CHAPTER XVII.

THE CANAL AND THE AMERICAS.

The likely effects of the Panama Canal on international commerce and the development of the world's resources is so big a subject that one can do little more than indicate the larger probabilities. The influence of the canal on the British Empire must be left to another chapter. Here we shall have to consider mainly the case of the United States, the country which stands to gain far more than any other from this new link between East and West.

The most obvious result of the new event, as it was the main object of the canal's construction, must be the immensely quickened all-sea communication between the eastern and western coasts of North America. The motive for the building of the canal was military rather than commercial. It was rendered necessary by painful experience during the Spanish-American War of the effects of the 14,000-mile sea journey between the two seaboards of the republic. But the commercial results will not be the less important because they were not foremost in the object and motive of the canal-builders. It is pretty clear that what we may call the main developmental effect of the canal will be felt along that Pacific coast of the Americas which has been so long shut out from the great centres of industrial enterprise in the New World and the Old.

We are so accustomed to regard the United States as a fully developed and fully equipped country that we forget how slowly her population and industries advanced westward from the Atlantic coasts. Even now it cannot be said that the railroad communications between the east and the Pacific states beyond the great mountain-divide of the Rockies are fully equal to the carriage of the produce which is or should be exchanged between east and west. The transcontinental lines have scarcely yet furnished a cheap and satisfactory connection between the Pacific coast states and their largest and most natural markets. Hitherto the railways have had to compete with only three alternative routes: (1) the all-sea route round Cape Horn for sailers, and through Magellan Straits for steamers; (2) the route _via_ Panama, with railroad transit over the isthmus; (3) the route _via_ Tehuantepec, with railroad transit over that isthmus from Puerto Mexico on the Gulf to Salina Cruz on the Pacific. The new canal will be a much more formidable competitor. It is highly important that the industries of the United States should have the benefit of this healthy tug-of-war between railroad and canal, and the government is perfectly justified in keeping that competition open, even to the length of forbidding the use of the canal to ships owned, controlled, or operated by railway companies.

There is no fear that the Panama Canal, even if it prospers exceedingly, will ruin the transcontinental railroads. The report of the Isthmian Canal Commission in 1901 made some interesting remarks on this subject, and they are as pertinent to-day:--

The competition of the canal will affect, first, the volume and rates of the through business of the Pacific railroads, and secondly, the amount of their local traffic. At the beginning of their existence these railways depended almost entirely upon their through traffic; but their chief aim throughout their history has been to increase the local business, which is always more profitable than the through traffic; and although the great stretch of country crossed by them is still in the infancy of its industrial development, the local traffic of some, if not all, of the Pacific roads has already become of chief importance. A vice-president of one of the railway systems states that since 1893 "the increase in business of the transcontinental lines has not come from the seaports, but from the development of the intermediate country." The canal can certainly in no wise check the growth of this local traffic, and the evidence strongly supports the belief entertained by many persons that the canal will assist largely in the industrial expansion of the territory served by the Pacific railways.

If this be true, the proximate effect of the isthmian canal in compelling a reduction and readjustment of the rates on the share of the transcontinental railway business that will be subject to the competition of the new water route, will be more than offset by the ultimate and not distant expansion of the through and local traffic, that must necessarily be handled by rail. It seems probable that the increase in the population of the country, and the growth in our home and foreign trade, will early demonstrate the need of the transportation service of both the canal and the railways.

The reduction of freight through the use of the canal is sure to give a big stimulus to many leading industries of the Pacific states. One of the most important is the lumber industry. California and Oregon are very rich in forests of pine, spruce, cedar, and redwood, the last being much in demand in Atlantic countries. A good deal of this timber is exported to Europe and the eastern states, and it has all to be carried in sailing ships round Cape Horn. It is calculated that the opening of the Panama Canal will reduce the freight by 50 per cent., which means that all this Pacific coast timber will be correspondingly increased in value. The exports eastwards are sure to advance rapidly with the new means of transport. Grain, wine, and fruit will benefit, and the manufactured goods from the industrial states of the east will flow through the same channel to the western states in an ever-increasing volume.

Every staple industry of the United States will feel the new stimulus, and England and Europe generally are certain to feel the pressure of this new competitive power of the American republic. In cotton and iron goods especially the exports from the eastern and southern states are bound to forge ahead. Manufactured cotton goods exported from the southern states have had to be carried by rail to the western ports, and thence by steamer to China and Japan, or else eastward by the Suez Canal, sometimes even _via_ England or Germany. We may imagine what a boon the Panama Canal will be to this trade, and how conveniently it will lie for the Gulf ports and all their raw and manufactured exports. American iron and steel will also be immensely strengthened for competition with those of England and Europe in the markets of China, Japan, British Australasia, and along the coast of South America. We need not describe in detail effects which are likely to be felt over the entire range of American industry.

The United States appears, indeed, to be on the verge of tremendous developments. In a paper read before the Royal Colonial Institute,[20] that well-known physical geographer and economist, Dr. F. B. Vrooman, gave us a hint of further American enterprises in civil engineering, after the Panama Canal is opened:--

The isthmian canal is but a part of the greater American waterways project. As soon as this is finished it is possible that the United States will start in a large way with the project of the artificial canalization of the Mississippi with its 16,000 miles of already navigable waters and a drainage basis of 1,280,000 square miles. The cutting-through of an ocean-ship canal to the Great Lakes will make seaport towns of the Canadian cities on the Lakes Ontario, Erie, and Superior. The Saskatchewan and the Red River can be canalized for 1,000 miles, and a short haul from Winnipeg will open the whole Saskatchewan valley from near the foot-hills of the Rocky Mountains--downstream, but for this short portage--all the way to the Gulf of Mexico, and thence to Panama and the Pacific ports. Every transcontinental freight-rate in Canada and the United States will be reduced, and perhaps some in the middle interior. As this great southern movement starts up the industries of the southern states will receive a new impulse. The Gulf of Mexico and the Caribbean Sea will spring into a new life, together with the West Indies and Central America and the vast and fertile interior drained by the Orinoco and the Amazon.

CENTRAL AND SOUTHERN AMERICA.

But there are no countries which will hear the call of the canal so nearly and clearly as those of Central and Southern America. It is astonishing how that forty-mile wide land barrier between the two oceans has isolated all the western shore of the continent. The Panama Canal Railroad has done very little to modify the situation. The Pacific coast of America has looked westwards over its waste of waters, and has scarcely been reached by the industrial and economic forces at work behind it in the Old and New Worlds. Its trade has been carried on mostly with Europe, and especially England, in sailing vessels that have plodded round the distant Horn. An interesting example of this geographical and commercial detachment of the west coast of Central and South America is furnished by the port of Mazatlan in Western Mexico. From this place there are considerable exports of logwood and mahogany. But thirty times as much of this lumber has gone to Europe as to the east of the American continent. On the opposite or eastern side of Mexico is Tampico, where the returns of trade are just the reverse, the United States being the largest customer for its exports. Despite the old Spanish paved roads across the isthmus at Panama, by which the silver and pearls of Peru and the Pacific were conveyed to Nombre de Dios and Porto Bello, for shipment to Spain, despite the sixty years of the little Panama Railway, the American continent even in its narrowest parts has been something like an impenetrable screen between east and west. Four centuries of continued agitation and effort to get the water through show how seriously this physical divorce has been felt, and give an earnest of the large results which are sure to follow the completion of the task.

There have been other reasons for the backward development of western South America. To begin with, the Spanish, not a progressive and pioneering race, laid their hands on these countries four hundred years ago, and have held them politically or racially ever since. This would not in itself have kept out the Anglo-Saxon or the German. But these countries have not yet been greatly needed as an outlet of the surplus populations of Europe. Even the United States is very far from being filled up, and Canada is likely to be giving away farms for many years to come. The Teutonic race, to which above all others the trusteeship of Western civilization is committed, has left these Spanish Americas, with their revolutions coming almost as frequently and regularly as the seasons, comparatively unvisited. As yet the North European emigration to the southern continent has been mainly confined to Argentina and Southern Brazil.

In one respect the isthmian breakwater has been profitable to these states of the Pacific coast. It has sheltered them largely from the negro element which has spread so widely over the West Indies and the southern United States. But Japan and China are already there, and the yellow will be laid on more and more thickly unless these countries are brought quickly within the zone of Western ideas and enterprise. And that process is likely to begin with the opening of the canal.

The backwardness of these regions is indeed almost unbelievable. Most people think of them as producing mainly nitrates and revolutions. But their possible resources and products are illimitable, and are only awaiting the organized capital of the West to be made available for human service. As yet these Latin republics are in their middle ages of development. There are few railways, only one continuous transcontinental line having been completed between Valparaiso, through Mendoza, to Buenos Aires. Their internal communications are carried on mainly by the pack mule, as they have been since the days of Pizarro and Valdivia. Each country, of course, has a foreign trade, but the people of the interior, the Indians or mixed breeds, live in isolated communities which are self-sufficing, raise their own food and make their own simple manufactures, knowing little or nothing of the products of foreign countries.

The whole coast and its hinterland is engaged almost solely in what are known as "extractive" industries--that is, in mining or agriculture. The exports consist mainly of foodstuffs and raw materials, nitrate, ores of copper, silver, and gold, grain, sugar, cotton, cocoa, coffee, wool, hides, rubber, and woods. With these the people pay for their manufactured goods, and these come mainly from Europe, and chiefly also from the United Kingdom. The mineral wealth of the northern parts, especially the Andean plateau, is still enormous, though vast quantities have been extracted. For centuries the Andes furnished the civilized world with most of the bullion used for its current coinage. Between 1630 and 1803 Peru alone sent out L250,000,000 worth of silver. Bolivia has contributed L800,000,000 worth; the famous mines of Potosi alone accounted for L600,000,000 worth of this metal. The nitrate works of Chile are in the hands of Englishmen and Germans, and American and other foreigners hold the sugar plantations of Peru. But, as I have said, the range of production is enormous and only awaits the stimulus of imported capital. To give one example of the variety of products, it is said that the Aconcagua valley in Chile would alone furnish annually from its vineyards 1,000,000 gallons of claret, if the grapes were not used to produce a local drink named "chica." There is no sign of the exhaustion of any of the natural products of these regions. Even the nitrate of soda, that most valuable of fertilizers, though it is being shovelled out at a great rate, covers about 220,000 acres, or about 400 miles from north to south, and is sufficient to last for a very long time to come.

Nitrate, minerals, wheat, barley, wool, hides--these are the main exports of the Pacific west, the returning imports being cotton goods, machinery, steel rails, woollens, coal, and all sorts of miscellaneous manufactures and supplies. But, as I said, the trade has been almost wholly with Europe, England enjoying a very predominant position. The United States have competed with Europe at great disadvantages. The trade has been mostly carried on in sailing vessels. Now such craft, to get from New York to South America, have been obliged to sail eastwards almost as far as the Canaries in order to catch the trade winds and weather Cape St. Roque on the coast of Brazil. The sailing vessel from Europe, on the other hand, sails right past the Canaries, and can give the American ship ten days' start in the journey to any part of South America south or west of the most easterly point of Brazil. If the reader will turn back to the chapter on the new distances he will see how the little streak of blue water at Panama will alter all this. Take one little fact to illustrate the change. Callao, on the coast of Peru, is, before the opening of the canal, farther by steam from New York than is the South Pole, but the Panama Canal will bring the city 1,000 miles nearer to New York by steam than San Francisco will then be. The canal will reduce the distance from New York to the Chilean nitrate port of Iquique by 5,139 miles (nautical), to Valparaiso by 3,747, to Coronel (farther south) by 3,296, to Valdivia (about 1,000 miles north of Magellan's Straits, nearly at the farthest southern limit of the commercially important part of western South America) by 2,900. Take Iquique, an important North Chilean nitrate port. By Panama this place is 4,004 miles from New York, but 6,578 from Liverpool. Their respective distances _via_ Magellan were 9,143 and 9,510.

It looks, therefore, as though the United States, with its new advantages, which begin when the first vessel is passed through the Panama locks, would have a good chance of securing for the future the main share of the South American trade. Its cotton, iron and steel goods, electrical machinery, etc., will be able to compete on very different terms with those of England and Germany. Cotton manufactures have reached Chile and the other countries of Pacific South America by a rather absurdly roundabout route. The raw cotton has been grown in the southern parts of the United States, carried to Europe for manufacture, and brought back to South America _via_ the Straits of Magellan. These goods will, we may be sure, tend in future to go direct from the American factories _via_ New York, Charleston, or New Orleans, without trans-shipment, thus saving about 7,000 miles of transportation. A very small part of the American trade with these countries has passed by the Panama railroad. The rates charged by the steamers which have picked up the goods for the west coast at Panama have been kept so high as to be practically prohibitive. It has actually been cheaper to send goods from the United States by way of England or Germany--that is, a journey of 14,000 miles--than by way of Panama, a journey of three or four thousand. One of the surest results, then, of the Panama Canal opening will be a rapid development of the Pacific coasts of America, especially of South America, and a great expansion of trade between these countries and the United States.

The effect of the canal on the Atlantic coasts and hinterland of South America will naturally be less striking. There has never been much interchange of trade between the two coasts of the southern continent, for the simple reason that their products are not complementary but mostly identical. Most of the trade of the eastern coast states is with the countries of the North Atlantic. But some trade to the more northerly and tropical parts of this coast is certain to flow through the canal. Lumber from the Pacific coasts of North America is used in Atlantic South America, and a part of this trade, which is likely to grow in extent, will be passed through the canal. It should be noticed, however, that the temperate reaches of the eastern coast of South America farther to the south will be nearer the Pacific coasts of the United States and Canada _via_ the Horn and the Straits of Magellan owing to the big easterly projection of Brazil.

We must leave the probable effects of the Panama Canal on the British possessions in America to another chapter. It has not been possible to deal with prospective commercial developments in great detail. Only some general idea could be given of the vast changes and developments in progress. On the day on which I am writing the Washington correspondent of _The Times_ summarizes the meaning and effect of the Panama Canal in three rather formidable words. He says it "symbolizes commercial Pan-Americanism." The canal is going to help America to keep its trade more to itself. It represents in commerce and economics what the Monroe doctrine represents in politics. It will immensely assist the United States to become the chief industrial supplier of the great continent, with the other states mainly as agricultural or mining annexes. One incident in the furthering of this ambition was the attempt to conclude a treaty of reciprocity with Canada, the effect of which, as Mr. Taft admitted, would have been to make Canada such an "annexe" of the republic. The Canadian people, however, realizing the ulterior political and commercial effects of such a treaty, refused to ratify it. Canada, in fact, belongs to another political and economic system. She gives valuable trade-preference to the manufactures of the mother-country in the Old World, and there is happily no reason to believe that she will abandon the Imperial ideals for the objects of continental Pan-Americanism. After all, the citizens of Canada and the United States are mostly of the same stock, speaking the same language and cherishing the same great traditions. The two branches of the Anglo-Saxon family ought to be able, while each maintaining its own life and growth, to remain happily side by side, sharing in the new prosperity which the world owes to this latest achievement of the great republic.

FOOTNOTES:

[20] March 19, 1912.