CHAPTER XX

THE TRADE OUTLOOK

Time and space, if they will not be annihilated, certainly will be tremendously lessened by the Panama Canal.

On February 11, 1912, a tug and three barges lay at the wharf in Cristobal, on the Atlantic side of the canal.  They were needed at Balboa, on the Pacific side, only forty-seven miles across.  There were two methods of getting the craft and barges to the desired point, one being to take them to pieces and transport them by the railroad and re-erect them on the other side, and the other method being to send them around Cape Horn. They started on the journey of 10,500 miles on that date, and arrived safely at Balboa on June 16, 1912, consuming 126 days in the trip.  If the canal had been finished, the distance of forty-seven miles could have been traversed in ten hours!  This is only one graphic illustration of the utility of the Panama Canal.

San Francisco is now 14,000 miles from New York around Cape Horn.   Through the Panama Canal it will be 8,000 miles nearer, or a little more than 5,000 miles distant.  From New York to Valparaiso, by the Straits of Magellan, the distance is about 9,000 miles.  Via the canal it will be less than 5,000 miles.

Our Atlantic coast will be brought 4,000 miles nearer to Australia than by the Suez Canal, through the Panama Canal route.  New York will be 5,000 miles nearer to New Zealand via Panama than around the Cape of Good Hope.  The distance to the Philippines will not be materially reduced from Eastern Atlantic ports, but the Panama route will make Hong Kong, Yokohama, and San Francisco ports of call for our own and European vessels, which the Suez Canal does not readily permit.

Equally great advantages in shortened trade routes will come to the Gulf and Pacific ports of the United States.  San Francisco, Seattle, and Portland may place their products on our Atlantic coast, the West Indies, the east coast of South America, and in Europe at correspondingly great savings in time and distance.

For coal- or oil-burning ships this saving in time represents an impressive lowering in freight rates.  Sailing vessels will not feel the fuel saving, but the difference in time effected by the Panama Canal doubtless will serve to hold that slow-transit method much longer in use than it otherwise would be held for those commodities, like lumber, which do not require speedy delivery.

Already the United States does a larger coastwise trade than any other nation in the world, and the canal will give this a spurt that cannot be measured accurately at present.  Pacific coast wheat, wines, lumber, barley, hops, wool, dried fruits, and mining products may be laid down in Gulf and Atlantic ports through the canal much more cheaply than by the continental railroads.  Atlantic and Gulf cost machinery, manufactures, textiles, and finished products generally, likewise may be delivered to the Pacific ports at a lower cost.

The great staple products of the South, cotton, tobacco, lumber, iron, and coal, when destined for Asiatic ports, will have an immense advantage by the Panama route, and much of the ocean freight which has been shipped long distances to Eastern ports to ships will go through the Gulf ports.  There necessarily will be a radical readjustment of our whole internal freight movements, but the increase in volume still will leave the railroads their proportionate share.

Geographically, the United States is magnificently situated, facing as it does the Atlantic and Pacific oceans and the Gulf of Mexico.  The natural flow of commerce will be southward to the republics which so far have bought more in Europe than they have in America.  The intensely self-centered industrial development which has characterized the United States to date seems to have reached a turning point, with the nation, after the first great attack at our own resources, ready to look around and participate more extensively in foreign commerce.  It is true, of course, that our foreign commerce already is stupendous, but it will be immeasurably greater when our enterprise is directed as absorbingly toward that phase of industrialism as it has been toward internal development.

The Panama Canal is bound to affect the politics of the United States, with especial regard to the tariff policy.  So long as we were engrossed in our own provincial affairs, taking such foreign trade as voluntarily came our way, the exclusiveness of the high protective tariff was beneficial.  When we get out in the realm of international trade with our full capacity, it is inevitable that we must modify that policy as the particular demands of commerce may require.

The United States has been too busy farming, mining, manufacturing, and exchanging these products among its own people to care whether the national flag floated on few or many ships.  It must be different when international competition becomes so keen that a nation operating its own ships would have a substantial differential in freight rates over a nation that must depend upon foreign bottoms for its carrying business.

England has had an absurdly disproportionate share of the world's shipping, due partly to our tariff policy, but more largely to the fact that its smaller internal resources made it necessary for its citizens to develop shipping as a main industry.  Following the opening of the Panama Canal an increase in American registry will be noticeable.

If we simply are anxious to see ships running about the oceans flying the American flag, Congress has acted effectively by throwing down the bars and allowing American capital not only to build its ships abroad, but to import ship-building materials duty free.  It is obvious, however, that such a method of building up our merchant marine will enrich European shipyards rather than our won, because Congress has set its seal of approval upon the practice of buying abroad if it can be done more cheaply than in the United States.  Coastwise ships still must be built in America.

Congress will be called upon to provide some way for handling the passenger traffic that would prefer to go to the San Francisco Exposition through the canal from Atlantic and Gulf ports.  This will be coastwise trade, and there are no American ships adequate for the probable traffic.  Unless Congress grants a special dispensation allowing the foreign lines to handle this traffic during the Exposition, it is likely that they would have to relay the Atlantic traffic to Bermuda Islands and the Gulf traffic to Cuba, and so make it, by reembarkation, travel from a foreign port to San Francisco.

There has been speculation as to whether the canal would pay.   Congress has authorized a maximum freight rate of $1.25 a ton and a rate of $1.50 for each passenger that passes through the canal.  The President has the power, through proclamation, to reduce these rates to any point that will still supply sufficient revenues to pay operating and maintenance expenses.  The Suez Canal pays for itself every four years, but it cost less than a third as much as the Panama Canal, which also will require 2,500 employees as a permanent operating force.

Operating and maintenance expenses for the canal in Panama will be, annually, about $4,000,000.  Interest on the investment, part at 2 per cent and part at 3 per cent, will be around $10,000,000 a year.

Suez may be expected to fight for its business by reduced rates.   This will not be so formidable as our own, short-sighted management.   Congress, by exempting American coastwise ships from tolls, deliberately affronted England, the largest prospective patron of the canal, because the greatest maritime nation.  And England, it should be remembered, controls Suez.  Misguided patriotism along dictated the exemption of our coastwise ships.  They already have a natural monopoly of coastwise trade.  If the nation desires to give a special industry a gratuity, it should be done without antagonizing the best customer we are likely to have at Panama—England.  The American people show an inconsistency in sanctioning this treaty violation, inasmuch as the whole cry for the last ten years has been against special interests and private monopolies fostered by the government.  To deliberately subsidize the shipping business, as much a private industry as Standard Oil, not only violates the spirit of the times but inevitably will result in a great economic loss at Panama, if the present method is continued.

One advantage Panama will have over Suez will be in the coaling rates.  We can sell coal at Panama for $5 a ton, or a trifle less, whereas $5 a ton is the prevailing rate at Suez.  This saving will go far toward paying for the passage of a ship through the canal.  For instance, a ship leaving New York, or Liverpool, would take on only enough coal to run to Panama, where a fresh supply could be obtained, and thus room that otherwise would be filled with coal for the whole journey may be used for additional freight.  The same saving to ships will be experienced in securing all kinds of supplies from the government at Panama, while dry docks and other facilities will be available.

Col. Goethals has displayed a high order of business acumen in guiding the government into this policy.  The advantage to the United States lies in the fact that other nations will not have to establish coaling stations and repairing facilities on the pretense of caring for their merchant marine, and so lead into a possible infringement of the Monroe doctrine.  An incidental benefit of the policy, through decidedly one worth while, lies in the fact that our coal mines will find a great market at Panama through the practice of selling to ships.  The government will not have private competition, because private capital could not operate on the margin of profit that will satisfy the government.

The rapid development of South America is the surest promise of a commerce that will make the canal economically profitable.  The business that originates there and our own expanding foreign trade will be great feeders of the canal, not considering Europe, Asia, Africa, and Australia.

As the United States becomes more thickly populated the overflow will go largely to the South.  With the practical proof afforded at Panama that health can be maintained in a tropical climate, Americans more and more will swarm to South and Central America.  Hundreds of canal employees have gone into business in the tropical countries rather than return to the harsher climate and sterner industrial competition of the United States.  South America, however, is not the place for the man with small capital such as the United States has been.  The cultivation of the staple products, such as bananas, coconuts, coffee, cocoa, sugar, rubber trees, etc., is precarious on a small scale because great monopolies dominate these industries and crush individual enterprise.  Syndicate operations on a large scale are the only successful means of business promotion, though here and there the prospector strikes a good thing.  For men of ability who are willing to work as employees there are many good openings in Latin America.

The Americans have a great deal to learn from the older nations of Europe in order to make the most of their natural advantage in South American markets.  Our merchandise is more attractive to the Latin American because usually it is smarter in design and appearance, though frequently inferior in quality, and simply because the United States dazzles the Southern imagination.  The Germans and the English are past masters in getting foreign business.  They send out salesmen who speak the native languages, and when they make shipments it is in a manner most convenient to the peculiar conditions of the particular country.

Your American manufacturer or exporter gets the biggest box he can find and puts as much into it as it will hold.  Frequently the big box is broken when it is unloaded at the South American port, occasioning trouble to the consignee.  Often the shipment is consigned to some interior point to which a mule pack train is the only means of transportation.  This occasions more trouble and expense to the purchaser.  The Germans do things differently.  They pack their merchandise in small packages and in durable boxes, knowing that it may have to be handled over mountain passes by hand or muleback.  They have a regard to the high temperature and the character of the merchandise so that it may not spoil.  But these are not insuperable faults upon the part of the Americans, and already they are being eliminated intelligently after bitter experience.  In nearly all our Eastern or seaport cities every exporting office has a Spanish-speaking attaché to conduct correspondence in the language of its Southern customers.

Among the agencies at work to bring Americans to a realization of the opportunities that lie in plentiful profusion in South and Central America none is more ably and successfully managed than the Bureau of American Republics, in Washington, with John Barrett as Director-General.  The most striking feature of Mr. Barrett's work is the statesmanlike plane on which he seeks to interest Americans in the twenty republics to the South.  Get business in his motto, but get it by straightforward, respectful, and enduring methods.  The constant aim of the Bureau is to abolish the foolish opinions Americans have entertained about the business, social, and political capacities of Latin Americans.  They are not the comic-opera revolutionist type at which we laugh on Broadway.  They are cultured people who expect to be approached as gentlemen, and the periodic fighting that attends a change in administration in some Central American countries does not gainsay that fact.

Mr. Barrett edits a monthly Bulletin which already is in the most wide-awake American exporting offices, and should be in the hands of every business head who directly or indirectly touches South American commerce.   Printed as it is in English and Spanish, it is serving to remove many prejudices by making closer acquaintances.  An impartial monthly review of all subjects of real interest, industrial, political, and general, enables its readers to keep in touch authoritatively with Latin America.  In view of the forebodings some of the southern republics had had at the possible territorial expansion of the United States at their expense, this Bureau under Mr. Barrett is doing an inestimably valuable service to American business interests by its sympathetic and tactful policy.

The dynamic expansion of American industrial life is the one overshadowing fact in the Western Hemisphere, as indeed it is in the whole world.  It is a new kind of conquest, not preceded by the sword, and if we maintain our moral poise will not be followed by any other than happy results to the conquered.   English is destined to be the sole language of the Western world.  American merchandise will form the bulk of its commerce.  American citizens will be found in every out-of-the-way corner of the two continents, carrying with them, even if in diminished luster, the ideals and abilities which have made the nation eclipse all records thus early in its youth.  The Panama Canal marks our passage from unfledged provincialism to the full stature of national manhood among the industrial activities of the nations of the world.