in the foreign trade. The deep-sea marine was in direct competition with the sea-going vessels of the world and was unable to compete successfully. 2. Unequal Construction Costs Substitution of steamers for sailing vessels and of iron and steel for wooden hulls carried with it a readjustment of shipbuilding costs in the United States as compared with Great Britain. Indeed, the construction of iron vessels in the United States, aside from a few isolated instances, did not begin until 1870 and then in but a small way. Iron and steel vessels of identical design cost from 40 to 60 per cent. more in the United States than in Great Britain and at times the margin was even wider. Yet it was a legal requirement that vessels to be registered under the flag of the United States had to be built in American shipyards. Vessels registered in the United States were penalized under the law with higher capital costsincluding initial investment, interest charges, depreciation and taxes. There is little wonder that American shipyards received few orders for deep-sea vessels, and that there were instances when American concerns purchased ships abroad and registered them under foreign flags. 3. Unequal Operating Costs Vessel operating costs, moreover, were higher than those of foreign vessels. The wages of officers and crews were on a higher level, the number of men required by law and the inspection authorities was greater in many instances, and the food requirements for crews aboard American vessels were stricter. Not all of these operating handicaps were undesirable, for the maintenance of an American standard of living aboard American vessels contains much of merit. Operating costs incident to wages and working conditions are likely to remain somewhat higher than aboard foreign vessels. They do not stand as an inseparable handicap in the way of the future growth of American shipping, as they constitute but one part of the operating bill. Outlays for coal, fuel, oil, tonnage dues, pilotage, port services, stevedore services, towage etc., were no higher for American than for foreign vessels and on particular voyages were sometimes in favor of American vessels. Though wage and sustenance bills ranged from 35 to 45 per cent. above those of foreign vessels, the aggregate operating costs of an American vessel before the war in Europe did not exceed those of comparable foreign ships by more than from five to fifteen per cent., the excess varying with different types of vessel and routes of different lengths. To this extent higher operating costs contributed to the decline of our ocean marine. 4. Unfavorable Merchant Marine Policy Meanwhile the Government did little to assist the merchant marine. The subsidies of the 40's were withdrawn in 1858 just when the change from wood to iron and sail to steam began to make rapid progress. The three small and short-lived subsidy contracts of the 70's and those paid under the mail contract Act of 1891 compared unfavorably with the larger sums paid by rival foreign countries. The Civil War taxes on shipping were retained until 1868; vessels which had been transferred to foreign flags during the war were refused readmission to American registry; imported shipbuilding materials for use in constructing iron and steel vessels for use in international commerce were not relieved from import duties until 1890, and the neglect of the American navy for twenty years after the war delayed the reorganization of our shipyards from a wood to an iron and steel basis. 5. Declining Interest in Oversea's Trade The decline of the deep-sea merchant marine was not, however, due entirely to the competition of foreign vessels and the handicaps suffered by American shipowners. A fundamental difficulty was the declining interest in foreign trade. The energies of the American people and their available capital were directed to the highly profitable employment incident to the settling of the West, to the development of our agricultural, forest and mineral resources, to the building of railroads and other domestic transportation facilities. Domestic industry and trade absorbed the capital and labor which in a young and growing country at best were scarce. It is probable that the deep-sea merchant marine would have declined somewhat even if American vessels had not been handicapped in their competition with foreign vessels. It was not until the close of the nineteenth century that substantial amounts of American capital were invested in foreign vessels, for until then the returns of foreign shipping likewise were not attractive to American business men. RECENT INCREASE IN OCEAN TONNAGE It is clear that these conditions which were chiefly responsible for the long extended decline in our deep-sea merchant marine began to change even before the present war and that the future prospects of American shipping are brighter than they have been for over half a century. There was an increase in registered tonnage from 782,517 tons gross in 1910 to 1,066,288 in 1914. The astounding increase since then is, however, traceable directly to war requirements. The war soon created a shortage of the world's deep-sea tonnage and an exorbitant level of freight charges, and caused the transfer to the neutral flag of the United States of many vessels which had formerly been operated under foreign flags. Numerous coastwise vessels, moreover, were transferred to the foreign trade. By June 30, 1915, the registered tonnage had risen to 1,862,714 tons gross and in 1916 it increased to 2,185,008 tons, an advance of 105 per cent. in two years. Then the United States Shipping Board became a factor. When the United States entered the war its shipbuilding program was extended with astounding rapidity, and after some delay the newly constructed and acquired tonnage became a power in the effective prosecution of the war as it should also in the future become a dominant force in international commerce. During the period from July 1, 1916, to September 30, 1918, 626 sea-going vessels of 2,021,860 tons gross were built and officially numbered in the United States. In September last 100 sea-going vessels of 301,433 tons gross were completed. The total number of sea-going vessels of over 1,500 dead-weight tons under the jurisdiction of the United States Shipping Board which now controls the operation of sea-going merchant ships, on September 1, 1918, was 2,185 with a dead-weight tonnage of 9,511,915. These figures include 891 foreign vessels under charter to the Shipping Board and to American citizens, and 81 Dutch requisitioned ships, but 1213 sea-going vessels of 6,109,460 dead-weight tons or about 5,046,400 gross registered tons flew the American flag on September 1st, and by September 30th the sea-going merchant fleet of the United States numbered 1,313 vessels of about 5,348,000 tons gross register. Returns just received this morning indicate that on November 1st 1,520 vessels of 1,000 tons gross or over were registered under the American flag with a gross tonnage of 5,133,417. How much additional tonnage will be completed by the enlarged and newly constructed shipyards during the next few years is conjectural but the program of the Shipping Board may be expected to continue at least in part. Indeed the final conclusion of peace should find the United States with a sea-going merchant fleet rivaled only by that of Great Britain. Meanwhile the tonnage losses of the world as a whole to September 1, 1918, excluding Germany and Austria, exceeded the gains by 3,362,888 tons dead-weight. The entire war losses have, according to the Shipping Board, amounted to 21,404,913 dead-weight tons while 14,247,825 tons were constructed and 3,795,000 tons of enemy tonnage were acquired. Had the world's tonnage since August, 1914, increased at the normal rate prevailing in the years 1905-1914 it would have increased by 14,700,000 tons dead-weight. If this is taken into account there is a net world deficit due to the war of over 18,000,000 dead-weight tons. It is clear that the foreign trade of the United States will depend more closely upon American tonnage than in the past, and that the tonnage now being constructed and that which has been furnished will not be a drug on the market but a trade building force of far-reaching effect, and perhaps also a factor in the reconstruction of Europe. Whatever the future operating policy of the United States may be the close of war will find us with a larger sea-going tonnage than even the most optimistic enthusiasts looked forward to a few years ago. And its usefulness will not then come to an end. Its immediate function was to transport troops and supplies although more than double the newly built tonnage was needed to transport and supply the troops sent over-seas during the twelve months ending September 30th. Its future function will be the promotion of international commerce. CHANGING SIGNIFICANCE OF FOREIGN TRADE There is every indication that the foreign trade of the United States will in the future have a new significance. A part of the new function of foreign trade and shipping extends back to pre-war conditions. Even then the foreign trade throughout a period of a decade was growing rapidly, and the most significant growth occurred in the exports of manufactures. A number of our manufacturing industries had even then reached a point where future growth would be retarded unless the great domestic markets were supplemented with permanent foreign markets. And these markets were not found primarily in the old WestEuropean countries to which we had long shipped foodstuffs and raw materials but in the newer agricultural countries of the Western Hemisphere, the Orient, Australasia, Africa and Eastern Europe. The exports of manufactures and semimanufactures from the United States increased from 35.4 per cent. of the entire export trade in 1900 to 47.2 in 1914, and the proportion of our total exports destined to non-European countries during the same years advanced from 25.4 to 37.1 per cent. Many of the larger exporting concerns had before the war ceased to regard foreign markets as a place for the occasional dumping of an unexpected surplus output, but as permanent markets to be earnestly cultivated and permanently retained. One of the obstacles frequently encountered by them was a steamship service performed mainly by foreign steamship lines and comparing unfavorably with steamship services operating from European countries to the newer markets which |