incorporation. Other free ports have at different times been temporarily established in Belgium, Roumania, and Russia. The only English free port in Europe is Gibraltar. The institution has, however, been employed in several European colonies or settlements, the most noteworthy being Aden, Singapore, and Hong Kong.

Free Districts, or Free Zones. It appears from the foregoing that free ports have been generally abolished in European countries, since they hinder the growth of nationality. They have been replaced by the bonded warehouse and the free district, or free zone. On this point, confusion is likely to arise because, in current discussion, the terms "free port" and "free zone" are commonly used interchangeably. Perhaps no hard-and-fast line can be drawn between them. But the latter is more specifically defined as "an isolated, enclosed, and policed area, in or adjacent to a port of entry, without resident population, furnished with the necessary facilities for lading and unlading, for supplying fuel and ship's stores, for storing goods and for reshipping them by land and water; an area within which goods may be landed, stored, mixed, blended, repacked, manufactured, and reshipped without payment of duties and without the intervention of customs officials. It is subject equally with adjacent regions to all the laws relating to public health, vessel inspection, postal service, labor conditions, immigration, and indeed everything except the customs." It differs from the earlier free port (of which it is historically an outgrowth) principally by being much more restricted both as to area and as to scope. Districts or zones of this sort are usually in mind when the European free ports of to-day are mentioned or when a free port policy for the United States is proposed.

In most of the European countries such institutions have been established where free ports previously existed, and the

1 U. S. Tariff Commission, Report on Free Zones, p. 9.

free-zone idea has continued to spread, not only in that continent, but throughout the world. By 1904, there were nine duty-free areas in Germany, two in Austria-Hungary, one in Denmark, and one in Roumania. Before the outbreak of the World War, steps had been taken toward the setting up of similar areas in other countries; and trade conditions during and after the war have in some cases hastened work on such projects. Among the more important cities having such free districts are Hamburg, Bremen, Copenhagen, and Cadiz; but the movement has also gained headway in France, Portugal, Switzerland, Sweden, Finland, Latvia, and other European nations as well as overseas. These districts vary in size from less than an acre to two or three thousand acres. They are generally supplemented by the bonded warehousing system, which is practically the only plan in vogue in England and in the United States. In view of her recent changes in tariff policy, however, the advisability of free zones is receiving serious consideration in Britain.

Proposed American Free Zones. For some years the advisability of a system of free districts in this country has been more or less discussed. One of the earlier suggestions came from Leslie M. Shaw, former Secretary of the Treasury, who advocated what he termed "bonded zones for export." His scheme was as follows:

"Suppose instead of a bonded factory, we bond a well-defined section of land containing, if you please, several thousand acres. Within this bonded territory all kinds of factories could be entered without the payment of duty. This port should, of course, contain no dwellings. I would allow free coal and every other element of manufacture excepting labor to be entered free. In other words this free port should be a great consumer of American labor, the product of which, under the most encouraging conditions, should be for export and for export only. If it was removed from the port for purposes of domestic consumption, it should pay the same duty as if imported from abroad. I do not see wherein the American people could be harmed by such a policy, and it

would result in furnishing employment to those who choose to live beneath our flag, consume our products, and work at the American scale of wages. All New England would be benefited by such a port somewhere on the North Atlantic coast. A similar port should be established in the vicinity of Norfolk and another on the Gulf. It will take time to develop the thought, but it is in absolute harmony with the present bonded warehouse, bonded factory, and drawback policy, and we have the example in the free ports of Germany."

Nothing definite came of this particular suggestion. But events of the past few years have vitalized the question of free zones in this country. In these years have come, (1) unprecedented interest in the promotion of export trade; (2) banking facilities for financing foreign commerce; (3) organization and expansion of trading corporations; (4) a great merchant fleet; (5) the thrill of war-time preeminence in international trade; (6) a partial recovery, under war, of transshipment and reëxport business; (7) a growing conviction that a fair share in this business of redistribution is important for the well-balanced industrial and commercial progress of the nation and that (8) such business tends to concentrate in ports having free areas.

In March, 1918, identical bills were introduced into both houses of Congress providing for the establishment, operation, and maintenance of free zones in the United States. Their administration was to be placed under the Secretary of Commerce who was authorized to grant, under stipulated conditions, to public or private corporations the privilege of establishing such zones in or adjacent to ports of entry for periods not exceeding fifty years and who was directed to prescribe rules and regulations concerning them. The proposed legislation was merely permissive, leaving the initiative and risk to the state or political subdivision thereof and thus avoiding ill-advised raids on the federal treasury; and not more than one zone was to be set up at any one port. The measure was carefully drawn in the light of European experi

ence and of American conditions; with slight modifications, it had the approval of the Tariff Commission; it seemed to meet with a favorable response in commercial centers where hearings were held. Nevertheless, neither this bill nor any similar measure subsequently introduced has yet come to en

actment.

Advantages of an American Free-zone System. The central argument for free zones is that they will stimulate the growth of consignment markets in our ports and enable our nation to secure a prominent place in the transshipment business of the world, which amounts to billions of dollars annually. These results are expected to follow because (1) the entry and clearance of vessels will be simplified; (2) goods, not for domestic consumption, will escape customs formalities; (3) much time and expense will thus be saved; (4) a maximum of freedom will be permitted in the handling, assorting, grading, cleaning, and other manipulation of foreign products in the zone area, in negotiating their sale, and in their transfer to the ultimate market; (5) free zone warehouse certificates may be made peculiarly acceptable as collateral for advances; and (6) as a result, ships and consignments will be attracted to our shores which would, under present conditions, seek foreign trade centers. They will come, it is urged, because, in such a zone, goods may be expected to find purchasers and ships expect to find return cargo for whatever port they sail. The inbound and outbound traffic of our ports will be more nearly equalized; and, in turn, (1) freight costs may be reduced because fewer ships must return to Europe in ballast and (2) a larger proportion of imports from South America and other overseas sources will come directly to the United States and not via Europe, because transshipment cargoes will be available here for outgoing voyages to the overseas markets. All these factors, it is argued, will react favorably upon American commerce in general, foreign and domes

tic. The direct stimulus to manufacturing is expected to come slowly, and to remain a secondary but not necessarily an insignificant outcome of zone policy.

Critics of free-zone proposals for the United States point out, among other things, that the American system of manufacture in bond and the American drawback system are now more comprehensive and liberal than those in Europe; that European provisions for "admission temporaire" (temporary admission) and "veredlungs-verkehr (improvement trade) represent a different development to serve much the same end as these American systems, but are more limited in application; and that manufacturing for export in American free zones would be practical only in a few lines, because the establishment of small branch factories there would destroy our chief competitive advantage: namely, large-scale standardized production.

Frontier Traffic in the Narrower Sense. - National boundary lines have often been established more with reference to political considerations than to the economic interests of those living on the frontier. Sometimes such lines have divided individual properties so that the same person owned land in two different States. When customs administration was ineffective and smuggling was more the rule than the exception, the inconvenience of artificial boundaries was easily evaded, but such conditions became incompatible with the development of national industrial life. Special privileges, however, have been granted in many instances to those living on the frontier, such concessions generally securing free transit over the border and exemption from customs duties on certain articles within a definitely prescribed zone on both sides of the boundary. Such regulations are found in many general tariff laws and in commercial treaties between several of the countries of Western Europe. These provisions are spoken of as regulating "frontier traffic in the narrower sense" in contra