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The importance of these distinctions has recently been realized in the course of the difficulties which have been encountered by the managers of the trunk lines connecting the West and the seaboard in their attempts to adjust through rates between the centers of trade at the West and Bos. ton, New York, Philadelphia, and Baltimore. About the 1st of February, 1877, the representatives of the various trunk lines met at New York to form a basis of agreement. There was no difficulty in agreeing as to the rates by the various lines for all traffic consigned from the West di. rectly to ports in Europe, but in regard to rates on commodities shipped to the sea-ports above mentioned the trunk lines were unable to agree, since such commodities may be consumed at those ports, and therefore constitute a local traffic, or be exported to foreign countries or to seaports in the United States, and thus become competitive traffic. The final adjustment of differences in this case is believed to have been effected through the spirit of compromise. The real difficulty in the case was to distinguish between “local” and “competitive" traffic.
This subject involves many perplexing questions in practice, for example, the drawing of a line of distinction between competitive and noncompetitive business; the determination of the geographical extent of the influence of trunk lines by means of their various branches and connections; questions as to the relative advantages which the rival lines enjoy on account of distance, grades, and other elements of the cost of transportation; the facilities for coastwise and foreign distribution, &c.
Experience seems to prove that there must be either a tacit or a formal agreement as to rates on all competitive traffic, the rates by tacit agreement constituting substantially the market value of transportation, whereas the formal agreement is an arbitrary or artificial mode of adjustment.
CERTAIN IMPORTANT CONDITIONS UNDER WHICH THE TRUNK LINES ENGAGE IN TRAFFIC BETWEEN THE WEST AND THE SEABOARD.
The several trunk lines engage in traffic between the West and the Atlantic seaboard under certain very important conditions which may be stated as follows: The more northerly lines to the seaboard enjoy peculiar advantages on account of their geographical position. Grain raised in the States of Iowa, Minnesota, and Wisconsin, which has the option of transport to the seaboard by the lakes and the New York or Canadian canals, as well as by the more northerly roads, can, under ordinary cir. cumstances, be shipped to Europe via Montreal, Boston, or New York at less cost than by the way of Philadelphia or Baltimore. On the other hand, grain raised in the southern part of Illinois or Indiana and exported to Europe can, on account of shorter rail distance and direct connecting ocean-lines, be transported over the Pennsylvania Railroad and over the Baltimore and Ohio Railroad, via Baltimore and Philadelphia, cheaper than by the way of the more northerly roads. These conditions are, however, quite variable in practice. In case the Baltimore and the Philadelphia markets are glutted or no available tonnage can be secured at these ports for foreign shipment, commodities raised on the line of the Baltimore and Ohio or the Pennsylvania Railroad will inevitably take a longer and more expensive route if such movement should be justified by more favorable conditions of trade or of transport at other sea-ports.
This is but a general view of the question. It runs into almost end. less detail and presents many striking exceptions. There are throughout the Western States many small interior points situated upon a road forming a direct communication with one of the trunk lines to the sea. board only. Assume a point thus situated on one of the connecting lines of the New York Central Railroad, from which direct transportation can be secured without change of cars to the city of New York, but involving a change of cars if sent to the seaboard over any other trunk line. The mere question of direct shipment or of avoiding the cost of transfer to any other line may cause the commodity to go to New York regardless of distance, or perhaps of greater advantages offered at certain times by rival lines or rival markets. Conditions of a similar na ture also operate in favor of the other sea-ports.
A second condition under which the trunk lines between the West and the seaboard engage in “through traffic" is that the amount of grain and other western products transported to each Atlantic sea-port for exportation to foreign countries depends largely upon the available supply of tonnage for such shipments at the several ports. It is found that the grain-trade of a port cannot be increased very much out of proportion to its total commerce; or, in other words, that the grain-trade is essentially a part of a great whole, and not an independent branch of commerce. Grain which, on account of the geographical situation of the point of production, would, all things else being equal, go to Philadelphia, may, on account of the scarcity of tonnage at that port, be diverted to New York. The latter city, by virtue of its enormous shipping interests, thus determines the direction of a very large amount of the general trade between the West and foreign countries.
The trunk lines terminating at Montreal, at Boston, at Philadelphia, and at Baltimore have been able to secure the control of a part of the foreign trade by means of improved facilities for the transfer of freights from cars to seagoing vessels, and through the new and improved mode of shipping commodities on direct consignment from points at the West to Europe.
For the purpose of effecting this object certain of the trunk lines have entered into combinations or agreements of some sort with steamer-lines making regular trips between the respective sea-ports and the principal commercial ports of Europe, and they have also aided directly or indirectly in the establishment of such ocean steamer-lines. In addition to the steamer-lines, however, a very large amount of sailing tonnage, not engaged in any particular traffic, is always required in order to meet un.
expected demands in any particular direction. Especially is this true with respect to the transportation of grain, the movements of which are exceedingly fluctuating, not only from week to week, but also from year to year. This requirement is met in the largest degree at New York, where shipping of all kinds, both sailing vessels and steamers, is generally free from any sort of combination of interest with the transportation-lines to the interior.
On pages 86 and 87 of the Appendix may be found a statement, prepared by Mr. Charles Randolph, which indicates the relative through charges which prevailed during the year 1876 for the transportation of wheat from Chicago to Liverpool via Baltimore, Philadelphia, New York, and Montreal, respectively.
The total through charges by the various routes at the time Mr. Randolph presented his statement were as follows:
Cents per bushel. Via Baltimore.... Via Philadelphia..
34, 28 Via New York
34.95 Via Montreal
36. 30 The closeness of the competition may be seen from the fact that the difference between the charges via the three Atlantic seaports of the L'nited States was only eight-tenths of a cent, and that the charges via Montreal were but one and a half cents higher than those via New York.
A third condition under which the trunk lines engage in traffic between the West and the seaboard is that the amount of western traffic over each one of the trunk roads is to a great extent limited by the demands at interior points on its line and at its terminus or termini on the Atlantic seaboard.
Flour and other products of the State of Michigan, purchased for the purpose of supplying the local demands at points in the States of West Virginia, Maryland, or Pennsylvania, on or near the main line or branch lines of the Baltimore and Ohio Railroad, must necessarily be trans. ported to sach points over that road, although in moving to these points it may cross all the other great trunk lines. Such traffic is considered "local” or “non-competitive.” The local demands of the city of Baltimore may be met by the Baltimore and Ohio or by the Pennsylvania Railroad, since both of these roads have connecting lines from the State of Micbigan to Baltimore. But the more northerly roads are not competitors for this traffic. Grain raised in the southern part of Illinois and shipped to interior local markets in the States of Pennsylvania, New Jersey, New York, or the New England States will almost invariably be transported over the line forming a direct connection between the point of production and the point of consumption, as traffic of this character is in the least degree competitive. Grain and western products shipped to New York and to Boston for local consumption will generally be transported over direct lines terminating at one or the other of these points.
In the cases just adduced the geographical situation of the point of production and of the point of consumption mainly determines the route, since it is confined to one or two lines. Other lines would compete, if at all, under very great disadvantages with respect to time, distance, and transfer of freight from one vehicle to another.
THE COMPETITIVE INFLUENCE OF THE TRUNK LINES AND OF THE ATLAN
TIC SEAPORTS DIFFERS WITA RESPECT TO DIFFERENT COMMODITIES.
The competitive influence of the various trunk lines and of the sereral Atlantic seaports differs very widely with respect to different commodities. Certain commodities furnish a large amount of competitive traffic, whereas other commodities, perhaps produced in the same locality, are in a very much less degree competitive. Cotton being a commodity of high value, in proportion to its weight and bulk, and being transported great distances, is in the highest degree competitive with respect to almost all the great trunk lines of the country and with respect to many rival markets. Hay, potatoes, and vegetables, being heavy commodities of low valne and produced in almost every State and county, are in the lowest degree competitive. They constitute a part of the local traffic of railroads and of the local trade of the several Atlantic sea-ports, since each port has to a great extent its separate sources of supply.
The contests which hare been going on during the last four years with respect to the movements of grain from the West to the seaboard render it a matter of much interest to note the characteristics of the different cereals with respect to the competitive forces of transport and of trade. Wheat, wheat flour, and corn, being largely exported, are to that extent in a high degree competitive as to the interests of the several ports. Oats, barley, and rye, on the other hand, are exported in very limited quantities, and are, therefore, both with respect to the interests of the several trunk lines and of the several seaboard cities, regarded as local" or "non-competitive" commodities. During the year 1876 there was received at the ports of Portland, Boston, New York, Philadelphia, and Baltimore 161,312,646 bushels of wheat, wheat-flour, and corn, and 30,814,570 bushels of rye, oats, and barley; and there were exported 103,354,171 bushels of wheat, wheat-flour, and corn, and 2,678,788 bushels of rye, oats, and barley, or, in other words, of the wheat, wheat-floar, and corn received, 64 per cent. was exported, and of the rye, oats, and barley received only 9 per cent. was exported. Grain shipped to each of the Atlantic seaports for local consumption naturally forms a part of the traffic of the roads which afford the facilities of direct shipment.
THE INTERESTS OF THE TRUNK LINES AND OF THE SEABOARD CITIES
ARE NOT ALWAYS IDENTICAL.
In order to appreciate the conditions which determine the course of trade between the West and the seaboard, it is important to note the fact that the interests of the trunk lines and of the sea-ports which respectively constitute their eastern termini are not in all respects identical, although not necessarily antagonistic.
The interests of the trunk roads are sometimes apparently at variance with the interests of their eastern termini.—The interests of the New York Central Railroad with respect to its through traffic" are closely identified with the commercial interests of New York City, and yet the managers of that road find it to their interest to develop traffic between the West and the New England States, since this traffic passes over 297 miles of their road from Buffalo to Albany. The interests of the road are most intimately related to the commercial interests of the city of New York; yet its managers would not attempt to force New England freights to New York, thence to be distributed to the New England States, as was the practice when the Erie Canal was the only avenue of commerce between the West and the seaboard. Any attempt of this kind would simply be to abandon the New England business to some existing road or to some new road which would inevitably be constructed in order to supply the demands of the New England States for direct trade. The New England traffic of the New York Central Railroad, (which is said to constitute about 60 per cent. of its through traffic, by increasing the volume of its total traffic, greatly reduces the cost of transportation and thus affords to New York City the advantages of cheap transportation.
In like manner the interests of the Baltimore and Ohio Railroad are closely allied to the commercial interests of the city of Baltimore; yet the management of that road find it to their interest to carry western products consigned to Philadelphia to New York and to Boston. This they are able to do by means of their eastern connections, viz, the Philadelphia, Wilmington and Baltimore Railroad to Philadelphia, and the Pennsylvania Railroad line from Philadelphia to New York; also, the interior water-line formed by the Chesapeake Bay, the Chesapeake and Delaware Canal, the Delaware River, and the Delaware and Raritan Canal to New York, and the outside lines by the ocean to Philadelphia, New York, and Boston.
The Baltimore and Ohio Railroad Company has its soliciting agents at Philadelphia, at New York, and at Boston for the purpose of securing a share of tbe west-bound freight to points reached by its western lines and their connections. In so far as possible, the managers of this road undoubtedly direct traffic in the interest of Baltimore, but their power to do so is not absolute. In competing for traffic to and from other Atlantic seaports, they must afford to that traffic all necessary facilities.
The additional traffic secured to and from other cities than Baltimore, by increasing the business of the road tends to reduce the cost of transportation and thus incidentally to advance the commercial interests of
It may be stated generally that the managers of all the trunk lines,