“The Chairman. It first went to Liverpool?
“Mr. Tuttle. Went from San Francisco around the Horn to Liverpool and then across the Atlantic back to Boston. In order to carry that flour to Watertown, across the continent by rail, the railroads would have had to make a rate which was practically nothing, because the transportation by water is so extremely low that you cannot put the railway rate against it and make a profit. The cost of carriage of a ton of freight by a large steamer is so low that there is hardly any way to figure it. We have to meet those conditions. That is what we are doing.”[[339]]
The low rates on imports enable European manufacturers to ship their goods to our western States more cheaply than our own eastern manufacturers can send their goods to the West. Rates on imports are frequently only a third of rates on domestic goods over the same lines,[[340]] and sometimes the difference is greater yet. And it is not confined to manufacturers. Thousands of acres of Kaolin mines from which the finest chinaware can be made are idle in the region round Macon, Ga., because clay can be shipped from England to Ohio factories cheaper than it can go from Macon to Ohio. Several mining companies have had to quit business because of foreign competition favored by low import freight rates.
Both export and import reductions lead to serious discriminations, not merely as between our people and foreigners, but among our cities and shippers.
Unscrupulous shippers take advantage of the export rates in the domestic trade, billing their freight on the export basis. Grain, for example, is “billed for export” to Chicago or New York or other centre; and then “the destination is changed in transit,” that is, after the grain or other shipment gets to Chicago or New York, the shipper stops it there, or orders it to Albany or Worcester or otherwise changes the destination.[[341]] The same thing is done in the packing-house trade to New York. The Vanderbilt traffic manager says: “Our domestic business does not amount to anything.” About all the dressed beef that goes east appears to be for export. When asked how the eastern territory got its dressed beef, the manager said: “I could not give you any information on that point.”[[342]]
Such results are worse even than the difference between the export rate on wheat and on flour, which tends to discourage the milling of wheat in this country and throw into the hands of foreign millers business that belongs to our millers. Worse than this or than the discouragement of home manufactures by cut rates on imports, is the discrimination in the export and import rates in respect to different ports.
“One of the most remarkable trade movements of recent times is the growth of the Gulf ports at the expense of New York and other Atlantic ports. New Orleans has become the second largest grain-exporting port, and gives promise of becoming the first. Galveston’s export and import trade is rapidly increasing. In 1897 New York handled 77.9 percent of the wheat, corn, and flour exports, and in 1904 her share had dwindled to 36.9 percent. The Gulf ports have made corresponding or greater increases. Natural advantages, including proximity to supply centres, and the extension of port facilities for handling cargoes, have had something to do with this increase of exports from the Gulf ports, but the chief factor has been the differentials made by railroads connecting with those ports. So alarming is the decrease of commerce through the port of New York that an effort is being made to secure a legislative investigation of the subject.”[[343]] The Chairman of the Committee on Foreign Commerce for the Baltimore Chamber of Commerce says: “We are gradually shrivelling up because of discrimination in freight rates. Ever since December last, 1904, when the grain rates were advanced 1 to 1½ cents on export grain and 3 cents for domestic delivery, business in this city has almost come to a standstill.... The Gulf ports are getting it all, and while millions of bushels of corn were accustomed to arrive here, after the December marketing from the Southwest, not one has been received since the first of the year. Firms formerly engaged in the exporting business in this city have pulled up stakes and have gone to New York in search of better railroad opportunities.... The Chamber of Commerce here is meeting daily to devise a means of surmounting the danger which now threatens the export business of Baltimore.”
The Government is forbidden to favor one port more than another, but the railroads are left free with a power of favoritism greater than any the Government possesses, and they are using the power as we have seen. Section 9, of Article 1, of the Federal Constitution says: “No preference shall be given by any regulation of commerce in revenue to ports of one State over those of another.”
Congress itself cannot establish any differential that would give one port of the United States an advantage over another port. But what the Constitution forbids Congress to do the railroads can do and have done, by manipulating the rates on exports and imports, thereby making business flow to whatever ports they please.