• TABLE OF CONTENTS
HIDE
 Title Page
 Dedication
 Preface
 Table of Contents
 Half Title
 Introduction
 Routes
 The Pacific countries
 The Atlantic countries
 Recent trade movement
 Classes of exports to the Pacific...
 Details of exports to the Pacific...
 Details of imports from the Pacific...
 Conclusion
 Appendix
 Index
 Advertising






Title: The Panama Canal and international trade competition
CITATION PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00074046/00001
 Material Information
Title: The Panama Canal and international trade competition
Physical Description: 283 p. : fold. map. ; 21 cm.
Language: English
Creator: Hutchinson, Lincoln
Publisher: The Macmillan Company
Place of Publication: New York
Publication Date: 1915
 Subjects
Subject: Commerce -- United States   ( lcsh )
Panama Canal (Panama)   ( lcsh )
Genre: non-fiction   ( marcgt )
 Notes
Statement of Responsibility: by Lincoln Hutchinson.
 Record Information
Bibliographic ID: UF00074046
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 000117535
oclc - 23266285
notis - AAN3376

Table of Contents
    Title Page
        Page iii
        Page iv
    Dedication
        Page v
        Page vi
    Preface
        Page vii
        Page viii
        Page ix
        Page x
    Table of Contents
        Table of Contents
    Half Title
        Half Title
    Introduction
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
    Routes
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
        Page 40
        Page 41
        Page 42
        Page 43
        Page 44
        Page 45
    The Pacific countries
        Page 46
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
        Page 52
        Page 53
        Page 54
        Page 55
        Page 56
        Page 57
        Page 58
        Page 59
        Page 60
        Page 61
        Page 62
        Page 63
        Page 64
        Page 65
        Page 66
        Page 67
        Page 68
        Page 69
    The Atlantic countries
        Page 70
        Page 71
        Page 72
        Page 73
        Page 74
        Page 75
        Page 76
        Page 77
        Page 78
        Page 79
        Page 80
        Page 81
        Page 82
        Page 83
        Page 84
        Page 85
        Page 86
        Page 87
        Page 88
        Page 89
        Page 90
        Page 91
        Page 92
        Page 93
        Page 94
        Page 95
        Page 96
        Page 97
    Recent trade movement
        Page 98
        Page 99
        Page 100
        Page 101
        Page 102
        Page 103
        Page 104
        Page 105
        Page 106
        Page 107
        Page 108
        Page 109
        Page 110
        Page 111
        Page 112
        Page 113
        Page 114
        Page 115
        Page 116
        Page 117
        Page 118
        Page 119
        Page 120
        Page 121
        Page 122
        Page 123
        Page 124
        Page 125
        Page 126
        Page 127
        Page 128
        Page 129
        Page 130
        Page 131
    Classes of exports to the Pacific countries
        Page 132
        Page 133
        Page 134
        Page 135
        Page 136
        Page 137
        Page 138
        Page 139
        Page 140
        Page 141
        Page 142
        Page 143
        Page 144
        Page 145
        Page 146
        Page 147
        Page 148
        Page 149
        Page 150
        Page 151
        Page 152
        Page 153
        Page 154
    Details of exports to the Pacific countries
        Page 155
        Page 156
        Page 157
        Page 158
        Page 159
        Page 160
        Page 161
        Page 162
        Page 163
        Page 164
        Page 165
        Page 166
        Page 167
        Page 168
        Page 169
        Page 170
        Page 171
        Page 172
        Page 173
        Page 174
        Page 175
        Page 176
        Page 177
        Page 178
        Page 179
        Page 180
        Page 181
        Page 182
        Page 183
        Page 184
        Page 185
        Page 186
        Page 187
        Page 188
        Page 189
        Page 190
        Page 191
        Page 192
        Page 193
        Page 194
        Page 195
        Page 196
        Page 197
        Page 198
        Page 199
        Page 200
        Page 201
        Page 202
        Page 203
        Page 204
        Page 205
        Page 206
        Page 207
        Page 208
        Page 209
        Page 210
        Page 211
        Page 212
        Page 213
        Page 214
    Details of imports from the Pacific countries
        Page 215
        Page 216
        Page 217
        Page 218
        Page 219
        Page 220
        Page 221
        Page 222
        Page 223
        Page 224
        Page 225
        Page 226
        Page 227
        Page 228
        Page 229
        Page 230
        Page 231
        Page 232
        Page 233
        Page 234
        Page 235
        Page 236
        Page 237
        Page 238
        Page 239
        Page 240
    Conclusion
        Page 241
        Page 242
        Page 243
        Page 244
        Page 245
        Page 246
        Page 247
        Page 248
        Page 249
        Page 250
        Page 251
        Page 252
    Appendix
        Page 253
        Page 254
        Page 255
        Page 256
        Page 257
        Page 258
        Page 259
        Page 260
        Page 261
        Page 262
        Page 262a
    Index
        Page 263
        Page 264
        Page 265
        Page 266
        Page 267
        Page 268
        Page 269
        Page 270
        Page 271
        Page 272
        Page 273
        Page 274
        Page 275
        Page 276
        Page 277
        Page 278
        Page 279
        Page 280
        Page 281
        Page 282
        Page 283
    Advertising
        Page 285
        Page 286
        Page 287
        Page 288
        Page 289
        Page 290
Full Text



THE PANAMA CANAL AND

INTERNATIONAL TRADE

COMPETITION






BY
NCOLN HUTCHINSON
umvmiT 0o CAUORNZM









gerw fat
THE MACMILAN COMPANY
1915
An m imi







Y~. 64A:-



LATIN
AUMICA
















Cowmmn. 1'S
BT THE AMIULLAN COMPANY
Set =p d dectroyped. PubH&W Januauuy 19




















TO MY FATHER


154340














PREFACE


IN preparing the following chapters on the Panama Canal
and international trade competition, the author has made no
attempt to present a complete compendium of facts relating
to the commercial intercourse between the two great regions
which the canal will connect. The great movements in
international trade result not so much from the successive
seizing of new opportunities to supply the demand for this
or that commodity in which the trader deals as from the
operation of economic forces which make two or more
economically different regions mutually dependent upon one
another. The roots of large trade movement lie in diversity
of resources and differences in stage of economic growth; the
understanding of its possibilities and the recognition of its
opportunities rest upon a group of factors which lie in the
field of economic geography. Throughout the following
pages the attempt has been made to place the emphasis upon
those economic-geographic factors which render the Atlantic
and the Pacific countries economically interdependent and
hence tend to produce commercial interchange between
them. The author has sought to avoid the mistake either
of too precise prediction as to what trade development
must take place or of presuming to instruct practical busi-
vii






PREFACE


ness men as to the precise methods which they should em-
ploy in the conduct of their businesses. American business
men have on the whole shown themselves well able to handle
the problems which have confronted them. Yet there are
certain fundamental movements and forces which are
sometimes easily overlooked unless one's attention is par-
ticularly directed towards them, the losing sight of which
may lead to the waste of a good deal of useless effort; and
the attempt is here made to indicate dearly what these
basic movements, forces and tendencies are. The traders
or the trading nations which most readily and quickly put
themselves in line with forces already operating are the ones
which will be the most likely to accomplish permanent
results.
The object of this book, therefore, is not to give mere
information or to present a mass of facts but to use the
material gathered for the purpose of illustrating tendencies.
It is hoped that such a presentation may prove to be sug-
gestive to business men who have or may have dealings
with the countries in question or are interested in forming
some opinion concerning the possible or probable com-
mercial influence of the new canal. At the same time, the
discussion of the problem may not be void of interest to the
general reader or the student of commercial or economic
history or geography. The business man who looks through
the following pages with a view to getting specific informa-
tion concerning some particular line of trade in which he
may be interested will probably meet with disappointment,
but he may nevertheless be able to find suggestions which,






PREFACE


in the light of his fuller practical experience in the business
world he may expand and make use of.
The materials for the book have been gathered through a
series of years during which the author has made a study of
the commercial problems of Latin-America and the Pacific
Ocean countries generally. The statistics used have been
compiled from official sources for all of the countries which
publish such data. Most of the facts and statements of a
more general nature are based upon the writer's personal
observations in the course of a series of visits to all of the
countries mentioned and conversations with men actively
engaged in commercial dealings in those countries. In the
chapter on the effect of the canal on trade routes the report
of the Isthmian Canal Commission on Panama Traffic
and Tolls by Professor E. R. Johnson, has been extensively
drawn upon; and here and there use has been made of ar-
ticles and reports previously published by the present
writer. Among these latter are: Trade Conditions in
South and Central America, Washington, 1906-07; The
Panama Canal and Foreign Trade Competition, Daily
Consular and Trade Reports, January, 1913; The Panama
Canal and Competition for Trade in Latin America, the
Orient, and Australasia, Joural of the Royal Statisical
Socidy, London, March, r193; New Opportunities in the
Pacific, Yal ReVie, July, 9rr4; Voyage Costs via Panama
and other Routes, American Economic Reiew, September,
1914. The author also takes this occasion to express his
appreciation of the courteous and efficient assistance ren-
dered him by the American and other consular and diplo-






I PREFACE

matic officers in the various countries visited by him in the
prosecution of this work and to friends at home who have
given aid in the form of suggestive criticism.
LINcoLN HUTCHMSON.
BuZZLEY, CAUORmIA, June, 194.


















CONTENTS

CHAPTER PAGE
L INmo nUncUo x ........................................... z
I. R .............................................. rs
I. Tas Pacmc ComUNT R .................................. 46
IV. Tai AnanIc CoUmNTa s ................................ 7a
V. RxCEm TRAD MOVEMENT ............................... 98 -
VL CAssas or Expons To = a Pacnc Co m mns........... 132 -
VI. DETAuS or ExponS TO =z3 Pacm CouNIax ........... 15 -
VIII. DzTAis or IlPOa s r aU THE PACme COUNTM ......... 21 -
IX. CoN~MaSO ............................................. 241
ApnnoX ..................................................... 253
INDEX ....................................................... 263





















THE PANAMA CANAL AND INTERNATIONAL
TRADE COMPETITION













THE PANAMA CANAL AND INTERNATIONAL
TRADE COMPETITION

CHAPTER I

INTRODUCTION

EvEx since Balboa's discovery that only a narrow strip
of land blocked the passage from the Atlantic to the Pacific
the traders of the world have looked forward to a time when
this obstruction would be removed. The goal of the
medieval merchant's ambition was the fabulously wealthy
East. The only routes thither in the sixteenth century were
either overland through Asia, or by the long and hazardous
sea voyage via Cape Horn or the Cape of Good Hope. The
Asiatic route was infested by the Turks: the voyage around
Africa was beset by serious perils of storm and Arab pirates:
the route via Magellan or Cape Horn presented the hand-
icap of enormously increased distance. The knowledge
that a mere forty-mile land barrier at Panama was the only
obstacle to a shorter and safer passage to the Eastern
treasure house, inevitably prompted men to dream of its
removal.
For three centuries and more this hope has lived, but the
demand for its fulfillment has been subject to many varia-






2 THE PANAMA CANAL

tions in intensity. The need for such a route has on the
whole grown less pressing as the world has passed from the
medieval to the modem stage of commercial activity.
The economic growth of the countries of western Europe
and the settlement and development of the resources of
America gradually converted the Atlantic Ocean basin into
the greatest commercial area in the world's history. The
trade of the Orient, though its value, in absolute amount,
was steadily increasing, was relatively of much less moment
than during the days of da Gama and Albuquerque. Euro-
pean commerce with Asia and the Indies still longed for a
better route than those which existed but the appeal was
vastly less general
Then came de Lesseps' triumph at Suez. European
commerce found its easier outlet to the East, and to Europe,
at least, the value of a western gateway to the Pacific
became even less significant.
This was true, however, only for a short time. During
the last quarter of the nineteenth century several new
factors made their appearance in the world of international
trade and turned men's thoughts again toward the de-
sirability of a more direct communication between the
Atlantic and the Pacific. The United States, which until
that time had been chiefly an exporter of raw materials and
foodstuffs and had not competed seriously with Europe in
the sale of manufactured articles, rapidly rose to prominence
as an exporter of the latter class of goods. Several of the
larger countries of South America, through greater political
stability and greater attention to the development of in-






INTRODUCTION 3

dustries and resources, rose from their former insignificance
as traders and lent new importance to the Pacific as well as
to the Atlantic littoral of that continent. A great industrial
revolution in Japan, predictions of similar developments in
China, American enterprise in the Philippines, increasing
population and the exploitation of new resources in Alaska,
British Columbia, Australia, New Zealand, and even in
Mexico and Central America, gave a new significance to the
Pacific Ocean not as a mere route to the Indies, but as a
trade area on its own account. The conception of the
Isthmus of Panama as a barrier naturally came into prom-
inence once more.
To the United States this aspect of the Isthmus as a
barrier, appealed with greatest force. The geographic rela-
tions between her great trade centers and the Pacific mar-
kets were such as at first sight to make the cutting of the
canal seem to offer her greater opportunities in the Pacific
than to any European nation. The deeply-rooted conviction
of American merchants carrying on trade between the At-
lantic and Pacific coasts of the United States itself that they
were helplessly the prey of the trans-continental railway
freight rate makers added to the demand for a short sea
route. And what was coming to be regarded as an economic
necessity was suddenly raised to the position of a military.
necessity as well, by the Spanish war and the spectacular
voyage of the "Oregon."
To Americans, then, for the reasons just mentioned, the
opening of the Panama Canal appeals as an event of the
utmost importance. To Europeans, on the other hand.







THE PANAMA CANAL


the significance is not thought to be so great; their largest
trade interests in the Pacific are already cared for by the
Suez or the Cape of Good Hope route. Yet even to them,
with the increasing importance of the West Coast of South
America, of Central America and Mexico, of the Pacific
Coasts of the United States, British North America and
Alaska, the facilities offered by the new route must appeal:
with considerable force. At any rate, whether directly
interested or not, their fortunes Ae seen to be rather deeply
concerned, indirectly, through the increased facilities whicl
will be offered to their great new competitor, the United
States. It is safe to say that' the commercial world as a
whole believe- in the canal as a potent factor in international
trade competition. In America there a certain tendency
to exaggerate its importance; in Europe a certain skepticism
as to the extent of its influence; but in general a belief that
its completion wil have important results. Predictions
as to what these results will be would be of great interest
to statesmen and of immense value to merchants; and many
attempts to forecast the future have been and are being
made. These have resulted in so many widely differing
and often diametrically opposed opinions that one is
tempted to despair of any real solution; yet surely, so pro-
found a geographical change as the cutting of a passage be-
tween the Atlantic and Pacific Ocean basins, through a
barrier which in extreme north and south length stretches
over 6,000 or 7,000 miles, must have some results which we
ought to be able to foresee. The differences of opinion may
merely be the outcome of too hasty generalization, on the






INTRODUCTION


one hand, and an exaggerated attention to details, on the
other. When the enthusiast makes sweeping statements as
to results it is so easy for the specialist to discover glaring
exceptions that the whole conclusion becomes discredited.
Much confusion seems to have resulted from our having
fallen into the use of a figure of speech. We use the phrase-
the canal will "create" a new line of traffic-the cutting
of the Isthmus will "do" certain things; forgetting that the
canal will be a purely passive factor in the problem and will
really "do" nothing at all. Foreign trade, like all trade,
is an affair of individuals or groups of individuals, actuated
by self-interest, seeking profit by exchanging goods. The
motive power lies with the traders of the various coun-
tries of the Atlantic and Pacific Ocean basins. The canal
will merely open to some of these persons opportunities
which did not formerly exist. Whether or not it will open an
opportunity to any specified person will depend on many
considerations. The canal will be used in any particular
trade only if it offers a chance for additional profit to some
particular trader or traders. The forces producing trade
between Atlantic and Pacific countries already exist and
operate: the canal may or may not, in any particular case,
offer new facilities for the operation of these forces. The
study of the probable results of the opening of the new route
becomes an analysis of these causes and the relation be-
tween them and the new opportunity.
Foreign trade is essentially a barter, an exchange of
Surplus commodities. One country exports to another only
because it has a surplus of some commodity which it can






THE PANAMA CANAL


exchange for something of which the second country like-
wise has a surplus. The transaction is reciprocal in char-
acter and the goods exchanged must, in the long run, be
equal in value. The exchange may, of course, be, and in-
deed usually is, indirect or "triangular." Any specific
country may export to a second country from which it
gets nothing in return, in order to use the credit thus es-
tablished for the import of goods from a third country, but
this does not destroy the reciprocal character of the trans-
action nor alter the fact that foreign trade is an exchange
of commodities. The fundamental prerequisite to the ex-
change is the production by each of the exchanging countries
of a surplus of something which the other peoples want:
and the fundamental determining factor is to be found in an
analysis of what these peoples want. Imports, in other
words, psychologically come first. Export exists only for
the purpose of paying for import.
The character of this demand for foreign goods depends
on many things. A country producing chiefly foodstuffs
must if it would progress economically usually import its
manufactured goods: one which is pre-eminent as a manu-
facturer will usually be in need of foreign food supplies.
Another which possesses abundant supplies of iron and
facilities for manufacturing it, may find it profitable to
purchase abroad its supplies of manufactured textiles.
/Given a demand for foreign goods of any class, the deter-
mination as to where these shall be purchased, i. e., the ori-
gin of the imports, will likewise rest on many considerations,
sometimes lying within the decision of the individual trader






INTRODUCTION 7

but probably more often settled for him by popular opinion:
sometimes determined even by the foreign seller himself.
If the goods demanded are bulk goods of uniform quality,
or with differences in quality which it is difficult for the
uninstructed public to understand, the individual trader
may exercise a wide discretion. If the goods be highly
specialized manufactures such as "fashion goods," i. e.,
goods which people learn to know by their size, shape,
color, label, etc., the consumers' taste may be the sole
determining factor. If the import be connected with some
foreign investment of capital for the construction, say, of
public works, the foreign lender may dictate in the matter.
On the whole there seems to be a movement in international
dealings toward an increasing number of transactions which
approach the second class. This results from the spread of
popular intelligence among the trading nations, a more
widespread knowledge of the character of goods and their
differences in quality: and it tends to reduce the position
of the individual trader more and more to that of a mere
agent giving expression to popular demand. Whether such
a tendency can be proved to exist or not, it is certain that
a very considerable proportion of the international trade
lealings of to-day belong to the second class just mentioned.
Consequence of this is that in regard to a very large
number of the commodities that enter into international
exchanges, mere price or cost is only one of many elements
which determine the origin of imports. When the individual
trader can himself determine where he is to purchase goods,
there is a strong incentive for him to purchase in the cheap-







THE PANAMA CANAL


est market. But when he is merely acting as an agent of
popular demand many other less strictly economic factors
may decide the point What we may call sentimental
considerations may turn the scale. Racial prejudice against
a foreign country may prevent the growth of any large
popular demand for its goods; while racial affiliations or
political or intellectual rapprochements may create a popu-
lar leaning towards goods which may be actually inferior
and dearer. The people may insist on having French or
German or American goods, merely because the facilities
of travel between their homes and one of these countries
have produced a greater degree of familiarity with its
products. Or the mere fact that people see the flag of a
particular nation on its merchant vessels more frequently
than that of another may produce a popular impression
that it, as a great trader, must have the best goods for sale.
It is in such ways that sentiment plays an important part
in determining the direction of trade.
The factors determining the direction of trade, resting
thus on the elements which make up popular demand
for goods, are extremely complex. Prices, transportation
charges, postal and telegraphic facilities for placing orders,
time required for delivery, conditions of payment and
credit, capital investments, racial and social conditions,
facilities for personal intercourse through travel, mere
habit, and many other things all play a part in determining
whence imports are to come.
Much more simple, though still complex, is the question
as to the route by which they come. Here the factors are






INTRODUCTION 9

almost wholly economic, though the elements which enter
into the economic problem are many. The element of
popular demand plays a much less important part here
than in determining the origin of imports. It is generally
a matter of complete indifference to a purchaser whether
the goods he buys have reached him by this, that, or the
other route: he is concerned merely in getting what he wants
at a price which is satisfactory. There are, it is true, a few
cases in which this is not altogether true, such as those
which arise from the belief of purchasers that goods which
travel over certain routes are improved or deteriorated as
compared with similar goods coming through other chan-
nels. Such for example is the case of tea, which is still in
many parts of the world believed to suffer in quality if
carried by sea; or of lemons or whiskey, which are supposed
to be improved by a sea voyage. Concerning the great
mass of ordinary articles of commerce, however, such con-
siderations play no part. The choice of route concerns
either the selling merchant, if the price has been made on a
c. i. f. basis, or the purchasing distributer, if the price is / / ?*'
f. o. b.: and even with them the question is only of indirect .
importance. The choice of route touches them only through
the medium of freight rates. They select the one which
offers them the lowest freight-all elements of time, safety,
reliability, etc., being considered.
The choice of route is, then, mainly an affair which con-
cerns the transportation companies. Assuming that real
competition exists between different companies, it will be
their aim to offer to the shipper, transportation of his






THE PANAMA CANAL


goods by the cheapest, quickest, safest means which will
yield current rates of profit on the company's investments.
Their choice of route will tend to settle upon that one which
offers the greatest facilities in these respects.
The problem of the Panama Canal is thus really a two-
fold one. The origin of imports, the determination where
they shall be purchased, depends upon one set of factors;
the route by which they shall come depends upon quite a
different set. The problem we are considering is primarily
the former; we are only indirectly concerned with the latter.
We are not considering the Panama Canal as a business
enterprise; we are not directly concerned with determining
whether as a business concern, it will "pay." Our object
is to form some idea, if possible, how, if it is used, it will
affect the trade of nations. The two questions are, of course,
intimately connected with one another. If it is not used at
all, it can produce no effect whatever; the extent to which
it is used will be an important factor in determining what
its results on the interchange of commodities will be. Still,
it will conduce to clarity of thought in the matter, if it is
remembered that the two problems are distinct from one
another.
The origin of imports depends, as already stated, on such
considerations as prices, freight rates, postal and telegraphic
facilities for placing orders, time required for delivery, con-
ditions of payment and credit, capital investments, racial
and social conditions, sentiment, habit, facilities for per-
sonal intercourse through travel, etc. The only way the
canal can effect changes in the determination of the origin






INTRODUCTION


of foreign purchases will be through alteration of some or
all of these factors. Only in this indirect way are we con-
cerned with the question of route at all. Our concern is an
intimate one and yet, after all, it is an indirect one. If we
are to form any estimate of the influence of the canal, we
must first determine how it is likely to affect routes, and
then ask how the changes in routes will react on the factors
which determine the place of purchase of goods.
The question is thus one of extreme complexity. It
bristles with most formidable difficulties. How will it be
possible to analyze the intricate actions and reactions of
so heterogeneous a series of factors? Serious differences of
opinion exist among men of long experience as to the rela-
tive importance of these various factors. If it were possible
to assign to each its due weight as a determinant of the
direction of demand the whole affair would be far simpler.
But who can say in any particular case, what the exact
relative influence is of price and sentiment, of capital in-
vestments and habit, of easy communication and condi-
tions of credit, in determining whether goods shall be pur-
chased in this, that, or the other country? The most that
could be hoped for is a very rough approximation. There
is a way, however, out of some, at least, of these difficulties.
It lies in adopting a method of investigation which in a
certain sense eliminates the necessity of a relative evalua-
tion of the separate factors by seeking to ascertain what the
net results of the interaction of all the factors as a whole,
is. The countries with which we are concerned have been
trading with each other for a long time. All the factors






THE PANAMA CANAL


which determine the origin of imports have been operating
under the old conditions as to routes. If we can determine
what the results of their operation in the past have been we
may relieve ourselves of the necessity of placing an exact
value on any one of them and be able merely to ask our-
selves what changes will take place in them. If, for ex-
ample, it can be shown that the operation of all these fac-
tors together under present and past conditions, is such as
to cause an increasing demand for, say German goods in
Peru-in other words, that the net effect of the interaction
of all existing stimuli to German trade in Peru has been to
increase Peruvian purchases in Germany; and if it can be
shown that the opening of the canal will render one or more
of these stimuli more active without decreasing the force
of others, it will be safe to predict an increase in German
exports to Peru when the new route is available. Only if
some of the stimuli were affected positively and others
negatively would it be necessary to place definite relative
values on them. As between two competing countries, say
the United Kingdom and the United States, if it could be
shown that the demand for American goods has been on the
increase in Japan, and that the opening of the canal would
affect the stimuli to American trade without materially
altering the forces which have promoted a demand for
British goods, it would be reasonable to conclude that the
new route would make for an expansion of the American
market in Japan.
All difficulties will not, by any means, be removed. Not
only in those cases in which the stimuli are altered, some






INTRODUCTION


of them positively and some negatively, but in those cases
in which, as regards two countries, the stimuli which are
altered positively are different in the two cases, will it
still be necessary to form some judgment as to the relative
efficiencies of these stimuli before any prediction can be
made as to the results of the change. Nevertheless the fact
that the method of investigation proposed offers any simpli-
fication of the problem, does give promise of enabling us
to make some forecast as to the commercial effects of open-
ing the canal.
It is proposed, therefore, in the following chapters, to
examine the trade of the countries which are at all likely to
be affected by the changes in trade routes, using the statis-
tics of the past ten or fifteen years, with a view to deter-
mining first of all, what the trend of development has been;
to plot the curves, so to speak, of growth or decline, and to
learn as much as may be of the causes which have led to
their assuming the particular forms which we shall find
them to possess. Then, having determined the direction
and character of the curves, the new factor, the canal, will
be introduced, and attention will be centered on the ques-
tion how this new factor, operating through the various
stimuli to trade, may alter the direction or character of
movement.
There is nothing novel in this method of investigation.
It is one which is already familiar in many sciences, or at
least something very similar to it appears in many scien-
tific investigations. It is analogous, for example, to the
method which would probably be used by astronomers in






14 THE PANAMA CANAL
predicting changes in the orbits of the planets if a new world
were suddenly to be introduced into the solar system. The
application to a social problem like commerce is of course
difficult in the extreme, but if its limitations are recognized,
valuable results may nevertheless be attained.












CHAPTER II

ROUTES

IT is evident from the analysis presented in the pre-
ceding chapter that whatever changes the opening of the
Panama Canal will effect in the direction of international
trade must be the result of alterations of trade routes.
The changes in routes will be the medium through which
the trade influence of the canal will be transmitted. Not
every modification of routes will alter the geographical
distribution of markets, but no alteration in the latter
will take place without a change in the former. It becomes
necessary, therefore, before taking up an examination of
the markets to form some sort of opinion as to the manner
and extent to which the opening of the canal will alter the
highways of commerce.
The commerce with which we are concerned is that of
the Pacific Ocean countries-Chile, Peru, Bolivia (so far as
its trade finds an outlet via the Pacific), Ecuador; the Pacific
Coasts of Colombia, Central America, Mexico, the United
States, and Canada; Alaska; the Pacific Coast of Asiatic
Russia; Japan, China, French Indo-China, Siam, the East
Indies, New Guinea, Australia, New Zealand, and the
Pacific Islands. The trade routes which can conceivably
be affected by the opening of the canal are those which con-






THE PANAMA CANAL


nect these countries with the nations of the Atlantic Ocean
basin. The Panama canal route must compete with com-
mercial highways already in existence; and in order to form
any judgment as to what success it is likely to have in this
competition it will first be necessary to get nearly in mind
what these present highways are and the causes which have
fixed them where they are. For this purpose, the report of
the Isthmian Canal Commission on the shipping and trade
of the Pacific Ocean as it existed in 19og-1o is of invaluable
assistance.' In the following pages this report has been very
extensively drawn upon.
There are to-day three main lines of all-sea communica-
tion between the Atlantic and the Pacific regions; by way of
the Suez Canal, the Cape of Good Hope, and Magellan
Straits. All three of these are used by steamers. A fourth
route is used by a decreasing number of sailing vessels,
namely that via Cape Horn. The Suez Canal is not made
use of by this latter class of vessels because of difficulties of
approach and toll charges: nor is the Magellan route, be-
cause of dangers of navigation. Sailing vessels reach the
Pacific either via Cape Horn or via the Cape of Good Hope.
By far the larger part of the commerce between the two
oceans is carried over the all-sea routes, with the exception
of the trade between the two coasts of the United States,
between the two coasts of British North America, and be-
tween the United States and Mexico. Of the all-sea traffic,
that of the Pacific Coasts of North and South America is
carried on chiefly via the Straits of Magellan. The com-
'E. R. Johnsoa: Panama Canal Traffic and Tols; Washington, 1912.







ROUTES 17

merce with the eastern coasts of Asia goes mostly via
Suez, while that of Australia, New Zealand, Southern Asia
and the East Indies uses either the Suez Canal or the Cape
of Good Hope route; large, fast steamers carrying passengers
and mail ordinarily choosing Suez, while slow freighters
prefer the Cape. Many of these freighters make the re-
turn voyage via Magellan. Such sailing vessels as are still
operating in this trade of course use the Cape route.'
It is the general opinion of shipping men, so widely held
that it may be accepted without question, that the sailing
vessel is rapidly disappearing from international trade.
Hence in any discussion of the influence of the Panama
Canal on trade routes we may leave them out of considera-
tion, and may simplify our problem by comparing only the
three great all-sea routes actually used by steamers.
The factors which determine the choice of ocean routes
include such heterogeneous items as distance, ocean cur-
rents and winds, weather conditions, dangers of naviga-
tion, distances between fuel stations, costs of fuel, way-
freight markets, passenger traffic, toll charges, etc. Any
attempt to make a general statement in regard to the merits
of a particular route, which shall include an estimate of all
of these items, must result in confusion. If, however, we
can select from among these numerous factors those which
play the most important part we may perhaps get a rough,
general guide which will help us in discovering what the
These statements can, of course, be accepted as applying oily to what
may be called the normal movement of vessels. There are many individ-
ual exceptional cases especially those in which a vessel makes the outward
voyage by one route and the return by another.






18 THE PANAMA CANAL

probabilities of choice would be between tm alternative
routes. Now it so happens that among these en or a dozen
factors which influence the choice of routes three or four
stand out pre-eminently. The first, and thi one exercising
the most profound influence is obviously' distance. If
it be assumed that the cost of operating thf average freight
steamer of 3,000 net registered tons and to knots speed is
$300 a day, the saving of a few days' distance must be a
much more important consideration, except under very
exceptional circumstances, than many d the other items
above mentioned. The truth of this statement is brought
out if we compare the effects of increased distance with
the results of certain other adverse conditions. Suppose,
for example, that in order to save a days distance by some
newly opened route a steamer of the sort just mentioned
should be obliged to encounter an adverse ocean current.
A current of twenty-four knots a day for any considerable
distance is an exception in the ocean. In order that the
benefit of saving one day's sailing for a ten knot steamer
should be counteracted by such a current, the conditions
would have to be such that the steamer in choosing the new
route must face the current for at least ten days. It is
doubtful whether anywhere in the ocean on any possible
trade route a current of this extent and average speed could
be found. Most currents are far weaker and much more
quickly traversed. The few currents that are faster owe
their speed largely to the fact that they are much more
limited in extent. They are consequently rather easily
avoided by unimportant detours. It seems safe to say that







ROUTES


only in an exceptional case would a steamer be likely to
avoid a route which offered even one day's saving of dis-
tance, merely to escape an adverse current, or to take ad-
vantage of a favorable one.
The most important consideration to the shipowner,
after saving of distance, is probably the saving of fuel
costs. An ordinary ten knot freighter of the size mentioned
burns something like thirty tons of coal per day. The aver-
age cost of coal in the chief coaling stations on the world's
trade routes is about $4.70 a ton. Of the $300 average
daily cost of operation of the average freight steamer,
therefore, no less than $141, or 47 per cent. is the outlay
for fuel. If saving of distance and costs of fuel were the
only two considerations determining the choice of two al-
ternative routes, it would, therefore, be an easy matter to
reduce the problem to a mathematical statement. On a
round trip voyage occupying say sixty days' sailing time
each way a new route cutting down the distance by a
single day's steaming each way would offer no saving of
expense over the old route if the average cost of coal by it
were enhanced by only ten cents a ton. On the other hand,
a new route cutting down the sailing time of a sixty days'
round trip by five days each way would offer a considerable
saving even if the cost of coal by the shorter route were
fifty cents a ton higher. On long ocean routes, such for in-
stance as those leading to the Orient, the differences in
average costs of coal by alternative routes probably do not
exceed $1.20 a ton. If this be taken as a fair average of
extreme differences it is possible to estimate approximately






THE PANAMA CANAL


the limits of influence of this factor in determining the
choice of routes. On a one hundred and twenty day round
trip a saving of a little over twelve days each way, by choice
of a new route on which the fuel costs were $1.20 per ton
higher, would leave the costs of the voyage equal by either
route. It would probably require a saving of thirteen days
to turn the scale in favor of the shorter route. Similarly,
other things being equal, a saving of seven days on a sixty
day round trip, or of three and one-quarter days on a thirty
day trip would be necessary in order to cause a preference
for the new route.
Toll charges are likewise one of the large items of ex-
pense and their influence in determining choice of route may
also be stated in fairly definite form. The estimated cost
of operation of ordinary freight steamers stated above at
about $300 a day is based upon an average which has been
calculated at approximately ten cents per day per net
registered ton.1 The charge for tolls in both the Suez and
Panama canals is also based on net tonnage, the rate being
practically the same in each case-six francs, twenty-five
centimes at Suez and $1.20 at Panama-with some slight
differences in the method of measuring net tonnage. Be-
tween these two routes, therefore, there may be said to be no
choice in this respect. But when it comes to a decision
whether a particular ship is to use either canal or some other
alternative route, the question of preference, other things
being equal, becomes one of simple arithmetic. The operat-
ing costs being ten cents per ton and the tolls $1.20 per ton,
ohbson: Pam Traffic and Tolls, pp. 176-9.






ROUTES


any route which required more than twelve days longer than
the canal route would be abandoned in favor of the canal.
In other words, for the average freight steamer it would
require a saving of time of at least twelve days, by the use
of a canal route, to offset the deterrent effect of a toll of
$1.20 per net registered ton. It is necessary to emphasize
the fact that this statement applies only to the ordinary
freighting vessel of say ten knots speed. For faster vessels,
such as are now ordinarily used for combined passenger
and freight service the per diem costs per net ton are of
course larger. For a twelve knot vessel of this class the
costs are probably fifteen cents per ton per day: for a fifteen
knot boat, they may run up to twenty cents. Obviously,
the repelling effect of tolls becomes less for such vessels.
For the twelve knot boat, an eight days' saving of time
would offset the tolls: for a fifteen knot one, six days would
be sufficient.
Much more difficult to reduce to a calculable basis is
the effect of opportunities for picking up local freights and
passengers. Rates of transportation of both freights and
passengers vary greatly, as do also the profits on the busi-
ness, especially between way ports. It would probably be
impossible to form any useful opinion as to the relative
value of this sort of business compared with through busi-
ness, but it may not be impossible to find a basis of com-
parison in this respect of two competing routes. The
amount of local freight and passenger business must bear
some more or less definite relation to the number of way
ports and the population and commercial activity of the






THE PANAMA CANAL


countries in which these ports are situated. Of two alterna-
tive routes, that one which has the greatest number of sta-
tions, with the larger population, and the greatest general
commercial activity, must offer the greatest opportunities
for local business. So that while it may be impossible in
advance to say whether the business of this kind picked up
on any particular route will be sufficient to pay the cost of
losing one or two or ten days' time in order to take that
route rather than a shorter one, it may nevertheless be pos-
sible to arrive at some judgment, other things being ap-
proximately equal, as to whether one route would be pref-
erable to another in this respect. For example, it may
be impossible to say whether local traffic between San
Francisco and Yokohoma would yield sufficient return to
make it worth while for a vessel bound from Panama to
Yokohama to call at San Francisco; yet it is practically
certain that there is much greater likelihood of such a stop
being profitable than a stop at Honolulu en route from
Panama to Yokohama.
The other factors which enter into the determination of
the choice of route by vessels are of very minor importance
compared to those which have now been discussed. In-
surance rates are not likely to be very different on the vari-
ous alternative routes. The prevalence of storms, unless
it be very marked in some particular locality, does not
play a great part in altering the routes of steamships. It
may cause them on a single voyage to alter their courses
somewhat, causing some delay and thus lengthening that
voyage, yet, on the whole, in the course of a year, the addi-






ROUTES


tion to the expense account is obviously very slight. It
would determine choice of route only if all other things were
quite equal and competition were very dose. The same
may be said in regard to differences in port charges. At
terminal points, charges would of course be identical by
either of two alternative routes. Only at way ports at
which a vessel might stop to discharge or receive passengers
or cargo would differences between the two routes make
themselves felt and then they would only form one of the
elements in the expenses of way freight and passenger
business. Only in those cases where this local business
furnished a large part of the income of a shipping company
would the question be likely to become one of much concern.
This brief analysis of the relative importance of the
elements which go into the determination of choice of trade
routes makes it obvious that the most potent factors in
determining whether vessels engaged in any particular
traffic will abandon the routes which they now use in favor
of the Panama route will be the question of distance, the
outlay for canal tolls, the cost of fuel supplies, and the pos-
sibility of getting way freights and passengers. In the main,
the other factors, though operating, will be of much less
moment. Only where the relative merits of the canal route
and some other are closely balanced would these other
factors need serious consideration.
These elements which may be regarded as the chief de-
terminants of the choice of routes naturally fall into two
classes; one relating to the operating expenses of the steam-
ship company; the other to its income. On the one side






THE PANAMA CANAL


must be placed the relative cost of operating a vessel over
one route rather than another, including the general operat-
ing expenses, the amount of coal consumed, the cost of the
coal, and the tolls payable, if any. On the other side of the
account will be the income from freights, which will ob-
viously depend upon the amount of cargo which can be
carried per voyage, the rates which can be charged, and the
number of voyages which can be made during a given period
such as one year. To this must be added passenger and
mail receipts, way freights, way passenger receipts, etc.,
for such vessels as carry mails and passengers or which do a
way freight business. For many vessels, also, subsidy pay-
ments add a large item.
In spite of the elimination of minor items, these factors
which remain are, therefore, sufficiently numerous and com-
plex to leave the problem still a most confusing and dif-
ficult one. It will be desirable, if possible, to get still further
simplification, and this we may do by confining our atten-
tion to one class of vessels only.
Speaking broadly, the international trade of the world
is carried in two distinct sorts of vessels; liners plying on
definite routes on a more or less fixed schedule with sailing
dates announced often many months in advance; and
tramps, sailing when, and to the port for which, they can
get cargo. The liner, in general, is the vessel which, because
of its fixed schedule and route, carries the bulk of the pas-
senger traffic of the world and if it is of sufficient speed
gets mail contracts and shipping subsidies where such
exist Sailing on definite schedule, whether it has a cargo






ROUTES


or not, this sort of vessel is the one most likely to have
space for and be most interested in seeking way freights.
The tramp is far more likely to have full cargo from its port
of clearance to its final destination.
It is well known that the bulk of the world's ocean freights
are carried by this tramp class of vessel. Just how large
the proportion is it is impossible to say with any degree of
certainty, but it is probably well over one-half of the total,
especially in regions like the Pacific Ocean basin the coun-
tries of which export chiefly bulky raw and semi-raw ma-
terials. Of the steamers entering and leaving San Francisco,
for instance, in the year g191, over two-thirds belonged to
the tramp class and less than one-third to the liner class.
If, therefore, in examining the relative merits of two
routes, we confine our attention to tramps, and assume that
they sail with full through-cargoes, we shall get compari-
sons which will cover a considerable share of ocean com-
merce, and may get results which, although they may not
be conclusive, will at least be suggestive. And we shall
eliminate from our problem the confusing and intricate
factors of mail, passenger, subsidy, and way-freight receipts,
leaving only to be considered the expenses of operation and
the annual freight receipts.
The average size vessel of this sort is about 3,000 net
registered tons, the cargo carrying capacity, about o,wc
tons, speed about ten knots, and the coal consumption
about thirty tons per day.' The cost of such a vessel is
somewhere in the neighborhood of $3oo,ooo and its owners
'Johnso: pp. 16-9.






THE PANAMA CANAL


aim to make an annual profit of about 25 per cent. on their
investment. The general operating expenses; salaries and
wages (both in land offices and aboard ship), provisions,
maintenance and repairs, insurance, taxes, etc., have been
put at an average of $i6o a day. The only other item
of expense, that for fuel, varies with the price of coal at
fuel stations. Such an average vessel is at sea under steam
approximately two hundred and thirty days in a year and
in port the remaining one hundred and thirty-five days.
The operating costs while at sea may be taken, therefore,
at $16o per day for general expenses, plus the cost of thirty
tons of coal per day at the prices ruling at the ports where
the vessel took on fuel. The operating costs while in port
will be merely the $i6o a day for general expenses.
Using these average figures as the basis for estimating
costs via two competing routes it would seem that we might
get results which although they would probably not be
applicable to any particular vessel, would at least be com-
parable with one another and help us form some judgment
as to the relative merits of the two routes.
This point can best be illustrated by giving a specific
instance. A vessel going from Liverpool to Wellington may
choose either the Suez or the Cape of Good Hope route.
If it takes the former its expense account will be somewhat
ds follows:
For the round trip:







ROUTES


Io8.2 days under steam @ ($6o a day for general expenses..... $ 17,31
Tolls @ 6 frcs. 25 cents, per net registered ton, $3,60o each way.. 7,200
Coal: Liverpool-Gibraltar.......... 162 tons @ 25/3 1 $1,023
Gibraltar-Port Said.......... 240 23/0 ,380
P. Said-Colombo............ 429 25/6 2,734
Colombo-King George Snd. ...423 26/0 2,749
King George Snd-Melbourne ..202 25/6 z,28z
Melbourne-Sydney ......... 72 19/6 35z
Sydney-Wellington & ret.....320 6/o 1,280
Sydney-King George Snd.......273 6/o ,092
King George Snd-Colombo... 423 25/6 2,696
Colombo-P. Said............429 26/o 2,789
P. Said-Gibraltar........... 240 25/6 1,530
Gibraltar-Liverpool........... 62 23/0 932

$ 19,837

Cost per round trip................... 44,349
1Contract prices, 1912. See Johnson, pp. 5I7-170.

If it chooses, instead, the Cape route, the costs will be:
xzr.2 days under steam @ $60 ........................... $ 17,792
Coal: Liverpool-Durban.............759 tons @ 25/3 $4,791
Durban-Sydney.............831 z3/o 2,701
Sydney-Wellington & ret......320 I6/o 1,280
Sydney-Durban........ ...... 831 6/o 3,324
Durban-Liverpool........... 59 x3/o 2,467

$ 24,563

Cost per round trip .................. $ 32,355

The annual costs for two exactly similar vessels running,
one via Suez, and one via the Cape would be:
Via SuW-2.12 round trips (23o days) @$44,349....... $ 93,133
General expenses in port (135 days @ $16o)............ 21,6a

Total annual expenses ................ $114,733
Via le Cape--2.07 round trips @ $32,355............. $ 67,946
General expenses in port ............................. 21,60

Total annual expeses ................ $89,546






THE PANAMA CANAL


This gives us a basis for a rough comparison of the an-
nual expenses of the two vessels; but the annual income
must also be considered. On the assumption that the
vessels will carry full cargoes, each will take on every voy-
age all the freight it can put into the space not occupied
by the necessary coal. The carrying capacity of each is
assumed to be 6,ooo tons. Each must surrender enough
of this space for use as coal bunkers, to give it a sufficient
supply of fuel to carry it over the longest distance between
stations. On the Suez route the largest amount of space
thus sacrificed will be four hundred and twenty-nine tons
(coal from Port Said to Colombo): on the Cape route,
eight hundred and thirty-one tons (Durban to Sydney).
The former, therefore, on a round trip can carry 11,142
tons of freight, and in a year 23,398 tons; the latter, 10,338
tons on a round trip, and 21,710 per annum. Assuming,
again, that each would aim at making an annual profit of
25 per cent., and that the capital investment is $300,000
per vessel, the Suez vessel would find it necessary to get an
annual gross income of $114,733 plus $75,000 or $189,733,
and in order to do so would be obliged to charge an average
freight rate of $8.19 per ton: the Cape vessel's annual gross
income would have to be $89,546 plus $75,00ooo or $64,546,
and its freight rate $7.58 per ton. Clearly, the Cape route
would be given preference.
This method of comparison is, obviously, based on a
series of rather violent assumptions; that the bulk of ocean
freight is carried by tramps, that the average size of such
vessels is 3,000 net tons and the carrying capacity 6,ooo






ROUTES


tons; that the average speed is ten knots per hour and the
coal consumption thirty tons per day; that the average
investment is $300,000 and the annual profit aimed at,
25 per cent.; that the average number of days at sea is
two hundred and thirty per annum and in port one hundred
and thirty-five; that the expenses other than for fuel aver-
age $160 per day and that fuel prices are those of 1912;
that full cargoes will always be carried; and that, on the
whole, there will be as many vessels moving in one direction
as the other on any particular route. It would be absurd,
therefore, to imagine that the figures arrived at have any
value as absolute quantitative measurements. But, if
exactly the same assumptions are made in every case, if
the average figures used may be accepted as at least being
somewhere near the truth, and if they include allowances
for the chief factors which are likely to affect the choice of
routes by the particular class of vessel considered, it may
not be unreasonable to believe that the calculations furnish
a fairly correct basis of comparison between such routes.
In the illustration given above concerning the routes
from Liverpool to Wellington, the figures arrived at for
freight rates between the two ports, of $8.x9 per ton via
Suez and $7.58 via the Cape have of course no validity in
themselves, but as units upon which to base a comparative
estimate of the relative merits of the two routes, they are
at least significant. They focus within themselves, so to
speak, the more important elements of the problem, time
(distance), fuel costs, general operating expenses, toll
charges, income, and normal profits. If we, therefore,






THE PANAMA CANAL


make a comparison of the various all-sea routes from the
Atlantic to the Pacific based upon figures reached by this
method, we shall be likely to get results which wilat least be
suggestive.
The all-sea routes from the Atlantic to the Paific, to-day,
are, as has already been stated, three in number: via Suez,
via the Cape of Good Hope, and via MagellanStraits. The
new Panama route will enter into competitim with all of
these. In order to get a complete estimate d the facilities
offered by the new canal it would be necessay to examine
the costs and receipts on every specific rmte from every
Atlantic port to every Pacific port between which trade is
being or may be carried on. Obviously sch an estimate
would necessitate a large amount of labor and would be
likely to result in confusion through the multiplicity of
details. Again, a simplification by elimination has been
attempted. The bulk of the trade from the Atlantic to the
Pacific originates in the Atlantic States of the United States
or in Northwestern Europe. New York handles most of
the American trade and half a dozen ports like Liverpool,
Southampton, London, Havre, Rotterdam, and Hamburg,
handle the European. If we analyze conditions for New
York we shall get a fair idea of the relation of the canal to
routes from America. Similarly, if we analyze conditions
for any one of the European ports just mentioned we shall
get a fair idea of its relations to Europe; for the effects of
the canal on the routes from these various European ports
will not greatly differ. They are so situated that distances,
costs, etc., from any one of them will be about the same






ROUTES


as from any other. We shall not go far wrong, then, if we
choose Liverpool as the typical European port, and make
our comparisons for New York on one side of the Atlantic
and Liverpool on the other.
On the Pacific end of the routes such a complete simpli-
fication is impossible. The best we can do is to select from
the hundreds of ports a few which may be regarded as
representing the more important regions. The following
may be regarded as the typical Pacific Ocean ports:--for
Southern Chile, Coronel; Central Chile, Valparaiso; North-
ern Chile, Iquique; Peru, Callao; Ecuador, Guayaquil;
Central America, San Jose de Guatemala; Western Mexico,
Acapulco; Pacific Coast of the United States and British
Columbia, San Diego, San Francisco, and Seattle; Japan,
Yokohama; Northern China, Shanghai; Southern China,
Hongkong; Philippine Islands, Manila; Straits Settle-
ments, Singapore; East Indies, Batavia; Southern Australia,
Melbourne; Eastern Australia, Sydney; and New Zealand,
Wellington.
Calculations, made as already indicated, for the various
routes from New York and Liverpool to these nineteen
Pacific ports give the results shown in Tables I, II, mI and
IV in the Appendix.
If we assume that in general (for vessels of the type we
have been considering) that route will be chosen which
gives the lowest rate per ton, calculated in the manner in-
dicated, then the Panama route will be used (if toll rates
remain as at present fixed, at $1.20 per net registered ton)
as follows:







THE PANAMA CANAL

From Liwpool From Neswork
To To
Coronel Coonel
Valparaiso Valparaiso
Iquique Iquique
Callao Callao
Guayaquil Guayaquil
San Jos6 de Guatemala San Jos deGuatemala
Acapulco Acapulco
San Francisco San Franco
Seattle Seattle
Yokohanm
Shanghai
Melboune
Sydney
Wellington Wellingbn
1Manila


The Suez route will be used

From Liverpool
To
Yokohama
Shanghai
Hongkong
Manila
Singapore
Batavia


homn Nme York
To
Hoenong
' Maoa
Siapore
Batavia


'No difference between the Suez and Panama routes


The Cape route will continue to be used from Liverpool
to Melbourne and Sydney.
For vessels of a larger, faster type, the passenger and
mail steamers of to-day, a different set of calculations is
required. Such vessels in use on routes to the Pacific
Ocean basin average approximately 5,ooo net registered tons
in size, have a speed of about fifteen knots, and burn about
seventy tons of coal a day. The average running expenses






ROUTES


reach about $700 a day exclusive of fuel. The average
capital cost of such vessels is taken at $8oo,ooo.
Calculations, exactly similar to those above, for vessels
of this class give the results shown in Tables V, VI, VII and
and VIII in the Appendix.
These tables show that if no other elements than those
included in the calculations entered into the problem, we
might be justified in concluding that the Panama Canal
would be chosen by vessels of the fifteen knot class on
practically the same routes as those preferred by the ten
knot vessels. But the receipts from passenger traffic,
mail contracts, way freights, and subsidies will here play
an important part and will in many cases be a determining
factor. For example, according to our calculations for a
fifteen knot vessel, the Cape of Good Hope route is ninety-
four cents a ton or io per cent. cheaper than the Suez
route on the voyage from Liverpool to Melbourne, and
twenty-four cents, or 3 per cent. cheaper, from Liverpool
to Sydney; yet it is a well-known fact that such vessels
prefer the Suez route. In other words, the Suez route
to-day offers inducements of a sort not included in our
calculations sufficient to counterbalance a xo per cent.
advantage in the Cape route. On the only routes from
Liverpool in which the Panama Canal may compete with
Suez (to Wellington), the advantage of Panama is only
sixty cents a ton or less than 7 per cent. and it is probable,
therefore, that the Suez route will continue to be used.
For fifteen knot vessels from New York, the advantages
of the Panama route, where any advantage exists, are in






THE PANAMA CANAL


every case well over io per cent.; to Shanghai, 12 per cent.;
to Yokohama, 25 per cent.; to Melbourne, 21 per cent.;
to Sydney, 27 per cent.; and to Wellington, 36 per cent.
It is not unlikely, therefore, that the Panama route will
be chosen by vessels bound for these ports in spite of
mail, passenger, and way-freight attractions of the Suez
route. To Hongkong, on the other hand, the calculations
putting the two routes on an exact equality, it is prob-
able that the Suez route will be chosen in many cases at
least.
On the American shores of the Pacific, the advantages
of the Panama over the Magellan route are, on the whole,
too great to be overcome by other considerations. From
New York, even to the southernmost port on the list,
Coronel, the Panama route shows a rate of 39 per cent.
cheaper than the Magellan: to Guayaquil, the advantage
of the Panama route becomes 70 per cent. Only in regard
to vessels from Liverpool to the southern South American
ports would there seem to be any doubt. The advantage
of the Panama over the Magellan route to Coronel is only
11 per cent. and to Valparaiso, 16 per cent. It may well
be that the way-freight and passenger business on the east
coast of South America, at Buenos Aires, Montevideo,
Rio de Janeiro, etc., will furnish sufficient attractions to
keep these vessels in their present channels.
On the whole, then, it may not be far from the truth to
conclude that for vessels of the fifteen knot class the situa-
tion after the competition of the Panama Canal shall have
made itself felt will be about as follows:







ROUTES


The Panama route will be used
From Lierpool
To
Iquique
Callao
Guayaquil
San Jos9
Acapulco
San Diego
San Francisco
Seattle


From New York
To
Coronel
Valparaiso
Iquique
Callao
Guayaquil
San Jose
Acapulco
San Diego
San Francisco
Seattle
Yokohama
Shanghai
Melbourne
Sydney
Wellington


The Suez route will be used
From Liverpool From New York
To To
Yokohama Singapore
Shanghai Batavia
Hongkong
Manila
Singapore
Batavia
Melbourne
Sydney
Wellington
Doubtful will be: the routes from Liverpool to Coronel
and Valparaiso, and from New York to Hongkong and
Manila.
From the facts thus brought out concerning the probable
routes of the two classes of vessels, if it be assumed that they
are even approximately correct, several important condu-
ions may be drawn. They may most dearly be indicated
Y reference to the following table.










"COST OF SERVICE" RATES FOR zo KNOT, 3,000ooTON VESSELS AND FOR I5 KNOT, 5,000oooTON VESSELS
FROM NEW YORK AND FROM LIVERPOOL VIA PRESENT ROUTES AND VIA NEW ROUTES

zo knof, 3,000 ton vessels z5 knot, 5,000 ton vessels
Ora Roonm rNw Romrus Ow RoUmT NEw RoIm
From From Percent- From From Percent- From From Percent. From From Percent-
New Liver Ne Liver- New Liver- New Liver.- e of
York pool i"erece pYork pool dJerceYork pool difference L d York pool differ
Coronel........... 4.90 5.54 +1.5 3.23 4.93 +34.5 6.x8 6.81 + 9.3 3.94 6.8x +42.1
Valparaiso....... 5.05 5.61 +9.8 3.2o 4.8 +35.7 6.44 7.05 + 8.7 3.80 7.05 +46.1
Iquique......... 5.56 6.03 + 7.8 2.80 4.41 +36.5 7.04 7.57 + 7.0 3.38 5.36 +36.9
Callao........... 5.82 6.42 + 9.3 2.40 4.03 +40.4 7.40 7.95 + 6.9 2.88 4.90 +41.2
Guayaquil ...... 6.24 6.86 + 9.0 2.07 375 +44.8 7.8 8.53 + 8.4 2.48 4.53 +45.3
' San Jose.........6.82 7.47 + 8.7 2.12 3.81 +444 8.62 9.25 + 6.8 2.54 4.60 +44.8
Acapulco ....... 7.07 7.73 + 8.5 2.45 4.09 +39.1 8.86 9.50 + 6.7 2.94 4.96 +40.7
S. Diego......... 7.80 8.49 + 8.1 3.27 4.96 +34.I 9.95 10.44 + 4.7 3.97 6.04 +34.3
S.Francisco...... 8.i6 8.89 + 8.2 3.51 5.20 +32.5 10.35 io.8o + 4.1 430 6.35 +32.3
Seattle .......... 8.45 9.21 + 8.2 3.90 5.55 +29.7 0o.63 11.35 + 6.3 4.78 6.83 +30.0
Yokohama....... 8.2 6.94 -154 6.21 6.94 +10.5 10.2o 8.72 -14.5 7.68 8.72 +1z.9
Shanghai ....... 7.61 6.48 -14.8 6.77 6.48 -4.3 9.41 7.96 -25.4 8.3 7.96 4.2
Honkong ........ 7.09 6.o6 -14.5 7.09 6.o6 -14.5 8.85 7.44 -15.9 8.85 7.44 -15.9
Manila .......... 7.09 6.o6 -14.5 7.09 6.o6 -14.5 8.75 7.35 -16.o 8.75 7.35 -z6.o
Singapore ......... 6.34 5.26 -17.0 6.34 5.26 -17.o 7.75 6.4o -17.4 7.75 6.40 -17.4
Batavia .......... 6.54 5.42 -17.1 6.54 5.42 -17.1 7.97 6.57 -17.6 7.97 6.57 -17.6
Melbourne........ 7.27 6.83 6.t 6.45 6.83 + 5.6 10.31 9.o6 -12.1 8.12 9.06 +0z.4
Sydney........... 7.32 7.14 2.5 6.33 7.14 + .3 io.6i 9.27 -12.6 7.75 9.27 +16.4
Wellington........ 7.73 7.53 2.6 5.78 7.35 +21.4 10.94 9.80 -10.4 7.05 9.80 +28.1
+ Indicates percentage by which New York rates are lower than Liverpool rate.
-ndicates percentage by which Liverpool rates are lower than New York rates.






ROUTES


It will be seen at once that the development of the new
routes makes a great difference in the relative positions of
New York and Liverpool in relation to many of the Pacific
markets. The rates which have been obtained by the calcu-
lations presented represent comparative costs of service.
By the old routes, for both classes of vessels New York
has a slight advantage over Liverpool to ports on the west
coast of North and South America, ranging from 7.8 per
cent. in the case of Iquique to 11.5 per cent in the case of
Coronel, for vessels of the ten knot class; and from 4.1 per
cent. to San Francisco to 9.3 per cent. to Coronel, for fifteen
knot vessels. The use of the Panama Canal will increase
New York's advantage from five to tenfold, the cost of
service becoming from 30 to 46 per cent. cheaper from New
York than from Liverpool.
For the Australasian ports New York now stands at a
disadvantage compared with Liverpool, ranging from
234 to 6 per cent. for ten knot vessels and from zoj4 to
12% per cent. for fifteen knot vessels. The Panama Canal
will convert this handicap into an advantage of from 5%
to 213 per cent. for the slower, and from o10 to 28 per
cent. for the faster vessels.
For ports in the Orient and the East Indies there will be
far less change. For Hongkong, Manila, Singapore, and
Batavia, there will be no alteration. For Shanghai, New
York will still remain at a disadvantage, but it will be re-
duced from about i5 per cent. to a little over 4 per cent.
Only in the case of Japan (Yokohama) will the present dis-
advantage be converted into a distinct advantage. At






THE PANAMA CANAL


present the costs of service from Liverpool are 15.4 per cent.
cheaper than from New York for ten knot, and 14.5 per
cent. cheaper for fifteen knot vessels. The new route will
make the costs from New York ro4 per cent. cheaper from
New York than from Liverpool for the slower, and 12 per
cent. cheaper for the faster ships.
It must again be emphasized here that the figures given
have no significance as absolute measurements of the freight
rates that are likely to be put in force. Their value is
relative merely. It would be absurd, for instance, to im-
agine, on the basis of the calculations presented, that the
freight rate to Wellington on a ten knot vessel will be just
the $5.78 per ton from New York given in the table, or the
$7.35 per ton from Liverpool. Actual freight rates depend
upon a vast complexity of factors many of which have not
been, and could not be included in any calculations such as
those that have been presented. For line vessels, in general,
it is a well-known fact that cost of service does not deter-
mine rates. The numerous shipping "conferences" to
which the owners of such vessels are parties, in large meas-
ure eliminate competition and the rates are fixed on the
monopolistic principle of "what the traffic will bear."
Costs of service which are represented roughly by the figures
given in the tables, in such cases give only a lower limit
beyond which the rates cannot permanently sink: the ac-
tual rates may be far higher. It may nevertheless not be
unreasonable to expect that whatever rates are actually
made by vessels of this class, the cost of service from New
York being higher or lower than from Liverpool, there will






ROUTES


be a tendency at least for these actual rates also to be
higher or lower and in somewhat the same proportions as
the costs of service.
For tramp vessels, the ten knot class of the tables, the
connection between cost of service and actual rates is far
closer. The rates here are in most cases highly competitive
and therefore tend to sink to the level of cost of service, and
the probability becomes far stronger that the actual rates
charged will bear a relation to one another fairly cose to the
ratios arrived at by our calculations.
On the whole, then, it seems justifiable to conclude from
the tables given that New York as a result of the opening
of the new canal will be likely to get, in the long run, lower
freight rates than Liverpool, to the entire west coast of
North and South America, to Japan and northern China,
and to Australasia.
Another element of possibly even greater importance to
the trade is the frequency and rapidity of service in the
transmission of goods. The higher and more costly the
class of goods the more important, of course, does this
factor become.
By present all-sea routes New York is, in general, at a
disadvantage compared with Liverpool. A reference to the
tables presented in the Appendix shows that the time of
delivery from New York to points on the west coast of
North and South America is only a day and a half less than
from Liverpool for ten knot vessels and one day for fifteen
knot vessels. With the new route open goods from New
York can be delivered by the slower vessels in about eleven






THE PANAMA CANAL


days' less time than from Liverpool, and by the faster, in
seven days' less time.
In Australasia, New York now labors under a disad-
vantage compared with Liverpool of something over three
days' time for ten knot vessels, and about five and one-
half days' time for fifteen knot vessels (via Suez). The
new route will put New York from nine to twelve days
nearer to Australia and New Zealand than Liverpool, for
the slower class of ships, and from four and one-half to
seven days nearer for the faster.
For Batavia, Singapore, Manila, and Hongkong there
will be no essential change in this respect, but for northern
China and Japan New York's position will be greatly
strengthened. Ten knot vessels now require eight days'
more time, and fifteen knot vessels, five and one-half days'
more time to go from New York than from Liverpool to
Shanghai. With the canal open the difference against New
York will become less than one day.
By present routes, ten knot ships from New York to
Yokohama require about eight days longer than from Liver-
pool: via the new route New York will be eight days nearer
than Liverpool. For the faster vessels New York's present
disadvantage of five days will be converted into an advan-
tage of five days.
The analysis of the all-sea routes between the Atlantic
and the Pacific Ocean basins presented in the preceding
pages makes it evident that so far as the traffic is water-
borne, the new canal will offer certain very definite advan-
tages to the shippers of the Atlantic and Gulf coasts of the






ROUTES


United States that do not now exist. Their position as
competitors with Europe for the trade of the west coast of
North and South America, of Australasia, of Japan, and
of northern China will be materially strengthened. Our
examination thus far has, however, been confined merely
to the all-sea routes, and will be incomplete unless the
relation of the canal to existing land-and-sea routes is also
analyzed. Many classes of goods get from the Atlantic
States of the United States or from Europe to the Pacific
countries either wholly overland or by a combination of
overland and sea routes. Many of these commodities,
especially those of high value relatively to bulk or weight,
will continue to use the channels already established and
the effect of the opening of the canal on trade in such com-
modities will be comparatively slight.
The present land-and-sea or wholly overland routes are
those via the Trans-Andine Railway from Buenos Aires to
Valparaiso, the Panama Railroad, the Tehuantepec Rail-
way, and the various American and Canadian transcon-
tinental railroads. Of the first three of these little need be
said. The Trans-Andine Railway is too far removed from
the main channels of Atlantic-Pacific trade, and its cost of
operation over the high Andean passes is so great, that it
is not likely ever to play an important r61e in the trade under
consideration. The Panama Railroad will obviously cease
to be a factor as soon as the canal is in full operation and
hence need not be considered, and almost the same may be
said of the Tehuantepec Railway. The costs of two trans-
shipments on this latter route (from ship to railway at one






THE PANAMA CANAL


end and from railway to ship at the other) plus the railway
freight between Salina Cruz and Puerto Mexico is so great
--over $2.50 per ton-that in spite of the rather longer
distance via Panama to certain Pacific ports and the toll
at Panama (about sixty cents per cargo ton) there is little
likelihood that it will continue to be used extensively except
for local traffic.
The only really important overland competitors of the
Panama route will be the great trans-continental railways
farther north. The bulk of the traffic between the eastern
and western sections of the United States and Canada, a
large amount of the trade between Europe and western
North America, and a considerable share of the commodity
and passenger movement between both Europe and eastern
North America and the Orient is carried on these railways.
These railways will continue to hold a certain portion of
this business and in regard to such traffic as does thus con-
tinue to use the old routes, the opening of the canal will, of
course, have no effect on the positions of the various com-
petitors for the markets, except so far as it may necessitate
a lowering of railway freights. And even if the competition
of the canal should force the railroads to lower their rates
the effects on the relative positions of the competitors would
be unimportant, for so long as rates were uniformly ap-
plicable to both domestic and foreign goods, whatever ad-
vantages American shippers might get from a reduction
their European competitors would also get. In attempting,
therefore, to form an opinion as to the influence of the
Panama route it will be necessary to arrive at some judg-






ROUTES


ment as to the extent and character of this traffic on which
the canal will have no effect because its routes will not be
changed from their present channels.
On this point there is a wide divergence of opinion, and
indeed the problem is so intricate that any conclusion that
may be arrived at can be accepted only with many reserva-
tions.' Such high-priced goods as the tea and silk of China
and Japan may continue to be carried as at present, across
the Pacific to San Francisco or Vancouver and thence by
special freight train to their eastern destination on this con-
tinent, or by further transshipment across the Atlantic
to European ports. Yet even in regard to these there may
be serious doubt. Silk, for example, now reaches New
York from Yokohama by the San Francisco route in about
twenty-one days, paying a through freight of $120 per ton
of 2,000oo pounds. If, on the completion of the new canal,
this commodity were to be carried direct from Yokohama
to New York in the fastest steamers now plying between
Yokohama and San Francisco (about fifteen knots), the
delivery time would be extended to 27.2 days. The share
of this through rate of $120 a ton which goes to the ocean
carrier is $40 a ton. If the rate from San Francisco to
New York via Panama were to be made proportional to
this, the through all-sea rate from Yokohama to New York
would be in the neighborhood of $80 a ton and the shipper
would therefore save as an offset to a loss of about six days'
time, a sum of $40 a ton. This saving would far more than
cover the loss of interest for six days on the value of a ton
'See Johnson: pp. 47-89.






THE PANAMA CANAL


of silk which is about $5,ooo. It may well be, therefore,
that even so costly an article as silk will seek the new route,
and if this be so then there is a strong likelihood that most
commodities will do the same except small packages of
high value, in the shipment of which haste is the prime
consideration.
Similar analysis leads to the conclusion that the bulk of
the traffic between the two seaboards of the United States
and Canada will also seek the canal route. The through rail
rate to-day from New York or Pittsburg to San Francisco
on harvesters, reapers, etc., is $25 a ton of 2,000 pounds.
The cost of service rate for steamers, calculated as in the
tables already presented (assuming that toll will be charged
at Panama) is $3.51 a ton on ten knot vessels and $4.30
on fifteen knot vessels. The time of delivery by fast freight
is about twenty-one days: by ten knot steamers the sailing
time would be twenty-two days, and by fifteen knot vessels,
fourteen and one-half days. Even making enormous allow-
ances, therefore, for possible errors in the calculations pre-
sented, it would appear quite certain that the Panama route
would be given preference. Even on goods of the lowest
rate class, such for instance, as nails, spikes, etc., it would
seem equally certain that Panama would get most of the
traffic, the rail rate from New York to San Francisco being
$14.00 a ton or several times as high as the cost of service
rate of the tables.
Concerning routes from interior points in the eastern
and central states to interior points in the Pacific States
there is much more uncertainty, for to the all-sea rate from






ROUTES


the Atlantic to the Pacific port must be added the local
freights at either end from the interior point to the sea-
board. The general conclusion of the Isthmian Canal
Commission's report already referred to is that freights
originating within a few hundred miles of the Atlantic and
Gulf coasts and destined for points within a similar distance
of Pacific coast ports will in all probability choose the canal
route, and vice versa. We shall see, in a later chapter, that
the chief demand on the Pacific slope of the United States
and Canada is for highly manufactured commodities and
that their principal export goods are such as seek a mar-
ket in densely populated manufacturing regions. Since,
therefore, the chief manufacturing sections of the United
States are relatively near the Atlantic seaboard and the
chief producing regions of the Pacific shore, near the Pacific,
it seems probable that the bulk of the interchange between
the two sections will take place via the Panama Canal.
In short, therefore, it seems highly probable that so far
as the great trade movement from coast to coast of the
United States and Canada, or from the Eastern United
States to the Orient is concerned, the present all-rail or
sea-and-rail routes are likely to be abandoned in favor of
the canal route. If this be true, then the conclusions al-
ready reached in regard to the all-sea traffic hold good for
this traffic as well, and the opening of the canal will tend
to strengthen the position of our eastern manufacturing
centers as competitors with Europe.
Johnson.












CHAPTER m


THE PACIFIC COUNTRIES

THE Panama Canal will open a channel between two great
commercial basins. Whatever influence it may have in
promoting or stimulating commercial intercourse must be
exerted through the alteration of trade routes. The prob-
able changes in routes we have now examined in detail and
have arrived at certain conclusions. Our next task must
be to try to form some opinion as to the nature and volume
of goods which will be carried by the new route. The
countries of the Atlantic Ocean basin are sending a stream
of goods into the Pacific for distribution to the peoples who
live on its borders. The canal will so change routes as to
alter the relative advantages and disadvantages of the
various competing purchasers and sellers. Whether these
alterations will produce changes in the markets for par-
ticular classes of goods will depend upon the ability of the
purchaser or seller or both to respond to the new oppor-
tunities. For example, it has been seen that the canal will
give a shipper from New York to Callao certain advantages
in competition with an European shipper which he does
not now possess. This points to an increased trade between
New York and Callao. If, however, the character of goods
which the merchants of Callao are demanding are of a sort






THE PACIFIC COUNTRIES


which the merchants of New York cannot supply, or the
products of Peru are not in demand in the United States,
the opportunity offered by the opening of the canal may
remain unutilized. In order to estimate the influence of the
canal we must know something of the character of the
markets at both ends of the routes which it will serve. This
involves a study of the economic and commercial conditions
in the countries which the canal will connect.
The countries of the Pacific which may be affected by
the opening of the canal include practically all the lands
which are touched by Pacific waters except southeastern
Asia and the East Indies. Specifically the countries are:
Chile, Bolivia, Peru, Ecuador, Colombia, Panama, Costa
Rica, Nicaragua, Salvador, Guatemala, Mexico, the Pacific
Coast of the United States and Canada, Alaska, Asiatic
Russia, Japan, China, the Philippine Islands, Australia,
New Zealand, and the Pacific Islands generally. Strictly
speaking, several of these countries touch both the Atlantic
and the Pacific Ocean basins. Colombia, the Central
American States, Mexico, the United States and Canada
all touch both oceans, and Bolivia's approaches are also
both from the east (through Argentina) and the west
(through Chile and Peru), yet they all, or certain parts of
them must be regarded as belonging commercially to the
Pacific rather than to the Atlantic. Bolivia is approached
more easily from Antofagasta or Mollendo than from Ar-
gentina and most of her foreign trade already passes through
these ports; the Central American States are approachable
from both sides, but their Pacific ports will be within much






THE PANAMA CANAL


easier reach of the great currents of trade than the Atlantic
when the new routes through the canal to the west coast
of the United States and Canada and to the Orient shall
have been established, and the same may be said of Mexico
so far as her foreign commerce is sea borne; and the Pacific
slope of the United States and Canada within four or five
hundred miles of the coast will be more accessible from
the Pacific than overland by rail. Colombia, at present,
belongs more definitely to the Atlantic basin, most of her
foreign trade passing through Caribbean ports, yet there
are possibilities of development at Buenaventura and
Temuco on the Pacific which may in time alter that
condition.
These two score or more of countries of the Pacific Basin
offer striking contrasts in economic development. Not
only do they differ fundamentally from the great com-
mercial countries of the Atlantic Basin but the contrasts
among themselves are enormous. A comparison of their
areas, population, foreign commerce, etc., will emphasize
this point
The total area of these Pacific Basin countries, including
the five South American countries named, the Central
American States, the Pacific States only of Mexico and the
United States, British Columbia, Alaska, Japan (and Korea),
all of China except Tibet and Chinese Turkestan, the
Philippine Islands, New Zealand, and the Australian States
of Queensland, New South Wales, Victoria, and South
Australia, reaches the enormous total of 9,539,000oo square
miles or about one-fifth of the land surface of the earth.






THE PACIFIC COUNTRIES


The aggregate population is 536,000,000 or one-third of
the world's total. The average density of population
(56) is therefore greater than the rest of the world as a
whole, though it is much less than in the great commercial
nations of Europe. Their aggregate foreign trade, how-
ever, is relatively insignificant: the grand total of exports
and imports ($2,658,000,000) is, for example, only about 40
per cent. of that of the United Kingdom alone. Their per
capital trade ($5) is only one twenty-seventh that of the
United Kingdom, and only about one-eighth that of the
United States. The Pacific Basin therefore as a whole may
be regarded as an unexploited area in the matter of inter-
national trade dealings.
There are, however, great contrasts among the Pacific
countries themselves. The entire Pacific Coast of North
and South America is a region of sparse population. The
total area of the western countries of South America,
Central America, the Pacific States of Mexico and the
United States, British Columbia, and Alaska, 4,359,000
square miles, is greater than that of Europe, but the popu-
lation, 31,600,000, is less than that of Italy which is just
the size of the single state of Nevada. The average density
of population is only seven to the square mile. Only one
country in the list, little Salvador, reaches what may be
considered a dense population, one hundred and forty-eight
to the square mile. No other Pacific American country
reaches even twenty to the square mile though the State
of Washington has seventeen and California fifteen.
As regards density of population Australia and New






THE PANAMA CANAL


Zealand belong in the same class as these Pacific American
countries just mentioned. The Australian Commonwealth
as a whole with its 2,975,000 square miles (equal in size
to the United States exclusive of Alaska) has but 4,600,000
inhabitants, or only one and one-half to the square mile.
Even its most densely populated states, those on the eastern
and southeastern coasts, might almost be classed as unin-
habited, with the single exception of the small State of
Victoria, and even it has only fifteen persons to the square
mile. New South Wales supports a population of only
5.2; South Australia, only xi.; and Queensland, only 0.9,
per square mile. Tasmania, the smallest of the states,
supports about seven to the square mile. A peculiar
feature of the distribution of population is the high per-
centage of urban population. The Commonwealth may
almost be said to be a country of cities. Six capitals, Mel-
bourne, Sydney, Brisbane, Adelaide, Perth, and Hobart,
contain over 35 per cent. of the total number of inhabitants
of the entire country. The other sixteen towns of over
io,ooo each, raise the urban population to about 45 per
cent. of the total. The single city of Sydney contains 38
per cent. of the entire population of New South Wales;
Melbourne, 45 per cent. of that of Victoria; and Adelaide,
47 per cent. of that of South Australia. Probably no other
important country in the world presents such a concen-
tration of population. New Zealand is somewhat more
densely peopled but even here the country is relatively
uninhabited, io.5 to the square mile. The concentration
is not quite so great as in Australia, the nine cities and






THE PACIFIC COUNTRIES


towns of over ro,ooo population aggregating only 38 per
cent of the total.
The contrast between these Australian countries and the
Pacific American countries above mentioned, on the one
hand, and the Oriental Pacific countries, on the other, is
profound. The Chinese Empire, as a whole, supports
1ox people to the square mile; the Empire, exclusive of
those parts which cannot be said to belong to the Pacific
Basin (Tibet and Chinese Turkestan), 130 to the square
mile; China Proper (the eighteen provinces), 266; Korea,
152; and Japan, the enormous number of 349. Even Man-
churia has 44 persons on every square mile. In no other part
of the globe of any considerable area (with the possible ex-
ception of India) is so dense a population supported chiefly
on the products of its own soil. Several countries have a
higher density, England for instance (669); the whole
United Kingdom (375); Germany (310); Belgium (659);
Holland (472), etc.; but these populations depend upon
outside peoples for a large part of their supplies. The
import trade of the United Kingdom reaches $73 per capital
per annum; of Germany, $36; of Belgium, $114; of Holland,
$223. The imports of Japan, on the other hand, are only
$4.70 per capital; of China, 70 cents.
The Oriental countries must, therefore, be regarded as
inactive in international trade. A comparison, in this re-
spect, with other Pacific countries, is instructive and inter-
esting. The total foreign trade of China (imports and ex-
ports together) amounts to $1.27 per capital; of Japan,
to $8.95. None of the Pacific counties on the American






THE PANAMA CANAL


coast falls as low as this with the single exception of Co-
lombia. Central America, as a whole, and Peru, average
$r2 per capital; Mexico, $16; Ecuador, $17; Bolivia, $21.
Chile reaches a rather higher total of $76 on account,
largely, of the great value of her nitrate export. These
figures seem large in comparison with those of the Oriental
countries, but they are far surpassed in the case of Aus-
tralia whose foreign trade reaches a surprising total of
$142 per capital, and of New Zealand, with a trade of $174.
The external trade of the Pacific States of the United States
and of British Columbia can only be estimated, as so much
of it uses land routes, but it probably ranges from $50 to
$Soo per capital.
These contrasts it is important to bear in mind in at-
tempting to form any judgment as to the commercial
possibilities of the Pacific Ocean countries, for they un-
questionably rest on causes which go to the very roots of
trading activity and it is only through a modification of
these fundamental forces that great changes of condition
can come. Exactly what these fundamental causes are it
is extremely difficult completely to analyze; yet some of
them at least seem to be demonstrable. Density of popu-
lation obviously has no very direct connection with com-
mercial activity for there are as many instances of low
density with high activity as there are with high density
and high activity. Climatic conditions do seem, however,
to be a potent factor. Only one of the tropical American
countries which we have been considering has a per capital
trade as large as $17; and even this figure which belongs to






THE PACIFIC COUNTRIES


Ecuador is due to the fact that the country has a semi-
monopoly of one important commodity, cacao. Even
Mexico, which is partly without the tropics, and Bolivia,
which while within the mathematical tropics, is, on account
of its altitude, partly temperate, hardly pass this figure,
having per capital trade of $16 and $21 respectively. Tem-
perate South America (Chile) and temperate North America
(Pacific Coast States of the United States) show a much
higher activity. Chile's trade reaches $76 per capital and the
North American countries at least as much and probably
more. On the western shores of the Pacific a similar tend-
ency is noticeable. Tropical Australia (Queensland for in-
stance) has a trade of $io9 per capital; the temperate
regions much more. New South Wales' figure goes to $i75,
and Victoria's, to $141. New Zealand, wholly temperate,
has a trade of $174 per capital. The same condition seems
to exist in China. Reliable figures of per capital trade of the
various regions are not obtainable, but the total trade of
North China (from Shanghai northwards) is more than
double that of South China. Japan, wholly temperate
except Formosa, is, as we have seen, much more active
commercially than any part of China.
Another factor which unquestionably plays a part in
stimulating commercial activity is the presence of European
populations, especially those belonging to the north Euro-
pean or Teutonic races. The countries with low per capital
trade as a rule have a low percentage of such population.
None of the tropical countries of the Pacific Coast of North
America has a European population of over 20 per cent. of






54 THE PANAMA CANAL
the total and many of them have much less. Mexico has
z9 per cent. In Chile the percentage goes much higher.
In temperate North America as well as in Australia and
New Zealand, the people are almost wholly European,
while in China and Japan the percentage falls practically
to zero. In a very roughly approximate way these differ-
ences, it will be observed, correspond with the difference
in per capital trading activity.
This European population or population of European
origin apparently makes itself felt in the foreign trade of
the countries in two or three ways. Native-born Europeans,
descendants of early immigrants or colonists, naturally
retain something of their taste for European goods and
devote their energies to the production of commodities with
which they are able to continue their purchases of such
goods. With European-born recent immigrants the con-
nection is of the same sort but more direct. They are apt
to demand not merely the goods which their European
standards of living require, but also the goods of the specific
country from which they came. The descendant of the
colonists demands European goods; the German or Italian
immigrant himself demands German, or Italian goods.
Thus the German "colonists" of southern Chile swell the
import trade from Germany and the English settler in the
Australian bush looks to the United Kingdom for many
of his supplies.
Another class, also, of European residents in these for-
eign countries and colonies exerts a direct influence on trade
movements. They are the corporation officials, managers






THE PACIFIC COUNTRIES


of enterprises, agents for this, that or the other activity
financed from home. All such enterprises tend to swell the
imports from the investing country during the period in
which the investment is being made. When German capital,
for example, gets a concession for a railway in China, the
materials for the building are apt to come in larger measure
from Germany than from other countries. After the invest-
ment is complete and the enterprise is a "going" concern,
the dividends to the investors tend to swell the exports to
Europe. The high per capital trade of Australia, New Zea-
land, Chile, British Columbia, and the Pacific States of
America with regions outside their own borders is unques-
tionably due in part to these investments of the capital
which has come to them from the outside.
Yet another factor may be regarded as of undoubted
importance. The younger, more sparsely populated coun-
tries have a more important trade than the older, more
densely populated ones. It seems to be a general law of
economic development in the centuries since the middle
ages, that new countries, if they have natural resources and
an energetic population, rapidly develop a high degree of
per capital trading activity. This unquestionably comes
about through the fact that, with overseas transportation
facilities, such countries at once find it profitable to devote
their energy to the production of a surplus of raw materials
rather than of the numerous other commodities of which
they are in need, and to export the former in exchange for
the latter. As, however, population increases, industries
requiring a larger employment of labor become profitable






THE PANAMA CANAL


compared with the extractive industries. A smaller relative
production of raw materials follows and a larger relative
production of the things which the people had been pur-
chasing abroad; with the result that the per capital inter-
change of goods with foreign countries declines. Later
still a further stage of growth is reached in which with in-
creasing density of population a country is no longer able
to supply itself with the needed foodstuffs and raw ma-
terials and in procuring these things for itself is forced to
purchase them by expanding its foreign markets for manu-
factured articles, thus again tending to increase its per capital
dealings with other nations. The great trading nations of
Europe seem to have reached this stage. Their exports
are, in the main, manufactured articles, while their imports
are predominantly foodstuffs and raw materials. Such
countries as Australia, New Zealand, Chile, and the Pacific
Coasts of temperate North America are still in the earlier
stage where trade is active because their sparse populations
are able to produce a large surplus of the raw materials and
foodstuffs which their territories supply and to sell them
elsewhere in exchange for the finished products which their
people demand. The Eastern United Statesispassingrapidly
through a transition from the former to the latter stage.
China and Japan present an interesting exception to this
general rule. With them the natural course of development
was arrested by the adoption, partly at least through fear
of political domination by foreigners, of a policy of isolation.
Their abundant natural resources, sufficient for the needs
of their earlier more sparse populations, and the exemplary






THE PACIFIC COUNTRIES


industry of their peoples, enabled them for a long period
to dispense with the necessity of commercial dealings with
outsiders. The growth of population, however, began in
time to press upon resources and as the fixed policy and
the established habits of the people prevented their meeting
their requirements by purchases abroad, physical need
forced them into closer attention to procuring at home the
necessaries of life-the things with which to feed and clothe
their bodies. The result was stagnation. A people who
are engaged in a life and death struggle to wring from their
soil enough food to keep them from starvation, ceases to be
able to produce much to exchange with foreigners, and the
consequence is seen in China's foreign trade to-day of $1.27
per capital, and Japan's of twenty years ago, of $1.70 per
capital. Japan is now, however, struggling out of that con-
dition. Labor, before applied to the struggle to get enough
food from the soil to feed the people, is being applied in-
creasingly to the task of producing things which can be
exchanged abroad for food. Net per capital imports of
food which in i890 were less than seven cents have risen
now to fifty-seven cents, an increase of eightfold, and
Japan's total foreign trade has grown from $i.7o per capital,
to $8.95. China is in the position which Japan occupied
before the recent industrial revolution in the latter country
began. The long isolation has resulted in so dire a struggle
for existence that no great development can be expected
until means are provided whereby the vacuum created by
the transfer of labor from the production of food to the
production of things which foreign nations require, has been






THE PANAMA CANAL


filled by providing other sources of foodstuffs, either in
foreign countries such as Siberia or in the less populated
regions of China itself such as parts of Mongolia, or in
Manchuria.
The ability of any country to engage in active commerce
with other parts of the world depends fundamentally of
course on the character and extent of its natural resources.
It must be able to produce in quantity larger than is re-
quired by its own people, commodities which other peoples
desire. In this respect there are enormous differences be-
tween the various regions which surround the Pacific. What
these differences are can probably be best indicated by an
examination of the export trade of the countries under
review. Having made clear what it is that they are able
to-day to produce in sufficient surplus to be able to sell
abroad we shall be better able to form some judgment as
to what part they may be able to play in the future trade of
the Pacific.
The trade statistics of many of the Latin-American
countries are too incomplete to give reliable figures of their
trade, but for Mexico, Costa Rica, Chile, and Peru, at least,
we may reach definite conclusions. For China, Japan,
Australia, New Zealand, sufficiently reliable figures are
available. For the Pacific States of the United States and
for British Columbia, because of the fact already alluded
to, that much of their extraterritorial trade is carried over-
land to regions under the same fiscal control as themselves,
conclusions must be based on other evidence than that of
official trade statistics which do not exist.







THE PACIFIC COUNTRIES 59

For the countries for which relatively complete statistics
are available the figures show the following:-
ANNUAL AVERAGE EXPORTS BY CLASSES OF COMMODITIES
Values in millions of dollars

Fosmt Aui-ul AgWul-Miin MMIl
prod- prod- trul prod ^ ^ Total
ucts ucts products ucts ft a

Mexico'...... 1.3 6.0 30.6 69.7 o.2 16-4 124.4
Costa Rica'... o.z o.1 7.3 0.7 .... 0.1 8.3
Chile* ........ o.o 2.1 3.0 90.3 1.2 8.7 105.3
Peru'......... 4.4 2.4 9.8' 5.0 0.9 6.0 28.5
China.......... ... 70.2 6.8 .... 34.6' 41.9 208.5
Japan'........ 7.6 60.46 zo.8 19-9 58.9 39.3 196.9
Australia'..... 5.8 172.4 39.0 93.5 3t.x 0.5 324.3
NewZealand 4.2 70.7 4.8 z2.0o .0 o.2 92.9
Philippines .. .... ... 30.3 .3 1.0 1.4 34.0
1 igo6--gxo.
'1907-1909.

'1906-2909.
'1905-1908.
SIncludes: silk, 564; and fishery products, 4.0.
Includes: silk, 49.7; and fishery products, x.o.
'Includes sugar, 5-4.
I Includes "medicines," 19.5.
"Includes: cotton yarn, 15.r; cotton tissues, 8.8; and silk tissue, z8.z.

Important differences between these countries will at
once be noticed. In Mexico and Chile mineral products
greatly exceed any other class, in the former constituting
56 per cent. of the total and in the latter, 86 per cent. In
China, Japan, Australia, and New Zealand, animal products
predominate, making 34 per cent, 31 per cent., 53 per cent.,
and 76 per cent., respectively, of the total export. Only
in the Philippine Islands and Costa Rica do agricultural
products exceed all other classes, the percentages in these






6o THE PANAMA CANAL

cases being go and 80 respectively; but in China, Mexico,
Peru, and Australia they are nevertheless important, mak-
ing 30 per cent., 25 per cent., 34 per cent and 12 per cent.
respectively of the total. Nowhere do forest products rise
into prominence except in Peru and even there they make
up only i5 per cent. of the total. Manufactures play a very
unimportant part except in the two most densely populated
Oriental countries; China's exports being 16 per cent. of
this sort, and Japan's, 30 per cent. There is this great
difference, however, between the manufactures of these
two countries that China's are almost wholly the products
of small domestic industries while 70 per cent. of Japan's
are the output of cotton and silk factories organized on
modem lines.
Although, as already stated, statistics of the extrater-
ritorial trade of the Pacific States of the United States and
of British Columbia are not available in form to make
them valuable for our purpose, yet the character of their
products is such as to make it clear that in the export busi-
ness they occupy a position very similar to that of the other
sparsely populated regions of the Pacific. The exports of
Canada as a whole are divided among the various classes as
follows: forest products, 3 per cent.; animal products (in-
cluding fishery products), 22 per cent; agricultural prod-
ucts, 37 per cent.; mineral products, 14 per cent; manufac-
tures, 24 per cent.; and miscellaneous products, a small
fraction of one per cent. As less than five per cent. of the
total capital invested in Canadian manufactures is employed
in establishments in British Columbia, it may be assumed







THE PACIFIC COUNTRIES


that the exports of manufactures from this region are neg-
ligible. British Columbia produces but 0.2 per cent. of the
wheat, o.i per cent. of the barley, o.5 per cent. of the oats,
4 per cent. of the potatoes, and 74 per cent. of the flax of
the whole Dominion. The agricultural exports of British
Columbia cannot, therefore, be large. On the other hand,
this province possesses 40 per cent. of the forest area of the
Dominion, produces 27 per cent. of the huge fish output, and
probably even a higher percentage of the mineral output.
The chief exports, therefore, it is safe to say are lumber,
fish, and minerals.
In the Pacific Coast States of the United States condi-
tions are very similar except that there is a larger variety of
products. These six States, Arizona, California, Nevada,
Oregon, Washington, and Idaho have manufacturing estab-
lishments whose aggregate capital represents only 5 per
cent. of the total capital so employed in the United States
as a whole. Their products are mainly the output of the
pastoral, agricultural, and mineral industries, and the
forests. Together they support 24 per cent. of the sheep of
the United States and supply 20 per cent. of the wool clip.
They grow 13 per cent of the country's wheat, 18 per cent.
of its beet sugar, and 26 per cent. of its barley. California
is the greatest producer of fruit and wine in the country.
Together they supply 37 per cent. of the country's gold,
43 per cent. of the silver, 38 per cent. of the copper, 36 per
cent. of the lead, 47 per cent. of the petroleum, 87 per cent.
of the quicksilver, and zoo per cent. of the borax. Oregon
possesses one-sixth of the standing timber of the nation, but







62 THE PANAMA CANAL

the lumber resources of Washington and California are also
enormous. The coast and river fisheries produce nearly
50 per cent. of the nation's fish supply.
The "money crop" of the region, therefore,-the things
which it has to sell-consists of raw and semi-raw materials
and foodstuffs, and economically it belongs in the same
class with all the other sparsely populated regions of the
Pacific Basin. They are all "young" countries in the eco-
nomic sense and their industries are complementary to those
of the "older" countries of western Europe. Even China
and Japan, though their dense population puts them in a
somewhat different class by giving them the latent possi-
bilities of a more rapid advance into the "older" class of
manufacturing nations, are still chiefly producers for foreign
trade of raw and semi-raw materials and foodstuffs.
The specific commodities which this whole vast Pacific
Basin is able to furnish for the markets of the world are
very varied and naturally differ greatly in different portions
of the region. Mexico's exports are 56 per cent. metals, in
which the largest items are silver (31 per cent.), gold (13
per cent.), and copper (io per cent.). The next largest is
textile fibers, making 12 per cent of the total, five-sixths of
this class being hennequin. Live animals and hides (5 per
cent.) and rubber (3Y per cent.) are the only other large
items.
Central America's exports consist chiefly of coffee (about
56 per cent.), bananas (about 20 per cent), gold and silver
(about 4Y4 per cent.) and hides and skins (about 2 per
cent.), with smaller quantities of hardwoods, rubber, etc.






THE PACIFIC COUNTRIES


While Colombia has a variety of resources and sends
abroad a considerable number of different commodities,
the chief exports are made up of a very few items; coffee
(36 per cent.), skins (9 per cent.), bananas (6 per cent.), and
rubber (2 per cent.). Ecuador's foreign sales are even more
concentrated into a few classes of goods. Sixty-two per
cent. of her total exports are cacao; 14 per cent. ivory nuts;
and 6 per cent. rubber.
Farther south on the American coast, mineral exports
come into prominence again. Seventeen per cent. of
Peru's exports are mineral, mostly copper ( z per cent.).
Bolivia's are 43 per cent. mineral, mostly tin (35 per cent.),
and Chile's, 86 per cent., mostly nitrate (72 per cent.).
Peru, however, furnishes also considerable supplies of other
important articles. The largest single item is sugar, about
$5,400,000 worth per annum; while rubber, ($4,4oo,ooo),
cotton ($3,600,000), and wool ($2,ooo,00o) are also im-
portant.
On the opposite shore of the Pacific, as has already been
stated, we find a different set of conditions. Australia and
New Zealand belong in the same general class of countries
as those already considered, sparsely populated, devoting
their energies to a few predominant industries and pur-
chasing their imports by the sale of the products of these
few industries; while China and Japan with dense popula-
tion and great variety of industries have a much larger list
of export commodities. In Australia, 40 per cent. of the
export is of the single commodity, wool. Wheat1 (14 per
Figures for g10.






THE PANAMA CANAL


cent.) is the only other item which rises above 7 per cent
of the total. Wool, hides, fresh meat, butter, tallow, live
animals, and leather, make up 60 per cent. of the total, and
minerals (mostly gold) furnish 17 per cent. Wheat and
flour together add another 15 per cent. These three groups
together, therefore, make up no less than 92 per cent of
the total exports. In New Zealand conditions are not very
different. Wool alone constitutes' 36 per cent. of the total
export, while wool, meat, butter, tallow, hides and skins,
live animals, etc., furnish 76 per cent. of the total. The
remaining 24 per cent. is composed mainly of minerals
(mostly gold) with 12.5 per cent.; phormium, 3 per cent.;
kauri gum, 2.6 per cent.; and lumber, 2 per cent.
The trade of China and Japan with countries of the
Atlantic Ocean Basin is largely of the same general char-
acter, though the item differs. Seventy per cent. of China's
exports are made up of silk, beans and bean cake, tea,
cotton, vegetable oils, sesame seeds, straw braid, and hides,
skins, and furs. Most of the cotton and a large part of the
beans go to Japan and cannot therefore be included among
the goods with which purchases are made from Atlantic
countries. Japan's export to Europe and the eastern United
States is mainly silk and silk manufactures, though cop-
per, tea, earthenware, straw plait, camphor, rice, matting,
etc., are also considerable items. The growing export of
textile manufactures (chiefly cotton), the output of modern
mills, goes chiefly to China and other near by Oriental
countries. In the Philippines there is an even greater con-
I Figures o906-xo.






THE PACIFIC COUNTRIES


centration in the list of export commodities. Ninety-five
per cent. of the purchases from Europe and the United
States are paidfor by exports of five commodities-"hemp,"
copra, sugar, cigars, and tobacco leaf.
On the whole it is evident that the export commodities
of the Pacific countries, in spite of the great contrasts be-
tween different sections, have this much in common-that
they are goods which in the main are complementary to the
products of the industrial regions of the Atlantic such as
the eastern United States, England, Germany, France, etc.
The Pacific Basin produces a surplus of raw and semi-raw
materials and foodstuffs which its peoples are able to use
in purchasing the surplus products of the Atlantic countries.
The character of the goods which the Pacific countries
receive in exchange for their exports may also be indicated
by a brief analysis of their import trade. For purpose of
comparison, the imports may be divided into four classes;
foodstuffs (including beverages, tobacco and similar lux-
uries), clothing and clothing materials (textiles, ready-
made clothing, boots and shoes, etc.), structural and in-
dustrial materials (such as are used in construction work
and development of industries), and miscellaneous man-
ufactures, etc. Taking the Pacific Basin countries as a
whole, their imports at present consist of about 14 per cent.
foodstuffs, 24 per cent. clothing, etc., 40 per cent. structural
and industrial materials, and 22 per cent. miscellaneous
manufactures, etc. Structural and industrial materials
and general manufactures therefore predominate, together
making up 6o per cent. of the total foreign purchases. And







THE PANAMA CANAL


they are increasing in relative importance. If we compare
the two five-year periods 1go2-1906 and 1907-g191 we find,
for the countries whose foreign trade figures are sufficiently
complete to make the comparison possible, that the follow-
ing changes have taken place: foodstuffs have dropped from
16.3 per cent. of the total imports to 13.9 per cent; and
clothing and clothing materials, from 28.4 per cent. to 23.8
per cent. Meanwhile industrial and structural materials
have risen from 37.7 per cent. to 40.4, and general manufac-
tures, from 17.6 to 21.9. There is abundant evidence,
although complete statistics are not available, that a similar
tendency exists in the other Pacific countries.
IMPORTS INTO PACIFIC OCEAN COUNTRIES. BY CLASSES
Annual averages in millions of dollars
ClFonmo Us-G anA DCi-
UCU A C G EOs-

Ist 2nd xst 2nd Ist and Ist 2nd
per- per- per- per- per- per- per- per-
ed iod iod iod lod

Mexico ............. 5.8 zI.2 12.1 13.6 29.6 40.8 24-3 36.o
CostaRica............ 1.0 1.0 1. 1.5 1. 1.5 2.4 2.9
Peru ............... 1.9 2.4 4.9 5.8 6.8 8.8 6.3 7.3
Chile................ 34 3.9 9.2 12.1 z6.5 38.0 21.9 36.o
China ............... 30.2 48.7 96.8 96.3 4.4 49.6 28.7 75.0
Japan................ 33.6 31.6 11.7 17. 77.7 129.0 22.2 39.0
Australia ........... 33.1 31.6 59.4 79.3 84.1118.1 13.6 21.9
New Zealand.......... 6.8 io.2 14.1 18.5 26.8 36.4 10.7 12.2
Philippines............ 8.8 6.8 8.8 8.3 4.4 5.4 4.4 2.5
Total........... 124.6 t47.4 218.0 252.4 288.3 427.6134.5 231.8

Percentage of total im-
ports.............. 16.3 13.9 28.4 23.8 37.7 40.4 17.6 21.9
1 Mexico, Costa Rica, Peru, Chile, China, Japan, Australia, New Zealand
and t Philippinc.






THE PACIFIC COUNTRIES


These figures mean that on the whole the Pacific coun-
tries are passing through an economic transition. With
certain exceptions which will be noted in the proper place,
they are developing more fully their domestic production
of foodstuffs and depending less on foreign supplies. This
does not necessarily indicate, in most cases, that the actual
quantity of foodstuffs produced is being increased, but it
points rather to a diversification of the industries, a growth
in production of certain classes of food, particularly those
which result from the more or less elaborate working up of
the crude materials (such for instance as wheat) into partly
manufactured goods (such as flour). Similarly with clothing
and clothing materials the relative decline in the importa-
tion of such goods does not indicate that the people are
using less or poorer clothing, but that a part of their indus-
trial energy is being turned toward the home production
of such goods. In nearly if not all the Pacific countries the
chief clothing material is cotton and in a great many of them
the first steps toward the introduction of manufacturing
have taken the form of an endeavor to develop cotton
factories by means of high protective tariffs. The result
has been that except on the Pacific Coast of the United
States and Canada and a few of the smaller unimportant
tropical sections of the Pacific, the manufacture of cotton
goods of the cheaper grades which make up the bulk of the
clothing materials which the people use, has made sufficient
advance to curtail the purchase of foreign supplies.
In short, wherever one turns in the entire list of Pacific
Ocean countries there is found a striking tendency of devel-






THE PANAMA CANAL


opment along roughly similar lines. They are all young
countries in respect to modem industrial development.
They are all engaged, more or less energetically, in develop-
ing their abundant natural resources whether they be the
mineral and pastoral resources of Australia; the mineral
deposits of South America; the minerals and fruits of
Central America; the mineral or pastoral activities, or the
textile manufactures of Mexico; the mineral, forest, agricul-
tural and horticultural resources of our Pacific Coast States
and Canada; the industrial resources of Japan; or the im-
mense and various latent resources of the huge Chinese
Republic. In the process of growth, as a necessary accom-
paniment and result of it, they are looking to the older in-
dustrial regions of the Atlantic Basin-to the eastern
United States, to England, Germany, France, Belgium and
other European States-for the needed capital and the
immense quantities of highly specialized manufactures
which the development of new industries demand-struc-
tural iron and steel, steel rails, locomotives, railway cars,
bridge materials, galvanized iron, wire, agricultural machin-
ery and implements, mining machinery, pumps, windmills,
dynamos, general electric machinery and equipment,
spinning and weaving machinery, hardware, tools, boilers,
pipe, etc., a list which might be extended almost in-
definitely. Alongside of this demand-which may be
called the direct demand made by growing industries-is
an accompanying indirect demand stimulated by more
intimate knowledge of the products of the western world-
for articles which in a certain sense partake of the nature of






THE PACIFIC COUNTRIES 69

luxuries: sewing machines, typewriters and calculating
machines, bicycles, automobiles, writing paper, newspaper,
printing presses, soap and other toilet requisites, patent
medicines, perfumery, glass and glassware, rubber goods,
furniture, household utensils, finer grades of textiles, mil-
linery, etc., an almost infinite list of things few of which
alone are important in international trade, but which in the
aggregate play a considerable part in the sales of our indus-
trial nations.
The general character of the interchange of goods between
the Atlantic and the Pacific Coast areas is clearly indicated
by the foregoing analysis of Pacific Ocean resources and
the tendencies which Pacific Ocean trade has revealed in
recent years. Whatever the ultimate commercial results
of the opening of the Panama Canal may be, it is obvious
that its first effects will be felt in connection with trade as
it at present exists. The Pacific Ocean countries are sending
to-day to the industrial countries of the Atlantic Basin,
increasing quantities of foodstuffs, and raw materials,
products of their mines, fields, flocks, and forests. With
these exports they are purchasing in return, and also in
increasing proportions, the multifarious products of Amer-
ican and European factories. The question to-day of prime
interest to the industrial regions of the Atlantic is which
of these Atlantic nations is going to be best able under the
new conditions to supply the Pacific with these things which
its peoples need.












CHAPTER IV


THE ATLANTIC COUNTRIES

NINETY per cent. or more of the foreign trade of the two
score of Pacific countries which we have been considering
consists of an interchange of goods with countries in the
Atlantic basin. Nearly every country whose shores are
touched by the Atlantic takes some part in this trade, yet
on the whole there is an astonishing concentration in the
hands of a very few. In the export trade to Mexico, Cen-
tral America, and Colombia, for instance, four countries,
the United States, the United Kingdom, Germany, and
France, hold 94 per cent. of the business; to the west coast
countries of South America, the same four countries supply
93 per cent. of the total imports which come from the
Atlantic basin. To China the United States, United
Kingdom, Germany, Belgium, and Russia supply 96 per
cent.; to Japan the United States, United Kingdom, and
Germany, 94 per cent; to Australia and New Zealand, the
same three countries, 96 per cent. A similar condition
exists in regard to exports from the Pacific countries; all
but about 2 per cent. of their sales to Atlantic basin coun-
tries go to the United Kingdom, the United States,
Germany, and France.
In attempting, therefore, to form an opinion as to the






THE ATLANTIC COUNTRIES


future trade between the Atlantic and Pacific it will not be
necessary, except in a few specific cases which will be ex-
amined in the proper place, to consider as competitors
on the Atlantic side any but these few countries. How are
these countries situated in respect to their ability to supply
to the Pacific lands the goods which the latter are de-
manding?
All four of these countries are among the great exporters
of manufactured goods, but thus far England maintains
the lead. No less than So per cent. of the huge export of
the United Kingdom belongs to this class. Germany comes
next in this respect with over 70 per cent. and France is
not far behind with 56 per cent. The United States has not
yet reached such eminence in the export of manufactures,
yet this class of goods is assuming a position of great im-
portance. Including manufactured goods ready for con-
sumption and partly manufactured articles for further use
in manufacturing, but excluding prepared (manufactured)
foodstuffs, the percentage reaches 45. In absolute figures
these exports of manufacturers reach enormous totals; in
England $x,8ii,ooo,ooo; Germany $I,2oo,ooo,ooo; France
$680,000,000; in the United States $907,000,000. The
grand total for these countries, $4,598,ooo,ooo, exceeds
the exports of the same class from Belgium, Holland, Spain,
Portugal, Austro-Hungary, Russia, and all the remaining
smaller countries of Europe, six or sevenfold. In regard
to the United States it should be noted that the estimate
of the relative importance of manufactures stated as above
in terms of percentage of total exports is somewhat mis-






THE PANAMA CANAL


leading, for it fails to recognize the preponderance of manu-
factures in certain sections. Fifty per cent. of the mechani-
cal power employed in manufactures in the entire country
is so used in the New England and Middle Atlantic States.
If we add the North Central States this percentage is raised
to 78. In the vast region west of the Mississippi, manufac-
turing is insignificant. If reliable statistics were obtainable
of the exports of goods originating in the Atlantic sea-
board States alone, those States which belong unquestion-
ably to the commercial basin of the Atlantic, there can be
little question that the ratio of manufactures to other classes
of export goods would rise far beyond the 45 per cent.
figure for the country as a whole: it would probably reach
seventy or eighty per cent.
The relative position of different classes of manufactures
in the exports of these four countries is far from being uni-
form, however. For England 24 per cent. of the total export
of manufactures is of iron and steel products and 56 per
cent. of textile goods. German export of manufactures is:
25 per cent. of iron and steel, 18 per cent. of other metals,
32 per cent. of textiles, and ii per cent. of chemical prod-
ucts. French exports of manufactures are made up chiefly
of textiles, articles de Paris, etc. (46 per cent.) and sundry
finer grades of what may be called fashion goods. Iron
and steel products do not exceed 8 per cent. The United
States presents a contrast to all of these. Although tex-
tiles stand second in importance among our manufactur-
ing industries (being exceeded only slightly by iron and
steel in value of product) they play an insignificant part in






THE ATLANTIC COUNTRIES 73

our export trade in manufactured goods-less than 5 per
cent. Iron and steel occupies first place with about 30
per cent of the total; other metals such as copper (14 per
cent.) occupy second place, while refined oil, leather goods
and manufactures of wood make up another 29 per cent.
The relatively unimportant position of France as an
exporter of iron and steel products makes it probable at
least that her position as a competitor of Pacific trade will
decline rather than increase. The strong demand from
the western ocean for goods of this particular sort will be
likely to bring the United States, England, and Germany
even more prominently to the fore as monopolizers of the
market. Each possesses certain well-defined advantages
in the competition which deserve examination.
In the United States we have a country young and vigor-
ous; one which although still predominantly an agricultural
country, has within the last decade or two made marvelous
strides in manufactures, until she now ranks as the largest
producer of many of the commodities which are in strong
demand in the markets which we are considering. Not only
are we producing, we are also exporting to such an extent as
to put us in the front rank of commercial nations, but to this
latter position we have only recently attained. We were
large producers long before we were large exporters, and even
now, in spite of the enormous growth of our sales abroad, our
home markets, until recently protected by a high-tariff wall,
remain far more extensive and far more valuable than our
foreign. It must be a promising field indeed which tempts
an American manufacturer of any particular line of goods






THE PANAMA CANAL


to make much outlay of time or money for the capture of
foreign markets, so long as easy, safe and profitable sales
are possible at home. This is a truth often lost sight of,
but one which it is essential to recognize before we can
make any progress in the understanding of our treatment of
foreign markets. The reluctance on the part of American
producers to seize what appear to be opportunities for
foreign trade must not be charged to any lack of perception
or energy. The immense success which they have obtained
in home markets, and in those foreign markets to which
they have given serious attention, confirms their world-
wide reputation for skill and farsightedness. But before
they bring these qualities to bear in a campaign for new
markets, they must be convinced that the new course is
better worth while than the particular one they are already
pursuing.
In England we find, in many respects, the very reverse
of American conditions-an old country, the pioneer of
modem manufacturing, dependent upon her foreign sales
of the products of her factories for the very food she eats,
long accustomed to pre-eminence in the output of many lines
of goods and the control of almost any market which she
cared to enter; confident, at least until recently, of the
stability of her commanding position, and imbued with a
conservatism of method due largely to her long-continued
success. Her home market is, of course, immensely valu-
able, though open to inroads from abroad through the
absence of a tariff barrier, but neither in character nor
amount is it relatively so important to herself as the home






THE ATLANTIC COUNTRIES 75

markets of the United States are to Americans. The
strength of her position lies largely in the relative impor-
tance of her foreign markets and in what we may call her
vested interests in those markets. The fact that as an
exporter she has shown some decline relatively to Germany
or the United States must not blind us to the fact that she
still holds a commanding position in many important
respects.
In Germany, France, Belgium, Spain, Portugal, etc.,
we find conditions which stand between those existing in the
two extremes, America and England, but while the four
last-mentioned countries may be regarded as approaching
the class of which England is the type, Germany approaches
the type represented by the United States. It is a young and
progressive country economically; has roused itself in recent
years, and is energetically and persistently struggling to
capture foreign markets. It, of course, differs widely
from the United States so far as concerns the relative
value of its domestic market, but it must nevertheless be
regarded as belonging to the same general class, because it
displays the same spirit of energy and adaptability, and
because it, with the United States, is an attacking party
in attempting to drive England and other possessors of the
market from their commercial entrenchments. Many
minor differences, of course, exist between the various com-
petitors, and the above classification can be accepted only
in the broadest outline.
A rough measure of the latent ability of the United States,
England and Germany, to compete in foreign markets may






THE PANAMA CANAL


be found in their power to produce the classes of goods de-
manded there. The fundamental requisites are of course
capital, labor, raw materials, and power. The United States
has a population approximately equal to that of England
and Germany combined, and it is increasing far more
rapidly than theirs. In the decade 19oo-9gio our census
figures show a growth from 76,ooo,o000 to 92,000ooo,o000 or
over 21 per cent. From i90o to I9II the number of in-
habitants in the United Kingdom rose only 9.- per cent. and
in Germany from 900o to 191o, only 15 per cent. There is
every reason to expect that this more rapid growth of the
United States will continue; the country will become
progressively more thickly populated and have an in-
creasing labor force to be applied to manufacturing in-
dustry.
Manufactures to-day depend also fundamentally on three
sources of power: coal, oil, and water power applied either
directly or through conversion into electric energy. Amer-
ican output of coal to-day is not far short in quantity of the
amount produced by England and Germany together and
is rapidly increasing. Neither England nor Germany pos-
sesses any considerable quantity of fuel oil. If they use
this fuel for manufacturing purposes they must import it.
The United States, on the other hand, is by far the largest
producer of this mineral in the world, supplying about two-
thirds of the total. While approximately one-half of this
is used for purposes other than for fuel, the amount applied
for the production of power, with the immense output of
natural gas as well, probably equals in power equivalence






THE ATLANTIC COUNTRIES


over 5oooo,ooo tons of coal, thus materially adding to an
already enormous supply of fuel.
In water power also the United States is highly favored
as compared with either England or Germany. The former
uses large quantities of power of this sort in the aggregate,
but the total amount not only falls far short of the amount
at present used in the United States, but there is not much
possibility of further large development. German water
possibilities are mainly confined to the southern portion of
that country where considerable development has taken
place, yet even here neither the present use nor the oppor-
tunity for further exploitation compare with those in the
United States. In the United States, probably 20 per cent.
of the 15,ooo,ooo horse-power employed in manufacturing
industries, is derived from water power and the possibilities
of further development, especially in the mountain regions,
seem almost unlimited.
Of the raw materials for manufactures it seems hardly
necessary to speak, so well known is the pre-eminence of
the United States in the supplies of many of the most im-
portant of them. Of the most important textile fiber,
cotton, the United States produces within its own borders
over 6o per cent. of the world's supply. In wool we produce
more than twice as much as Great Britain and six or seven
times as much as Germany though both of these countries
have the advantage in being near the great European
sources of supply for what they need in excess of their
domestic product, while the United States must get what
it imports from distant lands. The lumber resources of






THE PANAMA CANAL


the United States, of course, are many times as great as
those of England and Germany.
In regard to the metal industries, no country of the world
is to-day so well supplied with materials. Others, such for
instance as China, may possibly have greater resources of
this kind, but they still lie dormant. The iron ore produc-
tion of our country reaches 38 per cent. of the world's total
and is nearly equal to that of England and Germany com-
bined. Our pig-iron output goes even higher, rising to 43
per cent. of the world's total and considerably exceeding
the production of England and Germany together. In
copper, lead, zinc, and several other metals, important in
modern manufacture, we also either hold a virtual monop-
oly of the world's supply or greatly exceed the resources
of our European rivals.
With advantages such as have been mentioned above, it
is not surprising that the United States has reached a posi-
tion which opens to it the possibility of entering seriously
into the competition for markets in foreign countries. We
are already the greatest producer in the world of many of
the important manufactures which may be regarded as
entering into world commerce. Our factories consume a
larger quantity of cotton, and of wool, than those of any
other country. Our silk factories use nearly twice as much
raw silk as those of England and Germany together, and
50 per cent. more than those of France. Our production
of steel comes within a few per cent of equalling that of
all the rest of the world; it is 5o per cent. greater than that
of England and Germany together. The list of specific






THE ATLANTIC COUNTRIES


manufactures in whose production we lead the world would
be tedious to enumerate. It includes agricultural machinery
and implements, railway equipment of all sorts, wire, auto-
mobiles, copper manufactures, leather goods, clothing,
rubber goods, hardware, tools, structural iron and steel,
all sorts of calculating, registering, and writing machines,
pumps, pipes, windmills, printing presses, boilers, etc. The
fact that our domestic market for these things has been
so overwhelmingly important as to hamper the develop-
ment of our export of them, leads us often to overlook the
fact that our production is so pre-eminent. As a nation we
have devoted little energy to the capture of foreign markets
for these manufactures, because it has not yet seemed worth
while. Now, however, conditions are changing. The filling
up of our country, and the demands of our industrial popu-
lation for foodstuffs, are decreasing our power to export
our breadstuffs, provisions, and dairy products. More and
more do our factories make claim to our various industrial
raw materials and demand the importation of others. We
are forced to look more seriously to the possibilities of
selling manufactures to the foreigner in exchange for the
things which we require from him. The downward revision
of our import duties operates both to stimulate and facili-
tate this movement. In so far as it makes possible the im-
portation of foreign manufactures, it tends to force our own
manufacturers to seek a wider market for their products
abroad. In so far as it reduces the cost of imported raw
materials, it places our factories on a more even footing
with European factories in the matter of cost of production






THE PANAMA CANAL


and gives them a better chance to compete in neutral mar-
kets. In turning our manufacturers' attention towards
the need of cultivating foreign connections it tends to force
them to realize the necessity of good packing, proper in-
voicing, prompt deliveries, suitable credits, etc., and dis-
courages the pernicious habit of regarding foreign markets
merely as a convenient dumping ground in times of glut
in the home market.
In respect to these points just mentioned, as well as
several other important ones, the position of both England
and Germany is at present far stronger than ours. In the
care with which they cultivate the export trade, their dose
attention to details of demand, the character of their agents,
the organization of their methods, they are far superior,
on the whole; and they have further advantages in such
things as banking and shipping facilities.
It is a well-known fact that there are few American banks
in any of the Pacific countries while there are many Euro-
pean ones, especially English and German, and our con-
sular reports abound in statements that this lack consti-
tutes a serious handicap to American trade. Yet there are
good reasons for believing that our disadvantage in this
respect, although it may exist, has been grossly exaggerated.
So far as the actual settlement of balances is concerned
-the strictly banking part of the business-it is difficult
to see how the nationality of the bank cuts any figure.
Most settlements are made by the familiar letter of credit
system under which the exporter, say in Liverpool or New
York, in shipping his goods to the Pacific country, draws






THE ATLANTIC COUNTRIES


at from ninety to one hundred and twenty days on the
London account of the importer's bank, and then discounts
his draft at his own bank; and it is a matter of complete
indifference to him whether the importer's bank which
arranges the London credit, is American, French, German,
or English. Nor is the importer at the other end interested
in the matter; he will get his London credit from any bank
that offers him the best facilities, and there is no reason to
suppose that an American bank would be in any better
position to give such facilities than any other bank.
Another large class of trade exchanges, in dealings with
specific countries, are settled by large exporters and im-
porters who themselves conduct a sort of disguised banking
business. Where a large concern both imports and exports,
or where there are allied concerns, some exporting and
others importing, it is in many cases cheapest and simplest
for them to arrange for settlements which do not call for
the services of a bank proper, at all. Such a method is
employed, for instance, in a considerable share of the trade
with South America, and where it is employed, the dealers
are, naturally, not concerned with the existence or non-
existence of American banks.
In some transactions, but they are usually the smaller
ones and their aggregate is probably not large, the exporter
in New York may draw directly on his consignee and ne-
gotiate his draft at his own bank; or the importer in the
foreign country may make his payment by London or New
York draft purchased at his bank and forwarded either with
his order or upon receipt of the goods. In the former case






THE PANAMA CANAL


the presence or absence of an American bank in the im-
porter's country obviously plays no part in determining
what the exporter will get for his draft; and in the latter
there is no reason to suppose that the importer could buy a
draft any more cheaply from an American than from a
European bank.
So far as concerns the mere banking transactions, there-
fore, there seems to be no reason to suppose that an Amer-
ican bank in the countries with which we are trading could
offer any better facilities or any more favorable methods of
settlement than those given by other banks. Yet there are
other services performed by banks or by individuals in
banks, not strictly connected with the banking business
proper, in regard to which the case may be different. Banks
are the chief and most reliable source of commercial and
credit information. They are in a position to know the
financial standing of business houses and to get early "tips"
as to large transactions such as the floating of loans for
public improvements, etc. A German bank with branches
in Chile or Japan is in a somewhat better position to give
information of this character to its clients than an American
bank with no such connections, and the result is that the
German exporter is probably in a better position to give
credit to his foreign customer and the German capitalist has
earlier advice as to foreign investments. The American
exporter's unwillingness to grant long credits to purchasers
and the large European capital investments in many Pacific
enterprises unquestionably does hamper our trade to some
extent.






THE ATLANTIC COUNTRIES 83

There is also a certain psychological element which de-
serves mention: the lack of American banks, like the ab-
sence of American steamship lines, seriously reduces the
commercial prestige of the United States. The mass of the
people particularly in the Latin-American countries, do not
understand why it is that a country which claims to be one
of the largest of exporting nations, can be so backward
in banking and shipping, which to the popular mind seem
to be all-important manifestations of greatness and power.
Argument is useless. The foreigner is convinced that the
United States cannot be commercially as great as England
or some of the continental countries-if she were she
would have banks and ships as they do-and there is
created a certain tendency to regard trade connections
with them as more desirable than those with the United
States.
Another important question which arises in connection
with the relative strength of Europe and the United States
as competitors in Pacific markets is the influence on our
trade of the relatively inferior steamship service between
the ports of the United States and those of the western
ocean. It is an old question, one to which much attention
has been given for years past; and in nearly every discus-
sion of it the conclusion has been either assumed or deduced
that the inferiority of the service is a serious handicap to
our exporters, and that the establishment of direct lines of
large and fast steamers would bring an immediate and
enormous increase in our export trade. There are, however,
grave reasons for doubting whether such an improvement






THE PANAMA CANAL


in the service would cause any large results of the sort
predicted.
Many of the largest and most experienced importers in
the Pacific countries, men who deal in goods from both the
United States and from Europe, are inclined to ridicule
the idea that American exporters are in need of greater
facilities. They claim that they never have any serious
difficulty in getting all the goods that are demanded from
New York quite as readily, allowing for differences in dis-
tances, as from London, Liverpool, or Hamburg, and that
the steamers are smaller and the service poorer because
there is little freight offering, and not vice versa. And the
experience of those countries that control the bulk of the
transportation to the Pacific is confusing. The statistics
show that in the past ten years some of the countries of
Europe which have made the greatest effort to stimulate
steamship facilities between their ports and those of the
Pacific have been the least successful in holding the trade.
It is a notorious fact that the tonnage of American ship-
ping engaged in foreign trade has been steadily declining
until now about 92 per cent. of our exports and imports are
carried in foreign bottoms. It is also true that relatively
few regular lines under any flag run between the ports of our
Atlantic States and the countries of the Pacific Basin.
Our government has done little if anything to assist the
establishment and maintenance of such direct lines while
several of the European nations have found it advisable
directly or indirectly to favor connections between their
ports and the Orient, South America, and Australasia.






THE ATLANTIC COUNTRIES


England, mainly for the purpose of maintaining frequent
intercourse with her colonies, and Germany for the avowed
purpose of stimulating commerce, have been particularly
active in this respect. Yet the statistics of trade develop-
ment of recent years are far from showing that the efforts
toward maintaining direct, regular, and frequent service
have really had as great results as anticipated. Comparing
the two five-year periods 1897-1901 and 1907-1911 the
figures reveal the fact, not commonly recognized, that on
the whole the United States, in spite of the relative lack
of shipping facilities, has made greater gains in her exports
to Pacific markets than either England or Germany. To
Central America and Colombia we sent in 1897-1901 37.5
per cent. of all the goods which those countries bought from
the great commercial centers of the Atlantic in North
America and Europe; in 1907-1911 our share had risen to
40.6 per cent. Meantime England's share dropped from
33-3 per cent. to 30.4 per cent., and Germany's increased
only from 10.4 per cent. to 13.1 per cent. To the west coast
countries of South America we increased our percentage
from 14.1 to 194 while English trade declined from 43.6 per
cent. to 40.6, and German, from 25.9 to 24.4. In Austra-
lia and New Zealand we increased our exports from 14.2
per cent. to 15.3, while Germany increased hers from 6.3 to
7.0 and England's trade dropped from 75.3 per cent. of the
total, to 73.5 per cent. To Japan also, England's share in
the trade declined from 49.0 per cent. to 45.4, while Ger-
many's increased from 15.4 per cent. to 19.5, and ours from
26.8 to 29.0. In China, all three countries suffered a decline







86 THE PANAMA CANAL

in their share of the total but Germany's loss was propor-
tionately much larger than that of either the United States
orEngland. Our share dropped from 23.9 to 22.3 per cent.,
and England's from 50.3 to 48.2 per cent., while Germany's
share which in the earlier period was 13.2 per cent. declined
to II.8 per cent.
In the face of such figures it is far from safe to assume,
without further evidence, that the establishment of direct
lines of steamers from the United States to Pacific countries
would have results commensurate with the expense in-
volved; and a more complete analysis of the situation be-
comes necessary. The question is a complicated one, but
it readily divides itself into two considerations-the in-
fluence upon American trade of (i) the lack of transporta-
tion facilities and (2) the lack of passenger and mail facil-
ities. And these two must be considered separately.
First, then, is there an insufficiency in the amount of
freight accommodation offered to American shippers to the
Pacific, or does the irregularity of sailing and the uncer-
tainty as to exact date of arrival place any serious obstacle
in the way of our exporters?
The opinion of men who have had actual experience in the
countries in question in importing goods both from the
United States and from Europe, is that there is in general
sufficient freight space constantly offering to regular ship-
pers from the United States, and that the rates are as low
as could be expected in view of the smaller amount of our
exports compared with those of Europe and the greater
distance to most of the Pacific countries from New York






THE ATLANTIC COUNTRIES


than from European ports. For smaller shippers, attempt-
ing to build up new connections in the Pacific, the lack of
direct and frequent service is probably a much more serious
matter. Their shipments are not large enough to warrant
the chartering of "tramps" nor regular enough to make
possible the definite reservation of space in such vessels as
do run. Often, if they would fill orders with reasonable
promptness they must resort to round-about routes in-
volving transshipments in order to get their goods to market
A small shipment, for example, from New York to China,
unless the goods be sufficiently light and valuable to bear
the high freight of the combined rail and steamship route
across America and the Pacific, is more than likely to go
first to England or Germany for carriage in an English or
German vessel. For business involving these smaller ship-
ments, and the aggregate is large, there can be no question
that direct steamship connection would stimulate our trade.
There is no evidence, however, that the nationality of the
carrier is of any consequence whatever in regard to freight
rates or facilities for transfer of goods. Neither the im-
porter nor the exporter is concerned in any way with the
color or the design of the flag under which his goods are
carried.
The question of the frequency and regularity of mail
service and passenger service is allied to that of freighting
facilities and yet is quite distinct from it. In this respect
also the service from the United States is inferior. The re-
sults of this inferiority depend upon the size and nature of
the particular business affected. Large wholesale dealers






THE PANAMA CANAL


and commission men who import in considerable quantities
at a time, and whose orders are usually for standard grades
of goods, probably suffer little inconvenience. Their orders
go by cable and are thus independent of the mails, and by
timing them carefully they can get the goods shipped
promptly from the United States on one of the steamers
whose service is regular and certain. With smaller dealers
and smaller orders, as well as in all larger orders where full
and specific instructions have to be given as to sizes, shapes
and weights, and grades of goods, the mails must be
used, and there are many complaints as to the inadequacy
of the service. In many instances it takes much longer to
get such orders from the United States than from Europe.
As the United States is entering a comparatively new
market, in competition with older countries whose goods
have been long established in the field and have fixed them-
selves in the esteem of the people, a great deal of her trade
must be in commodities of the sort just mentioned, made
and shipped in such fashions as to conform with the cus-
toms and prejudices of a market already established by her
rivals. Consequently, in a considerable part of our Pacific
trade the mails are an important factor, and there can be
no doubt that many orders which might otherwise go to our
manufacturers go to Europe instead.
In still another respect the steamship service of the United
States is inferior-except between San Francisco and the
Orient there are no direct lines of large, fast passenger
steamers plying between the United States and the Pacific.
The Pacific countries are too little known in our country;






THE ATLANTIC COUNTRIES


a closer knowledge of their peoples and their wonderful
resources would be a powerful stimulus to commercial
relations. But under present conditions the traveling
public desirous of first-class accommodation have to go to
many Pacific ports via Europe at an additional outlay of
time and money and the annoyance of a transfer to a new
steamer in the European port. Good service on direct
lines running from New York would induce many of our
business men and capitalists to make holiday excursions to
the Pacific, and personal knowledge of the possibilities lying
dormant there would bring tangible results in the form of
investments or stimulated trade.
On the whole, then, the superiority of European steam-
ship service does operate adversely to American trade
interests. So far as mere freighting facilities are concerned
the handicap is one that is likely to remedy itself with time;
for, in general, as trade develops, vessels will be found to
carry it, especially that large class of traffic which prefers to
make use of chartered or "tramp" vessels. As to mail and
passenger service, a somewhat greater outlay for mail con-
tracts would probably go a long way towards improving
matters. The nationality of the carriers is a point of very
minor importance. As in the case of the banks, above
mentioned, the influence is a psychological one. There is a
general consensus of opinion that the mere appearance in
Pacific ports of steamships carrying the American flag
would help convince the people that American trade con-
nections are worth cultivating. At present our flag is sel-
dom seen except on an occasional warship, or private yacht,






THE PANAMA CANAL


or an out-of-date sailing vessel. The mass of the popula-
tion in many of the lands have but the dimmest notion
of the vast economic activities of our people. The markets
are peculiarly sensitive to notions of fashion and prestige
and most of the population-all except the very few who
have traveled in the United States-have exalted ideas as
to the greatness of England, France, and Germany, and the
fashionablenesss" of using commodities produced in those
countries. There can be but little question that these im-
pressions are deepened by visible illustrations of the supe-
riority of European merchant marine.
Many sweeping assertions have also been made, from
time to time, as to the inferiority of the methods employed
by the exporters of the United States to introduce their
goods into new markets, and the subject is of such impor-
tance as to demand somewhat extended examination. Like
all other questions thus far considered, this is a complex
one, and general statements are apt to be misleading, for
the excellence or the inadequacy of any particular method
of doing business obviously depends upon the nature of the
commodities involved, the size of the trade, the credit of
exporters or importers, and, to a certain extent, their
nationality. The various methods employed may be sum-
marized as follows:
(i) Many firms are content with the mere sending out of
circulars, either directly to importers or through the con-
sulates. In some cases these circulars are translated into
the foreign language, and the weights, measurements,
etc., given in terms of the local system. In the majority of




University of Florida Home Page
© 2004 - 2010 University of Florida George A. Smathers Libraries.
All rights reserved.

Acceptable Use, Copyright, and Disclaimer Statement
Last updated October 10, 2010 - - mvs