The rail charges into and out of the Southern States and the system of rates that has developed in that section, as will be shown in a later chapter, are largely influenced by the competitive rates and service of the coastwise vessels. Likewise the rates on the transcontinental traffic moving west and east between the Atlantic and Pacific sections of the United States are absolutely controlled by the competition of the water routes via Panama and the Isthmus of Tehuantepec. Moreover, it should be especially noted that water competition not only controls certain specific railway charges, but also exerts much influence upon the general systems of rate making prevailing in different sections of the country. The steamship and other vessel lines engaged in coastwise traffic along the Atlantic seaboard are to some extent owned by the railroad companies, but are for the most part independent of the railroads; while on our Pacific coast the opposite is true. However, the effect of the ownership of the Pacific coast lines by the railroads is rather to regulate than to eliminate water competition. The differences between the services performed by railways and waterways cause the two carriers to be competitors; then, too, the railway companies owning the water lines are traffic rivals, each striving to secure an increasing share of the total tonnage seeking transportation. The Great Lakes exercise an influence upon railways rates and rate making second only to that exerted by the oceans. The package freight lines on the lakes are owned by the railways, but these package lake lines are operated by rival railroads as parts of through competitive routes in order that each railway may secure a share of the large volume of traffic moving east and west on the Lakes. Those are your views to-day, Doctor? Prof. JOHNSON. I think, Senator, when I get out another edition. of that book I will change some of those observations. The CHAIRMAN. In what respect? Prof. JOHNSON. That statements in the book were, as the lawyer would say, true to the best of my knowledge and belief, in 1910. The CHAIRMAN. No; in 1912, I think, that was published. Prof. JOHNSON. The book was published in the beginning of 1911 and was written in 1910. Since then I have acquired more information than I then possessed in regard to the relation of the steamship lines to each other and to the railroads, and I would not express myself to-day exactly as I did in 1910. The CHAIRMAN. I want to read this one additional line at the bottom of page 358, in which you sum up what you stated in the two preceding pages, practically in a single line: Railway rates in the future will probably be increasingly subject to the regulation of waterway competition. Do you think your judgment on this matter to-day is better than it was two years ago? Prof. JOHNSON. I am sure of that; yes, sir. The CHAIRMAN. You think you were in error two years ago? The CHAIRMAN. Is there any possibility of our having the pleasure of meeting two or three years hence, when you may modify your testimony to-day? Prof. JOHNSON. I hope I shall meet you two or three years hence, Senator. I do not know about changing my testimony. Senator BRANDEGEE. What changes have occurred to lead you to modify your views? Prof. JOHNSON. Senator Brandegee, the integration-if I may use that word-of the coastwise steamwise steamship carriers has gone on most rapidly since 1910, and what was true of the broad effects of competition among ocean carriers, and even among railroads, in 1910, is to a very much less extent true to-day. The facts that have been brought out by the Committee on Merchant Marine and Fisheries of the House in its investigations throws a flood of light upon a subject that was only partly understood four years ago, when the book that has been quoted was written. I doubt whether any scientist hopes to say, at any one point in his intellectual development, the last word on any large question, even in natural science, and much less must that be true of economic science. Senator BRANDEGEE. What I fail to see-and I wish you would shed some light upon it is, if the steamship concentration has increased, you held the view read by Senator O'Gorman, why is it not still more effective now than it was then as a competitor of railroads? Prof. JOHNSON. The steamship companies will wisely accept the railroad rates as they are and leave them alone and adjust their steamship rates with reference to the railroad rates instead of entering upon any destructive warfare against the railroads. Likewise the railroads for the reasons I have tried to explain-have too much at stake, too much to lose by a destructive warfare to engage in a struggle to defeat the carriers by water. Senator BRANDEGEE. Your theory is then not that they could not compete if they wanted to but that they would not compete? Prof. JOHNSON. That is exactly so. If they chose to compete they are more powerful to-day than they ever were before. Senator THOMAS. Doctor, is it not a fact that the greater portion, and in some instances, all of the water fronts of the seaboard cities of the Pacific coast are owned by the railroad corporations? Prof. JOHNSON. The State of California and the State of Washington have reserved State ownership the tidal frontage. Senator THOMAS. The State of Washington has improved and sold all of its water frontage to the Northern Pacific Raliroad Co., have they not, or given it away? Prof. JOHNSON. It has given the shippers, including the railroad companies, lease control over a large part of the frontage, but the Constitutions of both States, if I remember correctly, reserve to State ownership the frontage at tidal waters. Senator THOMAS. The Constitution sometimes does not amount to much between friends. My information is that with the exception of the new front at San Pedro, controlled by Los Angeles, that the water front of all of the seaboard cities of the Pacific coast-that is, the American seaboard cities-are either owned or controlled by the great lines of transcontinental highways. Senator Chamberlain said in the Senate the other day that the city of Portland was engaged in But, assuming that to be so, I wish you would tell this committee recovering part of it in anticipation of the opening of the canal. how the coastwise traffic, whether it pays tolls or not, is going to compete under those circumstances with transcontinental lines of railway for traffic, if they must make arrangements with those companies for the facilities of wharfage, etc. Senator WALSH. Before he passes from that, I would say there is scarcely any use in basing an inquiry upon the assumption of such conditions of things, because, as a matter of fact, no such condition obtains, at least in the State of California. I know, as a matter of fact, that even the Southern Pacific line in that State does not control the wharfage rights in the city of San Francisco. 1 Senator THOMAS. It controls the est portion of it. Senator WALSH. The Santa Firoad Co., I know, has extensive wharfage rights there as well as the Southern Pacific, and so likewise has the Western Pacific. I am quite sure that the ferry even is owned by the city of San Francisco and I feel entire confidence in the assertion that the city of San Francisco owns all of its rights there, and the city of Oakland on the other side. Senator THOMAS. I know that San Francisco owns the ferry boat State of Colorado, but I am proceeding upon such information as I have acquired, and I would like an answer to the question, if it can be answered. Prof. JOHNSON. The assumption which Senator Thomas has indicated is not one that I would admit. The facts are not in accordance with the assumption altogether. Senator THOMAS. Let us exclude altogether the State of California and take the State of Washington and the city of Portland, Oreg., and answer the question as to the traffic of those two States. Prof. JOHNSON. If the entire frontage were controlled by railroads and there were no public wharves, it would be comparatively easy for the Panama Canal traffic in coastwise business to be reduced to very small proportions, because a route that leads to a bottled-up terminal can not be used for traffic. I assume it will be the duty of every port authority to provide adequate public terminal facilities. That can be done in one of two ways. It can be done by parceling out a portion of the terminal to large transportation companies and reserving for public uses enough of the terminal to provide facilities for other than the regular shippers, or the entire frontage, as in New York City, with certain exceptions, can be reserved to public ownership and development. I would personally advocate the latter course of making the terminals public in the fullest sense of the word. New Orleans has that system. New York is approaching it. It is by far the best system. Senator THOMAS. I quite agree with you that that is an essential prerequisite to obtaining substantial benefit from the Panama Canal proposition in those places. Prof. JOHNSON. And may I add also that that is a prerequisite to the general use of our waterways in all parts of the country. Senator THORNTON. Dr. Johnson, the chairman of the committee. read to you an extract from your book on "Elements of Transportation," found on page 246 of that volume, in which you made the statement that the canal would be of benefit and great service to different parts of the United States, covering all parts practically, and that its main benefits will accrue to the farmers, manufacturers, lumbermen, and miners in different parts of our richly endowed country, and the chairman asked you if you still held that opinion, and you answered that you did. I wish to ask you whether or not you consider the benefit that will accrue to the United States from the building of the canal to be dependent at all upon the exemption of coastwise ships from the payment of tolls? Prof. JOHNSON. No; and I tried to state in my testimony the reasons for that. Senator THORNTON. Then, Professor, I wish to ask you if you consider anything that you have said to-day in your testimony to be in be Senator WALSH. I want to ing what form of aid would you disposed to extend to the ships engaged in the overseas traffic in lieu of possible exemption from tolls? Prof. JOHNSON. Does the committee wish to ask me to go into the subject? The CHAIRMAN. Yes, you may answer. Senator WALSH. If you will state it briefly. Prof. JOHNSON. Briefly my recommendation would be that the United States Government follow substantially the same policy that has been followed by Great Britain, Germany and Japan, which countries select certain services which they wish it to have rendered, pick out the lines that are to render those services and give those selected lines substantial Government aid so that they are able to perform those services adequately and in successful competition with foreign lines. Senator SIMMONS. That is a plain ship subsidy, as the term is ordinarily understood, voting them a gratuity out of the Treasury? Prof. JOHNSON. Yes, sir. Senator THOMAS. Have you ever considered throwing the canal open without any tolls at all to all the world? Prof. JOHNSON. I think that would be very bad policy, sir. Prof. JOHNSON. I have thought of it, yes; but my reasoning has been in the opposite direction- that we ought to make the canal carry itself. Senator THOMAS. We expend, do we not, enormous amounts of money for the improvement of our harbors which are used, so far as over-seas traffic is concerned, almost entirely by vessels of other nations; we are maintaining a most perfect system of coast lights and buoys; we are deepening our channels all the time; we are expending $40,000,000 to $50,000,000 per annum for the improvement of our harbors, all in the interest of commerce. Following that, is not the policy of free tolls for all traffic consistent with our general policy for improvement of navigation? Prof. JOHNSON. I think the Panama Canal is a work that stands by itself and is not to be classified with river and harbor improvements or inland canals. Senator THOMAS. It is analogous to the Soo Canal, is it not? Senator THOMAS. Is it your view that the lines of traffic tend to crystallize or harden in certain directions after they have been established for some time? Prof. JOHNSON. They tend to become more firmly established. Senator THOMAS. Can we secure any of the traffic that now uses the Suez Canal without offering inducements that will be equal to those enjoyed by that route for over-seas traffic? Prof. JOHNSON. You mean by way of the Panama Canal? Prof. JOHNSON. The extent of the competition that will take place between the Panama and the Suez Canals is very much overestimated. When one comes to study into it carefully, he finds that each waterway has its own well-defined traffic territory, and that the two traffic fields do not very greatly overlap. Not much traffic will be diverted from Suez to Panama, nor could the Suez company hope by a rate 43756-1414 cutting policy to divert any considerable portion of the Panama traffic. Senator THOMAS. So far as over-seas traffic is concerned it is true, is it not, that with the exception of New Zealand the Suez Canal is the shorter route of the two? Prof. JOHNSON. It would depend of course upon where you started from. Senator THOMAS. Well, start from New York or Liverpool, or any of the Asiatic ports or Australia. Prof. JOHNSON. If you start from Liverpool you will get to any part of Australasia except New Zealand by a shorter route by way of Suez than Panama. You will get to New Zealand by 550 miles shorter distance by way of Panama than via Magellan. If you start from New York you will get to all parts of Australasia and to all parts of Asia north of Hongkong and Manila by a shorter route if you go by way of Panama than if you go by way of Suez. Senator THOMAS. My information is, while it may not perhaps be accurate or definite, that with the exception of the New Zealand traffic the other is the shorter route. Prof. JOHNSON. For Europe, not for the United States. Senator THOMAS. However that may be, is it not a fact that there are a number-quite a large number of trading points along the Suez route, both before you reach and after you leave that canal, that are not afforded by the Panama route? Prof. JOHNSON. Between Liverpool, speaking of Liverpool as a representative European port, and at the Suez Canal there are numerous possible ports for call. After passing Port Said, however, there is a long run to Singapore, equal to the distance surprisingly so, but none the less a fact-equal to the distance across the broad northern Pacific, and there is practically only one important port of call on the way and that is at the Island of Ceylon. Senator THOMAS. Where do they coal? Prof. JOHNSON. The vessels which pass eastbound through the Suez Canal fill their bunkers to the limit at Port Said with English or Welsh coal, and pick up Java coal-that is, the East Indian coalpossibly at Ceylon, but they more often run through to Singapore. Senator THOMAS. That coal costs about $2.50 a ton, does it not? Prof. JOHNSON. At Suez the contract price for 1912-I do not have the figures for 1913-was $6.20 or $6.30-over $6. Senator THOMAS. When was that? Prof. JOHNSON. In 1912. Senator THOMAS. $6? Prof. JOHNSON. Yes; the price of coal at the mines in Wales is $4, then on top of that has to be the freight cost, and, as you know, freight from Europe to the Suez moves in large volume, so that the coal has to pay a good stiff rate to get to the Mediterranean ports. Senator THOMAS. The coal, even at $6, is much cheaper than could be obtained by the other route, is it not? Prof. JOHNSON. No; I have gone into that question quite fully in a long chapter in my report on Panama traffic and tolls, in which I present detailed calculations of the actual fuel cost for round trips by way of the Suez and by way of Panama between designated north Atlantic and Pacific ports. It was to me a surprising fact that the coal |