REAL   ESTATE







AND







JANUARY 4, 1913





OUR GAINS FROM THE ERIE AND PANAMA CANALS

Freight From Middle West, Which Has Gone to the Pacific by Rail, Will Hereafter Come
Through New York—Natural Advantages Restored to the "Gateway of the Continent."

By FREDERICK B. De BERARD, Statistician of the Merchants' Association







HE completion of the
Panama Canal Avill
greatly modify the ex¬
isting currents of trans¬
portation, not only
upon the sea, but
throughout a large part
of the area of the
United States.
To the effect of the Panama Canal in
changing the direction of transportation
movements -will be added that of the
Erie Canal; and the result will be pro¬
foundly beneficial to the North Atlan¬
tic States, and particularly to the City
of New York and its adjacent territory.
Hitherto the main currents of trans¬
continental traffic have been by rail, the
west-bound rail traffic (including the
rail and water routes via the Gulf ports)
to Pacific terminals in 1911 aggregating
approximately 3,481,600 tons, as against
494,600 tons moving by the water routes
via the Panama and Tehuantepec isth¬
muses.

Until 1907 this disparity was still
greater, despite the fact that water rates
were from 20 to 60 per cent, less than
rail rates. The reason for the relative¬
ly small use of the water routes was the
control of the steamship lines by the
transcontinental railroads, which dis¬
couraged shipments by bad service, in¬
adequate facilities and extreme slow¬
ness; and which prevented competition
by independent lines by temporary rate-
cutting until competitors were driven
out of the field. After 1907 these con¬
ditions were bettered by the opening of
the Mexican State railroad across the
isthmus of Tehuantepec and the opera¬
tion in connection therewith of the
American-Hawaiian Line, which has rap¬
idly developed a large  traffic.

Trammels Will Be Removed.
The completion of the Panama Canal
will at once remove all the trammels
which have hitherto throttled the water
traffic in order to force the greater part
of the trafiic over the railroads, at high¬
er rates. Free competition in water
carriage will at once result, by reason
of that provision of the recently passed
law regulating canal tolls, which for¬
bids railroad ownership of or interest
in any steamship line. From this free¬
dom of competition will follow speedy
and adequate service, hitherto prevent¬
ed, so that the cheaper water routes will
become available for much of the traf¬
fic hitherto forced over the rail routes.
New York and the East generally
have been placed at a serious disadvan¬
tage by the largely compulsory use of
the transcontinental rail routes, for the
reason that it has been deprived in large
degree of the benefit of low water rates,
which if untrammelled would give it
nearly all the Pacific Coast trade. The
interest  of  tht   rail  lines  west  of  Chi¬





cago has been to exclude New York as
far as possible from the Inter-mountain
and Pacific territories to be served by
Western cities. This is because the rail
rate from all points east of the Mis¬
souri River to points on the Pacific
Coast is the same. Thus the amount re¬
ceived for hauling a carload from New
York, or from Chicago, to San Fran¬
cisco is the same, but in the former case
the amount is divided between the East¬
ern and the Western railroads, while in
the latter case the Western railroads
keep it all. The potential water com¬
petition has had the efifect, however, of
forcing a very low transcontinental rail
rate—much lower than the local rates
exacted by Western lines between in¬
termediate points. The latter have
fought vigorously against this discrim¬
ination; and it has recently become evi¬
dent, from the attitude of the Inter¬
state Commerce Commission, that the
Western railroads must either abandon
their policy of abnormally low through
rates to Pacific points, made to meet
water competition, or correspondingly
scale down their now highly profitable
local rates.

Will  Reverse  Traffic  Currents.

There can be little doubt as to what
they will do in this dilemma. The trans¬
continental traffic is of very doubtful
profit at best; the local traffic at high
rates is vital; and it is likely that, with
the real and vigorous competition of
water rates following the opening of the
Panama Canal, the Western railroads
will abandon the attempt to force traffic
to reach the Pacific Coast by rail, by
means of a highly artificial rate system.

The abandonment of the blanket rate
between points east of the Missouri
River and Pacific terminals (already
practically ordered by the Interstate
Commerce Commission) and the advent
of untrammelled water carriage between
tlie Atlantic and Pacific Coasts will
cause a radical change in the trafiic cur¬
rent between the Atlantic and Pacific
Coasts, not only by substituting the
water for the rail route, but also by
causing a partial reversal of the rail
movement. Even at present water rates,
commodities originating 500 miles west
of New York and destined for the Pa¬
cific Coast can reach their destination
most cheaply if shipped eastward to New
York and thence by water. The present
obstacle  is  defective  service.

More Freight Business Here.

Under the new conditions, with lower
rates and ample service, a great volume
of freight which has hitherto moved
westward by rail to the Pacific Coast
will hereafter move eastward by rail for
trans-shipment by water, thus concen¬
trating on New York the bulk of the
large  trade  with  the   Pacific  Slope.





To sum up the effect of the Panama
Canal upon the trade relations between
New York and the Pacific Slope: The
existing railroad control of the situation
will be broken up. The influences which
have been tending more and more to
deprive New York of the far Western
trade will be nullified, and through its
command of a through water-route freed
from railroad control and with rates
made by genuine competition, it will be
confirmed in its control of the already
very important and rapidly growing Pa¬
cific Coast trade. In addition it will be¬
come the shipping point for a wide
range of manufactured products made
within a radius of 500 miles or more,
of New York's City Hall which now
reach the Pacific Coast by the westward
all-rail  routes.

New York Chief  Beneficiary.

The influence of the Panama Canal up¬
on foreign trade relations is compli¬
cated by many economic conditions.
One fact is certain: that as America's
volume of exports increases those ex¬
ports will mainly find their outlet from
Atlantic and Gulf ports, with a great
preponderance in favor of New York,
because of its more available water
route, via the Erie Canal, from the in¬
terior. The Central States must of ne¬
cessity be the situs of great manufac¬
turing development, not only by reason
of contiguity to raw materials and fuel,
but also because of central location
with reference to a large consuming
population. In many branches of in¬
dustry in which freight is not a large
factor the Eastern States will continue
large producers. When the Panama
Canal is available, such part of these
manufactured products as is exported
can with few exceptions reach any part
of the world more cheaply through New
York than through any other American
port. Hence, whatever benefit the
Panama Canal confers in the promotion
of foreign trade, New York will be a
chief beneficiary, as it will surely be¬
come the great export market where
American manufacturers of every class
will maintain selling agencies.
The Erie Canal's Part.
Let us now consider the part which
the Erie Canal will take in this econom¬
ic readjustment. For many years past
the Erie Canal has been obsolete, al¬
though it has exerted an important in¬
fluence in the modification of rail rates
upon grain and coarse freights. Many
elements of waste have entered into
canal freights which thereby have been
maintained at a higher level than would
otherwise   be   economically   necessary.

Moreover, the canal has not been use¬
ful as a carrier of high-class freights
by reason of slowness of transit. In
the carriage of bulk freights small units
have   been   employed   at   an   excessive