Senator SIMMONS. That ship would not be engaged purely in coastwise trade nor purely in the foreign trade, would it?

Mr. DUNN. Yes; but I merely give his statement as he made it at

the time.

Another statement he made to me I think is interesting, as it tends to disprove the current idea that American ships can not be operated as cheaply as foreign ships. He said:

We have figured out the cost of operating the ships very closely, and with coal at $4 a ton we know we can carry a ton of ore 3,000 miles for a dollar and a half.

This surprised me, because, at the same rate, the ton of ore could be carried 5,298 miles, from San Francisco to New York, for $2.65, and could be carried 7,866 miles, from San Francisco to Liverpool, for $3.90. These figures are for the operation of American coal-burning steamers paying $4 a ton for coal. I know of no lower figures of freight carriage by coal-burning foreign ships for the same distance. Senator WALSH. That is exceedingly interesting to us. That will make the Swansea smelter a competitor with the coast smelters, which will be cheering news to our people.

Mr. DUNN. It was my knowledge of this which led me to make the former statement.

Senator SIMMONS. Let me ask you right there: I understand you that by substituting oil for coal you thought the freight for transporting lumber could be brought down from $9, the estimate which some of these gentlemen have given us, to $4 or $5?

Mr. DUNN. Yes.

Senator SIMMONS. By substituting oil for coal the rates on these other commodities that you have enumerated there could be correspondingly reduced from the rate given?

Mr. DUNN. Wherever I indicate coal as fuel the rates would be reduced by the use of oil for fuel.

Senator SIMMONS. Let me ask you right there, if you can get your rates down by using oil as low as you estimate, from $4 to $5, on lumber, and correspondingly on other heavy products, railroad competition would be utterly impossible under those terms, would it not? Mr. DUNN. Yes; that is what I said in the beginning. There would be no transcontinental railroad competition.

Senator SIMMONS. Would not the difference between the rail rate be so enormous that the little toll that would be charged would simply be negligible?

Mr. DUNN. On a great many products which I have enumerated the freight would move anyhow, but on the very bulky

Senator SIMMONS. Take lumber, for instance; they said it was $24 a thousand across the continent. You have got it down to $4 or $5 across the continent. If there is that enormous difference, that low rate, do you think that charging a little toll there is going to interfere with this water transportation of lumber from coast to coast? Could it do that if you got it down that low?

Mr. DUNN. It will not interfere with transportation probably on 60 per cent of the lumber cut, but somewhere between 20 and 40 per cent of the lumber cut could not move.

Senator SIMMONS. If you could carry it that low, eliminating the railroads altogether, bringing about, as you say we will have, absolute competition between vessels using the canal, do you think this toll rate would cut much figure?

Mr. DUNN. The toll rate has the effect of cutting out every article of commerce which moves on, roughly speaking, $1.20 a ton difference between the west coast, plus what it could be transported to the east coast, and the market price in the east. There are a great many such articles.

Senator SIMMONS. You think that would be so when you get the rate down so low as you put it?

Mr. DUNN. Yes. I have enumerated several that could not move because the ton profit is less than the toll-the possible profit is less than the toll.

Senator SIMMONS. So that the building of the canal, so far as lumber is concerned, would result in the lumbermen getting a rate of, say, $5, putting it at your maximum figure, as against the rate of $24 now?

Mr. DUNN. Yes. But under the $24 rate now they only export high-grade lumber, lumber which sells on the west coast from $30 to $50 a thousand, and not the lumber which sells for about $10 or $11 a thousand. It is the lumber which sells there for $10 or $11 a thousand that we have got to get a market for.

Senator SIMMONS. That is a saving of at least $19 from the present freight rate, and yet you say in that condition the freight could not afford to pay the tolls through the canal to help the Government out in defraying the expense of maintaining the canal?

Mr. DUNN. The high-grade lumber could pay that toll or even a higher toll, but the low-grade lumber could not pay that toll. Both grades of lumber are being cut together, all of which has to be marketed to insure a profit.

Senator SIMMONS. On these other articles you have enumerated, a dozen of them, or half a dozen, there will be the same difference between the railroad rate and the water rate by the canal, as I understand. If they can get that great reduction, would the traffic be shut out by a little rate of 60 cents, 80 cents, $1, or even $1.20?

Mr. DUNN. I can illustrate my answer by saying that I and my associates have in mind the shipment of two minerals from deposits which lay alongside of each other. Of the two, one, talc, can pay the toll, and the other, baryta, can not pay it.

Nor does the substantial accuracy of these figures rest wholly on conclusions from estimates. The annual report of the United States engineer in charge of the Sault Ste. Marie Canal states that 72,472,672 tons of freight, which included iron ore, coal, grain, lumber, and every sort and condition of general merchandise, passed toll-free through the canal in 1912, and that the mean freight charge per ton-mile was sixty-seven one-thousandths of a cent. The navigation season on the Great Lakes is only six months, during which the ships must earn a year's interest on the investment in them. Deducting the six months' interest charge to make the comparison even with the ocean-going ships which operate 12 months, the mean freight charge was sixty one-thousandths of a cent. On this basis the coal-burning American ship can carry a ton of cargo between San Francisco and New York through the canal for $3.18, and between Liverpool and San Francisco for $4.68. Foreign coal burning ships can not make these costs lower. And it may be stated as substantially conclusive that the opinion, largely based on common repute, that foreign-built and foreignoperated ships are necessarily always cheaper carriers of traffic than

American built and American-operated ships is an opinion which is subject to material reservations. The American Great Lakes coastwise ship traffic is admittedly cheaper than any foreign-ship-carried traffic anywhere. Why?

The reasons are, first, that the principal articles of commerce our Great Lakes ships carry exist in enormous quantities which are substantially equal in exchangeable tonnage between the terminals, under commercial conditions which make railroad carriage impossible; and, second, because the Great Lakes ships only earning money when they are moving between ports during a season of six months, the reduction of idle time in port loading and unloading has been forced on them, resulting in the improvement of port facilities on land and changes in the design of the ships, both to save waste of time in port, which have never been undertaken elsewhere, because nowhere else did economic necessity so spur invention.

No similar conditions exist on the Atlantic coast of our States alone. But-and here is something to which I invite your most serious attention similar conditions do exist between the Atlantic coast of our States and the Pacific coast of our States. The Pacific coast does have enormous cheaply minable deposits of minerals, enormous forests, and enormous areas productive of agricultural staples, all close to coast ports. Some of the minerals I have already discussed; among others I mention iron ores, copper ores, and gold ores, which, in Alaska particularly, are so close to the ship berths that the mine tramway cars can discharge directly into the ship holds. The Atlantic and Gulf coasts, particularly the latter, have the exchangeable tonnage for the Pacific coast products which will create traffic conditions identical to those of the coastwise American ship traffic of the Great Lakes. Railroad moving of the interchangeable articles between the two coasts is commercially impracticable, and the quantities are so great that the creation of port facilities and special design in ships to save waste of ship time in port will become an economic necessity. Why then should there not be an equal cheapness of American ship carriage of traffic in the open sea coastwise through the Panama Canal, to that now obtained by American ships in the closed waters of the Great Lakes through the Sault Ste. Marie Canal? The answer is that there will be at least an equal cheapness of ship carriage of traffic because it will be the same kind of traffic conducted under like commercial conditions. And again I invite your attention to a particular statement of mine-it should be an even cheaper ship-carried traffic because of three causes: First, the ships will run 12 months instead of 6 months, as on the Great Lakes; second, the distances between the terminals of the traffic will be 4,000 to 6,000 miles, compared with an average of 860 miles or thereabout on the Great Lakes, thus reducing the unavoidable stop of the ships in ports; and, third, the Panama Canal ship traffic will have the advantage of petroleum fuel in place of coal on the Great Lakes, making the cost of ship moving a half less.

Is it not plain, then, that a toll on this great interstate commerce which will be born of the Panama Canal, as well as borne through it, will have the same killing effect on it that a similar toll imposed on the Great Lakes' commerce through the Sault Ste. Marie would have? Sirs, a canal toll imposed would be the bourne of both.

To return to the Mexican ore which is planned to operate 17 American-built ships through the Panama Canal: This ore is figured

to pay the producers $1 a ton net profit, but no toll charge is included. If, however, toll be imposed on this traffic, the toll will amount to $1.08 a ton, the ore having to carry the charge both ways through the canal. The producer of the ore will have to pay the toll which is more than his profit It is obvious that if the toll is imposed none of this Mexican ore will pass through the canal. There will be no business in it at all.

The instance is typical of the effect on our States' commerce of a canal with a toll in place of a canal free of toll.

I recapitulate:

First. With a canal free of toll.

American shipyards and American workmen will build 17 ships for which they will be paid about $10,000,000.

American seamen will be paid over $1,000,000 every year for operating these ships.

American miners and American railroads will be paid over $1,500,000 every year for the coal the ships will consume.

American miners and American railroads will also be paid over $500,000 every year for the coal which smelteries at Baltimore will consume in extracting the metal from the ore.

American workmen in Baltimore will be paid over $1,000,000 wages every year for working the ore.

American producers of the ore will receive $1,000,000 every year as a profit from the business.

Together, $10,000,000 will be spent now for American coastwise ships, and $5,000,000 every year after will be divided among the American people from the Mexican ore which a single plant will bring through a toll-free canal into our States' commerce.

Second. By a canal on which toll is imposed.

None of this Mexican ore will come into our commerce at all, nor, indeed, into any commerce now.

No American, nor any ships, will be built to carry this Mexican ore. American seamen will get nothing from this Mexican ore.

American coal mines and American railroads will get nothing from this Mexican ore.

American workmen in Baltimore will get nothing from this Mexi

can ore.

The American Government will get not one single cent in canal toll from a commerce on which its canal law would be an embargo precluding its creation.

SOME OTHER FOREIGN COUNTRIES' COMMERCE BY THE CANAL.

Chile is the principal commercial country on the west coast of South America. But its commerce, so far as it may be carried through the Panama Canal, will be wholly with our Atlantic States. All of the commerce of Chile with European ports, both export and import, will most economically continue to be conducted, after the canal is opened, by its present route through the Straits of Magellan. Whether toll free or toll imposed would not matter. It would go through the Straits of Magellan, because it would go cheaper that way than by a toll-free canaÏ.

The exports of nitrates from northern Chile to European ports could go through a toll-free Panama Canal on about even terms as to

43756-14-54

cost with its present route by Magellan, but the imports of Chile brought back in exchange for the nitrates are most largely distributed to southern ports of Chile, to which the short cheap route is by Magellan.

There remains the commerce of Chile with the United States to be considered. The principal import of the United States from Chile is nitrate of soda, the amount in 1912 being 542,714 short tons, valued at $16,668,404. The quantity can be transported by 9 ships of 5,000 tons net register. These ships, if the Panama Canal be toll free, would route themselves through it, but if toll be imposed, it would be a cheaper route by Magellan.

This is reasonable. It was my fortune a few weeks since to examine closely a ship of the type described, the motor ship Siam, which, under the Panama Canal rule of measurement, is about 6,000 tons net register. The canal toll on this ship would thus be $7,200 a trip. The officers of the Siam informed me that her speed was 12 sea miles an hour, which would be 288 sea miles daily, and that the daily cost of operation, including the petroleum consumed, was $250. The cost of operation per sea mile is thus $0.87, and at that rate 8,250 sea miles could be run with the $7,200 toll money. But from northern Chile the distance of the Magellan route over the Panama is no more than 4,500 sea miles, so that the Siam carrying nitrates from Chile to the port of New York would save about $3,300 by taking the long but free Magellan route in preference to the short but tollburdened Panama Canal route.

The foreign commerce of Peru and Ecuador is a comparatively small ship tonnage annually. Like that of Chile, the part of it with European countries will stick to its present route, by Magellan, perhaps being collected by coastwise ships, which, plying between Valparaiso, Chile, and Panama, will collect on northbound trips cargo for the United States, which will be transshipped into our American coastwise vessels at Panama. It will not in any contingency be a ship traffic through the Panama Canal. It will merely piece out cargoes which do go through the canal. This will be so whether the canal be toll free or toll imposed.

For further commerce through the canal only New Zealand and the small tropic islands of the Pacific Ocean remain to be considered. Neither of these can be anticipated as likely to be considerable. Possibly 150,000 net vessel tonnage annually will include it all. It will, too, all be commerce with the United States, whether the canal be toll free or with toll.

If the canal be toll free it might divert another 150,000 net vessel tonnage from the Suez Canal route.

SUMMARY OF PROBABLE TOTAL COMMERCE THROUGH CANAL.

The striking fact which presents itself on reviewing the preceding discussion is the relatively insignificant part of the prospective commerce through the canal which is commerce exclusively between foreign countries not entering American ports at all. It seems that whether the canal be toll free or toll imposed affects the tonnage quantity of this exclusively foreign commerce very little. Outside of