wagon on the land. The debates in the Convention are a guide at this time as to what was intended by the various provisions of that instrument. While this Commission has no power over transportation outside the State line, yet the regulation of the rates on interState commerce by Congress will have such an influence upon rates established by a State, that we consider it of sufficient importance to notice it in this report.

We have been unable to find sufficient data upon which to base an argument in favor of the power or the right of Congress to establish the commercial relations of citizens residing in different States. The power, if it exists at all, rests in the clause at the head of this article. It may be necessary to ascertain what the commercial relations between the States were, or might become, if a clause of similar import was not inserted in the Federal compact. At that time each of the thirteen States was as free and independent as are England and France. Each one of them was acknowledged to be a free and independent State, by the great powers of the earth, by solemn treaty stipulation, and was free to contract alliances, conclude treaties, and to do all those things which, of right, a free and independent State might do. Such being their status, they, in order to form a more perfect union than the old confederation guaranteed, and to provide for the general welfare, and defense from within and without, and did ordain and establish the Constitution containing the above. clause. From the debates we have been unable to learn that this clause means, or was intended to mean, more than this. It is well known that each one of the States was jealous of its own territory and territorial rights. Had each State been left free to establish the conditions upon which the commerce of one State should cross the line of another State, the large and more powerful States might have established toll-gates at every highway where it entered the territory of another State, and levy toll upon the commerce of its neighbor at its own discretion, and thus cripple the less powerful States. The framers of the compact foresaw what might occur, and to guard against inter-State conflict, they provided a safeguard in the delegation of the power to Congress. The debates do not convey to us any meaning that can reasonably be construed into conferring upon Congress the power to establish the rates a carrier might charge for carrying a wagon or boat load of produce from one State across the border of another. The more reasonable theory would appear to be the prevention of the States from doing it, because commercial industry recognizes no State lines. The idea of conferring the power upon Congress to establish fares and rates was not thought of at that time. Now, does the power to "regulate commerce between the States authorize Congress to fix the carrier's charges between the States? From the fact that no such power was exercised, or even discussed, for a century, it may be a fair deduction that no such power was ever intended. Fairly construed, it would seem to operate as a prohibition upon a State to impose restrictions upon the commerce of another State, and vice versa. It established free trade between the States, and through it each State surrendered its right to restrict commerce between the States. For example, the Mississippi River and its tributaries passes through or borders nearly one half the States of the Union. No one of these States has the right, at the State line, to levy tolls upon the commerce of another State, unless Congress, under its delegated power, should consent, and then only

for some specific improvement to facilitate such commerce. And even this power has virtually been superseded, by Congress making all such improvements to facilitate commerce on our great natural waterways, and paying for them out of the Federal treasury. In this connection, another reason which actuated the States in restricting themselves as to this power, was that no passport system, similar to that prevailing in the German Principalities, should ever be established in this country to harass and annoy travelers at the State lines, and to avert inter-State conflicts of interests they delegated their right to restrict commerce between the States to Congress. The logical implication is, that the right of free and unrestricted trade should not be interfered with, either by the States or by Congress; that if either the States or Congress should attempt any such restriction, the right should be challenged. The right to the free use of all the public waterways and highways was thus secured to the citizens of the several States. But it may be answered, "the right of Congress, although it may not have been exercised, still exists, and is held in reserve to be used when necessary." The right of Congress to regulate the carriers' charges, if it exists at all, is derived from the clause: "Congress shall have power to regulate commerce between the States and with foreign nations." If the clause "and with foreign nations" confers upon Congress the power to establish the rates a common carrier may charge for passengers and freight between New York and Liverpool, or between New York and Montreal, we will yield the point without further discussion. Under the power to regulate commerce between the States and with foreign nations, Congress may very properly exercise the right in establishing the conditions upon which foreign vessels may trade with this nation, and pass the necessary laws for the execution of treaty stipulations which may be made by the treaty making power, but neither can exercise any control over the rates for passengers and freight such vessels may charge. Neither can Congress establish the rates our own vessels may charge when trading with foreign nations. When three miles at sea the ships of all nations are on perfect equality. If the power claimed exists within the three mile limit it ceases on passing it. But we will endeavor to prove that the power over inter-State commerce and international commerce rests upon precisely the same basis, and if it exists in the one case it would seem to exist in the other.

No one has yet claimed that the right to regulate "commerce with foreign nations" gave Congress the power to establish rates for foreign vessels trading with us; how then can the position be maintained that, deriving its power from the same clause of the Constitution, Congress can establish rates for our own vessels trading between the States?

commerce.

A vessel sails from New York to New Orleans, this is inter-State Another sails for San Francisco; this is also inter-State commerce, although 18,000 miles of the highway of nations is traversed in the voyage. Another leaves for Calcutta or Australia, under similar conditions. The latter is international commerce, and yet the regulating power in both instances is derived from the same clause, and is based upon the same authority. A train of freight cars leaves New York for Chicago. Another leaves Montreal for the same destination. If Congress fixes the rate on the former, under the "power to regulate commerce" between the States, then why cannot it fix the rate for the latter under the "power to regulate commerce"

with foreign nations? If the right to establish rates for inter-State carriers exists at all in Congress, the right to establish rates for international carriers exists also. We may also conclude that the right of Congress over inter-State commerce upon the high seas, is no greater than its right over international commerce upon the high seas.

The traffic between New York, via Cape Horn, and San Francisco, bears the same relation to inter-State commerce as the traffic overland by the present system of railroads. Congress may, under the authority granted, provide in both instances for the transmission in bond of dutiable goods from the Atlantic to the Pacific, and from the Pacific to the Atlantic. This would be a regulation of commerce between the States; but it would not be claimed, we think, that the carriers' charges were to be established by Congress.

Having given sufficient reasons why Congress has not the power under the Constitution to establish charges for carriers whose property is owned and operated within a State, we hope to be able to convince all who will carefully analyze our reasons of the inexpediency of so doing if the power was not wanting. We may have to traverse some of the points already covered in other parts of this report, but some of the reasons will bear repetition. For seven months out of twelve, the finest system of inland navigation the world has ever utilized is free for water carriage from the Mississippi and Missouri Rivers to the Gulf of Mexico, and from Lake Superior to the Atlantic seaboard by river, lake, and canal. During this time these great waterways fix the rates to the seaboard for all land transportation. These rates are much below the average cost of land transportation to the same points, yet they are better than hauling empty cars. An inflexible law of Congress depriving the railroads of meeting the rates these waterways establish, would result in diverting the traffic from the West to the water routes and the Canadian railways to such an extent as to seriously disturb commercial values at all the great terminal points on the seaboard, and would benefit none but our cousin across the border. This combined system of navigation establishes not only the through, but the local rates in a degree, for all the western traffic, and Congress cannot, by all the power delegated to it, control or regulate it. As well attempt to stop the flow of these great waterways to the Atlantic Ocean, as to establish any other rates for railway carriage than these natural agents of commerce shall dictate.

We may here present what appear to be still greater objections to legislative interference with the detailed workings of railway traffic, whether inter-State or State. We have already stated that commercial law recognizes no State lines or natural barriers. It pushes its way into countries of different tongues, habits, and manners. It is so easily mastered by all people who have anything to buy or sell, that it requires no officers of the law to execute its mandates.

Within the last five years we have witnessed its march southward, not even halting at the national boundary of our sister Republic to the south of us. With its advancement, we have witnessed the cessation of political violence, and a vast improvement in the habits and occupation of the people of Northern Mexico. Since the dethronement of Maximilian, under the leadership of Juarez, whose moral support in that memorable contest for national existence was obtained in the United States, the country has made rapid and permanent advancement. Mexico is a country of marvelous resources. For mining and

agriculture they equal the best of our own Territories. In the northern States of Mexico the people are poor. They had limited means of communication or of transportation.

The impetus given to commerce by the opening of the Southern Pacific Railroad along the thirty-second parallel, induced American capital to take up its line of march into Northern Mexico. Under the liberal inducements offered by the Mexican Government, several lines of railway are building, connecting the Capital with our great trunk lines of railroad along what is known as the table lands. Already one line has reached the Pacific Ocean at Guaymas. Other railroads are projected farther southward, all, however, connecting with the American trunk lines. Millions of dollars of American capital are already invested with encouraging prospects of large returns. Business between the two countries has already felt the vivifying influence of these railroad enterprises, as will be seen by the following statistics of commerce since 1878. Up to that year the largest amount of domestic commerce in one year, was valued at five and a quarter million dollars. In 1880-81 it was valued at more than eight and a quarter millions, increasing over fifty per cent in three years. For the nine months, from July, 1881, to March, 1882, over eleven million dollars worth of goods were exported to Mexico, and we imported more than six million dollars worth. With the extension of the Mexican railroad system our trade will still further increase. To borrow a term, this may be called a new "conquest of Mexico," not by the sword and the consequent devastation of the country, but by the simple yet all powerful forces of commercial development. We have already alluded to the difficulties that would grow out of an attempt on the part of Congress to establish tariffs for the railroads entering British territory to the north of us. The same difficulty must arise with railroads entering Mexican territory to the south of us. The Canadian railroad companies could neutralize any restrictive tariff imposed by Congress upon any railroad crossing the boundary, and the same could be accomplished by the managers of the Mexican companies.

If Congress attempted to establish rates for international traffic it would at once lead to international difficulties, and to establish inflexible rates on inter-State traffic would simply aid the railroad companies of the countries beyond our jurisdiction to the extent it embarrassed our own. When it is considered how easily traffic is diverted from one line to another; how that a difference of one dollar per carload will be the means of diverting the immense grain and other western traffic to the Canadian routes, Congress may well let the proposed bill for regulating the inter-State railroads sleep another four years, and perhaps by that time all will see the uselessness of the measure. We shall not go into the details of particularizing the thousands of reasons, each one of which is cumulative, why it would be injudicious and unwise for Congress to interfere with the commercial forces set in motion by our railroad system. With the experience of State legislation in ten or twelve States to make inflexible laws for regulating a business, the conditions of which were changing from week to week, even within the limits of the State, and the complete failure in every one to accomplish good results, would members of Congress representing such States be justified in supporting an inter-State railway traffic Act? The difficulties of inter-State regulation are at least cumulative in proportion as the

number of States are affected. Congress has fulfilled its functions when it has held the power of preventing the States from imposing restrictions upon inter-State commerce. This is its function, and this alone; under its delegated power over inter-State commerce. When it will be justified in restraining the active forces of commerce, and repressing industrial development, which the proposed legislation will do, better reasons for the action must be given in favor of it than are offered against such action. No person understands all the intricate details of working the traffic of railways, who has not had practical illustrations in connection with it. It is the study of the best minds of the world, and never mastered except in degree. Those persons who have worn their lives away in its practical details, have never passed a week without having to solve some new difficulty for applying new rules for the solution of old ones, made necessary by changing conditions. The struggle for commercial supremacy of trade centers affect transportation rates to and from those points as much as rival lines; and the solution of questions of this character commands the best thought the country affords in managing the transportation interests, and the man who thinks he understands it without years of experience and study as well, has not yet learned its alpbahet.

It is the man whose experience and study of causes and their effects, that is able to solve the transportation problems as they arise, which is only another name for the living trade problems of the day. Exceptional legislation, establishing prices for transportation, is dealing in values as much as would be establishing prices for the articles transported. Congress would not think that regulating commerce between the States would authorize it to fix the price of wool, wheat, or produce; yet the fixing the carriers' charges on these articles is as objectionable as would be the fixing the price of the articles themselves. We have briefly adverted to some of the inevitable effects of the proposed inter-State traffic Act. To us it would seem to be an effort to repress the active commercial forces which the completion of the overland railways have put in motion.

TERMINAL FACILITIES.

Not possessing the power to prescribe what the terminal facilities of railroads terminating at San Francisco shall be, we deem it of sufficient importance to call the attention of your Excellency to the matter. The Legislature alone having the power to provide for their improvement, we will direct your attention to them for such recommendations as to you may seem appropriate.

We, therefore, would suggest that the State provide for an improvement to the shipping facilities, by constructing a double track railway upon the entire water front, for an interchange of traffic from car to ship and from ship to car. The want of such facilities has been the means of diverting a very large amount of the grain shipments to other points. A railroad of this kind owned and kept in repair by the State, would tend to lessen the charges at the port of San Francisco, which have been, and are still, a detriment to our shipping interest. The facilities for transferring loaded cars across the bay are of such a character that their transfer involves but little more expense than switching to a side track. Besides, our deep water fleet discharges its cargoes alongside our wharves. Were there such a road, with switches, for cars to run out upon the wharves, it would