expressed in the rates, and will never even be figured on by the steam ship lines doing a coastwise trade, except as it may figure in their profit and loss account at the end of the year. But it will never even be figured in basing the rates on which they carry lumber, coal, and various other things.

Senator WALSH. That is, they will absorb it all?

Mr. OUTERBRIDGE. They will absorb all that the competitive state of the business will allow them to absorb.

Senator WALSH. Let me ask you there: Would you expect the competitive conditions to be such as to promote the building of other ships?

Mr. OUTERBRIDGE. I do not think that anybody can at this time determine what the effect of the Panama Canal is going to be on the traffic of the world. There was a great meeting attended by over 1,100 men in New York not long ago, the Economic Club of New York, at which this subject was the topic for discussion of the evening. The officials of that club thought they would get the best informed men they could to come there and speak on that subject. Col. Goethals was there, and made a brief address on the physical features of the canal. There was nobody who spoke who did not say they were incapable af attempting to forecast what the ultimate effect of this new avenue of commerce was going to be on the commerce of the United States or foreign nations, or its effect on the railroads of the country. And I believe that nobody can foresee it and foretell what it is going to be.

As to the third phase of the question, the political and business expediency of this question, it seems to me that there is a very strong argument against this exemption. If these tolls are exempted now they will be forever exempted. It will be politically impossible to ever impose the tolls at some later date. If these tolls are applied now, and if with the growth of the traffic it is found that they are not needed as a revenue-producing lever, and if with the time that will then have expired this country will through diplomacy or other means negotiate a clear understanding as to an interpretation of this matter, so that there can be none raised by any foreign nation or our own people, any question as to our moral rights, it can be simply wiped out by the simplest form of resolution, as it was taken off in the Erie Canal in New York, when it was deemed expedient and the wise thing to do.

So speaking for myself, I find as Mr. Page stated here, and as I move among business men of all classes, that this is distinctly the universal impression. I would not say unanimous, but I would call it sufficiently one-sided to be universal, that on the three grounds of moral right, of economic advantage or disadvantage, and of political and business expediency, that the preponderating argument is all opposed to this exemption.

That concludes all that I think I can say, Mr. Chairman.

The CHAIRMAN. Is there any Senator who desires to ask any questions?

Senator BRANDEGEE. Did you say you were the president of the Merchants' Association of New York?

Mr. OUTERBRIDGE. A director of the Merchants' Association.

Senator BRANDEGEE. I wanted to ask you if you knew anything about the allegation that these ocean rates were practically controlled by conferences?

Mr. OUTERBRIDGE. The ocean passenger rates are largely controlled by conferences, and the freight rates in various cases are also. I know of no line of business in which the competition is more terrific than it is in the transporting of freight on the water. The fact that the great maritime nations of the day are the great maritime nations is largely due to the fact that they are all nations with very small territory and a very dense population, very highly and intensively developed internally, so that the opportunities for the investment of capital within their own country are nothing at all of the magnitude or the opportunities that still remain in this country. They have got to find outside territory, colonies for their people, and then they have got to find the avenues of transit between them for their people, and they never establish lines until they have built up a trade. They never give what you may call subsidies to freight lines of steamers. It is contrary to the policy of all the maritime nations.

But after freight lines have established themselves by reason of population and the business that has been built up, and when it then becomes necessary to get a quicker transit for mails and passengers, and for carrying exchanges, and a small amount of very high-class freight, on which the interest and the tying up of capital amounts to much, then in a few cases those lines are subsidized to get them going. But the Hamburg-American Line, which is the largest one as to tonnage in the world, has never given a dollar of subsidy to any ship it owns or any route it owns.

Senator BRANDEGEE. You say it never gave any subsidy?

Mr. OUTERBRIDGE. It has never received a dollar of subsidy for any ship or line it operates, and it is the largest and perhaps the most progressive one as to tonnage in the world.

Another thing that we must recollect is that there has been a historical tendency for generations in these countries toward reaching out into the uttermost parts of the world and colonizing, exploring, followed necessarily by the traffic, and the lines to carry that traffic. Here we have been reaching inwards and developing internally, and if we are ever going to have a merchantile marine in the true sense of that word we have first of all to find capitalists to go into it. Here is the stock of the International Mercantile Marine Co. hawked around at $3 a share, and the preferred stock at $11 or $12 a share. If an American wants to own steamship lines, there is an opportunity to buy it all up. But we have not the talent in this country to manage them. It is a business you have got to be educated in. It is not like running a railroad where you have a clientele of people depending upon you. The ocean lane is open to everybody, and it is by the efficiency of your management, and the way you treat your foreign consignees, and your shippers, that you hold your business together, and then by that means drive off the oppositions that are continually coming on the line.

I have two brothers who are in the steamship business in New York. They have been in it for 40 years, and are still in it successfully, and there has never been a five-year period in the whole of the time that they have not had the most terrific kind of opposition, from one company after another, because those people believed they were

running a profitable venture. And they have only been able to live, first of all, by the extremely fair treatment to their clientele, so that they always had their shippers and consignees more friendly to them than anybody else; and, secondly, by the extreme efficiency with which they operated and developed the business.

Why was it when the American Line had a subsidy they could not run their steamers successfully, apart from the question of the limitation of our navigation laws? It was because they did not know how to run that kind of business.

The CHAIRMAN. Was it not overcapitalized?

Mr. OUTERBRIDGE. Not originally. Of course all those lines when they were consolidated into the mercantile marine were overcapitalized in the sense that the English lines went in with the good will, if you call good will overcapitalizing, but it did not take long for the market to squeeze out in the overcapitalization. Its securities have never sold at any overcapitalization in the market. But if we are ever going to have a mercantile marine here we have first of all to find the capital, and the only way I know to find the capital would be if this Government would pass a law that for a period of 15 years anybody would have a right to buy ships in the cheapest market of the world, Norway, Sweden, England, or Germany, or wherever it may be, and to operate them under equally free conditions with foreign nations. Make it a limited period; 15 years is long enough. It is almost the life of a ship in these days. She is outclassed by them if she is not worn out, and she has only the worn-out value. In 20 years you have got to earn the capital and provide for the amortization of the capital. Give us the opportunity for 20 years, and then let us see if the capitalists are seeking that kind of an investment. Senator BRANDEGEE. Do you mean merchant marine that will

be engaged in our foreign trade?

Mr. OUTERBRIDGE. I mean a merchant marine that will be engaged in the foreign trade of the country, carrying the freight, not carrying some passengers and merely high-class freight, like silk and mail.

Senator BRANDEGEE. You have spoken of the intensity of competition that exists by reason of the fact that anybody who wants to put on a vessel can use the lane of the established line. Prof. Huebner the other day stated, if I recall the substance of his testimony, that the very intensity of the competition was what drove the lines into the so-called conferences.

Mr. OUTERBRIDGE. Yes.

Senator BRANDEGEE. Whether there was a distinct agreement or not, the result of it was that the rates were fixed so that competition was practically eliminated among these lines.

Mr. OUTERBRIDGE. It is never eliminated, because there is always somebody else coming along.

Senator BRANDEGEE. That is what they call the potential competition; not the actual competition.

Mr. OUTERBRIDGE. Just as soon as the combination of the lines establish rates that are again at a paying basis some other line

comes on.

Senator BRANDEGEE. You speak with some knowledge of the shipping business. You are able then, are you not, to state as to specific instances or in general as to the profits of the American coastwise trade?

Mr. OUTERBRIDGE. I have not the slightest knowledge of it. I could not give you any information about it.

Senator BRANDEGEE. You do not know, then, whether it is necessary to give them any subsidy?

Mr. OUTERBRIDGE. They have a monopoly of the business. No other nation can engage in it.

Senator BRANDEGEE. I know that. In view of the fact that they have a monopoly, that they are what they are, as numerous as they are, and carry what commerce they do, do you know of any reason why they should have a subsidy from the Government?

Mr. OUTERBRIDGE. Not the slightest.

Senator BRANDEGEE. But if there is any, you, as I understand, advocate giving it to them direct from the Treasury of the United States and not by way of a tolls exemption?

Mr. OUTERBRIDGE. Unquestionably.

Senator WALSH. I understand you are opposed to that policy? Mr. OUTERBRIDGE. Absolutely, because I believe it will be absolutely ineffective within any sum that we could dare to contemplate. As a matter of fact, there is a great deal of misconception about the question of freights. The margin on the carrying trade, as I have already said, is extremely hazardous, and very small. The freight is paid by the consumer, the foreign merchant. If we sell him goods, it is always sold on the c. i. f. basis. We figure the freight of the day in with our insurance, etc., and he has got to pay it, whatever it is. Whether it goes in a British vessel, a Dutch vessel, or a German vessel, the consignee has to pay the freight. We lose nothing in this country by that except the narrow margin of profit, coupled with the terrific hazard in doing the business.

Senator BRISTOW. I understood you to say you were in the mercantile business?

Mr. OUTERBRIDGE. Yes.

Senator BRISTOW. Exporting and importing?

Mr. OUTERBRIDGE. Yes.

Senator BRISTOW. What is your line of business?

Mr. OUTERBRIDGE. The natural products of this country.
Senator BRISTOw. That is, agricultural products?

Mr. OUTERBRIDGE. Flour, provisions, and leather, and butter and butterine. We have a wide variety of products. I also have some domestic manufacturing interests in which the goods are exported as well.

Senator BRISTOW. Did I understand you to say you were interested in some steamship enterprises?

Mr. OUTERBRIDGE. I have been agent for steamers for years, but I have never owned any stock in steamship companies.

Senator BRISTOw. What steamship companies were you agent for? Mr. OUTERBRIDGE. Not for regular liners, but for tramps coming here seeking business.

Senator BRISTOw. As a rule, the tramp ships do not belong to the companies that maintain the liners?

Mr. OUTERBRIDGE. As a rule, each tramp ship is a company herself. There are some individual firms abroad that own a large number of so-called tramp steamers that run all over indiscriminately, picking up business where they can, but the majority of tramp steamers are owned in sixty-fourth shares, and each ship is a company in herself.

Senator BRISTOw. They are not controlled, then, by the line companies?

Mr. OUTERBRIDGE. Not at all.

Senator BRISTOW. They are in competition with the line companies, are they not?

Mr. OUTERBRIDGE. Well, generally not, because the line companies' boats are generally fast freight boats that carry very little freight and only freight of the higher classes and passengers. There are, of course, some established freight lines that go to the Far East, and to Australia, and South America, that are more particularly freight lines than passenger lines.

Senator BRISTOW. The tramp ships, then, are not in any of these combinations to maintain rates?

Mr. OUTERBRIDGE. None whatever, and they outnumber in number and tonnage all that are in any combinations many times.

Senator BRISTOw. What proportion of the commerce of the world— that is, the marine commerce is carried by tramps and by linersthat is the tonnage; the freight?

Mr. OUTERBRIDGE. I could only hazard a guess; but I should hazard a guess at certainly 85 per cent of the tonnage of the world is carried in tramps and 15 per cent in liners, so called.

Senator BRISTOw. You say the competition between these vessels is very severe; that they contend for business against each otherthese tramp ships?

Mr. OUTERBRIDGE. Most extraordinarily so. If you could get a few of our ship brokers down here, they could give you a great deal of information on that score. I do not know any other business that there is more run after and a keener solicitation for business than in the freight business except, perhaps, the advertising business.

Senator BRISTOW. You spoke of your brothers being in the steamship business. Do they own the tramp lines or line steamers?

Mr. OUTERBRIDGE. They run liners. One line is almost successful, a passenger line, and all the other lines are more particularly freight lines.

Senator BRISTOW. What line is that?

Mr. OUTERBRIDGE. They run to Bermuda and to the British West Indies, almost all the way down as far as British Guiana, carrying American produce out and produce of the islands back.

Senator BRISTOW. What flag do they sail under?

Mr. OUTERBRIDGE. The English flag.

Senator BRISTOw. They are English-built ships?

Mr. OUTERBRIDGE. Yes; English-built ships.

Senator BRANDEGEE. What is the average net tonnage of these tramp steamers which carry 85 per cent of the ocean-borne commerce of the world? I have heard it stated that it was about 3,000 tons on the average.

Mr. OUTERBRIDGE. It is very difficult matter to strike an average, but the tendency in recent years has been for larger units.

Senator BRANDEGEE. Running from what to what tonnage?

Mr. OUTERBRIDGE. Oh, I should be inclined to estimate the average tonnage at over 3,000. I should estimate it at 4,000 to 5,000. There may be a large number of smaller ships running at shoal draft to shoal-water ports, but their tonnage in the hold will not average