CHAPTER IV.

ECONOMIC ASPECTS OF CANAL OPERATION.

The canal was opened to traffic, on terms of equal tolls to all nations, including the United States, in July 1914. The amount of coastwise traffic that passed through the waterway during the first year indicated that experts had far underestimated its volume. Professor Johnson in his reports prepared for congress had predicted that 10,500,000 tons, net register, would use the canal in 1915, and that of this total but 1,160,000 net register tons (1) would be coast-to-coast shipping. It was expected that so few American coastwise vessels would engage in the trade that it would be necessary to repeal the navigation act of 1817 which limited this trade to American bottoms. An attempt to repeal the early law was defeated in 1914; though later the repeal was enacted as an emergency war measure, which was, in turn, repealed by the mer chant marine act of 1920.

As traffic conditions actually worked out in the first year of operation, the total shipping to pass through the canal amounted to 4,404,364 net register tons, or less than half of what had (2) been anticipated.. The reduced volume of foreign shipping was mainly due to abnormal war conditions. But of the total, 1,416,294 tons were American coast-to-coast shipping. Thus instead of 10 per cent of the total traffic, as Professor Johnson had estimated, the coast-to-coast trade amounted to about 35 per cent.

(1) Hearings Before the Committee on Interstate and Foreign Commerce, House Document No.680, 62nd Congress, 2nd session, p.705. (2) Marvin First Year at Panama, Review of Reviews, Vol. LII‚p.332.

And instead of a lack of competition between American lines, as had been predicted in the debates in congress, congress, there were by August, 1915, eight regular steamship lines, in addition to tramp vessels, carrying the coastwise trade. The American-Hawaian company put a fleet of twenty-six steamers into service; the Luckenbach Steamship company had fifteen in operation; the Atlantic and Pacific company had seven; and other concerns were building especially for interstate service. It was evident that American shipping interests were in earnest about seizing their opportunities to (1) develop water trade in competition with transcontinental roads.

The predicted effect of canal shipping in lowering railroad rates soon began to be realized. Rail competition with ocean coastwise trade, involving trans-shipment at the isthmus, first had been furnished by transcontinental railroads in 1869. In that year competition of the Union and Central Pacific railroads afforded the first continuous rail route from the Atlantic to the Pacific. Prior to this, the Panama railroad, from Panama City to Colon, had carried freight between ships that unloaded and reloaded on oppo(2) site sides of the isthmian barrier.

Early traffic by way of Panama rapidly diminished with the beginning of rebate practices by the northern railroads, which undercut isthmian shipping costs. Railroads accomplished their monopolistic purpose partly through transcontinental rates, which

(1) George H. Blakeslee

Results of the Panama Canal on World Trade, Outlook, Vol. CXI, p. 490.

(2) Emory R. Johnson The Relation of the Panama Canal to the Traffic and Rates of American Railroads, Senate Document No. 875, 62nd Congress, 2nd session, p. 8.