[161]. They did it, sometimes, in this way: Suppose A and B are towns of about equal size and about the same distance from Chicago, or that A is a little further away.
A railroad desiring to build up A and make it an important industrial center would merely give it lower freight rates to and from the western metropolis, despite the greater distance.
[162]. The act further provides that all net profits above the rate of six per cent upon the valuation of the railroads, as fixed by the Interstate Commerce Commission, shall be divided in equal shares between the railroads and the government. The share received by the government is to go into a fund for the benefit of those railroads which are not able to earn the normal net income.
[163]. Of the nine members three are representatives of the railroad owners, three of the railroad employees, and three of the public. This board has its headquarters at Chicago, which by reason of its location may properly be termed the railroad capital of the country. When the board hears both sides in a labor dispute it makes its recommendations but has no power to enforce these recommendations. It is believed, however, that the pressure of public opinion will give sufficient force to its decisions.
[164]. Canal transportation, which declined after the railroads were built, seems now to be gaining a new lease of life. The State of New York is improving the Erie Canal and proposals have been made to enlarge the canals between the Great Lakes and the Gulf of St. Lawrence so as to permit through traffic from Europe to the Lake ports.
[165]. The general course of American tariff policy may be marked off into four main periods. The first, which extended from 1792 to the close of the War of 1812, was a period of relatively low tariff duties. The duties levied during these years did not greatly hamper imports. While the United States and England were at war, however, some new industries were established in America, and it was deemed advisable to afford these new industries protection against English competition when the war was over. Accordingly, a more strongly protective policy was adopted in 1816, and this action ushers in the second period, which lasted till about 1842. During the earlier part of this interval the duties on imported manufactures remained relatively high. The high duties created strong opposition, however, especially in the Southern states, and in time a reaction took place with the result that the rates were gradually lowered to a general level of about twenty per cent in 1842. From this date until the outbreak of the Civil War the duties remained low, so that the third period saw the virtual abandonment of protection in favor of a tariff for revenue only. Then the outbreak of the Civil War changed the situation. The need of a great increase in revenue became imperative, and high duties on imports seemed to be a ready way of obtaining national funds. A series of tariff measures put the rates higher and higher. When the war was over the high rates for the most part remained and they have remained relatively high throughout the fourth period, which carries us to the present day. Since 1865 many tariff measures have been passed by Congress; some have raised the duties, while others have lowered them. In 1913 duties were considerably reduced by the Democrats; in 1921 they were put up again by the Republicans. The question of tariff rates has been an issue at many national elections. But, with all its ups and downs, the tariff has remained protective both in its purpose and effect.
[166]. In 1920 Congress enacted two important measures to aid the revival of foreign trade. One of these measures relieved foreign trade from some of the anti-trust restrictions; the other authorized the lending of government funds to exporters.
[167]. Many of the commercial treaties which the United States has concluded with other countries contain what is known as the “most favored nation clause”. This is a provision that if either of the treaty-making countries should grant to a third nation any special trading privilege, this same privilege shall at once accrue to the other treaty-making country. For example, if the United States and Brazil conclude a commercial treaty containing the “most favored nation clause” and Brazil should subsequently grant to Mexico the privilege of shipping oil into Brazil without payment of duty, the United States would become forthwith entitled to the same privilege or favor.
[168]. In the days of wooden vessels, propelled by sail, America had natural advantages in shipbuilding, particularly in the abundant supply of ship-timber. Many such vessels were built and the once-famous American “clipper ships” carried our commerce to all parts of the world. During the period from 1815 to 1860 the American merchant marine reached its zenith in size and prosperity. In 1860 it was second to that of Great Britain and served not only to carry the entire commerce of the United States but the trade of other countries as well. The Civil War interfered greatly with the progress of American shipbuilding, however, and with the advent of iron vessels, propelled by steam, the United States began to drop behind in the construction of ships for ocean service. European countries, particularly Great Britain, forged far ahead during the period from 1865 to 1900. Of the tonnage which cleared for foreign countries from the seaports of the United States in 1900 less than one-fifth was American. This decline in the size of the merchant marine inspired the government of the United States to stimulate the construction of ships by the grant of subsidies, but no great success attended these efforts. The shipbuilding industry did not make renewed progress until it received a great impetus from the World War.