FOOTNOTES:
[389] Compare chap. IV, p. [102], supra.
[390] The literature on the subject is scanty. Much of the material has necessarily been gathered in the field by conference with traffic officials and others. My hearty thanks are due primarily to Paul P. Rainer, Esq., chief of the Joint Rate Inspection Bureau at Chicago, for his willingness to impart such explanation of this complicated matter as the delicate responsibilities of his important post permit. The map published herewith, while in part prepared from the actual percentage tables, with his permission and that of several important trunk line officials concerned, has been checked and corrected by his official copyright map of January 1, 1899. While the scheme of graphic representation is entirely different, the facts represented are the same. I am also especially indebted to H. C. Barlow, Esq., formerly president of the Terre Haute & Evansville Railroad and now director of the Chicago Commercial Association, and to J. W. Midgley, Esq., for many years one of the Trunk Line Commissioners, for assistance in many ways.
The principal references consulted are included in the following list:
1874. Windom Committee Report, officially known as Report of the Select Committee on Transportation Routes to the Seaboard, 43d Congress, 1st Session, Senate Report No. 307, vol. I, pp. 24-30; vol. II, pp. 7, 80, [283].
1879. Hepburn Committee Report, New York State, Special Committee on Railroads, 8 vols., pp. 3001-3006, 3102-3111.
1886. Cullom Committee Report, 49th Congress, 1st Session, Senate Report No. 46, vol. II, p. [101].
1887. Typewritten Record, Opinion, etc., of the Interstate Commerce Commission in Detroit Board of Trade v. Grand Trunk, etc., Railways. Also the Toledo case (1889) and that of Pratt Lumber Company (1905), I.C.C. Reports, vol. II, p. 315; vol. V, p. 166; and vol. X, p. [29].
1890. Senate Report on the Transportation Interests of the United States and Canada, 51st Congress, 1st Session, Senate Report No. 847, pp. 497, 611-636.
1892. Cincinnati Freight Bureau case. Copy of Record before the Interstate Commerce Commission, etc., United States Circuit Court for Southern District of Ohio, In Equity No. 4748, vol. I, pp. 42-53. (Reprint.)
1900. Report of United States Industrial Commission, vol. IV, pp. 556-562.
1905. Elkins Committee, officially known as Hearings before the Committee on Interstate Commerce, United States Senate, 5 vols., vol. II, p. 1569, and vol. III, p. 2271.
1905. Record of Proceedings before the Illinois Railroad and Warehouse Commission in the Matter of Revision of the Schedule of Reasonable Maximum Rates, etc., Springfield, especially pp. 31 et seq. (Reprint.)
1876-1905. Proceedings and Circulars, Joint Executive Committee and Joint Rate Committee of the Trunk Line, etc., Associations.
[391] Fink, Adjustment of Railroad Transportation Rates, etc., p. 16.
[392] Ibid., pp. 19 and 52.
[393] Windom Committee Report, II, p. 7.
[394] Waste of transportation as an economic problem has already been discussed in chap. IX, supra.
[395] This persisted even in 1890. Consult 51st Cong., 1st sess., Sen. Rep., No. 847, p. 616.
[396] Hepburn Committee, pp. 3006-3010.
[397] Hepburn Committee Report, p. 318.
[398] Windom Committee Report, II, p. 287.
[399] This was adopted officially by the trunk lines April 13, 1876.
[400] Hepburn Committee Report, p. 3112.
[401] Record Proceedings Railroad Commission of Illinois in Revision of Maximum Freight Rates, 1905, pp. 32 and 88.
[402] 55th Cong. 1st ses., Sen. Doc. No. 39, p. 33. The Hepburn Committee (p. 3111) describes the local jealousies which prevailed.
[403] Chicago has never become reconciled to it, however, alleging that it injures her commercially. Compare Windom Committee, 1874, vol. i, p. 24; 51st Cong., 1st ses., Sen. Rep. No. 847, 1890, p. 611 et seq.; Elkins Committee, 1905, pp. 1433, 2538 et seq.; and Record Proceedings Illinois Railroad Commission on Revision of Maximum Rates, 1905. Cf. p. [378], infra. Seaport differentials are discussed in chap. XI, infra.
[404] Hepburn Committee, p. 3104.
[405] Distances are given in the Thurman-Washburne-Cooley Advisory Commission on Differentials, etc., of 1882.
[406] Hepburn Committee, pp. 3188, 3195. "Taking the Indianapolis & St. Louis Railroad, for example, running to Indianapolis, where they can connect with all the trunk lines.... Assume that company had only 100 cars of business per day; if the property went to Baltimore, that company would receive $800 per day more than if it came to New York, pro-rating the rates by mileage to both places; now $800 a day, there being 300 working days in the year, is a difference of $240,000 a year."
[407] The revised table of percentages is reprinted in full in Hepburn Committee Report, p. 3107 et seq.
[408] The official rule from Proceedings of the Joint Executive Committee, June 12 and 13, 1879, is as follows:
"First.—That from all points being less distant from New York than Chicago new percentages be adopted for making up rates on eastbound freight upon the following basis: the percentages from points of the same, or no greater distance than Chicago, to continue as heretofore.
"Second.—That six cents per 100 pounds be first deducted from an assumed rate of 25 cents per 100 pounds, Chicago to New York, said deduction to represent the fixed charges at both ends of long or short hauls.
"Third.—That, after such deduction, the rate per mile, which the remainder, or 19 cents per 100 pounds, produces from Chicago to New York, shall be charged per mile from all common points named in the first section, according to the percentages of distance shown by the table adopted at Chicago, April 30, 1876, to which result so computed the 6 cents per 100 pounds of fixed charges first above deducted shall be again added, and the percentage of the Chicago rate of 25 cents, produced by such additions, shall thereafter constitute the percentage of the Chicago rate, which shall be subsequently charged from the points named in first section.
For Illustration
| Chicago to New York, per 100 lbs. | 25c. |
| Less fixed charges, per 100 lbs. | 6 |
| Basis of rate for computation | 19 |
| Columbus, Ohio, as at present 70 per cent. of Chicago net rate, will be | 13.3c |
| To which add the fixed charges | 6 |
| And the new percentage from Columbus will hereafter be 77-2/10 per cent. of Chicago, in lieu of 70 per cent., as at present." | 19.3c |
[409] Hepburn Committee, p. 3104. A hypothetical instance will serve as illustration. Suppose a point with an 80 per cent. rate on the old schedule. When Chicago paid 25 cents, the rate to this point would be 20 cents. Under the new scheme the intermediate rate would be 80 per cent. of 19 cents, or 15.2 cents, plus 6 cents terminal charge, making a total of 21.2 cents. This is 84.8 per cent. of the Chicago rate instead of 80 per cent. as before. Compare table, p. [373], infra.
[410] Thus from Ironton, in the 87 per cent. zone south of Columbus, Ohio, the distance to Columbus is 127 miles, added to 638 miles from Columbus to New York makes a total of 765 miles. Multiplying this by 00.0206 makes it 87 per cent. of the Chicago rate.
[412] Cf. Industrial Commission, IV, p. 556.
[413] Record, Detroit Board of Trade case.
[414] Consult p. [195], supra.
[415] Computed apparently by regular rules, but on the basis of only 4 cents terminal charges instead of the usual 6.
[416] Joint Rate Circular, No. 815.
[417] Demanding a 70 per cent. rate on a strict mileage basis, and also, because the pro-rating basis with Western lines is that figure.
[418] 23 I.C.C. Rep., 684, on wool from Detroit, for example. 13 Idem, 300 concerns Evansville rates and those across in Kentucky.
[419] Trunk Line Association Circular No. 523, issued July 26, 1883, gives tables of these percentages in each direction. Present westbound percentages are given in ibid., No. 751, issued April 3, 1899.
[420] Typewritten record, Detroit Board of Trade case, 1887-88, Interstate Commerce Commission Office, pp. 244-251.
[421] Under a committee headed by the late J. T. R. McKay, of Cleveland. The Official Classification and the 75 cent New York-Chicago rate first-class were then adopted for good.
[422] 12 I.C.C. Rep., 186, on points about New York, for example.
[423] I am told that rivers intervening, to cut off cartage by wagon to competing lines, have sometimes effectively influenced the charges.
[424] The long and short haul principle has always been given great weight here. All exceptions to it were removed in good faith by the carriers when the Act of 1887 was passed. Cf. Windom Committee, vol. I, p. 26; vol. III, pp. 42, 134, and 283.
[425] G. C. Pratt Lumber Co. v. Chicago, Ind. & Louisville Railway Co., decided January 27, 1904.
[426] U. S. Industrial Commission, vol. IV, p. 562.
[427] Cf. 8 Int. Com. Rep., 169, on grain rates from Minnesota and trans-Missouri points; as also 23 I.C.C. Rep., 195.
[428] Cf. Joint Committee Information No. 298 of January 13, 1900, giving all these rules in detail.
[429] Cf. Windom Committee, vol. II, pp. 42 and 134.
[430] Known as the C. F. A. scale. Full text is printed in Illinois Railroad Commission Proceedings in Maximum Freight Rate case, Record, etc., 1905, p. 43. See also p. 97.
[431] Detailed comparison is made in ibid., p. 45. See also p. 17.
[432] Illinois Railroad Commission Proceedings in Maximum Freight Rate case, Record, etc., 1905, p. 152.
[433] Exhibit A 15, ibid., shows this by means of a map. See also Senate (Elkins) Committee, 1905, vol. III, p. 2271.
[434] The double disability of these smaller places is stated in ibid., p. 7.
[435] Chapter XVIII, infra.
CHAPTER XI
SPECIAL RATE PROBLEMS: THE SOUTHERN BASING POINT SYSTEM; TRANSCONTINENTAL RATES; PORT DIFFERENTIALS, ETC.
Contrast between the basing point and trunk line systems, [380].—Natural causes in southern territory, [381].—Economic dependence, [381].—Wide-spread water competition, [382].—High level of rates, [382].—The basing point system described, [383].—Its economic defences, [384].—Early trade centres, [384].—Water competition once more, [385].—Three types of basing point, [387].—Purely artificial ones exemplified, [388].—Different practice among railroads, [390].—Attempts at reform, [391].—Western v. eastern cities, [391].—Effect of recent industrial revival, [392].—The Texas group system, [393].—An outcome of commercial rivalry, [394].—Local competition of trade centres, [395].—Possibly artificial and unstable, [395].—The transcontinental rate system, [395].—High level of charges, [396].—Water competition, [396].—Carload ratings and graded charges, [398].—Competition of jobbing centres, [398].—Canadian differentials, [400].—"Milling-in-transit" and similar practices, [401].—"Floating Cotton," [402].—"Substitution of tonnage," [403].—Seaboard differentials, [403].—Historically considered, [403].—The latest decision, [403].—Import and export rates, [404]-409.
The rate system in the southern states contrasts sharply with that of trunk line territory.[436] Its most unsatisfactory feature is its complete violation of the distance principle. Public dissatisfaction was long voiced by a large number of complaints before the Interstate Commerce Commission in the early days,—a cessation of these complaints since 1900, however, was the result of the nullification of the law by judicial interpretation, rather than an indication of any acquiescence of the public in the scheme. Next to settlement of the problem of transcontinental rates, a reasonable adjustment of the southern situation is one of the important tasks confronting the Federal authorities.
Certain natural features of southern territory are connected with its peculiar rate system. The first of these is its scattered and relatively thin settlement. Density of population varies between one-third and one-fourth of that in the northern states. This greatly limits the volume of local business. In the second place, the largely agricultural character of the country, yielding a traffic predominantly of low grade, has had a great effect. Much attention being devoted to cotton, there is little local interchange of freight. The business, moreover, is largely seasonal in character. In the early days, at least, practically all of the profits of the carriers had to be made between September and January. This concentration of interest in the movement of the cotton crop is now rapidly being supplanted by a much more general movement of traffic; but the rate system in force is an outgrowth of the conditions prevalent in the early days.
The entire dependence of this territory for manufactured goods upon the northeastern states, and for foodstuffs upon the West, has had a profound effect, we have seen, upon its railway development.[437] The predominant direction of traffic is rendered quite peculiar by contrast with trunk line territory. In the North, the principal railroads lie parallel, east and west; in the South, they are radially distributed outward from Atlanta like the spokes of a wheel. Imagine a triangle with its apex at this city,—the focus of all transportation interests in the South,—and with its other two angles lying at New York and Chicago respectively. The hollow centre of this triangle, as appears by the accompanying map, is occupied by the Allegheny mountain chain. The movement of traffic historically along the western side of this triangle has been overwhelmingly southward; at one time the disproportion southbound from western territory being as thirteen to one.[438] Along the eastern side of this triangle,—that is to say parallel with the Atlantic seaboard,—the preponderance of tonnage, by bulk and probably by value as well, has been toward the north. In this direction cotton in the early days, and latterly lumber, have moved from southern fields and forests to northeastern markets. In Virginia-Carolina territory, today, about three-fifths of the loaded mileage is north bound. The uneven distribution of traffic is still further complicated by the excess of tonnage eastbound in trunk line territory along the northern side of our triangle, above mentioned. This general description explains many of the abnormalities in freight rates throughout this territory. Bulky staples moving one way, while manufactured goods, high in value but more concentrated in weight, go the other, greatly complicate the problem of economical operation.
Another omnipresent complication in the southern states is the widespread existence of water competition. The situation in the South in this regard is not unlike that of England. Its entire territory is threaded with a series of more or less navigable watercourses which penetrate from the seaboard or the Mississippi river, far into the interior. Here again is a physical peculiarity of the southern territory, which historically explains, even if it does not fully justify, as we shall see, certain peculiarities of its freight rate system.
MAP SHOWING PRINCIPAL RAILROAD SYSTEMS IN THE SOUTHERN STATES
[Facing page [382]]
The first general characteristic of the southern system is the relatively high level of freight rates. Bearing in mind that the distance from New York to Chicago is practically the same as from New York to Atlanta, the freight rate, first-class, on the trunk lines was, in 1900, 75 cents per hundredweight as against $1.14 to Atlanta. Sixth-class rates then stood to one another as 25 cents and 45 cents respectively, the relatively high ones being in the South. Reference, for example, to the table on page [349], will bring out this contrast at the present time in another way. According to this the rates in the South are not higher than in the West for the same distance. The disproportionately high charges in the South, however, occur mainly in the field of local rates. And it is the local, rather than the through, charges, which cause the present dissatisfaction. The principal complaint concerning through rates is that they are made up principally as the sum of locals based upon Ohio or Mississippi gateways.[439] Whenever such sums of locals have given place to unbroken through rates, a large measure of satisfaction to shippers has resulted. And then, finally, it should be observed that certain peculiarities of the classification system somewhat increase the relatively high grade of charges throughout this territory,[440] tending to support the allegation that rates are unreasonably high.
The so-called basing point system is the second fundamental peculiarity of southern rate adjustment. It has already been discussed in connection with local discrimination.[441] This basing point system, although not absolutely confined to the South, has been more highly developed here than elsewhere. In principle it is simply this: certain cities are established as basing points,[442] and rates to all other places in that neighborhood are made by adding to the through rate into the basing point, the local from that city to the final destination. Since local rates in the South, based upon slender local traffic, are always exceedingly high, this appears to confer a very great advantage in the matter of charges on the cities thus favored. The way in which this system is opposed to the long and short haul principle in law has also been discussed in another connection.[443] On the face of things it certainly appears unjust that goods should be transported directly through the place to which they are ultimately to go; and after being hauled to the basing point with a heavy charge for that haul, should thereafter be brought back again with the addition of a second high local rate for the service. And yet that very commonly occurs.
A number of economic defences for the basing point system have been urged by the carriers at different times. The most substantial one is that the basing points, historically, were originally important trade centres and are still intimately related to the business customs of the South.[444] These trade centres, it is alleged, were not made by the railroads: they were in existence before the railroads were constructed. They are an outgrowth of the agricultural system of the region. In the West a farmer may take a sample of his grain to the nearest town and sell the whole crop by that sample. No such transaction is possible with cotton and tobacco. Each shipment must be sampled, weighed and classified on its own merits. Such grading cannot take place at local stations. Convenient commercial centres are, therefore, a necessity, serving for the proper concentration of products. These trade centres, moreover, arising in connection with the sale of staple products of the soil, became natural distributing or jobbing points. The planters naturally buy in the places to which they resort to sell their crops, often employing the same merchant.[445] As such natural trading centres, these southern towns are forced to compete with the older established distributing cities up north. At this point a second defence of the basing point system arises.[446] It is urged that a decentralization of jobbing trade in a sparsely settled or newly developed territory can be effected only by means of encouragement through peculiarly favorable rates to offset the strength of the remoter great cities. The plausibility of this defence, however, is considerably weakened by the fact that under the peculiar southern classification system, carload ratings are largely absent.[447] Therefore, as it appears, the local jobber in the South competes under a disability as compared with New York and Cincinnati which is no less at the basing point than in the small town. Still a third, and probably a valid, defense of this violation of the distance principle by the use of basing points, is the paucity of local business. It is alleged that in the North the competitive points are so near together, and the volume of competitive business is so large, that it pays to reduce the charges at immediate points. In the South, on the other hand, competitive points are so far apart and, relatively speaking, the local tonnage is so small, that the adoption of such a policy would be ruinous.[448]
The most prominent defence of the basing point system brought forward at all times, and greatly emphasized in proceedings before the Interstate Commerce Commission, is the widespread existence of water competition. Carriers allege that in order to secure any portion of the traffic at many points, low rates must be offered, quite irrespective of the charges to intermediate inland stations. They affirm that to lower all rates to this "compelled" competitive level, would deplete their revenues and lead to bankruptcy. This has been the main excuse for the persistent violation of the long and short haul clause by carriers in the southern states down to the present time. The evidence goes to show, however, that on the lesser streams, at least, the steamers are so small, their service so irregular, and the incidental risk of damage, cost of insurance and other expenses of transhipment are so great, that the railroads practically control the business.[449] Furthermore, in many places it appears that the water lines were either owned by the railroads or appeared in league with them; or else that a division of the business had been effected by which the little river steamers were accorded a certain proportion of the low grade freight.[450] Such facts have been established before the Interstate Commerce Commission, for example, in the so-called Dawson case concerning the Chattahoochee river; on the Ocmulgee at Macon in the Griffin and Hawkinsville cases; at Montgomery in the Troy case; and on the St. Johns river at Palatka, Florida, in the Hampton case. A competent witness has declared in fact that there is "no more real water competition at many of these places than in the Rocky Mountains."[451] Probably the potentiality of competition is somewhat greater today with improvement of the larger navigable waterways. It seems to be real at Chattanooga since the construction of the Mussel Shoals canal; but that it has in late years been effective at Nashville seems open to question. The practical disappearance of the Mississippi river traffic also points to the decline in importance of the great rivers as rate regulators, except in respect of the carriage of ore, lumber, and coal. Whether the National Waterways movement will ever succeed in its revival is, it seems to me, open to serious question.[452]
Analyzing these several grounds of defence, a distinction should be made at the start between three varieties of basing point. This is not clearly brought out in the numerous decisions upon rates in southern territory. In the first group are the old natural trading centres, usually once blessed with effective competition by water, even if at the present this is of limited character. Savannah and Montgomery, Alabama, are of this type. Then, secondly, there are the great railroad centres like Atlanta and Birmingham. These are modern creations without water competition of any sort, although the rivalry of railroads with one another is exceedingly keen. Until recently, moreover, this competition has been over such widely divergent routes that agreement has been difficult and consolidation impossible.[453] And, then, in the third place, there are the basing points which seem to be absolutely artificial. A number of these are to be found in the southeastern part of Georgia, such as Cordele, Americus, Albany, etc. In these cases the only criterion which seems to have been adopted is that the place shall have attained sufficient importance to enable it to compel some carrier to give it special privileges in the matter of rates. As was tersely stated in a leading case—Cordele at that time not having been made a basing point:[454]
"Cordele is not treated by defendant roads as a competitive point, because it is not a sufficiently large distributing point, and it is not such a distributing point because it is not treated as a competitive point. Hence it appears that the roads seek to excuse their wrong-doing by offering the results of the wrong in justification. Judged by its results, this system of rate making is at variance with all the equality provisions of the act to regulate commerce."
The subsequent experience in this last case is significant. One of the carriers at Cordele having afterwards discovered the advantage to itself in making this town a basing point, all the other railroads were compelled to acquiesce. Such a thing has happened frequently throughout the South; with the result that many places have been given strongly preferential rates for no other reason than the arbitrary decision of some one of the carriers. Even the railroads themselves recognize this fact. They often deplore the necessity for reducing rates because of action by competitors at some particular point; but no option remains. It is with reference to this third class of purely artificial basing points that the most dissatisfaction among shippers arises.
The awkward and unreasonable situation is well exemplified in a very recent case,—important, also, because it was the first to be decided by the Interstate Commerce Commission under its new and enlarged powers. The location of Ashburn in southeastern Georgia, a county seat with a population of about 2,200, is shown with references to surrounding places by the map on opposite page.[455] It lies in the centre of an irregular quadrilateral, the corners of which are occupied by Cordele, Albany, Tifton and Fitzgerald. It has no commercial standing at present, but, being as large at least as Tifton, aspires to become a distributing centre in its immediate neighborhood. Yet from every direction its rates are made by a combination upon these surrounding towns. The disparity is illustrated by the charges from New York, which are $1.42 per hundredweight, first class, as compared with $1.17 to all the neighboring places. Examination of the history of these favored towns shows, however, that they have acquired their favored status as basing points, neither because they were originally important trading centres, nor because they enjoyed water competition. Two of them, actually, are as remote from streams as is Ashburn. The fact is that the competition of western and eastern dealers with one another, backed in each case by local railroads having routes or affiliations either northeast or northwest, has brought about their establishment as basing points. Neither is Ashburn today more of a local point than either Tifton or Cordele when they were first granted lower rates. As one examines further, it appears that this keenness of trade competition between East and West,—that is to say, from Baltimore and New York as against Cincinnati and Chicago, etc.,—which has brought Atlanta into prominence and made it finally the key to the entire southern rate arch,[456] has in the same manner led to the special favors granted to one town as against another.
In this case the Interstate Commerce Commission ordered an equalization between all five points. It is to be hoped that this special case may be a point of departure for a general reform in the immediate future of the entire iniquitous scheme of local favoritism which has too long been allowed to exist.
The entire artificiality and even at times iniquity of the basing point system is admitted in the following brief for the railways in the Alabama Midland case before the Supreme Court of the United States. "There may be," it is conceded, "a few mere 'railroad junctions' in the South, which, owing to the ignorance or corruption of certain railroad officials, have been arbitrarily 'called' competitive points and which 'receive' certain arbitrary 'concessions' in rates to which they are not justly entitled. There may be also a few strictly local stations in the South, which are not even 'railroad junctions,' where arbitrary and unfair 'concessions' in rates have been made by certain corrupt railroad officials, to enhance the value of property owned at such stations by said officials, or by their relatives or friends ... [but they are] the offspring of ignorance or corruption and should not be recognized by the courts." This artificiality is also proven by the difference of practice which exists on the various southern roads.[457] The worst offender and most defiant opponent of the government from the inception of Federal regulation, has been the Louisville & Nashville Railroad. The Southern Railway introduced the long and short haul principle in the main on its through line to Atlanta long ago. On the Atlantic Coast Line few violations of the distance principle exist, and the condition is improving. No basing points whatever exist in South Carolina; and the state railroad commissions in general are working for betterment. Neither the Chesapeake & Ohio nor the Norfolk & Western, operating alike in sparsely settled regions, find it necessary to violate the distance principle. One of the curses of the scheme, however, is that irregularity of one carrier may compel its neighbors to adopt a policy which they recognize as unjust. Only by compulsion applied to all alike can a just solution be had.
A determined effort was made in 1880 by the carriers themselves to apply the trunk line rate system, based upon the distance principle, to the southern states.[458] A thoroughgoing scientific readjustment was proposed. The situation is significantly described in the following extract from this report:
"Your committee entered upon the performance of their duty entertaining the sentiment that experience and observation have rendered generally potent among those in charge of the revenue interest of transportation lines, namely, the necessity for more intelligent and defensible methods of making competitive freight rates than the following of figures, descending to us from tariffs named on arbitrary bases or conditions now obsolete, or by the assumption of differences between centres of trade now changed or junction points now no longer such, or other methods for which there are no reasons capable of satisfactory explanation."
Representatives of most of the important lines subscribed to this plan; but it fell through at the last because of the opposition of others, selfishly viewing their own particular interests rather than the general welfare of all. It is clear that while minor improvements may be introduced, no widespread reform can be effected without the interposition of Federal authority. It is to be hoped that this exercise of authority under the larger powers now conferred by Congress since 1906 may not long be withheld.
A third and essentially different problem respecting southern rates concerns the discrimination against western cities in favor of those along the Atlantic seaboard. This has been for years before the Interstate Commerce Commission in the Cincinnati and Chicago Freight Bureau cases.[459] The amount of this discrimination appears in the fact that at the time of the original complaint, the rate from Cincinnati to Atlanta was ninety-four per cent. of the rate from New York to the same point; although the distance from Cincinnati was scarcely more than half of that from New York. It appears as if this difference were largely the result of keen water competition by coastwise steamers,—a competition which affects rates for a considerable distance inland all along the coast as far as New Orleans. Where such water competition is absent, there seems to be a general arrangement as between East and West which is standardized by distance. Atlanta gives the keynote; and all rates from outside southern territory change with its fluctuations. The disability against western cities may be expressed, therefore, in another way, by the fact that New York, although so much farther north than Baltimore,—supposed theoretically to be kept on a par with Louisville as to rates,—reaches Atlanta on lower charges than are made to Cincinnati.
Fortunately an attempt at improvement of the southern rate system will be greatly aided by the wonderful industrial revival which has been under way during the last decade. The growth of population, and especially the development of manufactures, may render it possible for the carriers to endure the hardship which any traffic readjustment always entails. The growth of manufactures, measuring in a way the degree to which the South is learning to supply its own needs, appears in the fact that in 1907 it converted one-fifth of its cotton production into cloth, and reduced from its own ores one-half of its consumption of pig iron in its own local factories. Furniture shipments to the South were once large. At the present time High Point, North Carolina, is second only to Grand Rapids in this line of manufacture. Every new mill and mercantile establishment which springs up, is bound to help to a degree in the transition from a mediaeval scheme of rate making to a more defensible system.
The Texas "common point" system affords a valuable illustration of the influence of competitive forces in trade in bringing about an equalization of transportation charges over a wide area.[460] It also shows the danger of localization of interest through the exercise of piecemeal control by state commissions rather than the enforcement of broad-gauge regulation by the Federal government. The settlement of the great area of Texas naturally first took place by extension inland from the Gulf coast. All supplies came by sea from the north. Freight schedules were scaled from the seaboard according to distance, more or less, in competition with stage and wagon. Gradually, however, with the growth of St. Louis as a rival centre of distribution, railroads serving that city penetrated directly from the northeast. The St. Louis jobbers were at once brought into keen rivalry with merchants in North Atlantic states, served by coastwise steamship lines. This competition beginning at the points of contact of the two different sets of railroads, gradually extended all over the state. St. Louis lines, acting for local jobbers whose goods came from New York, might not charge more at any point in the aggregate than the total rate from the same initial city which applied by way of the Gulf steamers. Nor could the railroads in from the Gulf ask more for both steamer and rail carriage than the entire double charge from New York around by way of St. Louis. The natural stronghold of the Gulf lines was in the centre and the south; northern Texas was more naturally tributary to St. Louis; but gradually a compromise was effected whereby equality of rates was accorded either from New York or St. Louis to all stations throughout the state. Thus arose the so-called Texas Common Point Territory, to all parts of which Kansas City, Chicago, and finally all other distant cities were admitted on even terms.
Another feature of the Texas rate adjustment is suggestive.
A vast territory, uniform in products and needs, might either be served by a few great distributing centres or by a larger number of smaller ones, each forming the natural focus of trade within a given district. Believing the latter arrangement to be better suited to local conditions, the Texas Railway Commission has arbitrarily prescribed such intrastate tariffs as to foster the development of a number of such jobbing points or mercantile centres. Local rates, more or less proportioned according to distance, are graded up to a maximum, all based principally upon the needs of the principal city, Houston, as served by its seaport, Galveston. The significant feature of these Texas local rates, however, is the fact that beyond a fixed maximum,—say 245 miles on classified tonnage, or 160 miles on cotton,—no further increase of rate occurs with extension of the haul. That is to say, beyond a certain radius fixed by the maximum rate, distributing centres are placed upon an entire parity with one another. Fort Worth, for example, within a distance of about two hundred miles, naturally has an advantage over all other competing centres, more distantly located; but outside of this zone, naturally tributary to it as a provincial trade centre, all others such as Dallas, Waco, or San Antonio enjoy equal opportunity. In only one respect is the distance principle violated: namely, in the preferential rates from the north to Houston and Galveston as compared with the higher charges to intermediate Texas points. These primary centres are encouraged by standing in a class by themselves.
This theoretically admirable Texas system is, however, unstable in several regards. It is artificial in that it is primarily adjusted to the needs of the state, without reference to the rights of other places lying beyond its borders.[461] The railroads naturally desire to contract the common point territory; the forces of trade rivalry seek to enlarge it. The growth of middle western cities and manufactures, supplying Texas from their own domestic plants rather than merely redistributing goods manufactured in the East, also tends to modify the scheme. Whether the common point system, therefore, can long withstand the force of these disintegrating influences remains to be seen. The conditions are not compact and homogeneous as they are in New England, which enjoys a similar flat rate system. And it may well be that ambitious cities along the northwestern border of the state, like Fort Worth, may finally succeed in forcing concessions in rates from the Middle West on the ground of their relative nearness as compared with competitors further south. On the other hand, distributing centres farthest away from the main sources of supply, like San Antonio, would naturally resist any infraction of the rule of parity. And then, again, it is becoming apparent that the decentralization of distribution through a number of second-rate jobbing towns rather than from one preëminent centre, is hindering the growth of a metropolis, able to compete on even terms in high grade products with the older centres of the East. Few dealers in Texas cities are able to purchase dry goods or boots and shoes in carload lots, that is to say, on the lowest terms as concerns freight rates; and the combination of shipments of different goods to make up a miscellaneous carload rate, thus overcoming this disadvantage, is open to serious objection.[462] All told, therefore, the experience of Texas is well worth attentive consideration, as a study in the intimate relationship between trade and transportation. The sharpness of contrast between such a common point scheme and the basing point system of the other southern states, brings the relative advantages and defects of each into strong relief.
Transcontinental freight rates have been brought into prominence of late in direct connection with the wonderful growth of population and trade on the Pacific slope.[463] Our territorial possessions in the Pacific and the development of Oriental trade, together with the general interest in the Panama Canal since 1900, have all conspired to direct attention to this complicated problem. The first point to notice is the relatively high level of rates, averaging very much more per mile than anywhere else in the United States. The following table of rates in 1905 is significant:
| Miles | Class | ||
|---|---|---|---|
| From | 1 | 5 | |
| 912 | Chicago to New York | $0.75 | $0.30 |
| 912 | Chicago to New Orleans | 1.10 | 0.47 |
| 2328 | Chicago to San Francisco | 3.00 | 1.65 |
These distance tariffs, however, as already explained in our chapter on Classification, need to be supplemented by additional details in order to bring into relief the relative amount of the charge. So far as these figures go, it will be observed that for a distance about two and one-half times as great as from Chicago to New York or the Gulf of Mexico, the rates to San Francisco are very much higher in proportion.
The unrest among shippers in far western territory is not due to the relatively high tariffs in force. It arises primarily from the nullification of the distance principle in rates. And, in the second place, it hinges upon the relation between carload ratings and the development of local jobbing business. The primary factor in the making of rates to the coast has always been the existence of water competition, either by way of Cape Horn or the Isthmus of Panama.[464] The facilities for cheap transportation over these routes have compelled the all-rail lines to make low through rates which would enable them to secure a portion of the business. Inasmuch, also, as most of the competition of the steamships over these very long routes involves shipments in large quantity, competition with the railroads has mainly been felt in making rates by the carload. The result has been the existence for many years of a special transcontinental tariff, more or less uniformly adopted by all the roads, which consists in the main of commodity rates for carload shipments, the scale of these rates being sufficiently low to meet steamship competition as above described.
This simple situation has been complicated by the fact that all of the transcontinental lines, except the Southern Pacific with its eastern terminus at New Orleans, have had a particular interest in building up both manufacturing and jobbing business at their eastern terminals at Chicago or Missouri river points. For such a policy enabled them to secure the entire charge for the transportation of commodities to the Pacific coast, without the necessity of a pro-rating division, as when goods are hauled from the Atlantic seaboard cities. The situation then resolved itself practically into a competition of markets. Chicago, St. Louis, and St. Paul were pitted against New York, Philadelphia, and other Atlantic ports in rivalry for the trade of the Pacific coast. In order to benefit the cities in which they had a peculiar interest, the all-rail lines, therefore, gradually introduced what is known as the system of "postage-stamp rates."[465] That is to say, they gradually extended to one city after another east of the Mississippi river, the same rates to the Pacific coast as were enjoyed by the seaboard cities. As a consequence, for some years every city east of the Mississippi has been able to ship goods to San Francisco at the same rate which is paid from Boston and New York, which may be more than a thousand miles farther away.
This system is justified in theory, even for rates from Chicago and St. Louis, as due to water competition; and it has been said that commodities are sometimes shipped from as far inland as this to the Atlantic seaboard, and thence to San Francisco by water. The latest phase of the controversy reveals the weakness of this argument. The inland cities, such as Chicago and St. Louis, having been accorded the same rate to San Francisco as New York and Philadelphia, demand lower rates than the Atlantic cities in proportion to their relative nearness to San Francisco. In other words, they demand that the rates, instead of being made upon the "postage-stamp basis"—absolutely the same from all cities, however remote—shall be graded. This would give Chicago, St. Louis, and St. Paul an advantage in laying down manufactures or in distributing products secondarily, in competition with the older centres at the East. To this policy the jobbing interests of the Pacific coast strenuously object. From their point of view, any grading of rates will enable the western cities to compete with them directly in local distributive business. They do not object to the low rates from the eastern seaboard, nor would it avail to do so because the natural conditions of water competition are beyond control. Moreover, the low rates from Atlantic points are all, as above said, on carload lots, and such low carload rates operate distinctly to the advantage of the Pacific coast jobber, enabling him to obtain goods in wholesale lots, and then to break bulk in order to distribute them up and down the coast.
The intimate relationship between the carload question and the grading of rates to interior centres, is plain from the foregoing paragraph. Viewed by itself alone, the carload question is not dissimilar to that presented in the southern states. Rivalry between jobbers in the East and provincial middlemen in a little developed territory is in evidence in either case. The St. Louis Business Men's League case best exemplifies this issue.[466]
Trade interests in this interior city wished to abolish all distinction between carload and less-than-carload lots, for the patent purpose of enabling them to sell direct throughout the Pacific coast territory in competition with San Francisco jobbers. The latter, on the other hand, demanded that all less-than-carload ratings should be abolished on transcontinental shipments; so that they might purchase their goods by the carload and resell them in parcels. The Commission, after fully weighing the evidence, decided that, so far as carload differentials were concerned, the existing scheme in 1902 was not abnormal as compared with other portions of the country. On the other aspects of the matter, such as the relativity of rates to Rocky mountain and Pacific terminal points, no ruling was made. But the dissenting opinion upon this point is significant, as we shall see, in that it put forth the suggestion of a scheme of rates graded according to distance,—a plan ten years later to be enforced by the Commission under its amplified powers at law.
The welfare of the entire Rocky mountain belt of population, and particularly its commercial centres, constitutes a second phase of the problem of transcontinental rates.[467] The whole chain of cities from Spokane on the north to the Mexican border has been long and vitally interested in this matter. Rates to these cities, elsewhere described,[468] as well as from these cities out in either direction, are very much higher than the rates for longer distances through them and beyond. Thus, for instance, in the case of Pueblo, it has been shown that bar iron was hauled 2,400 miles from Chicago to San Francisco, for fifty cents per one hundred pounds, and rails were hauled the same distance for sixty cents; while for the haul from Pueblo, Colorado, to San Francisco, only 1,500 miles, the rate on both commodities was $1.60. Cotton piece goods were shipped from Boston to Omaha for fifty-two cents per one hundred pounds, with the added rate on to Denver of $1.25, giving an aggregate of $1.77. In face of this, the rate through Denver to California is only one dollar. The railways' defence for this situation was that the low through rates were compelled by water competition. But it is certainly difficult on this ground to justify lower rates to Missouri river points than to Denver or Salt Lake City. In other words, as urged in our chapter on local discrimination,[469] having once recognized the principle of blanket rates as far west as Kansas City, there seemed to be no reason why the limit should not be pushed further west. All of these allied cases, however, were left unsettled for years, owing to the lack of power on the part of the Interstate Commerce Commission to enforce its decisions under the law as then interpreted. With the new legislation since 1906, as will be shown,[470] a permanent and just solution of the matter is promised at last.
The relations between the Canadian railways and the transcontinental lines in the United States were for many years unsatisfactory; and were oftentimes a source of serious disturbance in the matter of rates. The Canadian Pacific claimed, and was in fact accorded for some years, a differential or a lower rate, in order to offset its disability in the matter of distance, extra-territoriality, etc. Thus, for instance, in 1888 the Canadian Pacific was allowed to quote rates thirty cents per one hundred pounds below those by the standard lines. The rates were afterwards increased on first-class traffic. The other roads refused, after a time, to continue differentials at this figure, and after a year the differential was reduced to twenty-eight cents from the Atlantic seaboard. The question was bitterly contested after that until 1892, when all agreements were abandoned.
Since that time the Canadian Pacific has acted independently, taking, as a rule, rates about ten per cent. less than its competitors in American territory. The whole question was submitted to arbitration in 1898, and by a divided opinion two out of three of the arbitrators decided that the Canadian Pacific Railway was not, nor should it be, entitled to a differential under the rates made by the United States lines.[471] The intricacy of the question is indicated by the non-concurrence in this conclusion of so well recognized an authority as J. W. Midgley. The railroads concerned having all agreed to acquiesce in this decision, the situation has been far more harmonious in this respect than for many years previous.
A difficulty often arises in connection with the interruption of a shipment of goods in order to subject it to some simple process of manufacture. Shall the entire journey from producer to consumer be considered as a unit in determination of the rate; or shall the two parts, before and after the change of form by manufacture, be considered as separate and distinct in this regard? This problem arises in connection with the so-called "milling-in-transit" system for grain.[472] Logs likewise may be stopped at some convenient point en route for cutting into lumber.[473] Cattle or hogs must sometimes be stopped on the way to market in order to fatten or otherwise prepare them for sale;[474] structural iron may be halted for the purpose of fitting, shearing, or punching;[475] transit privileges on wool or concentration points for other commodities may be involved;[476] or other goods may be substituted at an intermediate point.[477] And then, finally, there are the so-called "floating cotton" cases.[478] The principle at bottom is practically the same in all of these sets of cases. It may be worth while briefly to consider two of them.
The "milling in transit" system is simply that of according to grain which is unloaded and milled at an intermediate point, the low through rate from the point of origin to that of consumption. Thus, for instance, wheat grown in North Dakota may be unloaded and ground into flour at Minneapolis and thence shipped to New York at the through rate from its point of origin to New York. Oftentimes a very small charge, as, for instance, one cent per one hundred pounds, is made for the privilege. This system prevails throughout the southern states also. Grain is brought, for instance, from Kansas City to Nashville or Birmingham, milled there, and shipped farther south for consumption. The rate charged is based upon the entire haul from Kansas City to the local point where the flour is consumed. Obviously this system stimulates very greatly the development of the milling industry at intermediate points. It is opposed correspondingly by the large cities which otherwise enjoy special privileges in the matter of low rates.
Precisely the same principle is involved in what are known as "floating cotton" rates. In this case the system has developed of permitting cotton to be unloaded in transit and compressed at an intermediate point, it being thereafter reshipped to the point of destination at a through rate from its point of origin. Thus, for example, cotton may be hauled twenty to thirty miles to one of the larger towns. There it is unloaded, sorted and compressed, reloaded, and sent on as if it had not been interfered with at all. Obviously one rate for the entire shipment is much less than the local rate into the town—which is always very high—plus a second rate from that town on to destination. The system in respect to cotton has developed even further than that of milling in transit of grain; for in the latter case the grain must be unloaded at some point on the line to destination; whereas in the case of cotton it may, under rulings of the Interstate Commerce Commission, be actually hauled away from its ultimate destination a number of miles and then reshipped back over the same line though at a lower rate than it could otherwise have enjoyed. Thus, in a leading case decided in 1899 it was held by the Interstate Commerce Commission that cotton could be hauled from Gattman, Mississippi, forty-one miles northwest to Tupelo, compressed there, and then hauled back again through Gattman and Birmingham to New Orleans.
Important centres, such as Memphis, which formerly enjoyed almost a monopoly of the compressing business, have strenuously opposed the development of this system. On the other hand, it offers a distinct advantage to the grower, because in place of selling the cotton through cotton factors at Memphis or other centres, it may be sorted and compressed at local stations. By this means much expense in the matter of drayage, handling and commissions is saved. This system is particularly advantageous because it tends to break up the pernicious basing point system, which tends to centralize all business at a few important points in the southern states. Almost a complete revolution in the matter of handling cotton has been effected during the last few years by the growth of this practice. Not only has the floating cotton system developed further than that of milling in transit by according the right of shipping even backward, away from the ultimate destination; it has also permitted of liberality in the handling of the product itself. It has been held that it is not even necessary for the same cotton to be reshipped from the point of compression. A carload started from the initial point for Boston, for example, may never reach there, other cotton being substituted for it. The destination of the car may be, and frequently is, changed. A few dozen grades of cotton being on the market, the original shipment into the point of compression may be entirely resorted and distributed to a dozen different points. Even the ownership of the cotton may change while it is in transit. Nevertheless, the system has been held as valid under the law, and its beneficial effects during the last few years have been observable, especially in the southern states. Of late the danger lurking in these systems of gross personal favoritism, have led to their careful examination in a number of cases. What the final policy regarding them is to be, cannot at this writing be affirmed.[479]
A problem of considerable difficulty, involving the relative shares of the various seaports in American export business, has occupied the attention of experts for more than a generation; and at this present writing, although before the Interstate Commerce Commission for the third time, seems to be almost as far from a satisfactory solution as ever.[480] It originated at the time of the rate wars in 1876. The first agreement between all the trunk lines concerning it was entered into in the following year. By this an attempt was made to equalize the aggregate cost of ocean and rail transportation between competing points in the West and all foreign and domestic points reached through Baltimore, Philadelphia, New York, and Boston. Under this agreement, Baltimore was allowed a rate of three cents below the rate from Chicago to New York; Philadelphia enjoyed a concession of two cents; while Boston had its rate fixed at a certain percentage of the Chicago-New York figure. There was considerable dissatisfaction expressed at various times with these differentials, and the whole matter was submitted to arbitration in 1882. The commercial interests of New York, as well as of the railroads centering in that city, have complained bitterly that these differences, once adjusted upon a very much higher scale of rates than at present, have become increasingly burdensome now that the Chicago-New York rate is perhaps not more than a third or a quarter of what it formerly was, while the differential has remained at a fixed figure. The recent decline of the export commerce of New York is, in fact, ascribed in a large measure to the operation of these differentials; and a leading case before the Interstate Commerce Commission, instituted by the Produce Exchange of New York, endeavored to secure their abolition. The Commission held, however, that the differentials—recognized by the Joint Traffic Association of 1896—were legitimately based upon competitive relations of the carriers; and that consequently no unlawful preference or advantage had been accorded to the cities competing with New York for export business.
The result of pressure for a larger division of export business, particularly from Boston, led, in 1899, to a reduction by one-half of the differentials. The matter was finally submitted for arbitration to the Interstate Commerce Commission, which very fully examined the question and rendered a decision in 1905.[481] By this decision rates via Philadelphia on traffic for export were to be one cent less than by way of New York, while to Baltimore they were to be two cents less. This arrangement still left Boston subject to its former substantial disability. It was contended that the original purpose of the differentials, namely, equilibration of rates from western centres of production through the various ports to Liverpool, had been practically nullified. For a time the phenomenal development of the Gulf exports diverted attention, forcing all the Atlantic seaports to make common cause against their southern rivals.[482] But the passing of this danger once more revived interest in the struggle between the Atlantic cities. Opportunity for the collection of full data under the strengthened Federal law in 1906, made it possible to reopen the case in 1912 before the Interstate Commerce Commission. But, in the meantime, both in 1909 and 1911, after an interval of twenty years, trunk line rate wars threatened to break out for the protection of Boston against its rivals. The latest decision by the Commission, just handed down,[483] still fails to satisfy Boston. No differential rate on export grain on the ground of distance as against New York is conceded; but those already in effect at Philadelphia and Baltimore are sanctioned. What the effect will be, remains for the future to determine.
The principle involved in the so-called import and export cases[484] is that of the reasonableness of charging lower rates on goods originally shipped from or destined to domestic points, than are charged for similar goods, over the same lines and for the same distances, when brought from or destined to foreign countries. Thus, for instance, in the case of cotton cloth shipped by way of Pacific ports to the Orient, the practice is not uncommon of charging a less rate to San Francisco for the transportation of goods ultimately destined for export, than is charged on similar goods which are to be unloaded for consumption at San Francisco or other California points. Or, reversing the case, this question touches the reasonableness of transporting goods from New York to Chicago at a lower rate, if they have been brought in from Europe, than is charged for similar service in the case of goods that have originated at or near New York. Cases of this description have become increasingly frequent during the last twenty years. The first and most important one, upon which both the Interstate Commerce Commission and the United States Supreme Court have passed, originated in proceedings before the Interstate Commerce Commission, brought by the New York Board of Trade of Transportation against the Pennsylvania and other railroad companies. The case practically raised the general question whether, in the carriage of goods from American seaports, carriers subject to the act could lawfully charge less for the transportation of imported than of domestic traffic of like kind to the same destination. The Commission, after careful examination, held that such differences in rates constituted discrimination as against the domestic shipper. According to its view, the circumstances and conditions pertaining to the carriage of freight from a foreign port to the United States could not be considered as creating the dissimilarity of conditions which alone would justify a different rate for like service in the two cases. The Commission held that:
"One paramount purpose of the act to regulate commerce, manifest in all its conditions, is to give to all dealers and shippers the same rates for similar services rendered by the carrier in transporting similar freight over its line. Now, it is apparent from the evidence in this case that many American manufacturers, dealers, and localities, in almost every line of manufacture and business, are the competitors of foreign manufacturers, dealers, and localities for supplying the wants of American consumers at interior places in the United States, and that under domestic bills of lading they seek to require from American carriers like service as their foreign competitors.... The act to regulate commerce secures them this right. To deprive them of it by any course of transportation business or device is to violate the statute."
The Commission thereupon ordered the carriers to cease and desist from making such discrimination. This order, while obeyed by a number of carriers, was disregarded by the Texas and Pacific Railway, which operated an import line from New Orleans to San Francisco. Upon application by the Commission this case was carried to the Supreme Court of the United States for final adjudication. The Supreme Court decided that the interpretation of the law by the Commission was defective, although three members of the court, including the Chief Justice, dissented from this opinion. As an illustration of the discrimination which existed in this case it appeared that the domestic rate on books, buttons, carpets, etc., from New Orleans to San Francisco was $2.88 per one hundred pounds, while the total through charge on the same articles from Liverpool to San Francisco was only $1.07. The Supreme Court distinctly refrained from an opinion as to the reasonableness of these rates, and contented itself with passing upon the propriety of any difference in rates whatever. It held that the contention of the railroads was sound, namely, that all circumstances and conditions, whether within the United States or having regard for ocean rates and foreign competitive conditions, must be considered. In other words, they recognized the validity of the claim of the railroads that this import traffic must be taken at an extremely low rate if at all, since otherwise the goods would go by water around Cape Horn, or by another route. On the basis of such reasoning it would appear that any contribution from low import rates to the fixed charges of the railroad would enable that road to transport its domestic traffic at a lower rate than it otherwise might. What, however, the majority of the court did not add, although it was developed by the dissenting justices, was the fact that these conditions might exclude domestic purchasers entirely from certain markets, giving them over to importers who could control the market by reason of the low rates accorded. Since this decision in 1896 the railroads have still further developed this system of discrimination. The only safeguard for the domestic producer must lie, obviously, in some decision by a competent tribunal as to the amount of such differences which may reasonably exist. The Supreme Court has upheld their validity as a system, but it still remains for the amount of such difference which may be deemed reasonable, to be determined.
Identical in principle with the above described case, although presenting reversed conditions, are the so-called export rate cases. These have to do mainly with the rates charged on products for domestic consumption as against like products for export. As an illustration of the extent of such differences, it was clearly shown before the Industrial Commission that at times the freight rate on wheat from Kansas City to Galveston was twenty-seven cents per one hundred pounds if for domestic consumption, while the proportion of an export rate for a similar service was ten cents.[485] The rate on wheat from the Mississippi river to New York for domestic consumption was at times twenty or twenty-one cents per one hundred pounds, while for the same service when the goods were to be exported, the rate would be thirteen cents per one hundred pounds. This system of stimulating foreign business by discriminatingly low rates seems to have attained large proportions only since 1897. The Interstate Commerce Commission took cognizance of the system in a decision rendered in 1899.[486] It was enabled to do so by virtue of the Import Rate decision above cited, whereby the United States Supreme Court authorized it to consider not only circumstances and conditions within the United States, but also those relating to ocean transport and foreign competition.
The railroads justify their action on the ground that only by making such concessions in export rates could they lay down grain in foreign markets in competition with other parts of the world. On the other hand, it was not made clear why such competition from foreign markets had become any more acute in the last few years than prior to that time. There appears to be much force in the argument of many shippers, and also of some railroad men, that this anomalous condition of rates was due, not so much to the keenness of foreign competition, as to the rivalry among the American carriers themselves. In other words, it was said that the competition between the Gulf ports and the Atlantic ports was responsible for the abnormally low rates on export business. In line with this argument would seem to be the fact that it is the rates upon wheat and not upon flour for export, which have decreased more than in proportion to the decrease upon similar commodities for domestic consumption. The passing of the acutest phase of competition from the Gulf ports since 1906, has rendered these questions of lesser interest of late years. They may at any time be revived, but seem unlikely to regain the importance which they formerly assumed.