England, Germany, and Belgium to the western coast, they are still rates which cover a very much longer distance and are not always so much lower as the Senator indicates.

The CHAIRMAN. Professor, I desire to have you state upon the record whether you recognize the accuracy of the statement that while there might be an equality in law between the foreign vessels and the American vessels if the foreign vessel were permitted to go through the canal without the payment of tolls, that as a matter of fact there would be a positive inequality to the disadvantage of the American ships?

Prof. JOHNSON. I will answer your question in the affirmative. As your question implies, the American ship is under a very definite handicap. It costs more to operate it, and the American ship is without Government subvention, and the payment of tolls would be another additional cost upon the American ships. There is no question about that. But the question is whether the exemption of coastwise ships does not work a discrimination which would not be worked if the American coastwise owner paid the tolls.

Senator SIMMONS. Professor, I do not understand, and I want to know if you understand that the purpose of this section of the treaty was to equalize traffic conditions upon the water between nations. I do not assume that that was its purpose at all. Its purpose was to recognize the conditions of ocean traffic and to provide that the Government would not place any condition of passage through the canal which would discriminate against the citizens or the vessels of other countries. And that being so, it would make no difference so far as the effect of this treaty provision is concerned whether the rates charged by American vessels and foreign vessels were the same, or very dissimilar, as in fact they are, and were at the time the treaty was made.

Prof. JOHNSON. I think we would all understand, Senator, that the purpose of the Hay-Pauncefote treaty was to lay down the conditions under which the Panama Canal could be used, and that could be the only purpose of the treaty.

Senator SIMMONS. And it was not the purpose to fix rates through the Panal Canal which will equalize rates throughout the world? Prof. JOHNSON. I do not so understand, and I do not know

The CHAIRMAN. As long as you are being invited to give your understanding, you never did understand that this Government intended entering into a treaty relation with Great Britain which in its results would involve the absolute destruction and disappearance of our local marine, our domestic coastwise trade, as our foreign trade has already been destroyed?

Prof. JOHNSON. That calls for an answer, does it, Senator?

The CHAIRMAN. Along the same lines as your previous question. You may proceed with the rest of your narrative, Professor.

Senator SIMMONS. Just a moment. If the contention insisted upon by Senator Bristow were correct, if the charges of an English vessel loaded with goods from England were lower than the charges by a German vessel loaded with goods from Germany, we would be at liberty to fix such rates for the canal as would equalize those rates, would we not? Would not that follow as a necessary consequence?

Prof. JOHNSON. I would rather that Senator Bristow answer that. Senator BRISTOW. I will answer that. The Senator and I will have a controversy about that in due time.

Prof. JOHNSON. I have troubles enough of my own.

Senator THOMAS. You do not understand, do you, Professor, that the disappearance of our flag from the overseas commerce was due to a treaty arrangement or relation with Great Britain?

Prof. JOHNSON. I do not understand it. No; it was due to broad economic conditions.

The CHAIRMAN. Do you not understand that the disappearance of the American flag in the overseas trade was due to the improvident provisions of the treaty of 1815, under which the United States obligated itself to observe a reciprocal relation, or reciprocal policy, which has prevented her from giving to her domestic shipping the preferential duties such as are contemplated by the UnderwoodSimmons tariff bill that we passed a few months ago, whereby we are denied, so long as these pacts continue, the right to give a preferential tariff rate to cargoes carried in American bottoms?

Prof. JOHNSON. You are, of course, entirely correct, Senator

The CHAIRMAN. Then, the disappearance of the flag from the sea is, in part, due to a treaty which we entered into and which can be abrogated at any time by a year's notice?

Senator THOMAS. The witness has not had an opportunity to answer fully.

Prof. JOHNSON. What I started to say is that you are entirely correct in saying that the treaty of 1815 established the principle of complete reciprocity in international commerce. It is also true that under those conditions we prospered highly as a carrying Nation until about 1861. At that time we reached our maximum tonnage in the over-seas trade.

Senator THOMAS. That was what year?

Prof. JOHNSON. 1861.

Senator SIMMONS. That was how many years after this treaty that the Senator speaks of?

Prof. JOHNSON. About 36 years. About 1850 the change, as we all know, from wood to iron began to take place on a large scale, a change which Great Britain was prepared to make and which we were not prepared to make, and did not begin to make until about 1870. In that 20 years' period when Great Britain was transforming her fleet from wood to iron occurred our disastrous Civil War, which eliminated in four years nearly a million tons from our over-sea merchant marine. The CHAIRMAN. What caused that elimination?

Prof. JOHNSON. The ships were sold abroad; 800,000 tons of shipping were sold abroad and put under foreign flags during the war. The CHAIRMAN. Do you know what led to that?

Prof. JOHNSON. The desire of their owners to avoid the risk of capture and destruction of their vessels.

The CHAIRMAN. It was the depredations of the Alabama, the Shenandoah, and the Florida, which were built in British ports and manned by British crews, which drove our commerce from the ocean, and it has not been restored since. Is not that a historical fact?

Prof. JOHNSON. That is essentially true. I do not hold any brief for Great Britain, Senator.

Senator BRANDEGEE. I do not want to go into historical questionsthe question why our merchant marine is not greater than it is--but inasmuch as various members of the committee have asked questions about those things, I want to read article 3 of the Hay-Pauncefote treaty, clause 1, and then ask you a question. It reads:

The United States adopts, as the basis of the neutralization of such ship canal, the following rules, substantially as embodied in the convention of Constantinople, signed the 28th October, 1888, for the free navigation of the Suez Canal, that is to say:

1. The canal shall be free and open to the vessels of commerce and of war of all nations observing these rules, on terms of entire equality, so that there shall be no discrimination against any such nation, or its citizens or subjects, in respect of the conditions or charges of traffic or otherwise. Such conditions and charges of traffic shall be just and equitable.

The point is this: We agreed in that treaty that "the canal shall be free and open to the ships of commerce and of war of all nations observing these rules," and one of the questions in this controversy is whether we are one of the nations that is bound to observe these rules or not; that is, whether the guaranty of equality of treatment applies to this Nation or not, whether we are to maintain the scales of equality simply among other nations, or whether we are to give all nations the same kind of treatment that we give our own vessels.

Now, as to that question, I understand that you are not expressing an opinion here, but are attempting to state to the committee in what way the exemption of our coastwise vessels from tolls through the Panama Canal would work a discrimination against the subjects and vessels of other nations, irrespective of whether the discriminations are prohibited by the treaty or not. Is that correct?

Prof. JOHNSON. You state my purpose correctly. I do not care to go into any legal argument as to the meaning of the treaty or as to the scope of the treaty, but to call attention to the fact that certain trade discriminations will inevitably result from the exemption of the coastwise shipowners from payment of tolls and the collection of tolls from foreign traders and shipowners who compete with American traders and shipowners.

The CHAIRMAN. As a matter of fact, if the vessels of all nations, including American ships, paid tolls for going through the canal, from an economic standpoint there would still be a discrimination against all foreign nations, because their vessels are not permitted to engage in the coastwise trade?

Prof. JOHNSON. Yes.

The CHAIRMAN. Is the other discrimination that you spoke of a moment ago any more substantial than the discrimination which you now indicate?

Prof. JOHNSON. Not so substantial, Senator. The question is whether the discrimination of which I speak is a discrimination or

not.

Senator BRISTOWw. Of course, it is pretty hard to discuss this from an economic standpoint and not get into the matter of political policy, but any ship that can engage of the coastwise trade of the United States under the law can go through the canal free. The discrimination is not the tolls act, but the act which prevents certain ships from engaging in the coastwise trade of the United Statesthe navigation laws. That is where the discrimination comes. It

does not cite that the ships of all nations can not go through free if they can engage in the coastwise trade of the United States. Why not repeal the navigation laws of the United States as well as the Panama Canal act, or instead of the Panama Canal act, or that provision of it? Is not that where the real discrimination is?

Prof. JOHNSON. I am experienced enough to realize that it is best to keep to one's text, and my text is that the nonpayment of tolls. by the coastwise shipowners, and the payment of tolls by foreign shipowners, works a discrimination.

Senator BRISTOW. Your theory is that it works a discrimination because of the American navigation laws?

Prof. JOHNSON. Because the foreign trader and shipowner pays the tolls and his American competitor does not have to pay the toll. Senator BRISTOW. But if he would engage in the coastwise trade of the United States, he would not pay tolls, so he is not discriminated against so far as that is concerned. If he wants to engage in the coastwise trade of the United States he does not have to pay tolls, and the law which prevents him from engaging in the coastwise trade is the discriminating law, is it not?

Prof. JOHNSON. I do not so view it; at least I am not talking about. the law of 1817 at the present time.

Senator SIMMONS. Whatever discrimination there is resulting from our navigation laws, which confines the coastwise trade to American vessels, existed as a matter of law at the time the treaty was made? Prof. JOHNSON. That law has been in force since 1817.

Senator SIMMONS. And this guaranty was a guaranty that the charges made for passage through the canal should not per se operate to discriminate against the citizens or subjects of a foreign nation. Prof. JOHNSON. Mr. Chairman, you see that Senator Simmons has very kindly stated the subject for me.

Senator SIMMONS. Of course, the Senator from Kansas [Mr. Bristow] has stated his view of it.

Senator BRANDEGEE. I desire to call Prof. Johnson's attention to the fact that our navigation laws, which prohibit other nations from engaging in our coastwise trade, seems to me to have nothing to do with the construction of the treaty, which only guaranteed equal treatment in the use of the canal to a foreign vessel going through the canal, not to engage in our coastwise trade, but in the use of the canal. That is all I have to state about that.

Prof. JOHNSON. I took occasion this morning, as the Chairman will recall, to speak with approval of the reservation of the coastwise trade to ships under the American flag.

Shall I now say just a word in regard to the oriental trade, which seems to me important?

Senator SIMMONS. Are you going to omit to discuss the other. questions as you raised them?

Prof. JOHNSON. I have discussed the first two questions.
Senator SIMMONS. There were four questions, I think.

Prof. JOHNSON. This takes up the third question, which, you recall, was whether toll exemption for the owners of ships carrying goods from our eastern seaboard to our western seaboard for reconsignment thence to the Orient and the payment of tolls on trade

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from Europe to the Orient worked a discrimination as to the conditions or charges of traffic through the Panama Canal. We ship a considerable tonnage now of cotton and other southern and eastern products to the western coast of the United States for export to the Orient. Some of those goods now go by water by the way of Panama or Tehuantepec and a larger tonnage goes by all rail to the west coast and thence to the Orient. After the opening of the canal I assume an increasing share of that export trade to the Orient from the eastern part of the United States will be sent by water to the west coast through the canal, consigned to San Francisco, Seattle, or other west-coast merchants, and then by them reconsigned to the Orient. In other words, the traffic will be handled by water essentially as it will be by rail-and-water to the Orient.

Senator PAGE. One word before you leave that. Do you mean to say we can not pass a law which will prevent that discriminationprevent that wrong?

Prof. JOHNSON. I did not say that, Senator. I merely wished to call attention to the fact that our present laws would seem to make it possible for a man exporting to the Orient, if it is a shipload of goods, to send that ship tolls free to the west coast, the goods being consigned to a bona fide merchant on the west coast, by him accepted, paid for, and by him reexported, without taking the goods off the ship, to the Orient.

The CHAIRMAN. Without taking them off the ship?

Senator PAGE. They would have to be transshipped, would they not?

Prof. JOHNSON. I do not know anything in the law that would require that.

Senator BRISTOW. That would be a manifest invasion of the law, would it not?

Prof. JOHNSON. It would seem to me to be an evasion of the law, not an illegal act.

Senator BRISTOw. Can that not be easily remedied without repealing the law?

Prof. JOHNSON. I have no doubt it can. If the trade can be conducted in the manner indicated, and I see no reason why it can not be done, the goods will move from our country to the Orient without paying tolls, whereas the goods will move from Europe to the Orient. by paying tolls.

Senator SHIELDS. That would be a manifest evasion-it would be merely a subterfuge, would it not, Professor

Prof. JOHNSON. It is an evasion of the law; yes.

Senator SHIELDS. One that the courts would not for a moment tolerate, even in a criminal prosecution?

Prof. JOHNSON. Are evasions of the law illegal?

Senator SHIELDS. Yes, sir; the worst form of violation is where

a man undertakes by fraud to defeat a law

Prof. JOHNSON. As I stated the problem, the business transaction would be, as I understand it, entirely legal. The goods are consigned

Senator SHIELDS. Not when they are consigned to a consignee on the west coast with the intention of reshipping them to the Orient