steam propulsion, the American merchant marine had been brought distressingly low. From 1861, when the United States was standing second in rank among the nations in the extent of her ocean tonnage, to 1866, this tonnage had declined from 2,642,648 to 1,492,926 tons: a loss of more than forty-three per cent; while England, the first in rank and chief competitor, had in the same period gained 986,715 tons, or more than forty per cent. Moreover, of this increase in English tonnage, a large percentage had been in steamers, one ton of which class was estimated to be equal in efficiency to three tons of sailing-ships; while, by substituting largely iron for wood, England had gained a still further advantage in her much larger class of iron vessels, doubly as durable as those of wood.[HD]

The matter was brought up in Congress by a resolution of the House, March 22, 1869, calling for the appointment of a select committee, "to inquire into and report at the next session of Congress the causes of the great reduction of American tonnage engaged in the foreign carrying trade, and the great depression of the navigation interests of the country; and also to report what measures are necessary to increase our ocean tonnage, revive our navigation interests, and regain for our country the position it once had among the nations as a great maritime power." Of this committee Representative John Lynch of Maine was made chairman.

The committee gave a series of hearings mainly in Atlantic seaboard cities, and submitted their report on February 17, 1870, accompanied by two bills recommended for passage; the one, a bounty bill, the other, relative to tonnage duties. With these measures the history of years of effort to establish the principle of general ship-subsidies in the American economic system properly begins.

The Lynch bounty bill, entitled "An act to revive the navigation and commercial interests of the United States," made provision for the remission of duties upon the raw materials entering into the construction of sailing and steam-ships; for the taking in bond, free of duty, of all stores used in vessels in sailing to foreign ports; and for bounties, or subsidies, to American sailing and steam-ships engaged in foreign commerce, already built as well as to be built: the aid being extended to those already built because they had been sailed during the Civil War and since "at great disadvantage."[HE] The amount of duties to be remitted was to be equal to the amount per ton collected on the materials required for certain defined classes of ships: on wooden vessels, eight dollars a ton; on iron, twelve dollars a ton; on composite vessels (vessels composed of iron frames and wooden planking), twelve dollars a ton; on iron steamers, fifteen dollars a ton. Where American materials were used in the construction of iron or composite vessels, allowance was to be made of an amount equivalent to the duties imposed on similar articles of foreign manufacture. The bounties were thus classified: to owners of American registered ships engaging for more than six months in a year in the carrying trade between America and foreign ports, or between ports of foreign countries, a dollar and a half per ton upon a sailing-ship each year so engaged, and a dollar and a half upon a steamer running to and from the ports of the British North American provinces; four dollars upon a steamer running to and from any European port; and three dollars to and from all other foreign ports.[HF]

The intent of the second bill, "imposing tonnage duties and for other purposes," was the readjustment of the existing tax upon tonnage so that it should fall "more equitably upon the different classes of vessels affected thereby."[HF] It removed all tonnage, harbor, pilotage, and other like taxes imposed upon shipping by State and municipal authority (except wharfage, pierage, and dockage); and imposed a duty of thirty cents per ton on all ships, vessels, or steamers entered in the United States.

The committee's measures were ably advocated, but they finally went down in defeat.

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In 1872 the Pacific Mail Steamship Company came forward with an offer to add another monthly mail-steamship service to Japan and China, for an additional subsidy of a half million dollars a year. At the same session a project to establish a subsidized line to Australia was introduced; another, for a subsidized line from New Orleans to Cuba. These failed, while the scheme of the Pacific Mail won. A bill authorizing such contract was enacted June 1, that year, after prolonged and warm debates, and by close votes in House and Senate. Two years afterwards it was discovered that bribery had been employed in securing the passage of that act; the charge being that a million dollars had been spent by a corrupt lobby in pushing the bill through.[HG] Upon these disclosures, and because the company had failed to fulfil its conditions, Congress, by act of March 3, 1875, abrogated the contract.[HH] In 1877 the first contract with the Pacific Mail for the Japan and China service, expired. During its ten years' term the company had received from the Government a total of $4,583,333.33.[HI]

With the Pacific Mail exposure the word subsidy became unsavory to the public taste, and for some years after no subsidy measure, however carefully guarded or respectably backed, could find favor in Congress. A second project for subsidizing a new line to Brazil, proposed by John Roach, the noted American shipbuilder, in 1879, was among those ventured, only to fail.

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A decade later, in 1889, when conditions seemed to be growing more propitious, the subject was revived with vigor by the introduction of a navigation subsidy bill proposed by the American Shipping League.[HJ] From this evolved in 1890 a tonnage bounty bill reported in the House by Representative James M. Farquhar of New York.[HK] The final outcome, indirectly, of these moves was the reëstablishment of the postal subsidy system, abandoned in 1858, in the enactment March 3, 1891, of what is known as the Postal Aid Law.

This one ship-subsidy law now on the statutes was in its original draft one of two proposed measures, termed respectively the Mail Ship Bill and the Cargo Ship Bill, both reported in the Senate by Senator William P. Frye of Maine. The Cargo Bill provided for navigation bounties to sailing-ships and steamers. The objects of these measures, as stated by the promoters, were "(1) to secure regular and quicker service to countries now reached; (2) to make new and direct commercial exchanges with countries not now reached; (3) to develop new and enlarge old markets in the interest of producers and consumers under the reciprocity treaties completed and under consideration; (4) to assist the promotion of a powerful naval reserve; (S) to establish a training-school for American seamen."[HL]

Both bills passed the Senate, but the House rejected the Cargo Bill and passed the Mail Bill only after amending it essentially. The subsidy rate was cut one-third on steamers of the first class--the highest class of ocean liners,[HM]--and was reduced on the second class. The act as finally approved comprises the following features:

Empowering the postmaster-general to contract for terms of from five to ten years with American citizens for carrying the mails on American steamships between ports of the United States and ports in foreign countries, the Dominion of Canada excepted; the service on such lines "to be equitably distributed among the Atlantic, Mexican Gulf, and Pacific ports." Proposals to be invited by public advertisement three months before the letting of a contract; and the contract to go to the lowest responsible bidder. The steamships employed, to be American-built, owned and officered by American citizens; and the following proportion of the crews American citizens, to wit: "during the first two years of each contract, one-fourth thereof; during the next three succeeding years, one-third thereof; and during the remaining time of the continuance of such contract, at least one-half thereof." The subsidized steamships are ranked in four classes: in the first class, iron or steel screw steamships, capable of making a speed of twenty knots an hour at sea of ordinary weather, and of a gross tonnage of not less than 8,000 tons; second class, iron or steel, speed of sixteen knots, 5,000 tons; third class, iron or steel, fourteen knots, 2,500 tons; fourth class, iron or steel, or wooden, twelve knots, 1,500 tons. Only those of the first class eligible to the contract service between the United States and Great Britain. All except the fourth class to be constructed under the supervision of the Navy Department, with particular reference to prompt and economical conversion into auxiliary cruisers, of sufficient strength and stability to carry and sustain at least four effective rifled cannon of a calibre of not less than six inches; and to be of the highest rating known to maritime commerce.

The subsidy, or rate of compensation, as it is termed, for mail-carriage is thus fixed in each class: first class, not exceeding four dollars (in the original draft six dollars) a mile; second class, two dollars a mile, by the shortest practicable route for each outward voyage; third class, one dollar a mile; fourth class, two-thirds of a dollar a mile for the actual number of miles required by the Post Office Department to be travelled on each outward bound voyage. Pro rata deductions from the compensations, and penalties, are imposed for omission of a voyage or voyages, and for delays or irregularities in service. No steamship in the contract service is to receive any other bounty or subsidy from the national treasury. Sanction is given to naval officers to volunteer for service on the contract mail steamships; and, while so employed, they are to receive furlough pay in addition to their steamship pay, provided they are required to perform such duties as appertain to the merchant service. The training-school for seamen is established by a provision requiring that the contract steamers "shall take cadets or apprentices, one American-born boy for each thousand tons gross register, and one for each majority fraction thereof, who shall be educated in the duties of seamanship, rank as petty officers, and receive such pay for their services as may be reasonable."[HN]

The first advertisements for proposals under this act resulted in contracts with eleven existing lines, of the third and fourth classes. No bids were received for the North Atlantic service calling for American-built steamships in the first class. But an offer was made by the American Line[HO] to begin the performance of the service with two British-built liners--the _City of New York_ and the _City of Paris_--acquired from the Inman Line, if these steamers were admitted to American registry, the company agreeing immediately to order two similar ships from American shipyards and add these to their fleet. The proposition was accepted, and a supplementary act was passed (May 10, 1892), legalizing such registry.[HP] The new American ships were promptly built,--the _St. Louis_ and the _St. Paul_, launched November, 1894, and April, 1895, respectively,--each 11,600 tons, "larger, swifter, safer, and more luxurious"[HQ] than the two British-built vessels: a perfection of workmanship deemed a matter for congratulation by patriotic Americans. To this extent at least the subsidy law was declared to have been beneficent.

It had become evident, however, that the law was not fostering the establishment of new American-owned and American-built steamship lines as its promoters had hoped. In 1893 the contract service had been reduced by the discontinuance of three of the routes. In 1894 only three contracts were in operation. Up to 1898 no lines had been established on the Pacific under the law.

In the judgment of the subsidy advocates the law's failure to produce the anticipated results only proved its inadequacy in not providing enough subsidy. Accordingly, further measures were proposed affording a more generous supply.

In December, 1898, Senator Mark Hanna, of Ohio, brought forward a bill providing liberal navigation and speed bounties to all American vessels engaged in the foreign trade. This measure, as defined by its title, proposed "to promote the commerce and increase the foreign trade of the United States, and to promote auxiliary cruisers, transports, and seamen for Government use when necessary." The subsidy was again termed "compensation." It was to be payable on gross tonnage for mileage sailed both outward and homeward bound, according to speed. The rate to steamships showing on trial test a speed above fourteen knots was to increase proportionately; sailing-ships and steamers of less trial speed than fourteen knots, were to receive the lowest rate. This was fixed at one dollar and fifteen cents per gross ton for each hundred of the first fifteen hundred miles sailed both outward and homeward bound, and one cent per gross ton for each hundred miles over one hundred miles both ways. The additional speed bounties ranged from one cent per gross ton for steamers of 1,500 tons and speeding fourteen knots, to 3.2 cents for those over 10,000 tons and showing twenty-three knots. The act was to be in force for a term of twenty years, and no contracts were to be made under it after ten years.

The Hanna bill met strong opposition, and was finally dropped. A substitute measure, drawn by Senator Frye, of Maine, took its place. This also was lost with the adjournment of the Fifty-seventh Congress. At the opening of the next Congress, in December, 1901, Senator Frye introduced his bill in an amended form. This offered subsidies to contract mail-steamships based upon tonnage and speed, and practically restored the rates of the original Postal Aid Bill. It further provided a fixed subsidy upon tonnage to other American steamers and sailing-ships, registered, and to be built in the United States. The bill passed the Senate, but failed with the House.

* * * * *

In 1903 the matter was taken up with greater vigor, by President Roosevelt. In his annual message to Congress December 7, the President, "deeply concerned at the decline of our ocean fleet and the loss of skilled officers and seamen," recommended the appointment by Congress of a joint commission to investigate and report at the next session, "what legislation is desirable or necessary for the development of the American merchant marine and American commerce, and, incidentally, of a national ocean mail service of adequate auxiliary naval cruisers and naval reserves."

In response Congress by act of April 28, 1904, created the Merchant Marine Commission with power to make the broadest kind of an inquiry. This body was composed of five Senators and five Representatives, two of the Senators and two of the Representatives members of the minority party. Senator Jacob H. Gallinger of New Hampshire was chairman. Eight months between the adjournment and reassembling of Congress was devoted to its appointed task. All the larger ports of the country were visited, its itinerary embracing the principal cities on the North Atlantic seaboard, on the Great Lakes, on the Pacific coast, and on the southern coast and Gulf of Mexico. Hearings were given in all these places to hundreds of citizens: commercial bodies, shipbuilders, shipowners, shipping merchants, merchants in general trade, manufacturers, bankers, lawyers, editors, doctrinaires. So wide indeed was the investigation, and so liberal the "open door" rule, admitting for consideration any "intelligent suggestion offered in good faith," that "alien agents" of foreign steamships were heard with the rest.[HR] While differences of opinion as to methods and policies naturally were encountered, the commission declared that it found public sentiment, as this was sounded throughout the United States, "practically unanimous not in merely desiring, but in demanding an American ocean fleet, built, owned, officered, and so far as may be, manned by our own people." This sentiment was "just as earnest on the Great Lakes ... as on either ocean."[HR]

The results of the investigation were embodied in an elaborate report, comprising majority and minority reports of the commission, and the mass of testimony taken at the hearings: the whole filling three large pamphlet volumes, in all of nearly two thousand pages.[HS]

The majority reported a bill. This was presented as merely an extension of the principles of the Postal Aid Act of 1891, involving "no new departure from the established practice of the Government." Its ocean mail sections were intended "simply to strengthen the existing act on lines where it has happened to prove inadequate." The subsidies which it granted were termed, inoffensively, "subventions," and its promoters protested that these "subventions" were "not in any opprobrious sense a subsidy or bounty." They were "not bounties outright, or mere commercial subsidies such as many of our contemporaries give." They were "granted frankly in compensation for public services rendered and to be rendered."[HT]

The proposed measure, however, was more than an extension of the act of 1891. Its scope was indicated by its title: "To promote the national defence, to create a force of naval volunteers, to establish American ocean mail lines to foreign markets, to promote commerce, and to provide revenue from tonnage." The subsidies offered comprised mail subventions to steamships; subventions to general cargo carriers and deep-sea fishing-ships, both steam and sail; and retainers to officers and men of American merchant ships and deep-sea fishing vessels enrolling as naval volunteers. It opened with provisions for the establishment of a naval reserve.

The new mail subsidies provided for ten specified lines of "steamships of the United States" of sixteen, fourteen, thirteen, and twelve knots speed, to the greater countries of South America, to Central America, to Africa, and to the Orient, with a total maximum subsidy for the ten lines of $2,665,000 a year. In all contracts it was to be specified that the steamships must carry in their own crews a certain increasing proportion, up to one-fourth, of men enrolled as naval volunteers. The subventions to American general cargo carriers, or the "tramp" type of ships, and deep-sea fishing-vessels, steam or sail, were fixed at these rates: those engaged in the foreign trade for a full year, five dollars per gross ton; so engaged for nine months and less than a year, four dollars; for six months, two dollars. These subsidies were conditioned upon these requirements: the employment in the crews of a certain proportion of naval volunteers; one-sixth of the crews to be citizens of the United States or "men who have declared their intentions to become citizens;" ships to carry the mails when required free of charge; all ordinary repairs to be made in the United States; the ships to be in readiness for Government taking for naval service in time of need. The payments in this class were to be made on contracts for a year at a time, renewable from year to year; and no vessel was to receive them for a longer period than ten years. The retainers to officers and men of the merchant marine and deep-sea fishing-ships as inducements to enroll as naval volunteers, were fixed at rates ranging from a hundred dollars a year for the master or chief engineer of a large steamship to twenty-five dollars for a sailor or fireman, and fifteen dollars for a boy, these retainers being independent of their regular pay. The provisions relating to tonnage revenue increased the tonnage taxes on all vessels, American and foreign, entering American ports, with a rebate of eighty per cent of the tonnage duties allowed to American ships carrying American boys as apprentices and training them in seamanship or engineering for the merchant service and naval reserve.[HU]

The minority report, signed by three of the four Democratic members of the commission, although outlining measures of relief which, in the judgment of the signers, would "accomplish substantial and permanent good without injustice to any other American interest and without doing violence to any fundamental principle of right or of organic law," proposed no bill. While the minority "saw objections to the entire bill" recommended by the majority, they were disposed to withhold any opposition except to the sections providing for direct subsidies. These they declared to be "so obnoxious to Democratic principles and to the economic sense of the country" that they were compelled to enter their "earnest protest against their enactment into law." Instead of subsidies, the remedial legislation which they outlined included: a return to the discriminating-duty policy; and the putting on the free list of all materials which enter into the construction of ships no matter whether intended for foreign or domestic trade,--thus admitting ships built from foreign materials, in whole or in part, to the coastwise trade, from which they are now excluded. The minority held also that it would probably "be necessary to remove the duties not only for materials but from all materials sold cheaper abroad than at home," meaning steel and iron products. "In this way, and in this way only, will our shipbuilders be enabled to obtain our materials at the prices at which they are sold to foreign shipbuilders."[HV]

The report of the commission was submitted to the Fifty-eighth Congress, third session, January 4, 1905.[HW] No action was had on the bill in that Congress. It was referred to the committee on commerce; reported back to the Senate with sundry amendments and a minority report against it;[HX] was debated tentatively; and finally passed over at the request of its sponsor, Senator Gallinger, who expressed himself as satisfied that the bill could not receive the consideration it deserved at that session. Meanwhile both Houses had directed a continuance of the commission's inquiry. In May the chairman, Senator Gallinger, held conferences in New York with several representatives of the shipping interests who had not been heard; and later sessions were held in Washington, at which other statements were received and considered.

At the opening of the Fifty-ninth Congress, December 4, 1905, Senator Gallinger submitted a supplementary report of the commission, and with it introduced a new bill--the previous bill in a new draft.[HY] At the same time Representative Charles H. Grosvenor, of Ohio, the first House member of the commission, introduced the bill to the House.

This draft added several new features to the original bill. The most important were provisions for increasing the subsidies payable under the law of 1891 to the single American contract line to Europe, and to the Oceanic Line from San Francisco to Auckland and Sydney. These provisions added two hundred and fifty thousand dollars to the former's subsidy of seven hundred and fifty thousand, and two hundred and seventeen thousand to the latter's of two hundred and eighty-three thousand. The reasons given for these increases were: in the case of the American Line, because this line "meets the fiercest competition of the State-aided corporations of Europe, soon to be intensified by the new subvention of one million one hundred thousand dollars granted to the Cunard Company by the British Government, on terms so liberal as to make it equivalent to one and a half million dollars a year"; and in the case of the Australasia Line, because it "operates in Pacific waters where cost of fuel, labor, etc., is considerably greater than at Atlantic ports; ... is required to maintain a very high speed; ... employs exclusively white crews instead of the Asiatics utilized by many other Pacific companies." Another provision, as a special encouragement for American shipowners to enter the Philippine trade, added a subvention of thirty per cent above the regular rate, or six and a half dollars a ton. The naval volunteer retainers were extended to seamen of the Great Lakes and coastwise trade.[HZ]

In the Senate the bill fared well as a whole. Like the original bill it came back from the committee on commerce amended, though slightly, and with a minority report against it: the minority again emphasizing their "unqualified opposition to this renewed effort to donate to certain favored interests moneys collected by the Government for public purposes under its power of taxation."[IA] It was closely fought by the opposition in debate, opened with Senator Gallinger's argument in its behalf on January 8, 1906. But it successfully ran the gauntlet. Further amended in several particulars, but unscathed in its essential parts, it passed the Senate, February 14, by a vote of 38 to 27, five Republican Senators and all the Democrats voting in the negative.[IB]

In the House its progress was less prosperous. It lay with the committee on merchant marine and fisheries into the second session of this Congress; and more hearings were given. Reframed after the enacting clause, but practically the same in principle, it was reported back January 19 (1907) by Mr. Grosvenor, accompanied by an explanatory report of the majority of the committee;[IC] and bill and report were referred to the whole House on the state of the Union. Later the views of the minority were filed.[IC] On January 23 a message from President Roosevelt in behalf of the measure was received. The president particularly urged the "great desirability of enacting legislation to help American shipping and American trade by encouraging the building and running of lines of large and swift steamers to South America and the Orient." As striking evidence of the "urgent need of our country's making an effort to do something like its share of its own carrying trade on the ocean," he directed attention to the address of Secretary Root before the Trans-Mississippi Commercial Congress at Kansas City, Mo., the previous November, giving the results of the secretary's experiences on his recent South American tour. The proposed law, Mr. Roosevelt repeated, was in no sense experimental. It was "based on the best and most successful precedents, as for instance on the recent Cunard contract with the British Government." So far as South America was concerned, its aim was to "provide from the Atlantic and Pacific coasts better American lines to the great ports of South America than the present European lines." Under it "our trade friendship" would "be made evident to the South American Republics."[ID]

Backed by the explanatory report and this message, the friends of the measure opened the debate, February 25, Mr. Grosvenor leading. It was a great debate, long and hot. Numerous amendments were put in; some changing the proposed routes, others adding new ones. At length on March 1, three days before the end of this Congress, the much amended bill was passed, and went back to the Senate for concurrence.[IE]

As it now stood it was shorn of the provisions for lines from the Pacific coast to Japan, China, the Philippines, and Australasia. The new subsidized lines were all to run to South America. Two of these were to run from the Atlantic coast to Brazil and Argentina, respectively; one, from the Pacific coast to Peru and Chile; and one from the Gulf of Mexico to Brazil. On all four lines sixteen-knot steamers were required, with speed on the average above the European mail lines to South America. The subsidies were reserved exclusively to ships to be built in the United States, so that the mail service could not be performed by existing steamers; thus a wholly new ocean-mail fleet was guaranteed.[IF]

The bill was reached in the Senate March 2, and strenuous efforts were made by Senator Gallinger and others to push it through. But it failed in the closing hours of the session to reach a vote. So this measure fell.[IG]

Another effort was made in the Sixtieth Congress. In his message at the beginning of this Congress (December 2, 1907) President Roosevelt recommended an amendment to the act of March 3, 1891, "which shall authorize the postmaster-general in his discretion to enter into contracts for the transportation of mails to the Republics of South America, to Asia, the Philippines, and Australia at a rate not to exceed four dollars a mile for steamships of sixteen-knots speed or upward, subject to the restrictions and obligations" of that act. In other words, to give the same subsidy to steamers in these services as allowed to the twenty-knot American mail transatlantic line, instead of two dollars a mile.[IH] A bill to this effect was introduced in the Senate December 4[II]; on February 3, 1908, was reported back from the committee on commerce so amended as to provide the four-dollar-a-mile subsidy to American sixteen-knot steamers on routes of four thousand miles or more to South America, the Philippines, Japan, China, and Australasia; was debated at length; further amended; and finally, passed, March 20. In the House it was referred to the committee on post office and post roads;[IJ] issued therefrom in a dew draft;[IK] debated; and finally failed to pass. Thereupon the subsidized service to Australia by way of Honolulu and the Samoan group was abandoned.

Again the measure was pressed in the Sixty-first Congress. It now had the backing of President Taft. In his annual message December 9, 1909, "following," as he graciously said, "the course of my distinguished predecessor," he earnestly recommended the passage of a "ship-subsidy bill looking to the establishment of lines between our Atlantic seaboard and the eastern coast of South America, China, Japan, and the Philippines." The bill, as introduced by Senator Gallinger (February 23, 1910), provided for subsidized lines of the second and third classes on routes to the points named by Mr. Taft, four thousand miles or more in length outward voyage, or on routes to the Isthmus of Panama: the second class to receive the subsidy rate per mile provided in the law of 1891 for steamers of the first class, and the third class the rate applicable to the second class. If no contract should be made for a line between a Southern port and South American ports, and two or more should be established from Northern Atlantic ports, it was required that one of the latter should touch outward and homeward at two ports of call south of Cape Charles. The total expenditure for foreign mail-service in any one year was limited--not to exceed the estimated revenue therefrom for that year.[IL]

The bill came back from the committee on commerce in March without amendment, and with a report.[IM] In June it was put over for consideration in December of the third session of this Congress. When at length it was reached, Senator Gallinger submitted a substitute. This, instead of naming the points to be covered, provided for subsidized routes to South America south of the equator outward voyage; provided for one port of call instead of two on the Southern Atlantic coast; guarded against "discrimination detrimental to the public interest," in other words "combines," by a provision that no contract be awarded to any bidder engaged in any competitive transportation business by rail, or in the business of exporting or importing on his own account, or bidding for or in the interest of any person or corporation engaged in such business, or having control thereof through stock ownership or otherwise; and fixed the limit of the total expenditure for foreign mail service in any one year at four million dollars. This substitute was finally passed on February 12, 1911, by a vote of 39 to 39, the chairman casting his vote in the affirmative. In the House the measure went to the committee on post office and post roads; and there rested.

Various other subsidy bills and measures for the revival of the ocean merchant marine without subsidies, were put into this Congress, as in previous ones, but few escaped from the committees; and these few fell short of passage.

FOOTNOTES:

[Footnote FS: Wells, chaps. 4 and 5, pp. 58-94. Also Rept. of commissioner of navigation for 1909.]

[Footnote FT: U.S. Statutes at Large. Also Rept. of commission of navigation, 1909.]

[Footnote FU: Marvin, pp. 240-241.]

[Footnote FV: U.S. Statutes at Large, vol. V, p. 748.]

[Footnote FW: This contract in Executive Document, 30th Cong., 1st sess, no. 50.]

[Footnote FX: U.S. Statutes at Large, vol. IX, p. 152.]

[Footnote FY: Meeker.]

[Footnote FZ: U.S. Statutes at Large, vol. IX, p. 187.]

[Footnote GA: Meeker.]

[Footnote GB: For the Sloo contract see Exec. Does., 32nd Congr., 1st sess., no. 91.]

[Footnote GC: For this contract see Exec. Docs., 32nd Cong., 1st sess., no. 91.]

[Footnote GD: Meeker. This contract in Exec. Docs., 32nd Cong., 1st sess., no. 91, pp. 71-74.]

[Footnote GE: Navy appropriation bills, Aug. 3, 1848, March 3, 1849.]

[Footnote GF: U.S. Statutes at Large, vol. IX, p. 188.]

[Footnote GG: Exec. Docs., 30th Cong., 1st sess., no. 51.]

[Footnote GH: Exec. Docs., 30th Cong., 1st sess., no. 51.]

[Footnote GI: Marvin, p. 243.]

[Footnote GJ: Meeker.]

[Footnote GK: Report in the Senate Sept. 18, 1850, in Exec. Docs., 32nd Cong., 1st sess., no. 91, pp. 14-15.]

[Footnote GL: Meeker.]

[Footnote GM: For contract see Exec. Docs., 32nd Cong., 1st sess., no. 91, pp. 154-157.]

[Footnote GN: Exec. Docs., 32nd Cong., 1st sess., no. 91, pp. 5-7.]

[Footnote GO: Marvin, p. 247. The measurement of these steamers is differently given by Spears: p. 26. "When done, the ships were found to have fine models--they rode the waves in a way that excited the admiration of all sailors. But the keelsons under the engines were only 40 inches deep, while the keels were 277 ft. long, and there was 'give' enough to rack the engines to pieces." Spears, p. 267.]

[Footnote GP: Meeker.]

[Footnote GQ: U.S. Statutes at Large, vol. XI, p. 101; chap. CLXI, Aug. 18, 1856.]

[Footnote GR: Same appropriation act for ocean steamship service, June 14, 1858.]

[Footnote GS: Marvin, p. 279.]

[Footnote GT: Meeker gives the details as follows: Bremen line (1847-57) $2,000,000; Havre line (1852-57) $750,000; Collins line (1850-58) $4,500,000; New York to Aspinwall (1848-58) $2,900,000; Astoria and San Francisco to Panama (1848-58) $3,750,000; Charleston to Havana (1848-58) $500,000.]

[Footnote GU: Marvin, p. 253.]

[Footnote GV: Bates, p. 133.]

[Footnote GW: Same, p. 143.]

[Footnote GX: Marvin, p. 254.]

[Footnote GY: George Frisbie Hoar.]

[Footnote GZ: Marvin, p. 258.]

[Footnote HA: Bates, p. 142.]

[Footnote HB: United States Statutes at Large, vol. XIII, p. 93.]

[Footnote HC: Session of 1866-67.]

[Footnote HD: Report of the select committee on the merchant marine, in Repts. of Committee, 1870, 41st Cong., 2d Bess., House Kept., no. 28.]

[Footnote HE: House Rept., no. 2378, 51st Cong., 2nd sess.]

[Footnote HF: House Report, no. 28, 41st Cong., 2d sess.]

[Footnote HG: House Docs., no. 598, also Miscellaneous Docs.; nos. 74 and 255, 42d Cong., 2nd sess.]

[Footnote HH: House Docs., no. 268, 43rd Cong., 1st sess.]

[Footnote HI: Meeker.]

[Footnote HJ: House Docs., Rept., no. 601, 51st Cong., 1st sess.]

[Footnote HK: Text of this bill in Bates, pp. 411-416.]

[Footnote HL: House Rept., no. 3273, 51st Cong., 2d sess.]

[Footnote HM: Marvin, p. 414.]

[Footnote HN: United States Statutes at Large, vol. XXVI, p. 830.]

[Footnote HO: Originally the International Navigation Company established in Philadelphia in 1871, and beginning service between Philadelphia and Liverpool with four American-built steamships.]

[Footnote HP: United States Statutes at Large, vol. XXVII, p. 27.]

[Footnote HQ: Marvin, p. 421.]

[Footnote HR: Report of The Merchant Marine Commission (1904), vol. I, p. III.]

[Footnote HS: Report of The Merchant Marine Commission, together with the testimony taken at the Hearings, 3 Vols., p. 1985; Senate Report, no. 2755, 58th Cong., 3d sess.]

[Footnote HT: Same: Report of the majority, vol. I, pp. XXIII, XXX, XXXI.]

[Footnote HU: This bill in Report of the Merchant Marine Commission, vol. I, pp. XLVI, LI.]

[Footnote HV: Rept. of The Merch. Marine Com., Views of the Minority, Vol. I, p. LVI.]

[Footnote HW: Senate bill, 6291, 58th Cong., 3d sess.]

[Footnote HX: Senate Report no. 2949, 58th Cong., 3d sess.]

[Footnote HY: Senate Report no. 1, 59th Cong., 1st sess.]

[Footnote HZ: Senate Report no. I, 59th Cong., 1st sess. This bill is Senate no. 529.]

[Footnote IA: Senate Report no. 10, 59th Cong., 1st sess.]

[Footnote IB: Cong. Record, vol. 40, part I, 59th Cong., 2d sess.]

[Footnote IC: House Report no. 6442, 59th Cong., 2d sess.]

[Footnote ID: House Doc. no. 4638, 59th Cong., 2d sess.]

[Footnote IE: Cong. Record, vol. 41, part 5, 59th Cong., 2d sess., p. 4378.]

[Footnote IF: Cong. Record, 59th Cong., 2d sess., p. 4688.]

[Footnote IG: Same, p. 4653.]

[Footnote IH: Senate Report no. 168, 60th Cong., 1st sess.]

[Footnote II: Senate bill no. 28, 60th Cong., 1st sess.]

[Footnote IJ: Cong. Record, 65th Cong., p. 3743.]

[Footnote IK: House bill no. 22301, 60th Cong., 1st sess.]

[Footnote IL: Senate bill no. 6708, 60th Cong., 2d Sess.]

[Footnote IM: Senate Report no. 354, same.]