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about $11.50 per ton of 2,000 pounds. The agreement between the American-Hawaiian Steamship Company and the Mexican National Railroad provides that one-third of the through rate shall be paid to the railroad across the Isthmus of Tehauntepec for transferring the cargo from the steamer in one ocean to the steamer in the other ocean. Thus, the cost of transfer at the Isthmus, while varying for different kinds of cargo, probably averages about $3.50 per ton of 2000 pounds.

Through traffic by way of the Isthmus of Panama is handled on through rates, the Panama Railroad Company taking a proportional of the through tariff. The average cost of transferring cargo from one steamer to another at the Isthmus of Panama probably is about $3.00 per ton. Thus, the absence of a canal across the Isthmus increases the transportation cost between the two seaboards of the United States from $3.00 to $3.50 per cargo ton. As vessels carry on an average nearly two tons of cargo for each net vessel ton, the transfer costs across the Isthmus are equivalent to six or seven dollars per net vessel ton. The double handling of traffic at the Isthmus often damages goods; articles may be lost; and, in time of congested traffic, delays may occur that are annoying and expensive to shippers and consignees. The tolls fixed for the use of the Panama Canal are $1.20 per net vessel ton, which is probably less than one-fourth of the saving which the canal will effect in the cost of transportation between the two seaboards of the United States.

The reduction in freight rates coastwise between the two seaboards will not necessarily be equal to the decrease which the canal will effect in the cost of the service. If the competition between the steamship lines were keen and unrestrained, the rates would be based upon the cost of the service; but the competition of the steamship lines will be carefully regulated in their “conferences.The rates between the two seaboards will be the same by the several lines. For a part of their traffic, the regular steamship lines will have to meet the competition of individual vessels owned or chartered by producers and shippers whose business is large enough to enable them to ship goods in full cargo lots. This competition, however, will be limited, and only a minor part of the rates of the regular lines will be regulated by the cost of transporting goods in vessels owned or chartered by the large shippers.

There will be competition between the transcontinental railroads and the coastwise steamship lines, but it remains to be seen how active that competition will be. Will it be the policy of the railroads to reduce their rates generally from coast to coast in order to hold traffic against the active competition of the steamship lines, or will the railroads maintain their through rates practically at the present level, knowing that they will thereby lose such traffic between the two seaboard sections as can secure satisfactory service and lower rates from the carriers by water? If the railroads elect to maintain their present rate schedules, will the steamship lines, acting through their conferences, maintain their common rates at such differentials under the stable schedules of railroad tariffs as will cause the rates by water to attract to the coastwise lines the volume of traffic needed to fill the ships in service? In other words, will the coastwise lines operated via the canal so compete with each other and with the railroads as to bring rates as low as the cost of service will allow, or will the coastwise lines restrict their competition with each other and fix and maintain their rates, not with reference to the cost of the service, but with regard to what the traffic will bear — with regard to what shippers can pay, and what they will pay, for transportation by water rather than by rail?

These questions are not easy to answer in advance of experience; but the history of rate making by railroads and by steamship lines does not presage keen competition either between the through transcontinental rail lines, or between the coastwise steamship companies, or between the railroads and the steamship lines. It is probable that the railroads will maintain most of their through rates between the two seaboard sections.

Only a comparatively small percentage of the traffic of the transcontinental railroads originates in the seaboard sections of the country. Of the westbound traffic carried through to the Pacific, only 20 to 22 per cent originates east of the Buffalo-Pittsburgh territory, and only 35 per cent originates in the eastern section and in the Buffalo-Pittsburgh territory. More than two-thirds of the through westbound traffic of the transcontinental lines is shipped from the central West. Similarly, only a small portion of the traffic originating on the Pacific coast is carried through to the section east of Pittsburgh and Buffalo. Most of the shipments from the far West are to the middle West.

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Another reason for anticipating that the railroads will not seriously disturb their present rates for the purpose of meeting the competition of coastwise lines through the canal is that for most commodities the same rates are charged to the Pacific coast and Mountain States from the entire section of the United States east of the Missouri River. In order to put the industries and railroads of the middle West on an equal footing with the industries and railroads of the Eastern States, railroad rates to the far West have been blanketed over the eastern half of the United States. Thus, if the rail rates from the Atlantic section to the West are cut to meet canal competition, like reductions will have to be made from the middle West, or the railroads will have to do what they probably will not do

abolish the present blanketing of rates. A third reason for thinking that the railroads will probably not make large reductions in their rates to meet the competition of the coastwise lines is that the eastern trunk line railroads will not be in favor of joining with their western connections in low, through, transcontinental rates. It will be to the advantage of the eastern railroads to haul traffic from points within 500 miles of the Atlantic to the seaboard for shipment thence by water, rather than to divide with their western connections low, through, all-rail rates from the Atlantic to the Pacific. Otherwise stated, it will be to the interest of the eastern railroads to join with the coastwise lines in through services at profitable rates, instead of fighting the steamship lines by uniting with the western railroads in through rail services at low rates.

It was suggested above that the steamship lines will probably not base their charges upon the cost of service, but that they will make the rates what the traffic will bear. If the railroads maintain their rates and do not seriously attempt to prevent traffic from moving by water, it can hardly be doubted that much, if not most, of the general commodity traffic handled by the coastwise lines will be at rates that are less than the railroad charges only by such a differential as experience shows to be necessary. The rates via the Tehuantepec route have been, as a matter of fact, adjusted with reference to the railroad tariffs, and there is little reason to suppose that this policy of the coastwise carriers will be abandoned after the canal is opened.

It is not, however, to be inferred from this analysis that the rates between the two seaboards will not be lower after the canal is opened than they are at the present time. The lower cost of the service, the increased volume of traffic, and the larger number of steamship lines, will affect the policy of the steamship companies in making rates. Although the companies will, unless prevented by the effective enforcement of anti-trust legislation, regulate their competition in rates and services by means of conferences, the competition to be regulated after the canal is opened will be stronger than it is at the present time; and the force of public sentiment will undoubtedly have its effect - at least, some effect — upon the policy of the

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