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the struggle we must make to hold our rank in transpacific navigation a measure found necessary in transatlantic navigation after decades of a steadily decreasing trade.

As was stated in the report for 1895, the privilege bestowed by the act of May 10, 1892, has been wisely and beneficially used; so well used, in fact, as to warrant the belief that if American shipowners and shipbuilders generally were permitted to avail themselves of the privilege it bestowed upon one corporation our merchant marine would be augmented by the purchase and registry of desirable foreignbuilt vessels, while at the same time construction in our own shipyards would be stimulated. In this belief the Bureau is confirmed by the opinions, expressed verbally and in writing, of leading shipbuilders of the United States.

While general in its terms, that act was in fact the grant of a special privilege to one corporation, as the only two vessels in existence which conformed to all of its requirements were the steamships City of New York and City of Paris. The act admitted foreign-built vessels to American registry upon the following conditions:

1. That such vessels should be steamships, engaged in freight or passenger business in an established line from a port in the United States.

2. That they should not be less than 8,000 tons each.

3. That they should have a speed of not less than 20 knots.

4. That 90 per cent of the capital of the foreign corporation operating such steamships at the time should be owned by citizens of the United States and have been so owned since January 1, 1890.

5. That American owners should obtain a complete transfer of the title to such steamships from the foreign corporation.

6. That the American owners should build in American shipyards steamships of an aggregate tonnage not less in amount than the steamships so admitted to registry.

7. That each steamship so built or contracted for should be not less than 7,000 tons.

8. That all vessels documented under the act should be available for the purposes of the United States in the event of war.

9. That foreign-built vessels admitted under the act should not engage in the coasting trade.

It is believed to be desirable, both as a matter of principle and as a matter of practical benefit to navigation, that the privilege bestowed by this act upon one shipowner and the opportunity for construction it opened for one shipbuilder should be bestowed upon all American shipowners and opened to all American shipbuilders. Every American shipowner can not command the capital to purchase vessels of 8,000 tons or upward, capable of a continuous speed of 20 knots an hour across the Atlantic, nor has every American shipbuilder the facilities to construct a like class of vessels. The bulk of the carrying trade of the Atlantic and Pacific is not carried on in ocean greyhounds and doubtless never will be. If the principle so successfully invoked in the case of the New York and the Paris is to be of general service to American shipowners and shipbuilders, it must not be restricted by conditions as to tonnage and speed which enable only those with great capital to make use of it.

The purpose of the act, declared by Congress, was "to encourage American shipbuilding," and it has already accomplished that purpose as far as it can, unless extended. More encouragement, under a more general law, based on the same principle, it is safe to assert

from experience, would accomplish still more for shipbuilding and for navigation. Of all the conditions prescribed in the act of May 10, 1892, only three appear to conform to the purpose declared in the title of the act, while the remaining six are limitations or impediments to the encouragement afforded. They may now well be removed, in view of the success which has attended the experiment on a restricted field. Those three conditions are the requirement that an equivalent tonnage should be constructed in American shipyards for the tonnage of foreign construction admitted to registry, that American ownership should be established, and that foreign-built vessels thus admitted should not engage in the coasting trade.

The admission of the New York and Paris, coupled with the construction of the St. Louis and St. Paul, has demonstrated that a more liberal policy toward shipping than that which has hitherto been followed does not mean the closing of American yards. It has been shown, on the contrary, that the admission of foreign-built vessels to American registry is possible with a simultaneous increase in American construction, and may even contribute to it. To stop at the act of 1892 without carrying it to its logical conclusion by giving it general application and enabling all to share in its benefits is avowedly to stop short at the grant of a special privilege, to put aside an opportunity to increase the tonnage of the American merchant marine and the construction of vessels in American shipyards.

Under present conditions the difference in cost of construction is such that the American shipowner desiring two steamers for foreign trade buys both in foreign yards and neither at home. Under an extension of the act of May 10, 1892, that difference in cost of construction would be reduced one-half. What was saved in the first cost of the foreign-built vessel would be available for expenditure in American yards. Conditions would thus be created which would certainly be more favorable to domestic construction of all kinds of vessels than those which now obtain. There would still be a difference in favor of foreign purchase and navigation under foreign flags, but the incentive to such purchase and navigation would be lessened materially and possibly in time wholly neutralized.

The fact is not overlooked that the four great steamships which carry the American flag on the mid Atlantic, by virtue of the act of May 10, 1892, are receiving the munificent mail compensation provided by the postal subsidy act of 1891, but, as already indicated, the act of 1891 was not sufficient to establish a fleet of 20-knot steamers until supplemented by the act of 1892. It is possible that the measure proposed would not add more 20-knot steamships to our fleet, unless heavy mail payments were provided, but for that purpose the law is already adequate.

The bill recommended adopts the principle of the act of 1892, and frees it from those restraints upon the encouragement of American shipbuilding imposed solely to define in general terms the steamships New York and Paris. It (S. 188, H. R. 2665) is now pending in the Senate Committee on Commerce and in the House Committee on Merchant Marine and Fisheries. Its text is a follows:

A BILL to encourage American shipbuilding.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Commissioner of Navigation be, and he is hereby, authorized and directed upon application by a citizen of the United States or a corporation organized under the laws of the United States or of any

State thereof, and upon satisfactory proof that such American citizen or corporation is the owner of a foreign-built vessel, to issue an American register to such vessel provided that such citizen or corporation, before the issue of said register, shall, under regulations to be prescribed by the Secretary of the Treasury, give a bond to the United States, with satisfactory sureties, in a penalty equal to the appraised value of the vessel so purchased, that said American owner will build in American shipyards a vessel or vessels of an aggregate tonnage and value not less in amount than that of the vessel so admitted to registry. No foreign-built vessel registered pursuant to this act shall be entitled to engage in the coasting trade of the United States.

SEC. 2. This act shall take effect one month after its passage.

Its passage at the coming session of Congress is strongly urged as a measure which has recent practical experience in its favor. Its enactment will in no manner conflict with any general policy toward shipping likely to be enacted in the immediate future, but, on the contrary, it will materially assist in the execution of any such policy.

DISCRIMINATING DUTIES ON SHIPPING.

For over eighty years the United States has followed the policy of reciprocity in shipping. Every other maritime nation of considerable rank has adopted and now pursues the same policy. In brief, that policy provides that foreign vessels and their cargoes shall be subject to no higher charges than domestic vessels and their cargoes in domestic ports on condition that in foreign ports American vessels and their cargoes shall be treated on an equality with foreign vessels and their cargoes. That policy was established as part of the law of the United States by John Quincy Adams, Henry Clay, and Albert Gallatin in negotiating the treaty of 1815 with Great Britain. It has been followed undeviatingly by American statesmen since that time, and with it are associated the names of Daniel Webster, Martin Van Buren, James Buchanan, Charles Francis Adams, Hamilton Fish, and Thomas F. Bayard, to enumerate but a few in illustration of the fact that the policy has had the continuous support of all political parties in this country. It has had the support of nearly all civilized nations, as is shown in Appendix D, giving the navigation articles of our treaties with them of friendship, commerce, and navigation.

A policy thus approved by the national administrations of eighty years and ratified by every Senate which has been called upon to consider it during that interval should not be disturbed without the fullest investigation into the consequences of such disturbance. Even if it could be shown that a change of policy would be of benefit to our shipbuilding and ship-owning interests, the change should not be made at the sacrifice of other large and equally important domestic interests.

A bill (S. 3232) imposing 10 per cent additional discriminating duties on all cargoes brought into the United States by vessels not of the United States fifteen months after its passage has been introduced and referred to your Department for a report. I have the honor earnestly to recommend that you report against the propriety of the passage of that bill.

The value of the total imports into the United States for the year ended June 30, 1895, was $731,969,965, of which $590,538,362 were carried in foreign vessels. The total duties collected were $149,450,608, and the value of the free goods included in the total imports was $363,233,795. The Treasury statistics do not subdivide the cargoes of foreign vessels into free and dutiable classes, but there is no apparent reason why the percentage of either carried in foreign vessels should

be different from the percentage of either carried in American vessels or imported by land. Of the total imports, $731,969,965, there were carried, as stated, $590,538,362 in foreign vessels. It seems reasonable, therefore, to conclude that about fifty-nine seventy-thirds of the free and of the dutiable goods were carried by foreign vessels, and that about fifty-nine; seventy-thirds of the duties were paid on goods imported in foreign vessels.

The value of the free goods imported for the year being $363,233,795, we are thus warranted in assuming that $293,063,242 of this amount was imported in foreign vessels. The immediate effect of the bill under consideration will be to impose a 10 per cent duty on this valuation, amounting to $29,306,324.

The duties paid on $368,736,170 dutiable goods were $149,450,608. We are warranted in assuming that fifty-nine seventy-thirds of this valuation, or $297,475,120, were imported in foreign vessels. additional 10 per cent discriminating duty on this sum amounts to $29,747,512. This sum, plus the new duty of $29,306,324 proposed to be levied on goods now free, makes a total of $59,053,836 as the immediate fiscal result of the measure, estimated on the imports of 1895.

There will be the widest divergence of opinion as to the incidence of this additional taxation of $59,000,000 on our international exchanges, but there can be no question that it will be a tax. The proceeds will go into the Treasury as do other taxes, whether it is ultimately paid by the American consumer, the foreign exporter, or the transporting vessel, or whether it is paid in part by all. While the incidence of the tax would be a matter of partisan discussion in which there will be little hope of securing change of opinion, the amount of the tax upon commerce is worth consideration. The total value of our combined exports and imports by sea for 1895 was $1,456,403,388. Mulhall, the eminent statistician, estimated several years ago that the average rate of ocean freights on British vessels the world round was 8 per cent of the value of the cargoes. On this basis the ocean freights on the value of our combined exports and imports by sea for 1895 would amount to $116,500,000. But the well-known American economist, Mr. J. W. Dodsworth, in the New York Journal of Commerce on July 8, 1895, from detailed investigation and market freight rates, estimated that the ocean freights on $533,600,000 of goods imported into the United States was $19,250,000, and that the average rate of ocean freights to the United States was 3.6 per cent of the value of the cargo. On this basis our ocean freight bill for 1895 on exports and imports would be $52,400,000. Whether either of these estimates be accepted or mean figures between them be taken it is evident that the scheme of discriminating duties proposed will exact from our international commerce an amount equal to a very large percentage of our total payments for ocean freights. Cheap and rapid transportation on the seas is as important to our exporters, manufacturers, farmers, and importers as it is on the land. The reduction in the time and expense of oversea transportation of passengers, cargoes, and mails is one of the great factors in the recent development of civilization, and any legislative project which proposes to hamper progress won by invention and the skillful application of industrial forces should be challenged to justify itself as soon as it appears.

It has been stated that the incidence of the proposed increased taxation will be a matter of dispute. Whatever view be taken the conclusion must be against the proposed project on the ground of general

welfare. If it be conceded that the additional discriminating duty of $59,000,000 must be paid by American consumers, unquestionably the proposition will find scant favor among the American people. And so far at least as coffee and tea-of which in 1895 we imported $125,000,000and other articles not produced in this country are concerned it will be conceded by all that the customs duty is a tax on the American consumer. For that reason the tax on tea and coffee was abolished nearly a quarter of a century ago. In 1895 we imported $95,000,000 of coffee, of which $60,000,000 came from Brazil and $8,000,000 from Venezuela. The tonnage of American vessels entering the United States with cargo that year from Brazil was 22,338 and of foreign vessels with cargo was 243,712. At least nine-tenths of the $60,000,000 coffee imported into the country from Brazil or $54,000,000 thus came in foreign vessels. The 10 per cent duty proposed on this importation of a product not produced in the United States would amount to $5,400,000 annually. The postal subsidy paid annually to the American Line steamers is about $800,000. That subsidy, with the partial adoption of the freeship principle elsewhere recommended in this report, has established a line of the four largest, quickest, and best transatlantic steamers. Waiving any discussion of the principle of steamship subsidies, it is thus evident that for the extra sum which under the discriminating duty project the American people would have to pay for Brazil coffee alone, there could be established steamship lines, including 25 steamers equal to the St. Louis or St. Paul, or a much larger number of the class required for South American, Asiatic, and African trade. If ocean freight rates average 8 per cent of the value of the cargo, as Mulhall asserts, it would evidently be a saving to the American people if by direct subsidy they should pay out of the Treasury the 8 per cent freight on all the coffee we import from Brazil rather than pay a 10 per cent discriminating ad valorem duty. The new duties proposed by the discriminating duty bill on coffee alone from Brazil, $5,400,000, equal the total average annual expenditure for ten years, estimated at $5,391,000, under the so-called Farquhar navigation bounty bill of 1890. The foregoing statements show the operations of the bill before its effects upon navigation have begun to appear. The object of the bill. is to increase the proportion of American tonnage in trade with Brazilto continue the concrete illustration in hand-and to reduce the proportion of foreign tonnage. This object is to be attained by imposing a tax of $5,400,000 on American consumers if they persist in importing Brazilian coffee in foreign vessels. As the percentage of imports of coffee in American vessels increases the amount of the new tax derived from coffee will decrease. It does not follow that the additional expense imposed upon the American people would decrease proportionately. If coffee can be carried as cheaply in American as in foreign vessels obviously there is no reason why it should not be so carried at present. The purpose of the bill under consideration is so to increase the cost of coffee carried in foreign vessels, through a customs duty, that American vessels can increase their freight charges on Brazilian coffee and still undersell the article imported in foreign vessels. The limit of the possible increase in freight charges is the 10 per cent ad valorem duty. Were it possible for all American vessels proposing to enter that trade to make an effective combination, freight charges would be raised to nearly that maximum. Such a combination would probably prove impracticable, and the competition of American carriers for the trade, which this bill proposes to put entirely into their hands, would raise freight charges to the extent to which the trade

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