Senator WALSH. Do you figure that there would be more automobiles manufactured in your community and shipped if you had water communication?

Mr. DONNELLY. Without a question of doubt by the rate we would get by water.

Senator WALSH. Do you think of any new line of business that would be developed?

Mr. DONNELLY. The American Bridge Co. has a plant along the waterfront of Trenton. They are planning to enlarge their ironwork, their bridge work. That could all go by water and no doubt will go by water. They are planning to build steel barges there, also, that can be shipped by water to the Pacific coast.

Senator WALSH. What are they used for?

Mr. DONNELLY. For transportation purposes.

Senator WALSH. On rivers?

Mr. DONNELLY. On lakes and rivers.

Senator BRISTOW. Mr. Donnelly, the Government spent something like five and one-half million dollars on the Cape Fear River in North Carolina. Do you think there is any more reason why tolls should be charged at Panama than on the Cape Fear River?

Mr. DONNELLY. Do I think there is any reason why they should be charged?

Senator BRISTOW. Yes.

Mr. DONNELLY. Not to follow the policy the Government has established for free waterways and highways.

Senator BRISTOW. All the people of the United States paid for this five and one-half million dollars improvement on the Cape Fear River, did they not?

Mr. DONNELLY. Yes, and they will be getting returns in new industries and new developments.

Senator BRISTOW. You can see no difference between expenditures of that nature in improving our river transportation and the canal construction principle?

Mr. DONNELLY. As far as the coastwise business goes, no.

Senator SIMMONS. You say you can see no difference between an internal waterway and an international waterway?

Mr. DONNELLY. I do not look upon the waterway as an international waterway. I look upon it as purely a national waterway, in which we are the owners as much as the Delaware River, and the war conditions, battleships, is the one that probably leads up to the question of regulations more than anything else, to prevent it being occupied by enemies in time of war.

Senator SIMMONS. If we are the owners of it in the same sense that we are the owners of the Cape Fear River, of which the Senator has spoken, of course we owe no obligation or duty to any other nation; and we could charge the German ships one rate of tolls, the English ships one rate, and the French ships another rate, just as we might see fit?

Mr. DONNELLY. I do not think it would be a very wise policy to pursue to discriminate against different nations.

Senator SIMMONS. You think we could do it?

Mr. DONNELLY. Not from a business viewpoint; no.

Senator SIMMONS. You think we could do it without violating any obligation?

Mr. DONNELLY. I would not admit that we would do it. Senator SIMMONS. But you think we could do it without violating any obligation?

Mr. DONNELLY. I think we can do anything we want with the Panama Canal, the same as we can with the Hudson River or the Delaware River.

Senator SIMMONS. Do you think now, without violating any contractual obligation with other nations, that we can charge the ships of England one rate of tolls, the ships of Germany a different rate of tolls, and the ships of France still a different rate of tolls?

Mr. DONNELLY. I would not admit that we could, because it is impracticable and bad business judgment.

Senator SIMMONS. But you think we can under the treaty without violating it?

Mr. DONNELLY. I think you could if you wanted to-if you desired to

Senator SIMMONS. And yet with that answer

Mr. DONNELLY. I would not attempt to do it.

Senator SIMMONS. And yet in your answer to my question you have assumed to discuss this treaty and to express an opinion as to what the rights of the United States and the rights of other nations. under that treaty are.

Mr. DONNELLY. Is that all you desire?

The CHAIRMAN. That is all.

Senator BRISTOW. Just a moment. The Senator has intimated that we had a right to charge a different rate of tolls to GermanySenator SIMMONS. On, no, Senator.

Senator BRISTOw (continuing). Or England in his question to you. Senator SIMMONS. I have not. I asked him if he thought so. I have not intimated anything.

Mr. DONNELLY. You made the proposition yourself, Senator-would we do that or could we do that.

Senator SIMMONS. I asked you, my dear sir, if you thought we could do that without violating our treaty obligations.

Mr. DONNELLY. I have not admitted that we could do it or that we would do it.

Senator SIMMONS. I have not said you could. I know you can not. Senator BRISTOW. As I remember the Senator's question, it was, Have we the same right to do it in Panama as we would on the Cape Fear River.

Senator SIMMONS. I asked him that question; yes.

Senator BRISTOW. Have we any more right to discriminate against foreign nations in the use of harbors than we have in the use of the canal? I ask the Senator this: Does not the favored-nations clause in all our treaties prevent us discriminating between two countries? Senator SIMMONS. I think you misunderstood my question altogether. He said, as I understood him, that we had the same rights in the canal as we did in any inland waterway of this country; that we could deal with it just as we could with any inland waterway in this country. I then asked him if that is so, do you maintain that we could charge a German ship one rate through the canal, an English ship another rate, and a French ship another rate without violating our treaty obligations? That is what I asked him.

Senator BRISTOW. My contention, Senator, is that that is an inference, then, that we could pursue the policy upon a river.

Senator SIMMONS. That means this: The witness said we had just as absolute control over this international waterway, as I call it, as we have over an internal waterway; that we could do our will with respect to this international waterway just as we could with respect to an internal waterway. Of course we can charge in our internal waters the ships of the world a different rate of tolls if we want to. Senator BRISTOW. For different nations?

Senator SIMMONS. Yes; in our internal waterways, if we have absolute control over them.

Senator BRISTOW. There is no use for us to argue that question. The CHAIRMAN. That is all.

Senator SIMMONS. There may be some treaties that would change that, but he did not recognize any treaty rights at all. That is the point I was making.

STATEMENT OF MR. WILLIAM H. RANDALL, PRESIDENT JOHN S. EMORY & CO. (INC.), BOSTON, MASS.

The CHAIRMAN. You are a member of the corporation of John S. Emory & Co. ?

Mr. RANDALL. Yes; president of it.

The CHAIRMAN. You are described in the card you hand me as ship brokers, steamship agents, and commission merchants.

Mr. RANDALL. I am president of the Emory Steamship Co. and the Shawmut Steamship Co. I came over from Boston last night for the privilege of speaking to you for about three minutes. I am simply a plain business man. I came on my own initiative. I am affiliated with nobody but the enterprises I am going to speak to you about.

At the time that the law was passed allowing coastwise vessels to go through the canal free we formed two or three steamship companies, with the intention of operating a line between Boston and Pacific coast ports. We now have four steamers in operation and we are building two steamers at Quincy, Mass., which will be completed in June, which cost $1,200,000. We have financed a terminal in Boston which is costing $1,600,000.

We have in the hands of the builders plans for two more steamers, with the probability of four. Our operating plan is to be between Boston and Pacific coast ports, and with this terminal of which I speak there is connected a lumber yard, which is to be a general distributing lumber yard for New England, and by this line we expect to bring many millions of feet of lumber from the State of Oregon to the city of Boston for distribution through New England. These steamers we are building are built and adapted particularly for this lumber trade.

If we are to pay the Panama Canal dues on these steamers it will cost us from $10,000 to $12,000 per round trip on each one of these boats, and we intend to make four trips a year, which will be in the neighborhood of $40,000 to $50,000 for each boat each year, which simply means that we can not bring lumber from the State of Oregon to Boston to compete with that lumber brought in British and foreign bottoms from Vancouver to Boston.

One of the questions asked here by a Senator why that can be so I am going to answer. We could build these boats in England for $400,000 apiece. We can operate the English-built boat for 15 to 25 per cent cheaper than our American boat. The result is that the discrimination in favor of American coastwise shipping on the tolls question will put me in a position where I can compete with the foreign boat and bring American products from Portland and Seattle to Boston, where I can not do it if under the disadvantage of paying the same tolls that a foreign vessel does.

There is no monopoly in the coastwise trade, so far as the earnings of the steamships is concerned. People generally seem to think that the men engaged in the coastwise transportation service have a perfect bonanza. The fact is they have the greatest competing line of business that I know of, so much so that there are existing to-day very few American coastwise steamships lines, and I have just taken over one which I had to recapitalize and reorganize, because after running for three years in the coastwise trade it was a failure. We had to infuse $300,000 to $400,000 more capital into that existing line in order to put it back on its feet and try to make it a paying investment, and for three years the stockholders of that line never have received a single cent of dividends.

The CHAIRMAN. Was it an alliance or connected with any railroad system?

Mr. RANDALL. Not at all; not in any way. They were both running in the New England coal trade, running from Hampton Roads, Philadelphia, and Baltimore, all through New England, Boston, Portland, and Portsmouth. There is so much competition in the coastwise trade that it keeps the rates sufficiently low to keep the shipping men nearly poverty-stricken. That is a fact, and I can demonstrate it by figures.

Senator THOMAS. Are you doing any coast-to-coast trade?
Mr. RANDALL. We do a large coast trade now.

Senator THOMAS. Coast-to-coast?

Mr. RANDALL. No; but we will have these boats off in June, and we intend to begin operations as soon as the canal is opened.

Senator THOMAS. Can you tell me what the cost is of breaking bulk and shipping across the Tehuantepec Railroad?

Mr. RANDALL. No; I can not. The American-Hawaiian Line, who do that business largely, I believe have never advertised what proportion of their freight rate goes to the railroad.

Senator THOMAS. If it would not interrupt, I should like to call your attention for a moment to the statement of Congressman Humphrey, which was laid before this committee the other day. He says: 'You can take a cargo of fir lumber to-day-I will say 1,000 feet to-day-and you can send that lumber down the Pacific coast on a vessel to the Isthmus, 103 miles across the Isthmus (I think it is 184 miles) by the Tehuantepec Railroad, put it on another vessel, bring it up to Philadelphia, put it on the railroad there, send it back to Indianapolis for about 1 cent less, or 2 cents less, than you can send it direct from Seattle to Indianapolis or any of the Pacific-coast ports." I then asked him if the rate across the Tehuantepec Railroad was not greater than the amount of these tolls, and he said: "The rate in that way, handling and unloading, of course is a great deal greater than going through direct."

Assuming that testimony to be true, and I have no doubt it is, I should like to be informed as to the manner in which the $1.20 rate, which is so much less than the present rate, is going to so materially disturb your business?

Mr. RANDALL. For the reason that when the Panama Canal is open and operation is taking place the freight rates through that canal will be cheaper than they have been formerly. That is, the rates of freight from New York and Boston to the Pacific coast ports will be cheaper than they have been, either going around the Horn or across the Isthmus by rail.

Senator THOMAS. But with the higher rates, as they are now, this gentleman says that the competition is not only possible, but successful, even including a railway carriage from Philadelphia to Indianapolis.

Mr. RANDALL. I think that is true. The rail rate across the continent on Oregon fir is in the neighborhood of $20 to $24 per thousand. We expect to bring it around in our steamers from Portland, Oreg., to Boston at $10 per thousand. We shall go into competition with the existing lines that are now operating in the Pacific coast business, and that always means lower rates. It also means that if we pay tolls and are able to operate at all—which may be doubtful-we shall be able to bring a cargo and send it by rail very much less far into the interior and take it on the other side from a less distance interiorily than we would if the tolls were free.

Senator BRANDEGEE. Do you mean if you can be exempted from the tolls through the canal you can compete successfully with the British foreign trade from Vancouver to Boston?

Mr. RANDALL. Yes; and if we can not do that I think it will shut out our operations in lumber largely in the way that we have at present devised. It probably means that we shall have to run the boats elsewhere and that we shall have to, if we go into the lumber business as we are prepared to do now at a very large expense at these terminals-it means we shall probably have to take Canadian lumber and bring it here in British of foreign bottoms. We never would have built these boats or started on this plan had we felt that the law was to be changed whereby we should have to pay tolls through the canal.

Senator THOMAS. When did you begin their construction?
Mr. RANDALL. Six months ago; five or six months ago.

The CHAIRMAN. Do you know whether other owners of ships have commenced the construction of new vessels just as you did in reliance on the good faith of the legislation passed by Congress 15 months ago? Mr. RANDALL. Yes, sir. I know two operating lines now that have done that.

Senator BRANDEGEE. If the treaty prevents discrimination in favor of our shipping, the operation you have described would be prohibited by the treaty, because you admit that by getting the exemption of tolls through the canal you can successfully compete with the British foreign shipping?

Mr. RANDALL. Yes, sir; but only limited strictly to our coastwise trade.

Senator BRANDEGEE. I understand you claim that in the coastwise trade you could successfully compete with the British foreign shipping from British Columbia to Boston?