The railroads continue to nullify the protective tariff upon imports, and erect a counter protective tariff of their own in favor of foreign goods and against domestic manufactures, aiming to supply home markets, while on the other hand they facilitate the export of our productions by rates much lower than the charges on the same goods for the same haul when intended for domestic consumption. The effort seems to enable our producers to capture foreign markets, and to give our markets, especially the transcontinental markets, to foreign shippers. Anything to get business, long hauls, ton-miles.
The Industrial Commission found that merchandise for export went from Chicago to New York at 80 percent of the ordinary transportation rates, and grain from Kansas City to Chicago took 3 cents a hundred lower rate if billed for export than if intended for local consumption.[331] The export rate on wheat from Chicago to New York is 15 cents, the domestic rate 20 cents; from Kansas City to Galveston the export rate is 17 cents against a domestic rate of 33½ cents.[332]
Another recent investigation shows that wheat from Kansas City to Galveston was paying 27 cents if for domestic use, against 10 cents if intended for export. The rates fluctuate, but if the domestic rate flies low the foreign rate flies lower still.
The price of grain in Liverpool is determined by world competition; the railroads cut rates so that our grain can be sold in Liverpool. They get a little more than the cost of hauling and are satisfied.
When oil is selling at 9 cents a gallon here it can be bought at 3 cents for shipment to Europe.
Railroads often give manufacturers a reduction of 33⅓ percent for export, and manufacturers sell at 30 percent less for export. Mr. Bacon told the Senate Committee (1905) that the export rates from all inland points to the seaboard have been for years 25 to 33 percent below the rates on goods for domestic use.[333]
The rate on rails from Pittsburg to Hongkong via San Francisco is only 60 cents per hundred, or less than the rate between points a few hundred miles apart in this country.
“For the past two years the trunk lines have given the steel and iron producers a reduction of 33⅓ percent less than the published tariff on domestic freights, so that all iron and steel exported is carried at one-third less than the people of this country are required to pay on freight of the same character.”[334]
American steel has sold at Belfast for $24 a ton, while purchasers in this country had to pay $32 a ton at Pittsburg for the same steel.[335] American rails sell for $28 a ton for home use, but for foreign use they can be bought in New York for $19 a ton and delivered in Beirut for $22.88. Last year Mr. Wright, general manager of the Macon and Savannah Railroad, stated that his road had to pay $29 a ton for 5,618 tons of steel rails, although the same steel company offered him rails for Honduras at $20 loaded on vessels chartered to a foreign port.[336] During the last three or four years, while the home price has been $28, the price for export has been $5 to $12 below the home price, and during the period 1902–1904 the difference has been $8 to $12. The Great Northern and the Northern Pacific pay $28 a ton for rails, while their competitor, the Canadian Pacific, buys the same rails for $20 a ton and sometimes for $18 a ton.[337] Even the United States Government could not get fair prices at home for the materials and supplies needed for the Panama Canal project, and found it necessary to open the competition to foreign bids. Even if it were determined to use only American goods they could be bought more cheaply abroad than at home. Matters are arranged so that goods are hauled across the ocean to Europe and then hauled back and sold here at lower prices than they could be bought for at the factory here for home use. If the railways and the steamboats and the allied interests make money they do not care how much industrial power is wasted.
An investigation last year brought out the interesting fact that the cheapest way sometimes to get goods from Chicago to San Francisco is to ship from Chicago across the Pacific Ocean and then back to California. The Interstate Commission says: “The complainant desired to ship the machinery for a stamp mill from Chicago to China. Being interested in a line of steamships between San Francisco and the East, his intention was to make shipment to San Francisco and thus to destination by his own line. Upon investigation, however, he learned that the rate from Chicago to San Francisco was $1.25 per hundred lbs., while from Chicago to Shanghai it was 90 cents per hundred lbs. The rate at that time from Shanghai to San Francisco was 20 cents per hundred lbs. Had he desired to lay down his stamp mill at San Francisco, he could have shipped it to Shanghai, and from Shanghai back for 15 cents per hundred lbs. less than the direct rate from Chicago to San Francisco.”[338]
President Tuttle of the Boston and Maine tells of a cargo of flour carried from the Pacific Coast around the Horn to England and then back to Boston to be delivered to a starch factory at Watertown. “A sailing vessel had gone to the Pacific coast with goods from Europe. There was some lack of a cargo for return. They found a lot of soft wheat flour there with which they loaded that vessel and carried it to Liverpool and put it in storage. Then the owner of the flour began to hunt around the world for a market, and found that within ten miles of Boston he could sell that flour to a starch factory at a profit and pay for the additional land haul of 10 miles.”
“The Chairman. It first went to Liverpool?
“Mr. Tuttle. Went from San Francisco around the Horn to Liverpool and then across the Atlantic back to Boston. In order to carry that flour to Watertown, across the continent by rail, the railroads would have had to make a rate which was practically nothing, because the transportation by water is so extremely low that you cannot put the railway rate against it and make a profit. The cost of carriage of a ton of freight by a large steamer is so low that there is hardly any way to figure it. We have to meet those conditions. That is what we are doing.”[339]
The low rates on imports enable European manufacturers to ship their goods to our western States more cheaply than our own eastern manufacturers can send their goods to the West. Rates on imports are frequently only a third of rates on domestic goods over the same lines,[340] and sometimes the difference is greater yet. And it is not confined to manufacturers. Thousands of acres of Kaolin mines from which the finest chinaware can be made are idle in the region round Macon, Ga., because clay can be shipped from England to Ohio factories cheaper than it can go from Macon to Ohio. Several mining companies have had to quit business because of foreign competition favored by low import freight rates.
Both export and import reductions lead to serious discriminations, not merely as between our people and foreigners, but among our cities and shippers.
Unscrupulous shippers take advantage of the export rates in the domestic trade, billing their freight on the export basis. Grain, for example, is “billed for export” to Chicago or New York or other centre; and then “the destination is changed in transit,” that is, after the grain or other shipment gets to Chicago or New York, the shipper stops it there, or orders it to Albany or Worcester or otherwise changes the destination.[341] The same thing is done in the packing-house trade to New York. The Vanderbilt traffic manager says: “Our domestic business does not amount to anything.” About all the dressed beef that goes east appears to be for export. When asked how the eastern territory got its dressed beef, the manager said: “I could not give you any information on that point.”[342]
Such results are worse even than the difference between the export rate on wheat and on flour, which tends to discourage the milling of wheat in this country and throw into the hands of foreign millers business that belongs to our millers. Worse than this or than the discouragement of home manufactures by cut rates on imports, is the discrimination in the export and import rates in respect to different ports.
“One of the most remarkable trade movements of recent times is the growth of the Gulf ports at the expense of New York and other Atlantic ports. New Orleans has become the second largest grain-exporting port, and gives promise of becoming the first. Galveston’s export and import trade is rapidly increasing. In 1897 New York handled 77.9 percent of the wheat, corn, and flour exports, and in 1904 her share had dwindled to 36.9 percent. The Gulf ports have made corresponding or greater increases. Natural advantages, including proximity to supply centres, and the extension of port facilities for handling cargoes, have had something to do with this increase of exports from the Gulf ports, but the chief factor has been the differentials made by railroads connecting with those ports. So alarming is the decrease of commerce through the port of New York that an effort is being made to secure a legislative investigation of the subject.”[343] The Chairman of the Committee on Foreign Commerce for the Baltimore Chamber of Commerce says: “We are gradually shrivelling up because of discrimination in freight rates. Ever since December last, 1904, when the grain rates were advanced 1 to 1½ cents on export grain and 3 cents for domestic delivery, business in this city has almost come to a standstill.... The Gulf ports are getting it all, and while millions of bushels of corn were accustomed to arrive here, after the December marketing from the Southwest, not one has been received since the first of the year. Firms formerly engaged in the exporting business in this city have pulled up stakes and have gone to New York in search of better railroad opportunities.... The Chamber of Commerce here is meeting daily to devise a means of surmounting the danger which now threatens the export business of Baltimore.”
The Government is forbidden to favor one port more than another, but the railroads are left free with a power of favoritism greater than any the Government possesses, and they are using the power as we have seen. Section 9, of Article 1, of the Federal Constitution says: “No preference shall be given by any regulation of commerce in revenue to ports of one State over those of another.”
Congress itself cannot establish any differential that would give one port of the United States an advantage over another port. But what the Constitution forbids Congress to do the railroads can do and have done, by manipulating the rates on exports and imports, thereby making business flow to whatever ports they please.