Page images

Various methods of estimating the cash value of the carrying trade thus lost to the country have been used, but only approximations are possible. The receipts of the Cunard Line, Peninsular and Oriental, and Pacific Steam Navigation Company, exclusive of mail and Government payments, for last year were in round numbers $21,000,000, and the combined tonnage of their fleets was 435,000 tons, or an average, say, of $50 per ton per year. Probably this average of receipts per ton per annum is higher than earnings per ton of the steamships required to maintain constant steam communication between the United States and foreign nations. That tonnage may be put at upward of 2,000,000 tons, so that the gross receipts of steamships in constant employment between the United States and foreign nations undoubtedly equal $100,000,000 in an ordinarily prosperous year. Part of these receipts are American, though coming to this country under foreign flags. The percentage lost which might be won is purely a matter of conjecture among the tens of millions. [The annual railroad receipts of the United States are put by the Eleventh Census at $1,200,000,000.]

These various facts demonstrate that while the registry law has accomplished nothing for shipbuilding, it has stunted the development of American navigation, and must continue to do so until under natural laws the vessels required to compete for the foreign carrying trade can be built as cheaply in this country as abroad. Doubtless the time is not many years distant when we shall build steel steamships better and more cheaply than they can be built elsewhere, as our native forests enabled us to surpass all in the days of wooden ships, when the registry law was enacted. But the registry law itself can neither hasten the dawn of that day nor will it effectively retard it. It is without effect on shipbuilding, but it obstructs navigation. Other maritime nations have recognized this fact, and without exception have abandoned laws which forbade the national flag to foreign-built vessels. Those which have undertaken to stimulate shipbuilding by legislation have resorted to direct cash payments from the public funds in the form of bounties for domestic construction, bounties for the navigation of domestic-built vessels, or large mail compensation to domestic-built vessels. Such is the policy of France, Italy, and Austria, where the subsidy system is in force. Those nations give their citizens the markets of the world from which to buy shipping on the most advantageous terms, in order to encourage navigation under the national emblem. encourage national shipbuilding they offer rewards in cash out of the public funds. Such support as the system of subsidies has in the United States is a confession of the inadequacy of the registry law to benefit shipbuilding for foreign trade, a tardy realization of our backwardness in navigation. Free registry and subsidies are not alternative or conflicting propositions, but independent methods of dealing with two different subjects.


That such is the fact will appear from an examination of the pecuniary relations of foreign governments to their merchant marines. In Appendix K are set forth, as far as circumstances have permitted, these relations in so far as the United States, Great Britain, Germany, Norway and Sweden, France, Italy, Austro-Hungary, and the Dominion of Canada are concerned.

The notion that any grant of money by government to a steamship company is clear gain or is necessarily a source of profit is as likely to

lead to wrong conclusions as the notion that every government contract is a source of profit. No such general rule can be laid down, and the practice of lumping in one sum the payments of a government to navigation and designating the result as "subsidy"-in the sense. usually given to the word in this country-is altogether delusive. Whether such payments mean profit or loss to the company receiving them depends, as in the case of every other contract, upon the terms of the contract. Thus it will be noted in its annual report that the North German Lloyd Company recently gave up a subsidy of 900,000 marks, because it was unprofitable, and the abandonment of the subsidy and the service required for it has enabled the company to convert a loss into a profit. Concerning Canadian mail payments Messrs. H. and A. Allan wrote to the Canadian government in 1892 of their line:

It has also established a claim upon the government of Canada in relation to its transatlantic mail service by the circumstance that for a good many years it has supplied steamers for that service at great pecuniary loss to its owners, the postal subsidy it has received having in the changed circumstances of trade been inadequate. - The Compagnie Générale Transatlantique on somewhat similar grounds a few years ago obtained a remodeling of some of its postal contracts with the French Government. In numerous instances contract rates of speed undoubtedly call for an increased consumption of coal which wipes out all profit in the subsidy, and makes the profit or loss of the contract depend wholly upon ordinary passenger and freight business.

Payments from the public funds to the merchant marine and to national shipbuilding take several forms:

First, direct bounties for the construction of vessels, engines, and boilers in domestic yards, as is the present practice of France, Italy, and Austria.

Second, indirect bounties for the construction of vessels in domestic yards in the form of a Government bounty for every mile navigated by a vessel so built, or in the form of large mail payments to vessels so built. France, Italy, and Austria adopt this course also, and Germany, to a very limited extent.

Third, navigation bounties for every mile traversed by a vessel under the national flag, regardless of its place of build. France held this policy from 1881 to 1892, and it has just been adopted by Austria.

Fourth, mail compensation, (a) operating as subsidy in France, Italy, and Austria, though designed in part for political and commercial purposes; (b) ordinary payments for services rendered with no excess, except so far as required to insure regularity of communication or for political or commercial purposes, as in British, German, Norwegian, and Swedish mail contracts; (c) ordinary payments solely for commercial purposes, as in the present transatlantic service for the United States, Canada, and many British mail payments, the effect on navigation being wholly ignored.

Fifth, payments to selected merchant steamships as reserved cruisers or transports.

The object of the British Government in paying steamship companies to carry foreign mails is to secure the quickest, surest, and cheapest mail communication for British merchants with all parts of the globe. To attain this end it does not hesitate to withdraw its payments to British steamship companies and transfer them to foreign railroads. The theory that the encouragement of British navigation is the purpose of British mail compensation will not stand before the fact that

French and Italian railways are utilized as far as possible for the mail service, and that recent and undeveloped plans for a transatlantic service to Canada are based on the possibility of partially substituting the Canadian Pacific Railway for the Suez Canal as an important link in the mail connection between Great Britain, China, Japan, and Australia. Any impression that the ocean mail payments of Great Britain are so large as to become bounties will be modified by a reference to the payments of the United States and Great Britain, respectively, for transatlantic mail service last year, as stated by the Postmasters-General of the United States and Great Britain in Appendix K. For the transmission of its mails to Great Britain, Germany, and France, the United States last year paid $610,000, the service being rendered presumably at the cheapest rates the Government could obtain as it was rendered in great part by foreign lines. The amount will be greatly increased under the postal subsidy act of 1891. For the transmission of its mails to the United States, Germany, and France, Great Britain last year paid $630,000, and included in this sum is the amount paid for carrying from Dover to Calais, the through Indian, China, and Australian mails via Brindisi. On the Atlantic, the British mails are carried on the cheapest terms the Government can obtain consistent with the quickest delivery which is prescribed in its contracts, and the total expenditure is no greater than that of the United States, making the cheapest terms with foreign lines. A comparative statement of the aggregate amount of mail matter carried across the Atlantic for the two Governments, respectively, and of the average rates of speed should be considered if the relative cheapness of the two services were to be closely fixed, but it does not appear feasible to obtain such statement. The facts stated, however, indicate that the encouragement of navigation on the Atlantic is not considered in making British ocean mail contracts.

The political and commercial importance to Great Britain of close and certain communication with India, Asia, and Australia is generally understood, and as steam navigation furnishes the only means of such communication British payments to steamship lines to these portions of the British Empire have always been large, and in the beginning bore some analogy to the support the United States gave to the early construction of the Pacific railroads. Encouragement to navigation has been only incidental and secondary to political and commercial considerations, and, as indicated, where circumstances permit it is being withdrawn and arrangements with the railroads of France, Italy, Canada, and the United States are in part taking its place. The percentage of payments to steamship lines to the entire cost of transporting British mails is steadily decreasing.

But the sufficient facts to demonstrate that Great Britain does not subsidize shipping, in the sense in which the word is used in the United States, are that the profits of mail lines do not average higher than those of merchant lines, that the stock quotations of one class of securities are not higher than the other, and, finally, that barely 3 per cent of the British mercantile marine receives public funds in any form.

Colonial contracts are entered into on the best possible terms, without regard to the merchant marine of the home country, as witness the New Zealand contract with an American steamship company to San Francisco, thence by American railroads to New York, or the projected Canadian contracts already referred to, looking to the substitution of the Canadian Pacific Railway for British steamships, and involving a saving of time roughly computed as follows: From Southampton via Brindisi (for mail) and Suez Canal to Shanghai, approximately 12,500

miles; from Liverpool to Quebec, approximately 2,500 miles; from Quebec to Vancouver (by rail), say 3,000 miles; from Vancouver to Shanghai, 5,500 miles; in all 11,000 miles, a saving of fully 1,500 miles in distance and in time of over five days. By utilizing the Canadian Pacific Railway a saving of about five days in mail time to Australia also is deemed possible.

British admiralty subventions, amounting in all to $165,000 a year, paid to 28 of the most powerful and largest British vessels afloat, had their origin in difficulties in the rapid transfer of British troops to the East some years ago when war with Russia seemed possible and again at the outbreak of the revolt of Arabi Bey. The conditions of these subventions are highly favorable to the Government in case it is called upon to issue a requisition for the use of any of these steamships as transports, and the payments to the corporations concerned are not strictly profit, but in the nature of an insurance fund to make good the probable loss resulting from the diversion of a subsidized steamer to Government purposes, and the consequent interruption of regular mercantile traffic.

The results of nine years' trial of a complete bounty system in France, involving an expenditure of $19,000,000, and of seven years' trial of a similar system in Italy, at an expense of $5,500,000, are stated in Appendix K. The meager results attained in both countries warrant the statement that the nation which enters upon this system of building up a merchant marine with the expectation of success must do so with a free hand and no care for the cost. It must be prepared to spend not $1,000,000 or $2,000,000 a year, but several times that sum annually for a long period. That by a sufficiently large and continuous expendi ture of public money shipyards can be established successfully in any country, does not admit of question. It is not deemed necessary to consider here the propriety of that course as a matter of public policy, or its desirability from the economic point of view. Those nations which have made the attempt have not succeeded, confessedly for the reason that their expenditures were not large enough. In France and Italy the advocates of the system maintain that if construction bounties had not been paid for some years past shipbuilding would have shrunk to insignificant proportions. The practical difficulty in the way of the establishment of a bounty system is that if the distribution of public funds is made general, an expense is entailed greater than a people, taxed for the purpose, will long endure, while if the favor is extended to but few, it operates as a discrimination against other domestic interests in navigation, and in effect builds up part of the interest at the expense of the whole interest. The experience of France and Italy demonstrates that the shipowners of both countries find it more to their profit to buy ships in the cheapest market than to avail themselves of government bounties conditioned upon the purchase of higher-priced domestic shipping. Had this alternative not been open to them the French and Italian flags would doubtless have disappeared from the seas, and French and Italian shipowners would have resorted to the use of the British flag, as is the custom, under our registry law, of the leading American shipowners in transatlantic trade.


The notion that American navigation and shipbuilding for the foreign trade can be encouraged by the imposition of heavier taxes on foreign shipping in American ports than are imposed on domestic shipping involves a radical misunderstanding of the conditions of foreign

trade by sea between nations. The theory would undoubtedly work admirably if, in practice, it were possible in some fashion to bind foreign nations to refrain from prompt and effective retaliation against American vessels in their ports; but the assumption that they will not strike back rests on a belief in a spirit of humility not yet general in commercial affairs among either nations or individuals. The laws now provide -whether wisely or not is not here in question-that only American vessels shall engage in the coasting trade between ports of the United States, and these laws are easily enforced because these ports are all under our own control. The power of any State to discriminate against the shipping of another State is denied by the Constitution. The exercise of that power under the Confederation proved harmful to the mercantile interests of the States which attempted it, and it was forbidden by the fundamental law when the Government was established. Long ago the leading maritime nations found, by an experience not different from our own under the Confederation, that discriminating taxes on shipping injure the shipping of all parties who engage in such commercial wars of retaliation, and by common consent the project no longer ha a place in any intelligent maritime policy. An attempt to deny entry to the ports of the United States to foreign vessels would naturally result in the refusal of foreign nations to allow American vessels to enter their ports. What is true of absolute prohibition is equally true of any plan of modified discrimination. Whatever its degree, it would inevitably result in reprisals which would deprive American shipping of any hoped-for advantages at home by putting it to corresponding disadvantages abroad.

The belief entertained in some quarters that the early history of the United States shows that discriminating taxes are a successful means of upbuilding an American merchant marine finds no warrant in the facts or discussions of the period. On the contrary the United States adopted discriminating duties at the beginning of government expressly as a matter of reprisal for discriminations made against American vessels in foreign ports, and the policy was given up as soon as it had been effective in putting an end to those discriminations. The words of Representative Benjamin Goodhue, of Massachusetts, father of the navigation laws, less than three weeks after the first Congress began business, are conclusive on this point (Annals of Congress, vol. 1, p. 184, April 21, 1789):

Mr. GOODHUE. There would be no occasion to lay additional duties on ships owned by foreigners if our own vessels were not subjected to charges in foreign ports over and above what the natives pay. It is the operation of this unequal burthen that renders it necessary for us to discriminate. It becomes us, therefore, to ascertain what these extraordinary impositions are in order to regulate our conduct.

The last nation to give a trial to discriminating duties was France, which in 1872 revived its surtaxe de pavillon, and after seventeen months' trial abandoned the effort. The proposition has no analogy in the present practices of maritime nations except in the restriction of European trade to certain treaty ports by China and Japan. If those nations had any considerable navigation in European waters commercial reprisals against it would doubtless soon open the remaining ports of those Asiatic powers.


It has not appeared desirable to undertake an inquiry into the cost of construction of steel steamships in this country and abroad for various reasons. Such an inquiry is rendered unnecessary by perfectly

« PreviousContinue »