extensive as those of Glasgow, Belfast, Newcastle, Greenock, and Sunderland, building many vessels from a few models, with organized forces steadily employed, and unquestionably ships could be built more cheaply at Philadelphia, Newport News, San Francisco, Chester, Bath, and Wilmington than in Great Britain, notwithstanding relatively higher wages of labor. The increase in the size and number of our establishments for the construction of steel steamships has been notable since the last census year, but it has not yet been sufficient actually to build large merchant steamships as quickly or as economically as can be done in Great Britain.

The assertion is safe that the materials of modern merchant vessels are now produced and brought to the seaboard in this country at as low a rate as in Great Britain. This fact is thorougly appreciated by Germany, whose efforts on the ocean the United States must surpass before entertaining the hope of overtaking Great Britain. The Consolidated Shipping Companies of Hamburg, in their latest report, refer to the new relations of the United States to the East resulting from the Hispano-American war, and, in free translation, state:

This increase in the influence of the United States in the East will now render important further measures for the development of German maritime interests in that trade and the rapid performance of Imperial projects. It is of the greatest importance to the German Empire to make the construction of vessels for the trade as cheap as possible, and legislation to that end should be enacted. The matter of lower freights on Government railroads is an important factor to be considered. After long-continued and earnest effort some progress has been made in the direction of lower freight charges this year on iron for shipbuilding. These reduced rates also apply to materials billed to seaports when intended to be used in the construction and repair of vessels for river navigation. The reduction in rates already made is not sufficient, and there must be still lower railroad fre ght charges to enable us to compete with the United States. The agitation for lower railroad charges on materials for shipbuilding must be renewed, and the navy, which is equally interested, should cooperate to bring about the result.

The reduction in the cost of the materials of shipbuilding in this country carries with it the probability of larger orders, leading to the steady employment of an increased number of men, who will gain by practice in efficiency and by this means decrease the cost of labor while increasing the volume of wages. Decrease in the time required for construction and in the expenses of administration and superintendence will follow. Time will be required to attain these results, but legislation can undoubtedly reduce the time required.

As nearly as can be ascertained, the cost of a 4,000-ton seagoing auld.

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ship. Interest on original investment may be put at 5 per cent. This is not a high rate at which to borrow money on mortgage bonds on shipping in this country, in view of the fact that loans on ocean steamship construction are not yet a familiar form of investment. In Great

Britain and Germany money can be borrowed at a somewhat lower rate on similar security, though the North German Lloyd's mortgages are at 4 per cent, and are based on shipping securities above the German average. Insurance may be estimated at the average rate of 6 per cent, which is general here, and also the rate at which the North German Lloyd insures its own vessels. This factor does not vary much in maritime countries. For depreciation owing to age, wear and tear, introduction of improvements in newer vessels, etc., an allowance of 5 per cent is usually made. At this rate a vessel at the end of twenty years will cease to appear as an asset on its owner's books. The allowance for depreciation depends very much on the excellence of original construction, and thorough work at the beginning is thus an ultimate economy.

If the difference in the first cost of construction between a 4,000ton steel cargo steamship for transoceanic trade built in the United States and built in Great Britain be taken as $60,000, the factors enumerated would enter to the following extent in the annual cost of operation: Interest on investment (mortgage bonds), at 5 per cent, on $60,000 additional cost, $3,000; insurance, at 6 per cent, on $60,000 additional, $3,600; depreciation, at 5 per cent, on $60,000 additional, $3,000; making a total of $9,600. No increased allowance is made for repairs, as the extent of these will not deperd on first cost, though excellence of American work would reduce them, and repair work is doubtless done in this country about as cheaply as elsewhere.

COMBINED DIFFERENCES OF CONSTRUCTION AND OPERATION.

The sum of $9,600 may be taken as the difference in the annual cost of operation based on difference in the first cost of construction. The difference in the annual pay roll of a vessel of the kind under consideration has been shown to be $7,000, so that the total difference in the annual cost of operation of a 4,000-ton steel cargo steamer of between 11 and 12 knots, engaged in trans-Atlantic trade, with a crew of 48 men, may be put at $16,600 a year, or for 4,000 tons at $4.15 per gross ton. The mileage navigated during the year has been fixed at 45,000 nautical miles. A difference of $16,600 in the cost of navigating this distance is equivalent to a difference of $37 on each 100 miles traversed by the vessel of 4,000 gross tons, or a difference of about one cent for each 100 nautical miles for each gross ton.

EXCEPTIONS.

This average can not, however, be applied at random to any voyage or any type of vessel. Any considerable increase in tonnage over 4,000 tons will reduce the number of yards which could undertake such construction at present. Of the steel merchant vessels of over 4,000 tons in existence, 489 were built in the United Kingdom, 59 in Germany, 31 in the United States, 25 in France, 6 in Austria, 5 in Italy, and 2 in Holland. Of those built in the United States, 16 were built on the Great Lakes and can not pass through the Welland Canal. For this reason our extensive shipyards on the Great Lakes are not available for the construction of large vessels for international competition. An increase in size thus means an increase in expense greater than in arithmetical ratio, and this increase, as shown, must be considered in cost of operation. If the vessel to be considered were of only about 2,000 tons, the difference in cost of construction

would be considerably reduced. The yards of the Great Lakes are now able to compete for construction of vessels under 1,500 tons for the seaboard.

An increase in speed over 11 knots involves a rapid increase in the difference in cost of operation. The cost of coal is, of course, very much greater, but as we can obtain this article on as favorable terms as our competitors it need not be considered. Increased coal consumption involves a large increase in the force employed in the engine and fire rooms. The difference between the wages of American and British engineers, firemen, trimmers, and oilers is much greater than the difference in wages of able seamen. A large increase in relatively the highest-paid labor on an American vessel thus carries with it an increase of cost of operation which is much more than the arithmetical ratio of increase in speed. The labor cost of propelling a steamship through the ocean at 20 knots is not double the cost of propelling it at 10 knots; it will be five or six times greater.

From the estimated annual difference of $16,600 in operating expenses there must be deducted an indefinite amount for the one advantage which an American steamship enjoys over a foreign vessel. The coasting trade of the United States, including the privilege of carrying from a port on the Atlantic coast to Colon through goods via the Isthmus for our Pacific ports and the privilege of carrying those goods from Panama to a Pacific coast port of the United States, is restricted to American vessels. This privilege has a money value, but for obvious reasons no approximation of it in dollars is possible. It will vary with the conditions of foreign and domestic carrying trade, and it will vary with the kind of vessel. Vessels over 4,000 tons are beginning to carry from New York to New Orleans and Galveston, but, as a rule, the coasting steam freighters are considerably under this tonnage. Applications for the admission of foreign-built vessels as repaired wrecks, under section 4136, Revised Statutes, are chiefly for the purpose of securing the privilege of entering the coasting trade. While a money value can not be put upon the privilege, it may be stated generally that the privilege of entering the coasting trade at this time is of little value to a vessel over 5,000 tons, but of considerable value to a vessel of from 1,000 to 3,500 or 4,000 tons.

TRANS-PACIFIC NAVIGATION.

In the report of the Bureau for 1896 it was suggested: "There can be no more proper subject for Congressional inquiry than trans-Pacific navigation. The events of the current calendar year have shown how valuable the results of such an inquiry would be at this time, but they have also shown that the time is now lacking to conduct any thorough examination. Two years ago it was stated that the navigation of the Pacific was rapidly slipping away from us. In 1880 the tonnage of American vessels entering the United States from Asia and Oceanica, including Australia and Hawaii, was 283,395 tons, and of foreign vessels 442,251 tons. During the fiscal year 1897 the American tonnage entering from the same foreign countries was 376,967 tons, an increase of less than 40 per cent, and the foreign tonnage 973,379 tons, an increase of 120 per cent. The greater part of this increase has been effected within the past three years. Excluding trade with Hawaii, the facts of trans-Pacific navigation are even more striking and unsatisfactory. With this exception, tonnage entering the United States from Asia and Australia in 1880 was 238,960 tons

American and 431,242 tons foreign, and in 1897 was 221,438 tons American, a decrease, compared with 924,720 tons foreign, or practically the whole of the increase of 120 per cent. The transfer of the Northern Pacific and some of the Pacific Mail steamers from the British to the American flag by special acts of Congress will materially increase American navigation for the current year.

Six events of prime importance to the consideration of the question of the control of the navigation of the Pacific have occurred during

the year:

First. The annexation of Hawaii to the United States.

Second. The battle of Cavité and, as now seems certain, the addition of the Philippines to the United States.

Third. Considerable additions already made, or presumably to be made, on the Pacific to the American registry of vessels formerly under foreign flags.

Fourth. The permanent establishment of Germany in Asia and the increase of Government subsidies to German steamship lines in the Pacific.

Fifth. Renewal of the principal British mail contracts with British lines to Asia and Australia.

Sixth. Japan's entry as a permanent factor in competition for transPacific navigation.

The first three events, if use is made of them at once in legislation, will be sufficient to establish the United States in the front rank of trans-Pacific ocean carriers. The last three events contribute greatly to the success of our maritime rivals.

The Japanese bounty system, elsewhere referred to, has already sufficed to put into operation a line of steamships between the Empire and the United States, chiefly with British-built vessels. This year, however, Japan will take a place among the few nations which have built steamships of over 4,000 tons. The scheme of Japan contemplates an annual expenditure of over $5,000,000 on the development of its merchant marine.

ANNEXATION OF HAWAII.

It is assumed that one of the earliest measures relating to Hawaii to be passed by Congress will be an act so far applying our navigation laws to the new possessions as to restrict to American vessels trade between the Hawaiian Archipelago and the United States and the coasting trade of the islands. Such a measure is prescribed by our general policy of confining the coasting trade of the United States to American vessels. A similar course was followed upon the annexation of Alaska, and trade between the Atlantic ports and the Pacific ports of the United States, whether it be by sail around Cape Horn, or by steam to Colon, thence by rail to Panama, and from that point to Pacific ports, has for many years been confined to American vessels. To bring trade with Hawaii within the definition and limitations of American coasting trade will involve no perceptible disturbance in existing conditions. About 80 per cent of that trade is already conducted by American vessels, the combined entries and clearances in the United States from Hawaii for the fiscal year ended June 30, 1897, comprising 394 American vessels, of 283,211 tons, and only 67 foreign vessels, of 77,831 tons. Included in the foreign tonnage are 40 entries and clearances, aggregating 42,816 tons, of Hawaiian vessels. As Congress presumably will provide American documents for vessels

under the Hawaiian flag at the time of annexation (Appendix K), the foreign shipping element in trade between the United States and Hawaii will be barely 10 per cent of the total, and for all practical purposes may be ignored. Its place will be easily and immediately supplied by vessels under the American flag. Indeed, American vessels departing in ballast from Honolulu at present would fully supply the place vacated by foreign carriers. The report of our consul-general at Honolulu (Appendix O) of the total tonnage entered at Hawaii during 1897 corroborates this view. His figures, of course, besides trade with the United States, include the trade with foreign countries, which will not be affected by an application of our coasting laws.

The importance of confining the trade between Hawaii and the United States to American vessels does not consist in the opportunity it will afford to American vessels to take up the 10 or 15 per cent of trade, now possessed by foreign vessels, or depend on the growth of navigation between the archipelago and our coasts, which will undoubtedly be rapid and considerable. Foreign shipping interests can afford to regard such matters with indifference, and they are not of first consequence to the United States. Almost the entire value of the annexation of Hawaii to the development of American navigation in the Pacific is involved in treating the islands as an extension of the boundaries of the United States, bringing this country 1,500 miles nearer to Asia and Australia. If for purposes of navigation the islands are to continue substantially foreign, with trade between them and the United States as free to competition as is trade between foreign ports, the Pacific coast of the United States will become the base of operations for a development of foreign shipping, more rapid and extensive than can easily b、 predicted. If, on the contrary, our coasting laws are applied by annexation to the archipelago, we will in effect have pushed a strip of American territory 2,000 miles from San Francisco and Seattle into the Pacific, and have gained for American commerce the advantages which would accrue to this country if nature by some unprecedented upheaval had joined the Hawaiian group to our western coast. Whatever opinions men may have entertained concerning the propriety of annexing Hawaii, there can be no doubt that their value to our maritime rank on the Pacific rests absolutely on the enactment of a bill applying our coasting laws to trade between the islands and the United States. The shipping interests of Great Britain and Germany in the Pacific are not unaware of this fact.

ROUTES TO ASIA AND AUSTRALIA.

A glance at the globe will show that by the application of certain portions of our navigation laws to Hawaii we shall be able to offset to a considerable extent the large expenditures made by Great Britain, Germany, France, and Italy in support of steamship lines to the eastern coast of Asia and Australia. The continental base of operations of the British Peninsular and Oriental steamship lines to Asia and Australia is Brindisi, Italy; the base of operations of the North German Lloyd lines to Asia and Australia is Naples, and the base of operations of the French Messageries Maritimes lines to Asia and Australia is Marseilles. The heavy subventions granted to the steamships of these lines by their respective Governments are in effect for navigation between these ports of departure and their respective ports of entry in China, Japan, Australia, and New Caledonia. The distance