It is to be borne in mind that the fiscal year 1911 embraces nine months of business done by the California & Atlantic Steamship Co., which began operations October 1, 1910. It will also be noted that in the face of the latter's competition the Pacific Mail Steamship Co. shows a gratifying increase in business. It is our understanding that the American-Hawaiian Steamship Co., through its excellent service via Tehuantepec, has also made marked gains in the volume of its business. All of this demonstrates that San Francisco shippers are fast coming to the realization that they must use the sea if they would profit by our city's seaboard location. The day has arrived when sea competition must be actual and not merely potential, if San Francisco is to come into her own as the great seaport of the Pacific. On page 20 of the same report I will read as follows: THE PANAMA CANAL. The bureau from the beginning has been vigilant in its efforts to make the canal, when completed, of the greatest possible value to the shippers of this city and State. As pointed out in our last annual report, we brought to the attention of the President of the United States the necessity for an amendment to the act to regulate commerce making unlawful the ownership or control by railroads of competing water lines, and pointed out the importance of the adoption of such an amendment in view of the approaching completion of the Panama Canal. It is gratifying to note the appreciation by the President of the importance of such legislation as expressed in his message to Congress of December 6, 1910, which is incorporated in the resolutions adopted at the congress of the representatives of commercial bodies of Pacific Coast cities, held in this city October 2 last through an invitation of the San Francisco Chamber of Commerce, at which this bureau was represented. At this meeting the question of canal tolls was fully discussed, Senator Perkins and Congressmen Knowland and Hayes being present. The following resolution was unanimously passed: "Whereas, The building of the Panama Canal was undertaken by the people of the United States in pursuance of a great national policy, amongst other things, of providing for the national defense, opening up the shortest possible water route between the respective coasts of the United States and foreign countries, to provide through natural methods and to prevent monopoly of transportation, means for transportation between the various sections of the Union at the lowest possible cost, to build up and expand our commerce with foreign nations and incidentally to encourage the upbuilding of a now decadent merchant marine; be it "Resolved, That it is the sense of this meeting that there should be no tolls charged through the canal to vessels coastwise flying the American flag; and be it further 'Resolved, That we heartily approve of the legislation recommended by President Taft in his message to Congress of December 6, 1910, reading as follows: "I can not close this reference to the canal without suggesting as a wise amendment to the interstate commerce law a provision prohibiting interstate commerce railroads from owning or controlling ships engaged in the trade through the Panama Canal. I believe that such a provision may be needed to save to the people of the United States the benefits of the competition in trade between eastern and western seaboards which this canal was constructed to secure. In view of the fact that the question of tolls to be charged through Panama will beyond doubt be acted upon at the coming session of Congress, and the importance to the country at large of low rates of transportation, particularly on its productions, each member of the bureau is urged to do all that he can to secure the adoption of the policy outlined in this resolution. Every charge made on domestic traffic through the canal will be a direct tax on the commerce of this country, and it is believed that united efforts can go far toward freeing domestic tonnage from any tolls. On page 23, it reads as follows: RIVER TRANSPORTATION. As pointed out in our last annual report, the development of navigation on our inland waterways is a corollary to the building of the Panama Canal. It is plain that to water transportation, or to rail rates controlled thereby, San Francisco must look for her advantages and consequent upbuilding in the future. This has been the slogan of the traffic bureau from its inception, and, therefore, it has been active in promoting improvements that will make our two rivers navigable for as great distance as possible. On page 24, it reads as follows: In this connection it is proper to report that the bureau was successful by petition to the President of the United States and Secretary of War in bringing to an end the ruinous freight war inaugurated by one of the Pacific connections of the Panama Railroad against the other Pacific carrier. East-bound rates, San Francisco to New York, were cut from $8 per ton to $5 per ton; the latter, under present conditions, can hardly be considered a compensatory rate. It is not to the interest of San Francisco to have ruinously low rates, which can be but temporary; what she wants are fair rates and the guarantee of permanency. The freight war referred to emphasizes the necessity for such legislation as will prevent railroad-owned lines from operating through the canal, as recommended by the President and referred to elsewhere in this report. I think, gentlemen of the committee, that it will be appropriate to here read the protest which was filed by the traffic bureau of the chamber of commerce, a copy of which I have here. It is under date of San Francisco, February 20, 1911. It is addressed to the Hon. J. M. Dickinson, Secretary of War, Washington, D. C. There was a duplicate telegram addressed to the President at the same time. The protest reads as follows: Hon. J. M. DICKINSON, [Copy of night telegram.] Secretary of War, Washington, D. C. SAN FRANCISCo, February 20, 1911. The traffic bureau of the Merchants Exchange of San Francisco, by unanimous vote of its board of governors, directs me to call your attention to existing deplorable cut in rates on traffic San Francisco to New York via Panama, inaugurated last week by the Pacific Mail Steamship Co., the majority of whose capital stock is, as you know, held by the Southern Pacific Co., the latter's president being also president of the Pacific Mail. It is obvious that the present intention of this combination is to destroy a competing line which has given the shippers of this State a greatly improved service and at reasonable rates resulting in large increase in tonnage, to the advantage of the Panama Railroad & Steamship Line, as well as to the shippers of both coasts, and to a considerable extent the shippers of the interior of our country as well. This bureau strongly urges immediate administrative action that will prevent the railroad-owned steamship line from destroying an independent competitor and thus relegating this important commercial freight route to its former condition of inactivity and practical uselessness to the shippers and producers of this State. We respectfully submit that through the Government's ownership of the Panama & Railroad Steamship Line, the Pacific Mail's sole New York connection, the administration is in a position to promptly restore traffic conditions via this route so that the permanent interests of the shippers will not be imperiled. WM. R. WHEELER, Manager Traffic Bureau of the Merchants' Exchange of San Francisco. Senator PERKINS. What response was made to that? Mr. WHEELER. We received no direct reply, as I recall it, beyond perhaps an acknowledgment, but the action taken was to call a conference of these lines-the Panama Railroad & Steamship Line, the California Atlantic Steamship Co., and the Pacific Mail-at the office of the Secretary of War, I believe, I was not present at any time, but they finally adjusted the rates, I think, as was testified to the other day here by Mr. Drake. I think he described the meetings, if I recall rightly. It is in the testimony, I think. The rates were finally restored, and the restoration became effective on June 1, 1911. They at the same time adopted some gradations in the rates. Instead of a flat rate of $8, the rates were made on some things $9, some possibly $10, and some as low as $7, I think. I think the rate on barley was made $7, and on asphalt $7, or even lower, perhaps. The gradations were thought to be reasonable and fair. The flat rate of $8 was or dered in by Secretary of War Wright, as a result of his disgust when he found that his steamships were actually buying ballast at Colon to make them seaworthy to go back to New York. He said we will see if we can not stop that, anyhow. When Mr. Drake protested against the $8 rate being made flat, his reply to Mr. Drake was that "it is better than buying ballast. I do not like this idea of buying ballast. We will put in the $8 rate and see how it works for awhile. We will see if we can not stop buying ballast." Now, with the committee's indulgence, I will submit a little more history, still more up to date, that will bring us really down to the present time. I wish to call the attention of the committee to the chronology of events which brought into being this New York-Oriental-San Francisco-incidental steamship line, which my friends are advocating, and the committee may draw their own conclusions. You have already, by what has been introduced into the record, learned of the activities of the San Francisco Chamber of Commerce with regard to preventing the interference with the freedom of water-borne traffic when the canal is finished. I wish to call the attention of the committee to the fact that on October 2, 1911, a congress of Pacific coast commercial bodies was held in San Francisco, as reported in the last annual report of the chamber, at which strong and unequivocal resolutions were passed, joined in by every commercial organization of the Pacific coast from Seattle, from San Diego, and many interior organizations, calling upon Congress for legislation in line with President Taft's recommendations in his message of December 6, 1910, by which railroad owned lines would be inhibited from competing with themselves, so-called competition, through the canal. I should say that these resolutions were given full publicity through the columns of the press, not only in San Francisco but Los Angeles, San Diego, Portland, Seattle, and everywhere. October 29, 1911, or within four weeks after the passage of these resolutions Mr. Schwerin, the general manager and vice president of the Pacific Mail Steamship Co., in a letter to Judge Lovett [page 280, part 6], unfolds this New York-Oriental-San Francisco-incidental steamship scheme, not confined to coastwise traffic. Mr. Schwerin tells this committee, in substance, that it is a foreigngoing line, for foreign trade, oriental traffic, touching at such ports as San Francisco and San Pedro, but that that is merely incidental; that is nothing. He says that it will take a little freight if they have room for it, if the oriental freight is not crowded out; that it is merely incidental; that it will not come within the scope of these resolutions. He says that these resolutions are not aimed at a foreign line; the resolutions are for coastwise only. He says: "We are a foreign linethis proposition of ours-a foreign-going line. Of course, we want to touch at San Francisco and have the right to carry traffic there," from New York, "but it will be negligible, the volume we will carry." He says further: "It is very small, nothing at all to amount to anything. On January 3, 1912, the Bristow bill was introduced into the Senate (S. 4119). That bill inhibits railways from owning or operating or controlling competing water lines anywhere, on the canal or anywhere else within the jurisdiction of this Government. On January 10, 1912, there was something done which in my experience or observation of a good many years duration, was contrary to the previous policy of the Harriman system. That was, publicity was given to their plans, the broadest newspaper publicity given to this New York-Oriental-San Francisco-incidental steamship scheme. Here is the heading of one of the articles: PACIFIC MAIL TO BUILD FOUR SHIPS. R. P. SCHWERIN ON WAY EAST WITH SPECIFICATIONS FOR LEVIATHAN LINERS. It reads as follows: R. P. Schwerin, vice president and general manager of the Pacific Mail Co., who left here last Monday for New York took with him the plans and specifications for four leviathan liners which will cost $11,500,000, and which will be operated between New York and the Orient via the Panama Canal, San Francisco, and Honolulu. Whatever change may be contemplated in the management of the steamship company will not affect, it is said, the plan to build these ships. To build them it will be necessary to float a special bond issue, the details of which are said to have been arranged. Whoever, in the final struggle, gets control of the Pacific Mail Co. will need such ships as these to compete in the battle for business that will follow the opening of the canal. It was this fact that made it possible to finance this addition to the fleet, which also will mean a vast increase of strength to the American merchant marine. The shore engineering staff of the Pacific Mail Co. worked night and day for more than a week prior to Schwerin's departure completing the plans and specifications, which call, it is said, for four of the finest ships ever launched from American yards. The new ships are to be 680 feet long and 75 feet in beam. As they will be used through the canal, their draft loaded will be only 30 feet. This comparatively light draft is made possible by the great beam. The ships will have accommodations for 300 first-class passengers, 200 second-class and 300 third-class or steerage. There will be 30 staterooms de luxe in the first cabin, each provided with a bathroom, and the steerage passengers will be housed in staterooms instead of large dormitories, as is now the custom. They will be twin-screw ships of 16,000 horsepower and will be able to make 17 knots an hour. Each ship will be able to carry about 17,000 tons of freight, and they will all be oil burners. They will carry oil in the double bottoms and in two big tanks, one forward of the engine room and the other aft. They will take their main supply of fuel at this port, but an auxiliary oiling station will be established at Honolulu. The ships will make the run from New York to this port in 17 days. From New York to Honolulu they will operate under the protection of the coastwise shipping laws. In the direct trade between here and the Orient they will compete at a disadvantage as regards cost of operation with foreign competitors, but it is believed that the superior size and equipment of the new ships will insure them a big share of the open business. The CHAIRMAN. Does that show what paper it is from? I did not obtain copies of other similar articles. Some are much. larger and go into more detail than this does. These appeared in all the San Francisco papers contemporaneously. On January 19 the San Francisco Chronicle published an article which I have here indicating that some of our people were beginning to smell a rat in connection with this New York-Oriental-San Francisco-incidental steamship-line proposition. The heading is: WOULD SHUT CANAL TO RAILROAD'S STEAMSHIPS. PACIFIC MAIL PLANS CONFLICT WITH PROVISIONS OF A BILL NOW BEFORE CONGRESS. A PECULIAR SITUATION, WILLIAM R. WHEELER DECLARES PRINCIPLE OF PROPOSED LAW IS CORRECT. The article reads as follows: With a bill before Congress proposing to prohibit any railroad-controlled steamship line from operating through the Panama Canal, and the announcement of the Pacific Mail Steamship Co., part of the stock of which is owned by the Southern Pacific, that it intends to build four monster passenger liners for operation through the canal, a situation has arisen which is interesting shipping men here and throughout the country. The bill in question has the pronounced backing of President Taft. It has been introduced by Senator Bristow, and is similar to the Flint bill which was introduced at the last session. It prohibits railroad ownership or control of steamship lines operating on routes which are competitive with the railroads, and provides that it shall be unlawful for the railroad lines "to own, lease, operate, control, or have any interest whatsoever, by stock ownership or otherwise, either directly or indirectly, through any holding company, or in any other manner, in any common carrier by water with which said railroad does or may compete for traffic." Just what the Pacific Mail Co. would do about its plans to build four liners for the canal if this bill is enacted is a subject that is provoking much discussion. "The traffic bureau of the Chamber of Commerce is strongly committed in its advocacy of this bill, as is also the President of the United States," William R. Wheeler said yesterday. "There seems to be a good show of its passing at this session of Congress, when several other measures relative to the canal are to be considered. I am going to Washington next week and shall certainly do everything in my power to urge the enactment of this bill. The principle is right and there can be no denying that it is right. A strong fight will be made for it, and there is a good chance that it will pass.' In shipping circles it is considered rather remarkable that the Pacific Mail should have announced an intention of building four magnificent liners on the eve of the discussion of this bill in Congress. One opinion that is expressed is that the purpose is to urge as an argument against the bill the statement that it is aimed at the destruction of the American merchant marine, as it would prohibit the construction and operation of the liners in question. It is also suggested by those who are anxious to keep the canal free from railroad influence that in the event of the defeat of this bill it might actually be the intention of the Pacific Mail to build the liners on such magnificent lines that competition would be precluded, and after the monopoly was well established to raise the rate so that it would not be seriously competitive with the transcontinental passenger rates. In this case these ships would come under the classification of "commerce destroyers," to use the language of one of the reports of the traffic bureau. Another theory which is advanced in the gossip on this subject is that if the bill should be enacted the Pacific Mail might attempt to change the ownership of the stock now held by the Southern Pacific. The careful wording of the bill, however, might make it difficult to preserve any railroad control in whatever form it should be attempted. As I said before, gentlemen, I leave you to draw your own conclusions. I do not propose to comment upon the chronology of events. It is there for your use if it is of any use. At the top of page 284, part 6 of the hearings before this committee, Mr. Schwerin says: It is alleged that we only "propose" to build these steamers and not to build them, and that our motive is ulterior in bringing this bill before Congress. I do not know of any bill that Mr. Schwerin has brought before Congress. I have not been informed as to that. I am quoting the exact language of the report. I am inclined to think that that is an error and that Mr. Schwerin refers to the canal legislation: Mr. Wheeler, in the hearings before the Committee on Interstate Commerce, United States Senate, February 28, 1912, page 2589, states as follows: "Because a railroad-owned line has an ulterior motive all the time. The railroad does not care whether the steamship line makes a profit directly so long as it can be operated to protect the rail rate.” This (indicating a blue print) is the elevation of a strictly cargo steamer costing in the neighborhood of $800,000, a class of boat such as would fill Mr. Wheeler's idea of ulterior motive, if that was the intention-operating this class of boat for such a purpose through the canal. You will see it is a flush-deck ship with center citadel house for officers quarters. All the rest of the ship is adapted solely for freight purposes. This vessel is 414 feet between perpendicular with a beam of 53 feet, and you will note it is fitted with great derricks for handling large cargoes. I do not know who it is that has made the allegation that Mr. Schwerin's company only "proposes" to build the steamers. I, for one, am perfectly free to say that, on the contrary, I think, and we |