Spanish Government since 1887 has expended, in round numbers, $2,000,000 annually, toward which the colonies contributed about $1,000,000, for the maintenance of steam communication between Spain and Cuba, Porto Rico, and the Philippines [Appendix E]. While the contract of the Spanish Government has some years to run, it is a moral certainty that the line to the Philippines must very soon be abandoned. There are no reasons in Spain's national policy for its maintenance, and the establishment of an American line to Manila must begin a competition which the Spanish line via Suez can not withstand. We must be prepared in time to undertake very many of the obligations toward the islands Spain has lost which Spain has hitherto discharged, and the supply of adequate transportation facilities is among the most important of those obligations. The British Government devotes £80,000 annually to the support of its steamship connection with the West Indies. The Royal Mail Line, which has the contract for this service, showed a surplus of £25,000 available for dividends at its last annual meeting in October. During the current month an American steamship line, under mail contract, will begin a regular semiweekly service between New York and Philadelphia or Boston and the British colony of Jamaica. The fruit trade between our Atlantic ports and the West Indies and Central America has for some years been a profitable sphere of employment for foreign vessels. The entry of an American line into this sphere has been anticipated by a demand from British shipowners for Government support of British lines in this trade. This demand, expressed in an article from Lloyd's Gazette (Appendix E), significant of the promptitude and energy with which British shipping is supported, is to be answered by the establishment of four British subsidized lines between the British West Indies, the United States, and Canada, and for these contracts the Royal Mail Line is in advance a bidder. The competing American line will have a speed almost entitling it to rank in the second class under the act of 1891, and complies with all the requirements of the third class, except tonnage, and this exception will require the line to meet at the lowest rate of compensation early and formidable competition. It has been aimed to demonstrate that the act of 1891 is not adapted to the present requirements of our American steamships in competition with the shipping of foreign nations. It fails to observe the fundamental differences between conditions on the Atlantic and on the Pacific. As to speed, tonnage, and compensation, the act lacks flexibility and adaptability to the different and varying conditions under which the United States must compete with foreign nations for the over-sea carrying trade or else abandon without effort this large and honorable sphere of human activity. As contracts under the act of 1891 are not made by the Secretary of the Treasury, it is not appropriate to recommend specific modifications of this act in this report. It is, however, respectfully suggested that the matter be submitted to the Postmaster-General with a view to concerted recommendation which may lead to an early recasting of the act of 1891 so that it sball meet the requirements of 1899 and future years. TRANSPORTATION OF TROOPS AND SUPPLIES. A further question of national policy, closely associated with the matters just considered, must soon be determined. Under the stress of a war for which we were not wholly prepared, the War and Navy Departments purchased a large number of merchant vessels, American and foreign (Appendix E), for the transportation of troops, coal, and supplies. The retention of Porto Rico, Guam, and the Philippines and the military occupation of Cuba will require a considerable and constant movement of men and supplies by the Government. This movement may be so conducted as to contribute to the establishment of our commercial and maritime supremacy, or it may be so conducted as to impede the development of our merchant shipping, which should be one of the beneficial results of the war. It is of no account to the commerce of the United States whether merchant vessels temporarily employed in the transportation of troops, coal, and supplies be under the direction of army or navy officers or their merchant masters. It is, however, a matter of some moment whether the considerable volume of transportation of men and freight required for military purposes be handled by American lines of steamships, or whether the Government which contributes to their support with one hand shall take away from that support with the other. This matter is to be determined upon a full and deliberate consideration of all the factors involved. As a commercial nation we are confronted with the facts that the value of our Navy exceeds the value of our merchant marine registered for foreign trade; the number and aggregate tonnage (so far as comparison is practicable) of our steam Navy exceeds the number and aggregate of our steam merchant marine in foreign trade; the number of men employed in our Navy at the present time is nearly equal to the number of men, 21,000, who would be required to man all our merchant vessels registered for foreign trade when actually engaged in navigation. A statement of the relation of expenditures for naval purposes to the tonnage of the merchant marine of the principal maritime nations and to their commerce generally may be found in Appendix E. The fact that our Navy is out of proportion to our merchant marine is not cited as a reason for a small Navy, but as a reason for the creation of a larger merchant marine. The Atlantic fleet of merchant vessels owned by the Army (Appendix K) is able to keep afloat 15,000 troops at one time. It is assumed that the Government will not adopt the policy of keeping the nearly 100,000 tons of foreign merchant shipping already purchased, most of which for most of the time must be idle and a source of expense. Great Britain sends its garrisons to North American ports by contract with established lines of British steamships operating between England and Canada, thus contributing to their support, and "conveyance of troops" is a regular item in the accounts of the Peninsular and Oriental Steamship Company. The policy to be adopted involves the views of other Departments besides the Treasury, and the views submitted are to be taken only as tentative suggestions from the point of view of the merchant marine. EXTENSION OF THE ACT ADMITTING THE NEW YORK AND PARIS. A modification of the act of 1891 as to speed, tonnage, and compensation will not suffice to establish as promptly as desirable powerful American mail steamship lines to the eastern coast of Asia and the Philippines. An extension of the act of May 10, 1892, will unquestionably be needed for the Pacific as it was found necessary for the Atlantic. There are not enough American seagoing steamships of 4,000 tons, much less 5,000 tons, available for trans-Pacific lines, even if the speed requirement be reduced below 16 knots and the compensation be fixed at over $2 per mile. Outside of the four American trans-Atlantic "liners," there are only six American steamships of over 4,000 gross tons adapted to transoceanic navigation. Two of these, the Segurança and Vigilancia, are already employed in the mail service, under the act of 1891, between New York and Havana. The El Rio, built for the old Brazilian mail service, has been bought by the Navy. The three vessels of over 4,000 tons which are capable of the service proposed are the City of Peking, 5,080 gross tons, 14 knots, built in 1874; the China, 4,940 gross tons, 17 knots, built in 1889; and the Arizona, 5,305 gross tons, 16 knots, built in 1879. The Arizona, which alone complies with requirements of the act of 1891, at present is owned by the War Department. The China and Arizona are foreignbuilt vessels entitled to American registers by special acts of Congress passed last June. Should Congress see fit to revise the act of 1891 concerning mail compensation, probably eighteen months must elapse before steamships of 4,000 tons or over could be built in this country and put into operation. The interests involved are believed to be too important to warrant long and unnecessary delay. The situation on the Pacific coast at this time very closely resembles that on the Atlantic coast in 1892. The act of March 3, 1891, had been inoperative, so far as trans-Atlantic mail steamships were concerned, for over a year. On May 10, 1892, an act was approved providing that certain foreign-built steamships should receive American registers on condition that steamships of corresponding tonnage be built in the United States. While general in its terms, the act was in fact the grant of a special privilege to one corporation, as the only two vessels in existence which conformed to all of its requirements were the steamships City of New York and City of Paris. The act admitted foreign-built vessels to American registry upon the following conditions: 1. That such vessels should be steamships engaged in freight or passenger business in an established line from a port in the United States. 2. That they should not be less than 8,000 tons each. 3. That they should have a speed of not less than 20 knots. 4. That 90 per cent of the capital of the foreign corporation operating such steamships at the time should be owned by citizens of the United States and have been so owned since January 1, 1890. 5. That American owners should obtain a complete transfer of the title to such steamships from the foreign corporation. 6. That the American owners should build in American shipyards steamships of an aggregate tonnage not less in amount than the steamships so admitted to registry. 7. That each steamship so built or contracted for should be not less than 7,000 tons. 8. That all vessels documented under the act should be available for the purposes of the United States in the event of war. 9. That foreign-built vessels admitted under the act should not engage in the coasting trade. The direct result of that act was the construction of the St. Louis and St. Paul in this country, the establishment of a successful transAtlantic mail line, and the addition of four valuable auxiliaries to the strength of the Government. The purpose of the act declared by Congress was "to encourage American shipbuilding," and it has already accomplished that purpose as far as it can unless extended. More encouragement under a more general law based on the same principle, it is safe to assert from experience, would accomplish still more for shipbuilding and for navigation. Of all the conditions prescribed in the act of May 10, 1892, only three appear to conform to the purpose declared in the title of the act, while the remaining six are limitations or impediments to the encouragement afforded. They may now well be modified or removed, in view of the success which has attended the experiment on a restricted field. Those three conditions are the requirement that an equivalent tonnage should be constructed in American shipyards for the tonnage of foreign construction admitted to registry, that American ownership should be established, and that foreign-built vessels thus admitted should not engage in the coasting trade. The proposition to remove or modify the restriction as to size and speed is not only equitable to all private interests, but also is in line with our national professions. There was no delay in granting American registers to foreign-built vessels to carry our flag and men and arms in war. In five months Congress directed the unconditional issue of American registers to 15 foreign steamships of 42,715 tons, the Navy Department purchased 8 more such steamships of 23,627 tons, and the War Department has purchased 16 more of 70,846 tons, a total of 38 foreign steamships of 131,883 tons brought under the merchant flag or the Government flag to prosecute the war (Appendix K). To carry our flag and men and merchandise in peaceful commercial pursuits to the Philippines and to Asia, to secure the full benefits of the war, Congress, it is suggested, may now provide for the issue of registers to foreign-built vessels under conditions which will involve the construction of equivalent tonnage in American shipyards. The fact that foreign-built steamships have been bought by the Government for the purposes of war will not under the law entitle them to American registers for purposes of trade, when the Government has no further use for them. tonnage so acquired shall return to its normal use, it can acquire the privileges of American merchant shipping only through the action of Congress. When Our own experience under the act of 1892 has its counterpart in the experience of Germany. When the German Government mail lines to Asia were first established, it was necessary to procure the first steamships required in Great Britain. This was permitted on condition that the North German Lloyd should also construct steamships in German yards. The result of this arrangement has been the establishment of two of the most important shipyards in Germany (Appendix E). From 1885 to 1891 the North German Lloyd spent in round numbers $7,500,000 in German yards and $9,000,000 in British yards. Under the system proposed for the United States, German shipyards developed so rapidly that from 1891 to 1897 the same company spent only $1,500,000 in British yards and $16,000,000 in German yards. SHIPPING BOUNTIES. The specific measures thus far considered look toward the development of regular and quick steam communication under the American flag between the United States and foreign countries. The encouragement of such lines, while desirable and in accord with the policy of maritime nations, falls short of a comprehensive project for the promotion of American navigation and shipbuilding. An increased tariff on all goods imported into the United States in foreign vessels above the tariff rates imposed on goods imported in American vessels has been suggested as a means of increasing the use of American vessels. The plan is open to the elementary objection that it is in contravention of our treaties with Great Britain, Germany, Sweden and Norway, Italy, the Netherlands, Austria-Hungary, Denmark, Belgium, Russia, Spain, Portugal, Greece, Turkey, Venezuela, Brazil, Argentina, Paraguay, Peru, Bolivia, Ecuador, Japan, China, Korea, Honduras, Costa Rica, Guatemala, Haiti, San Domingo, and Liberia (Appendix I). It involves the delay of abrogation of articles in our treaties with these nations and a general readjustment of our commercial relations with nearly all the civilized world. the outset it raises most extensive diplomatic questions, which must be considered by the Department of State. At The proposition has also been advanced to pay bounties on all American products or on certain American products exported from the United States in American vessels. This proposition, however, is met at the threshold by the same objection. We are bound by our treaties to pay the same bounties on goods exported in foreign vessels as we pay on exports in American vessels. The number of treaties containing this provision is not so large as the number of treaties against discrimination, but it embraces Great Britain, Germany, the Netherlands, Belgium, Italy, Denmark, Portugal, Austria-Hungary, Brazil, Argentina, Japan, and others (Appendix I). Maritime nations have resorted to neither of these projects for many years, France being a notable exception in its experiment for a little over one year with discriminating duties in 1871. They have, however, made use of liberal mail subsidies and bounties for the construction and navigation of vessels under the national flag. The following table shows the methods in use by the principal maritime powers, the amounts expended for the latest year for which a report is available, and the national tonnage (according to Lloyd's): The Japanese bounty act went into effect in October, 1896, but expenditures for the first year are not at hand. The Nippon Yusen Kaisha, the principal Japanese steamship company, expected to receive this year 2,500,000 yen ($1,250,000 gold) on twelve steamships as construction bounties. The Norwegian construction-bounty law was enacted in 1897. Besides mail compensation, Great Britain is paying this year $236,196 as retainers to a few fast-mail steamships which may be used as auxiliary cruisers in case of war (Appendix E). Great Britain has also included in her estimates for this year the sum of $1,219,923 to be expended on officers and seamen of the merchant service who are in the naval reserves. Of this expenditure the annual retainers, amounting to about $600,000, are an indirect con |