Mr. WHEELER. If the rate, including the tolls Senator BRANDEGEE. Yes. Mr. WHEELER (continuing). Was lower than the rail rate? Mr. WHEELER. It would go by the lines of least resistance, which would be the vessel, of course. Senator BRANDEGEE. And your claim is, as to interior points back from the terminal ports, that the vessel rate must be enough lower to reach the ultimate consumer in the interior point? Mr. WHEELER. Yes, sir. Senator BRANDEGEE. In order to get the trade? Mr. WHEELER. Assuming, Senator, to make that point clearassuming that with a toll charge, which distributed over the cargo would amount to, let us say, $2 a ton; that is to say the vessel owner would have to add $2 a ton to what otherwise would be his freight rate in order to cover his toll charge; now, if with the toll charge included, the freight rate from New York to San Francisco exactly met the rail rate, so that the water rate was getting its share of the business, then if that toll charge were taken off and the rate from New York to San Francisco became $2 less per ton-that water line the people in the interior, where the rate did not exceed $2 per ton to New York, would profit by the reduction in the tolls to the extent that they could use the water route in competition with the railroad. They would be brought into the competitive territory. Is that clear? Senator BRANDEGEE. Yes. It has been testified, however, that the difference between the water and the rail rate between the points you have mentioned is so great that it would not seem to me that the toll of $1.20 per ton would have any effect on it. Mr. WHEELER. A toll of $1.20 a ton, if that were all there were to it, would not have as great an effect as a toll of $2 or $3 a ton. The CHAIRMAN. An effect on what? Mr. WHEELER. Upon the staple commodities-most any staple commodity. Senator BRANDEGEE. I meant it would not have any effect upon the route by which the goods were shipped. In other words, without giving the exact figures, there was a difference of some $6 or $8 a ton on certain goods. I think it was iron and steel produced somewhere by some concern in Pennsylvania, if I remember correctly, that the difference of the rate of $1.20 a ton did not seem to me to be of any consequence in a difference of that kind. I beg your pardon for having interrupted you. I will not do it again and would rather you would proceed consecutively. I think you can make your own points better in your own way. Mr. WHEELER. No; the questions very frequently draw out information, and I am very glad to have them. Senator BRANDEGEE. If we all interrupt you and cross-examine each other we shall never get through. The CHAIRMAN. You will proceed. Mr. WHEELER. That is best expressed here in this language, the advantages of no toll: A canal without toll means the free and catch as catch can against all conscience, a larger area of territory served, a greater volume of business, and more American ships, inasmuch as the Panama Canal gives a first-rate opportunity for the development of an American merchant marine of the right type of ships, and the type qualified to engage in a foreign trade if the opportunity ever offered. Senator BRANDEGEE. What are you reading from? Mr. WHEELER. I am reading from the publication "Panama Canal Tolls," by Mr. George S. Dearborn, which he handed me when he was over here the other day. I was very much interested in it, because it was so thoroughly unselfish in its expressions and taking a very broad-spirited view of the situation. Senator WALSH. He is the representative of the American-Hawaiian Steamship Co. ? Mr. WHEELER. He is the president of the American-Hawaiian Steamship Co. And I would say that Mr. Dearborn, in conversation with me, said: "If I were not a good American and wanted first to consider the interests of the country"-and I know he was absolutely sincere in that expression-he said, "I would be advocating a toll charge" because the toll charge, for reasons as I have explained this morning, keeps the tramp out. The tramp can not come along and take his chances of getting enough cargo to justify him in loading. But he said: "We want that canal just as free and open to the vessels of this country as it is possible to make it." He said: "The canal toll itself cuts no figure, so far as my revenues are concerned, excepting I will do a bigger volume of business without a canal toll than I will with a canal toll, but if there is a canal toll charged, of course I have not got to tell you that the shipper is going to pay it, of course." Senator BRISTOw. The questions of Senator Brandegee this morning and this afternoon both seemed to be based upon the idea that if the Panama rate was lower than the rail rate that the traffic would go by Panama. Now, is it not a fact that some traffic would go, if the rate were slightly lower; more traffic will go if it is considerably lower; but there will be some rail transcontinental traffic regardless of what the rate might be? Mr. WHEELER. Oh, always. Senator WALSH. Depending upon commodities and circumstances? Mr. WHEELER. Always; particularly high-grade commodities. I do not think a great many boots and shoes, for example, will move by the water route as compared with what will move by the rail route. And the reason for that is that boots and shoes are very high value commodity, and when you add the marine insurance, which obtains upon the water shipments, it goes a long way toward offsetting any reasonably fair freight rate. To-day the freight rate on boots and shoes, Boston to San Francisco, is $2.75 per 100 pounds. That is $55 a ton, you see. Senator BRANDEGEE. After Senator Bristow left the room this morning, after I had asked my questions to which he refers, we both agreed, did we not, that the whole thing was a matter of speculation? Mr. WHEELER. I think it is. It is largely a matter of speculation. We can only make our own estimates and we may differ very largely upon it. The CHAIRMAN. What is the great road in the James J. Hill system? Mr. WHEELER. The Great Northern is the great road, and the Northern Pacific also exercises a control over The CHAIRMAN. Where is the western terminus? Mr. WHEELER. The Great Northern and the Northern Pacific have identical termini, Seattle and Portland; Tacoma as well. The CHAIRMAN. What is the eastern terminus? Mr. WHEELER. St. Paul and Minneapolis and Duluth: they both run to Duluth as well. The CHAIRMAN. What control, if any, has Mr. Hill, or the railroads that he represents, over the shipping on the Great Lakes? Mr. WHEELER. Senator, I am not directly familiar with that. My understanding of that situation is that the Hill lines have a passenger service which they operate there, some fine big steamers, during the summer time, but whether they are in the freight business or not, I am not sure. But other railroads do control pa ket lines on that coast if they do not have any interest, others do. Senator WALSH. I think, Mr. Chairman, the Hill lines have no freighters. The CHAIRMAN. No freighters? Senator WALSH. The Pacific western terminal of the Northern Pacific, the port of the Great Northern, is Seattle, but the Great Northern, what is known as the North Bank Road, the recent construction, runs from Spokane to Portland; the Great Northern enters Spokane on its direct western route, so that through the North Bank Road the Great Northern has entry into both Portland and Seattle. The CHAIRMAN. Is that all with the witness, gentlen en? Senator OWEN. I should like to ask you one or two questions. I understand the freight on lumber from New York to San Francisco by rail would be about $24 a ton, or $24 a thousand feet? Mr. WHEELER. I believe that was testified to, Senator, yes. I am not familiar with the rate on lumber from New York to the coast, because I do not think any lumber moves. If there is such a rate as that it is a paper rate. The lumber, whatever might move, would move probably from Indiana or the Middle West, from the hardwood section-a little hardwood lumber used for flooring and the like of that. In the first place, it would be carrying coals to Newcastle to carry any lumber from New York to the Pacific coast. In the second place, I do not think any could move that way. Senator OWEN. I understand that is the official rate? Mr. WHEELER. That may be the tariff rate. There is a rate, of course, on every commodity. Senator OWEN. And that by water through the canal, not including the tolls, that could be carried for $4? Mr. WHEELER. Yes; I think that was testified to. Senator BRANDEGEE. Mr. Dunn, the freight expert from the Pacific coast, I believe, gave that testimony, did he not? Mr. WHEELER. I do not recall the figures, Senator. Mr. WHEELER. I think so. I heard his testimony, but there have have been so many figures I do not recall. Senator BRANDEGEE. So there would be a difference of $20 on that item, not counting the tolls, and you are of the opinion that if the Government should charge the tolls of 75 cents, I would say, upon 1,000 pounds, or some such amount, it would be a subsidy to the railroads who charge this higher rate, and would not be a subsidy to the boats that would carry it at the low rate? Mr. WHEELER. You mean the failure to charge would not be a subsidy to the boats? Senator BRANDEGEE. Yes. Mr. WHEELER. Charging the tolls would be a subsidy to the railroads, and failure to charge is the contention of my friends on the other side would be a subsidy to the boats. Senator BRANDEGEE. Do you think it would really be a subsidy to the railroads if it was charged? Mr. WHEELER. Not in that instance, Senator, because the railroads, I think, are not collecting any freight at $24 per thousand on lumber from New York. Senator BRANDEGEE. But in other relative cases of heavy freight you think it would not be a subsidy? Mr. WHEELER. Why, take it on steel products, for example. Senator BRANDEGEE. What is the rate from New York to San Francisco on iron and steel products? Mr. WHEELER. Iron pipe, you mean, by rail? Senator BRANDEGEE. Yes. Mr. WHEELER. Sixty-five cents a hundred, iron pipe by rail. Mr. WHEELER. $13 a ton. It is 45 cents by the Tehuantepec Railroad; that is, by the American-Hawaiian Steamship Line. The business to-day moves altogether by rail. Senator BRANDEGEE. So if we were to go through the Panama Canal, it would probably be about $4 a ton, would it not? Mr. WHEELER. It depends on whether the tolls were charged. Mr. WHEELER. I would not say as low as that. I think we have very likely every reason to believe that the rate might be $7 a ton through there. Senator BRANDEGEE. Granted it was $7 a ton, for purposes of comparison. Then you think where the roads now charge $13 a ton and it would go through by water for $7 a ton, that if the Government should charge 75 cents a ton for that going through the canal it would be a subsidy to the railroad that at present charges $13 a ton? Mr. WHEELER. If the charge of the Government amounts to 75 cents a ton, that would enable the railroads to charge at least 75 cents more per ton in competition. Senator BRANDEGEE. That is to say they could charge $13.75? Mr. WHEELER. They could do that in that instance. Senator BRANDEGEE. And probably would do that in order to profit themselves in competition at $7 a ton? Mr. WHEELER. You said $13.75. Of course, the railroad would primarily have to meet the canal rate to get business. Senator BRANDEGEE. You think they would at $7 a ton? Mr. WHEELER. I can make the illustration a little clearer, using your own simile. If the canal rate, without tolls, would be $7 a ton on that iron pipe, then let us say the railroad rate would have to be about $11 a ton to meet the $7 per ton rate via the canal, because, as I have explained-you were not here, Senator-but the advantages of rail transportation are such that they can get a very considerable premium over the water rate; that pipe moves from the transfer door in Pittsburgh to the warehouse door in San Francisco. There is no cartage or hauling at either end; there is no marine insurance; the sailings are every day of a freight car-in fact, half a dozen times a day, as often as you want to send a switch engine to pull a car out; but the sailings of a vessel are at stated periods, perhaps five or six may days apart, once a week, or once in two weeks. according to the service rendered, so that is a fair differentiation; it really expresses the differentiation to-day, 45 cents via the Panama Canal or $9 a ton, and 65 cents via the rail line or $13 a ton, and as I said before, substantially all the pipe moves by rail at those rates. If you reduce that $9 per ton rate when the canal is finished to $7 a ton, let us say, it be lower, but that will do for an illustration, in case there is no toll charge. Immediately the balance already having been found by experience, the relations of rail and water rate and the rate which will take the business, they simply reduce their rate from $13 to $1 in order to meet this $7 rate by water. If a toll is charged, and while I am not prepared to agree that that toll would be only 75 centsI showed by my testimony this morning, I think conclusively, that the freight rate reflected upon the toll charge would be much more than 75 cents. But assuming that the steamer line must pay a toll and she adds only 75 cents for the toll, then her rate becomes $9.75 and the rail rate becomes $11.75, and the rail continues to get the business. Senator OWEN. Of course you are adjusting these rates up from $4 to $9 a ton and do not concede Mr. WHEELER. I do not concede an adjustment of only $4, either, Senator. Those are not my figures. Senator OWEN. Your estimate from $11 to $13 and estimate from $4 up to $7, makes an artificial statement, which I think is not warranted by the fact. Senator BRISTOW. Four dollars to seven dollars-$9 is the rate now. Senator BRANDEGEE. Do you think the remission of these tolls is going to be for a wider distribution though the country to the consumers? Mr. WHEELER. I do, Senator Brandegee. Senator BRANDEGEE. If that is so, they have to pay it back into the Treasury in order to have the Government pay this amount, have they not? Mr. WHEELER. Why have they got to pay it back to the Treasury? Senator BRANDEGEE. The people of the country have got to pay into the Treasury enough to maintain the canal, have they not? Mr. WHEELER. If the canal is not self-maintaining, yes, sir. That is, the country supports the canal just as we built the canal. Senator BRANDEGEE. If the people have got to pay out of the Treas ury the tolls for these vessels in order to get the benefit of it, the benefit of the remission of the tolls is to be general over the country, I do not see where the people gain anything. Mr. WHEELER. The people are not paying anything for tolls by reason of the remission, any more than the people are paying for the support of the Soo Canal, built by the Government, maintained by the Government, and operated by the Government. Senator BRANDEGEE. The Government is paying for the maintenance of the canal, is it not? Mr. WHEELER. Yes, sir. Senator BRANDEGEE. And paying it out of the Treasury, in which the money is collected by taxes from the people? Mr. WHEELER. Yes, I understand that. Senator BRANDEGEE. I do not see then really what difference it makes to the shipper and to the ultimate consumer, if he gets this |