with the Eastern States in the markets and for the trade of the Pacific Coast and Rocky Mountain States; and (6) to summarize the probable effects of the Panama Canal upon transcontinental traffic and rates.

It is well known that only partial information regarding the traffic by rail between the eastern and western sections of the United States is obtainable, but enough facts are known as to the total transcontinental mail tonnage and as to the seaboard and inland origin and destination of that tonnage to give some indication of the probable effects of the Panama Canal upon the traffic and upon the rate policies of the eastern, southern, and transcontinental railroads. It will be possible to present in sufficient detail the traffic and rates of the coast-to-coast carriers by water and to compare the present intercoastal rates by water and rail lines. It will be understood that the conclusions as to the effects which the Panama Canal will have upon the transcontinental traffic and rates of the railroads must be only tentative.

I. ROUTES AND TRAFFIC BY Water BetweEN THE ATLANTIC AND PACIFIC SEABOARDS OF THE UNITED STATES.

Shipments between the two seaboards of the United States may move by three water routes that compete with the rail lines connecting the two coasts: (1) the all-water route around South America via Cape Horn for sailing vessels and through the Straits of Magellan for steamers; (2) the route by way of Panama with the transfer of traffic by rail across the Isthmus; and (3) the route via the Isthmus of Tehuantepec, across which, from Puerto Mexico, on the Gulf, to Salina Cruz, on the Pacific, freight is handled by a railroad owned by the Mexican Government. Map 1 shows the intercoastal steamship lines and water routes.

Traffic carried by rail lines between the Atlantic and Pacific seaboards may move coastwise for a short distance on each seaboard— as from New York to Norfolk, or from Portland to San Franciscoat the beginning or end of the railroad haul across the continent. The only railroad controlling a through route between the Atlantic and Pacific seaboards is the Southern Pacific, which operates the Morgan Line of steamers between New York and New Orleans and Galveston. The steamers of the Morgan Line extend the Southern Pacific route from the Gulf termini of the railroad to New York, and thus enable the Southern Pacific to compete both with the other transcontinental railroads and with the intercoastal water routes around South America and across the Isthmuses of Panama and Tehuantepec. This combined rail and water line of the Southern Pacific is called the "Sunset-Gulf route."

1. The oldest route between the two seaboards of the United States is the one taken by sailing vessels around Cape Horn. Prior to 1849, however, only an occasional vessel, which was in most instances & whaler, undertook the voyage between the Atlantic and Pacific; but with the discovery of gold at the close of 1848 and for a few years thereafter, there was a very large use of this route. In 1849, 775 vessels cleared from the Atlantic seaboard for San Francisco, and all but 12 of them were sailing vessels. The opening of the Panama railroad early in 1855 caused most of the traffic between the seaboards to abandon the long route around South America, but a considerable

number of sailing vessels were annually dispatched between the two seaboards by way of Cape Horn, and a small amount of steam tonnage made use of the Magellan route.

The superiority of steamers over sailing vessels for handling most classes of freight, even for such a long route as that between the two seaboards of the United States around South America, became evident during the nineties, and caused the company which was then operating the principal line of sailing vessels between our two seaboards by way of Cape Horn to sell its sailing vessels and to inaugurate, in 1899, the American-Hawaiian Line of steamers run by way of the Straits of Magellan. Early in 1907 the American-Hawaiian Line shifted to the route via the Isthmus of Tehuantepec, and since that date practically all of the shipping moving between our two seaboards around South America has consisted of chartered sailing vessels and steamers that handle such bulky cargoes as can be economically shipped by that circuitous route. Table I shows the approximate tonnage of freight handled between our two seaboards via Cape Horn and the Straits of Magellan during the six years from 1906 to 1911, inclusive. It will be seen that there was a sudden decline in this tonnage after the withdrawal of the American-Hawaiian Line from the Magellan route, and that the volume of tonnage around South America has fluctuated largely during recent years.

S D-62-2-vol 39-52

TABLE I-Volume of intercoastal water traffic, 1906-1911.

1 Annual reports of Panama Railroad Co.

2 Statement of E. A. Drake, vice president Panama Railroad Co. Statement of American-Hawaiian Steamship Co.

2. The Panama route between our two seaboards was opened for traffic at the close of 1848, at the time of the rush to the California gold fields. With the completion of the railroad from Colon to Panama, early in 1855, most of the traffic between our two seaboards moved by way of Panama; and this continued to be the principal highway for transcontinental traffic until 1869, when the connection of the Missouri River with the Pacific coast by the Union and Central Pacific railroads established the first rail line across the United States. The traffic by way of Panama rapidly fell off after 1869, and, though varying from year to year, remained comparatively small until 1911, when there was a sudden increase in the volume of traffic by water between our two seaboards.

Several causes account for the relative unimportance of the Panama route since 1869. The transcontinental railroads until recently have maintained a relentless competitive warfare against the Panama route. The through rail rates between the Atlantic and Pacific seaboards are lower than the rates for shorter hauls to and from the intermediate points in the Rocky Mountain territory, and until the Government regulation of railroads became effective the railroad companies quoted shippers such rates as were necessary to keep traffic from taking the Panama route. Moreover, the transcontínental railroads were able to restrict the use of the Panama route through their close relations with the Pacific Mail Steamship Co., which has, for most of the time, been the only regular line between the west coast ports of the United States and Panama.

For a period of 20 years ending in 1893, the railroads, through the Transcontinental Association, paid the Pacific Mail Steamship Co. a fixed monthly sum, or rental, for the freight space available in its steamers and thus completely controlled the Pacific Mail as a competitor. From 1900 to the present the Southern Pacific Co. has owned a majority of the stock of the Pacific Mail Steamship Co. The history of the relations of the Pacific Mail to the transcontinental railroads and to the Panama Railroad need not be presented in this account of the traffic and rates by the various routes connecting the two seaboards of the United States.1 It is sufficient to state that the transcontinental railroads by active competition and by artificial restraint have until recently kept the traffic via the Panama route comparatively small.

The development of traffic via Panama has been hampered not only by the competition and restraint of the transcontinental railroads, but also by two other causes: While the French company was engaged in construction work on the Isthmus, from 1882 to 1889, the use of the Panama Railroad by commercial freight was restricted by

1 For history of the relations of the Panama Railroad to the Pacific Mail Steamship Co. and for an account of the connection of the Pacific Mail with the transcontinental railroads, the following references may profitably be consulted

1. Opinion of the Interstate Commerce Commission in Railroad Commission of Nevada v. Southern Pacific Co. et al. (June 22, 1911, 21 I. C. C. Reps., 329-384).

2. Statement by Edward A. Drake, vice-president Panama Railroad, to the Committee on Interoceanic Canals, United States Senate, Feb. 11, 1910.

3. Report of Joseph L. Bristow, special Panama Railroad Commissioner, to the Secretary of War, June 24, 1905, upon policy to be pursued in management of the Panama Railroad Co. (Government Printing Office.) Also report of Jan. 20, 1908, on the Advisability of the Establishment of a Pacific Steamship Line by the Isthmian Canal Commission (Sen. Doc. No. 409, 62d Cong., 2d Sess.).

4. Statements by R. P. Schwerin, vice president and general manager Pacific Mail Steamship Co., to the Committee on Interoceanic Canals, United States Senate, on Senate bill 428, Mar. 10, 1910. Also statement by Mr. Schwerin before same committee on House bill 21969, Mar. 1, 2, and 3, 1912.

5. Statement by William R. Wheeler, representative of San Francisco Chamber of Commerce, to Senate Committee on Interoceanic Canals, on House bill 21969, May 27, 1912.

Statement of American-Hawaiian Steamship Co.

Total water traffic less total line traffic.