the rate of growth in the traffic with which we, in this inevstigation are especially concerned.

Let me speak for a moment, with your permission, upon the general problem of the competition of the Panama Canal with other

routes.

For the trade of the west coast of the Americas, the only effective competitor which the Panama Canal will have will be the Straits of Magellan. The Isthmus of Tehuantepec can not maintain effective competition with the Panama Canal. At the present time the

ЕХНІВІТ Х.

The lines marked "C" of the chart refer to the trade of the United States with non-European countries, the increase having been 78 per cent.

The two lines marked "D" refer to the net tonnage of the Suez Canal, the increase there having been 70.26 per cent.

The most significant lines upon the chart are those marked "E," which graphically represent the net tonnage available for the Panama Canal in 1898-99, in 1909-10, and in 1914-15, and which indicates

Tehuantepec Railway receives one-third of the through rate between the two seaboards. That is equal to $3.50 per cargo ton. Converted into vessel tonnage that would be a tax of $7 per vessel ton net register, for, as you know, a ship ordinarily carries two tons of cargo for each ton net register. There is then a $7 handicap for every register ton. Any more than $2.50 handicap would throw the traffic to the Panama Canal, assuming that the tolls are $1 or even more than $1 per ton net register. As the president of the Hawaiian Steamship Co. has stated to me personally (I don't know whether he did to you in his testimony), there is no serious question of the competition of the Tehuantepec route with the Panama Canal.

The CHAIRMAN. His testimony removed that from consideration entirely.

Dr. JOHNSON. The Straits of Magellan, however, will offer effective competition, especially for the trade of Europe and the fact should not be forgotten that the present trade of Europe with the western South American countries is many times as great as the trade of the United States with those countries, and the tolls must necessarily be studied carefully with reference to the possible diversion of Europe's traffic with the western coast of South America through the Straits of Magellan.

As regards Australian trade, that belongs to Panama as far as the Atlantic-Gulf coast of the United States is concerned. At the present time, our trade with Australia from the Atlantic sea board is handled via the Cape of Good Hope, the distance from Australia by the Cape being practically the same as by the Suez Canal; but, with the opening of the Panama Canal, our Australian trade to and from the Atlantic-Gulf seaboard will use the Panama Canal.

Europe at present reaches Australia with freight steamers mainly by way of the Cape of Good Hope. The distance via Suez for all ports east of the entrance to the British Channel is barely 1,000 miles less than by the Cape of Good Hope, and that distance does not warrant a freight steamer using the Suez Canal and paying tolls. Furthermore, the large freight steamers have, until the last few years, not been accommodated by the Suez Canal, its dimensions not being kept quite up to the growth in the size and draft of ships. At present, even the largest freight steamers out to Australia might use the Suez Canal, but do not use it to any considerable extent because of the tolls. Mail and express steamers to Australia regularly use the Suez Canal.

The competition between the Panama Canal and the Suez Canal for Australian trade may be explained in a word, as follows:

The line connecting points equidistant from Liverpool by way of Panama and by way of Suez passes 150 miles to the east of Sidney, Australia. It passes north through the Pacific, well east of the Philippines, and touches the northern part of the islands of Japan. Australia, then, as far as distance is concerned, lies entirely within the Suez traffic zone. As regards the commerce of Europe, however, a vessel going out to Australia from Europe, whether it goes by the Suez route or by the Cape of Good Hope, is practically certain to extend its trip to Sidney. The vessel passes along the south coast of Australia, and if traffic warrants it, stops at Adelaide and Melbourne, and then goes on to Sidney, the principal port of Australia, which is also within a few miles of the Newcastle coal field.

That fact is of the utmost importance in the consideration of this question. Vessels outbound from Australia start from Sidney, and they have only 150 miles more to travel to reach Liverpool via Panama than via the Suez Canal. Thus if a ship is fully loaded, coal costs, favoring winds, and other considerations may easily swing the vessel from Sidney to Liverpool or Hamburg by way of the American canal.

In our study we have assumed that 10 per cent of the commerce between Australia and Europe will find it advantageous to use the Panama Canal. That, of course, must be merely an estimate, but the more I study it the more I think it is a conservative estimate.

Much the same might be said of the trade of Japan. Vessels out from northern Japan by way of the Suez, if they pass Hongkong, are quite apt to go on to Japanese ports. Of course, as you know, a large amount of tonnage makes Hongkong its ultimate port. Somo vessels make Shanghai their final port, but a large number of vessels make Yokohama their destination. A vessel at Yokohama, if it is fully loaded, or nearly loaded, can return to Europe by way of the Panama Canal by increasing its distance 694 miles. Many vessels leave Japan lightly laden, seeking cargo; many of them come across the Pacific now, take our west coast lumber (and formerly grain) and go on around South America to Europe. The tendency of fully loaded vessels outbound from Japan to Europe will be to use the Panama route, if coal is cheap, if the tolls are less, and if other conditions are more favorable than at Suez. The tendency of a certain number of vessels, that are but partly loaded, will be, as at present, to cross the Pacific to take our heavy cargoes on to Europe. We have estimated that 5 per cent of the commerce of Europe with the countries north of Hongkong would probably use the Panama Canal.

The competition between the Suez and the Panama Canals, it should be remembered, must be limited. In the first place, the < Panama Canal has, as far as the Suez Canal is concerned, a complete monopoly of the American traffic field, while as regards the Asiatic and Australian traffic field the Suez Canal has nearly a monopoly. As regards Europe the Suez route has a distance monopoly and we can invade the traffic field of the Suez only by making our tolls competitive and by making coal and other costs of using the Panama route favorable.

The trade of the Atlantic-Gulf seaboards with the Orient as far as Hongkong and Manila, at least, belongs to the Panama Canal for the most part. The line connecting points equidistant from New York by way of Panama and by way of Suez passes within 18 miles of Hongkong and within 41 miles of Manila and passes on south through the central portion of Australia. The distance divide, then, is at Hongkong and Manila. There can be thus no sharp dividing line separating the Panama and Suez traffic, so far as our commerce with the Orient is concerned. There will be an overlapping of traffic routes in the section between Singapore and Yokohama. Some commerce north and east of Hongkong will pass through the Suez to New York and some from Singapore north will pass through the Panama Canal to Liverpool.

We have assumed that all the traffic of the Philippine Islands with our eastern seaboard will belong to the Panama Canal, and we have

included Hongkong within the Panama zone in studying the AtlanticGulf trade of the United States; but we realize that not all the traffic of Hongkong and Manila will use the Panama route. We believe, however, that the amount of this traffic that uses Suez will be offset by the amount of traffic from south of Hongkong and Singapore that will move through the Panama Canal.

Mr. KNOWLAND. I would like to ask regarding that 10,500,000 tons, how much of that do you figure would be coast-to-coast commerce?

Dr. JOHNSON. The Panama traffic of 1910 is put down at 418,000 tons net register. The American-Hawaiian Steamship Co.'s traffic is credited with 363,000 tons, and there are 172,000 tons of traffic through the Straits of Magellan. The total would be 950,000 tons net register.

Mr. KNOWLAND. About 11 per cent?

Dr. JOHNSON. Yes, sir; a little over 11 per cent.

Mr. KNOWLAND. A very small proportion?

Dr. JOHNSON. Very small. One reason for thinking that these figures may prove conservative in future years, is that very soon after the opening of the canal there should be a very large increase in the coast to coast movement of American traffic.

The CHAIRMAN. Have you figured what portion of it would be foreign commerce of American ports?

Dr. JOHNSON. Over half of this total here consists of foreign commerce that would not touch the shores of the United States.

The CHAIRMAN. I asked you what per cent of it represents the foreign commerce of the ports of the United States, ships that touch at the ports of the United States and foreign countries, is not that the large bulk of the commerce we may expect?

Dr. JOHNSON. I find that 33.8 per cent of the total trade available for the canal in 1909-10 consisted of the foreign commerce of the United States.

Mr. KNOWLAND. These figures for 1915, 950,000 tons, are exclusively coast to coast from American port to American port?

Dr. JOHNSON. Yes, sir; 1909 and 1910.

Mr. KNOWLAND. Of the 950,000 tons, 418,000 is via Panama? Dr. JOHNSON. That is Panama traffic. The American Hawaiian Steamship Co. had 363,426 tons net register of Tehuantepec traffic, and there were 172,655 tons net via the Strait of Magellan, making in all some over 950,000 tons net, or 11 per cent.

Mr. STEVENS. You have made no estimate here of the traffic that may be taken away from the transcontinental railroads by the canal. Dr. JOHNSON. I have not referred to that. The statistical tables do not make any conjectures as to what will be taken away from the railroads, or as to what the growth of the coastwise business will be after the opening of the canal. We have preferred to keep on the basis of solid facts, and simply refer to the limitations of the data presented. Mr. STEVENS. What was the estimate of coast to coast business over the transcontinental lines and other lines, as shown by the testimony before the Interstate Commerce Commission in the Long-and-shorthaul cases?

Dr. JOHNSON. About 3,000,000 tons.

Mr. STEVENS. What would that amount to in 1915 if the same ratio of increase were taken which you estimate, about 6 per cent a year?

Dr. JOHNSON. I assume those figures for 3,000,000 cargo tons by rail must have been for a period as early as 1908, and that would mean a period of seven years. I should say the increase would be over 40 per cent, which would thus be 4,200,000, or four and a half million tons, possibly. Of course, the committee will understand we are now talking about tons of 2,000 pounds, not vessel tons.

Mr. STEVENS. I am speaking of cargo tons shown by testimony that existed, say in 1908, and by the same estimate will exist for transportation in 1915, which should be an amount probably in excess of 4,000,000 tons. Now it is estimated by quite a number who have testified here, Mr. Dearborn and Mr. Skinner and others, that there will be a substantial reduction of rates on the coast to coast business due to water transportation. If that be true, have you any judgment as to what proportion of that could be taken by water rather than by rail? Now this is just a matter of conjecture entirely, outside of your

Dr. JOHNSON. The traffic men say there is comparatively little traffic that may not theoretically move by water, as well as by rail, west bound.

Mr. STEVENS. What did Commissioner Lane say?

Dr. JOHNSON. I think all but about 7 per cent consisted of traffic which might not move by water.

Mr. STEVENS. So over 90 per cent of the traffic is competitive in character?

Dr. JOHNSON. Yes, sir.

Mr. STEVENS. So if it can be made competitive in rates and facilities, have you any estimate as to the amount which might be carried by water?

Dr. JOHNSON. I do not think any traffic expert will venture to make an estimate, because it is not the rate which controls the route taken so much as it is the character of the service performed. It often happens that a shipper may prefer a higher rate by a rail line which takes his goods from his shop or warehouse and delivers them to the factory, store, or warehouse of the consignee without cartage and without transfer; I think only experience can demonstrate the actual division of this competitive traffic between the water and rail

routes.

Mr. HAMLIN. I understand that 950,000 tons, in round numbers, is the estimate for 1909 and 1910?

Dr. JOHNSON. Yes; and of course that is effected by the 26 per cent increase to 1914-15.

Mr. HAMLIN. For instance, in making your 10,500,000 tons estimate, how much of it is the coast-to-coast business?

Dr. JOHNSON. Of that ten and a half million tons, 1,160,000. Mr. HAMLIN. Then, in other words, of the 10,500,000 tons estimated for 1915 but 1,160,000 tons is coast to coast?

Dr. JOHNSON. Less than one and a quarter millions. Mr. HAMLIN. So that in the total revenue it is very small? Dr. JOHNSON. Your statement is correct. But the traffic moving from coast to coast in 1914, at the time of the opening of the canal, may and probably will be larger than that. The American-Hawaiian Steamship Co. will have a fleet whose passage through the canal will add 500,000 tons to the net register tonnage of canal traflic.

Mr. HAMLIN. In other words, that being the case, the total tonnage would be more than 10,500,000 tons?

H. Doc. 680, 62-2--45