■^ IMAGE EVALUATION TEST TARGET (MT-3) k // ^/ ^J'. ^J%^ ^^ ^ /. l/u :/. 1.0 II I.I 11.25 i^yi 12.5 ■^ i2i& |2.2 — 6" 71 Hiolipgraphic Sciences Corporation 23 WIST MAIN STMIT WEBSTIR.N.Y. MSIO (716) S72-4S03 fV ri>^ <^ 4^ y. %o CIHM/ICMH Microfiche Series. CIHM/ICIVIH Collection de microfiches. Canadian Institute for Historical Microreproductions / Institut Canadian de microreproductions historiques Technical and Bibliographic Notes/Notes techniques et bibliographiques The Institute has attempted to obtain the best original copy available for filming. Features of this copy which may be bibliographicaliy unique, which may alter any of the images in the ' reproduction, or which may significantly change the usual method of filming, are checked below. D D D D D D D Coloured covers/ Couverture de couleur I I Covers damaged/ Couverture endommagde Covers restored and/or laminated/ Couverture restaur^e et/ou pellicui6e I I Cover title missing/ Le titre de couverture manque I I Coloured maps/ Cartes gdographiques en couleur Coir ur J ink (i.e. other than blue or black)/ Enc le couleur (i.e. autre que bieue ou noire) I I Coloured plates and/or illustrations/ Planches et/ou illustrations en couleur Bound with other material/ Relid avec d'autres documents Tight binding may cause shadows or distortion along interior margin/ La re liure serrde peut causer de I'ombre ou de la distortion le long de la marge int6rieure Blank leaves added during restoration may appear within the text. Whenever possible, these have been omitted from filming/ 11 se peut que certaines pages blanches ajouttos lors d'une restauration apparaissent dans le texte, mais, lorsque cela 6tait possible, ces pages n'ont pas 6t6 filmies. Additional comments:/ Commentairas supplAmentaires; L'institut a microfilm^ le meilleur exemplaire qu'il lui a dtd possible de se procurer. Les details de cet exemplaire qui sont peut-dtre uniques du point de vue bibliographique, qui peuvent modifier une image reproduite, ou qui peuvent exiger une modification dans la m^thode normale de filmage sont indiqute ci-dessous. I I Coloured pages/ D This item is filmed at the reduction ratio checked below/ Ce document est filmA au taux do reduction indiquA ci-dessous. Pages de couleur Pages damaged/ Pages endommagdes Pages restored and/oi Pages restaur^es et/ou pellicui^es Pages discoloured, stained or foxet Pages d^coiordes, tachet6es ou piqu^es Pages detached/ Pages d^tachtes Shovifthrough/ Transparence Quality of prir Quality inigale de I'impresslon Includes supplementary materii Comprend du materiel supplimentaire Only edition available/ Seula Edition disponibie I — I Pages damaged/ I — I Pages restored and/or laminated/ rrn Pages discoloured, stained or foxed/ I I Pages detached/ rri Shovifthrough/ I I Quality of print varies/ I I Includes supplementary material/ I — ! Only edition available/ Pages wholly or partially obscured by errata slips, tissues, etc., have been ref limed to ensure the best possible image/ Les pages totalement ou partiellement obscurcies par un feuillet d'errata, une pelure, etc., ont 6tA filmtes A nouveau de fapon A obtenir la meilleure image possible. 10X 14X 18X 22X 26X 30X >/ 12X 16X 20X 24X mn 32X The copy filmed here has been reproduced thanks to the generosity of: University of Windsor Law Library The images appearing here are the best quality possible considering the condition and legibility of the original copy and in keeping with the filming contract specifications. L'exemplaire filmA fut reproduit grAce A la g6n6rositA de: University of Windsor Law Library Les images suivantes ont 6t6 reproduites avec le plus grand soin. compte tenu de la condition et de la nettetA de l'exemplaire filmi. et en conformity avec les conditions du contrat de filmage. Original copies in printed paper covers are filmed beginning with the front cover and ending on the last page with a printed or illustrated impres- sion, or the back cover when appropriate. All other original copies are filmed beginning on the first page with a printed or illustrated impres- sion, and ending on the lest page with a printed or illustrated impression. The last recorded frame on each microfiche shall contain the symbol ^^> (meaning "CON- TINUED"), or the symbol V (meaning "END"), whichever applies. Les exemplaires originaux dont la couverture en papier est imprimte sont film^s en commenpant par le premier plat et en terminant soit par la dernidre page qui comporte une empreinte d'impression ou d'illustration. soit par le second plat, salon le cas. Tous les autres exemplaires originaux sont filmfo en commen^ant par la premidre page qui comporte une empreinte d'impression ou d'illustration et en terminant par la derniire page qui comporte une telle empreinte. Un des symboles suivants apparaftra sur la dernidre image de cheque microfiche, seion le cas: le symbols — ► signifie "A SUIVRE ". le symbole V signifie "FIN". Maps, plates, charts, etc.. may be filmed at different reduction ratios. Those too large to be entirely included in one exposure are filmed beginning in the upper left hand corner, left to right and top to bottom, as many frames as required. The following diagrams illustrate the method: Les cartes, planches, tableaux, etc.. peuvent Atre filmAs d des taux de reduction diffArents. Lorsque le document est trop grand pour Atre reproduit en un seul clichA. il est filmA A partir de Tangle supArieur gauche, de gauche A droite, et de haut en bas, en prenant le nombre d'images nAcessaire. Le& diagrammes suivants illustrent la mAthode. 1 2 3 1 2 3 4 5 6 Hej PROCEEDINGS AT Hearing before Board of Arbitration ON Ol'KSTKJN ()|- Canadian Pacific Differentials Al' All»lT(H{llM HOTEL, ( lil('A(JO, OdolHi- 12, isiN. /■:. DECISION OF BOARD OF ARBITRATION (Soc l-ayro 201 licn'of.) Mr. INDICES. I'AtiK Foard ok Ariui r.mion. Rki'rkskmaiion, (JlKSrioN for CoNSlDKKA riON OK ArI'.I I R \ lORs, Canadian Paciiu; Raiiwav ( O/s Ar(;imk\is. Amkruan Links' Ariu'mknis, DK( ISION OK ArI'.KI RATORS. 5, 201 - 5 5 «, i5«- 1H3 65. HJO - 201 Aroimknis ok Amkrkan Links. AR(;r.MKNis OK Canadkan FAriKir R\ii\\\\ Cn., Board ok Arbkiraiion. DK( ISION OK Aivlil rRAIORS. 65. 190 S. 15S. 1H3 5. 201 201 Mr. Roi'.r. Kkrus Arcimknis kdr Canadian Paiikk Raiiwav Co.. - - - - - - S. 15H !Mr. T. G. SHAlMiHNKSSV's A R( U' M KN I S KOK CANADIAN I'aiIKIC Raiiavav Co., - - - - - - 183 Mr. J. C. Si'UHits' Ariumknis kor Amkruan Links. - 65, 190 (JLESnoN KOR CoNSlDKRA I ION OK \ Rlil I R A I < tRS, " " 5 RkI'RKSKN"! AI'ION, ----- c T HE, Mkss A.MK Mi; At iirowi ix-solul T PROCEEDINGS A I HEARING BEFORE BOARD OF ARBFrRATION ON Question of CANADIAN PACIFIC DIIFtREM IAI.S Al AIDITORIIM Horn. CHICAGO, oc roiiiciv' 1-^. isKs. BOARD OF ARBITRATION- t n \iK\i \\. i representation: ■Ml >M<>. J. c. Si I Mils. \r, , I. ,. 1 Al I, Morion. /■•mi, W. H. Tk.km.mi. • •'• J"'^^^'"<'"- B. Cami'|:i.i.i . giKSTIOX j.oK C().V.S||)|.;kaTI()X. At a mocting- of c-x.outivc oft^cers of IVans-e o.uincntai lines held ai >rou.n Palace Hotd. l).„v.,-. Colo.. o„ Anoust ._>. ,.S,S. tli. follow, !! lesolution was adopted: ' -Kesolved. that provide.l tli. ( anadian I'antir Railuav will P'" -th the I nitcd .States Lines in a eo-operative a.n.enu.nt des.jjncd to secure the maintenance of rea.sonal.le rates on the ircght traffic mterchanged with San Fra.,cisco,Cal..bv other points »" he United States and Canada, that the lines her'e represented w.ll subnnt to arbitration, the qnotion of whether the C anadian lac.fic Ra. way ,s. or slionid be. entitled to a differential nn.ler the . rates made by the I 'nited States lines for the carriage . .f the freiLrht m qtK^t.on. and if any differentials, what these and Mid}4;ley selected Mr. l^dward S. Washburn as the third iueud)er of the l>oard. Pursuant to the resolution above recited, a hearin,tj before the I'.oard of Arbitration was arran^^ed to convene at Auditorimn Hotel. Chica^i). (,)ctober ij. i(X(;S. at ii o'clock, .\. M. ■ The nieetint; was called tt) order by Arbitrator \\ ashburn, who offi- ciated as Chairman of the lioard. The appoiiUnient of Mr. 1*'. S. .*^tephens. as Secretary of the lioard. was announced. AKIMTK.\T()K WASI I.I'.IKX— Objection havino been made to the sessions beiujn" in ])ublic. it has been decided that only railroad officials will be permitted to be present at the heariui;'. l"he I'.oar hearinjj;^, or whether, if the Arbitrators deem necessary after the hearing, they shall obtain information through other sources. .Also whether the\ desire or prefer that we should or should not in considering the c|uestion. use any knowledge that we now have of the matters in dispute. 1 will first call upon the Canadian Pacific Ry. MR. KKRR — Mr. Chairman, we regard this as a most serious matter, and we would like that every means be taken by the .Arbitrators to get at all the facts in every way possible, not only through the means of sucii facts as may be presented here, but in any other way they choose. We want full light on the subject, and we want, of course, as much of the facts as arc necessary in order to g^et at a proper decision of the question. Therefore, we think that the .Arbitrators should be unrestricted in any )ftl- i way and slioiild seek light In mi an\ .soiir^i' in oifJiT to gnidf ihcin to a proper dfiision. ( )nr icka with rt'gard tr,l)mittrd on a resolution i)assed at a lueeting of the lines interested. The American lines and the Canadian line. That resolution state> two (piestions that are to be deternn'ued by this Hoard. We think that it should be sub- mitted and received by the Hoard of .\rbitrators at this hearing. It is. as Mr. Kerr has well stated, a very serious (piestion; at the same timi' it is not a new (piestion. It is not a new (piestion to the parties in contention. It is not a new (|uestion to the mend)ers of the I'.oard. We have, after a good deal of wrangling among ourselves, tinally reached the conclusion that there was but one wax to determine this matter. That i> bv nferrinij It to a lioard of three disinterested arbitrators, before whom wc should api)ear and make our showing for or against, as it may be. the (|iustions stated in that resolution. At the original meeting where thi> arbitnition was decided upon it was manifest to all that it was so important that we ought to gt't it out of the way as soon as possible. We contemplated tluTe that we nnght get this before the Arbitrators and ])ossil)ly reach a decision previous to ( )ctober loth, day before yesterday, so that following the determination of this I5oard we might go about intelligently to adjust the rates and gel upon a rea.sonable working relation that would be conducive to harmony and peace, just .so far as that is possil)le betwei'u competing lines, but to follow the suggestion of the Canadian Pacific representative would make this an interniinate contest. It would hardly be just to either side. We believe that if after the statement made here the I'.oard should feel that it required testimony in supi)ort of statements of alleged facts or should want further light upon the subject, they certainly could call upon the parties to appear and give that evidence, or jjroduce the information, but I believe I express the view of the Committee in charge of the Ameri- can lines' case when I say that if it is possible we should close the matter here and get it out of the way. I"or my own part, it seems to nie that the (piestions are clearly and explicitly stated in the resolution. What we have to submit to this Hoard is there stated. There is no roving com- mission at all. ^ 8 .\ki;i TKA'li >K W ASIir.lKX A^ tluiv is a .UhViviuh- ..f ..pinion Ijctufcn till' t'onti'iidiiif; partii-s, this is a matter that thi- I'.Dard will havf t(» (letcrniiiK- lattr; Iml \vi- h(ti)c that all the cvideiUH' that will hi' iieie^- sa;'y will he prodiieed at this hearitij^. At a preliminaiy niectinj,^ of the I'loard yesterday, to ilelenniiir niode^ (•f piVK'ediire, and so forth, it wa^ decided that we would not adopt aii\- thin^ more than neeessar\ to hriiijH' the matter pro])erly before the I'.oard. and it was dceidid that, as the Canadian I'aeitie Ky. has the aftirmative .side of thi.s fpiestion. that company will open the case: that the American side will then reply, and that the C'anaflian Tacitic will close the case; but only in their closing argument to answer points made by the Ameri- can lines, not to introduce anythin.t,^ new. It was also decided to call upon the parlies to the controversy, to present each its case in full, and make a full disclosiu'e of its case in the arguments that will now be made. We will now call upon the Canadian Pacific Ry. .MR. KI'LRR — .Mr. C hairman, I will not take u]) the time of the .\rl)i- trators in any i)reliminary remarks, oratorical display, and all that sort of thinjj^, even thouf^h I were e(|ual to it. ft is not ai)i)licable to the .subject nor to the time and place. The ineneral principle of }.;"rantini;' differentials to broken rail-and-water routes is admitted and applied as between .\merican lines in variou- sections of the Cnited .States, as beinj.'^ the only means left under tlu' law whereby weak routes may obtain a share of business, the law not permit- ting" an ai;reement or combination whereby either physical division of tonnajj^e may be made or a money pool, or any other iifounds upon which broken rail-and-water lines can obtain a reasonable proportion of the traffic, as against direct rail line competitors. This beino- the case, munerous rail-and-water lines have been <.jranted and for years have wor' 1 mider differential rales as ai^ainst their all-rail competitors. Later. I i)ropose to show the i^reat mnnber in extant and the universal custom, law and rule, prevailiuj;' throuj'hout the whole Cnited .Siate> and Canada, whereby broken routes, rail-and-water, ocean-and-rail. river- and-rail. all have ditiferential rales in order to enable them to competi' with their direct rail rivals. 1 will i;o into the detail of this matter later on. 1 am now only sketchini;- .generally, the princii)le. The history of the I'anadia;) Pacific differentials extends over a ])eriod of leu years. ( )n November 5th, 1887, a meetin.q- of the chief traffic of^cers of the 'r;ans-Ct>ntinental lines was held at the Crand Pacific Hotel. Chicaj.jo, at which it was decided to organize an association to be called the Trans-Continental Association, the ory;anization to take effect T^ecember. 1887. The mectin<:v adjourned to meet in New ^'ork for the purpose of havmu- conference with the representatives of the Canadian l-watt-T iri«tu> U' law (.■rniit- on Ml wliioli if till' I." a St.'. liavt.' iviTsal Slato rivii- [V with on. I period iraffio *aci tie- to 1)1' effect •k for ladjan I'ai'ilu' kailwav ( oni|i;iii_\ . whirli \\a> had. and rr>nltid ni an a^ri iiut'iit oil iH'rtain dilV''ri'iitials in favor nf that road. < >n .\o\riiilirr jSih. jiitli .iiid .V''''- •' ,U<-'"*'''<'d mei'tiiiL; \\a> iuld in ( liiia,L;o where tliroiiLjh r.itrs were agreed upon, and >onir of the I'anaihan I'aeitie (htYemitiai- wm li\e(L The first ditTereiitials tixed lan: J-'ruin I J 3 4 5 ^) Xew ^'ork ,V' -5 -'* '5 '5 '- Chicago JO 15 iJ IJ iJ It) ,s >) 10 10 7 5 S t) ^ i !_' 1,^ 14 ela>>e> 5 ^ 3 .^ eent> r\ .3 5 .^ 'Idle ea.sthouiitl ihfferentials from San I'raiuiseo to .\ew N'ork and (.liicaj^t) were fixed t)n the same fis.,uires. .\ ineetiiiL; was hehl at St. l.oiiis t)ii Dec. 19th, 1887. wlien the (jiiestion of (HtYereiitials for the Catiachan Pacific Ry. to Detrtjit.Tttletlo ami Uuffalo not haviii.i;- previously heeii decitletl on. the Chairman was authorizeil to l)a>e the differentials for lUiffalt) by makinj^" the lUiffalo rate for llieiii <)<> per cent of tlu' Xew York rate, and Toledo ami Detroit 8; per cent ttf the Xew N'ork rate. Then the t|nestion of the Canadian Pacific differentials on hnsiness hetween St. Paul and Minneapt)lis and San Pnuicisco was hrttiij^ht umler discussion when the follt)wini;- ditfereiitials were allow etl to the (anadian Pacific from St. Paul: -' 3 4 _' 10 10 8 <) (.K; 1( iwer classes 10 8 8 7 cent? The .\orthern Pacific Ry. claimed the >ame differentials throui^li factjina by rail-and-water and their claim wa> allowed and aL^reed to. In ct)nnectit,)n with the formation of the Asst)ciation an a,iiTeeinent was niatle with the I'acific Mail Panama Route whereby certain space was renteil in their steamers; the Association agreed to fill such .^pace or lo pay ft)r it if not filled, the Pacific Mail acjreeiujn that the I'acific ( oasi rates should be controlled by the American roads. ( )n May 17th, 1888, a meetini;- was heltl in San Prancisco. when owiuL,^ tti the differentials awarded to the Canadian Pacific Ry.. not miviii"; that company a reasonable share of the traffic, they ap[)lied for an increase of differentials to the basis t)f 40 cents on first idass ami 10 cents on loth class and lower between San I'rancisco and .\ew N'ork. .\ committee was appointed to consider the tpiestioii. and broiiL^ht in tlu following' veport: "Resolved, that it is the sense of our committee tliat the diff'er- entials allowed the Canatlian Pacific Railway Company sin.uld at all times be fixed upon such a basis as will secure to that Company a fair ami reasonable share of the ttverlaiul tonna|LTe. and that if lO tilt' ])rc'sc"iit fij^ures do not acconi])Iisli that result, they should be so modified as to bring it about. To this end the Chairman is authorized to neg-otiate for the American Lines with the Canadian Pacific Railway Company and make such changes from time to time as, in his judgment, are warranted, with the understanding that the same dilTerentials shall api)ly to St. Paul and Minneapolis trafific via the Xorthern Pacific as may be awarded the Canadian Pacific Railway Company; it being understijod that these differen- tials shall ap])ly via the ( )cean routes only." This report was adopted. Xow, gentlemen, here was a principle that was evolved by this C'oni- mittee right in the early history of our connection with the Trans-Con- tinental -Association that is very important. JMiis Committee, consisting of representatives of the Southern Pacific Company, the .\tcliison, Topeka & Santa l"e Company and the Xorthern Pacific Company advanced an7 ■4 '4 1 1 1 1 ^) 7 7 >< St. Paul i ^linneapolis 1^5 12 10 10 10 S S / 3 :> ARIUTRATOR \).\\ — Mr. Kcmt. what year was that, if you please? MR. KKRR— That was in 1888. On May 17th. 1888. was when the San J'rancisco meeting was hvkl at which the differentials were changed. ARIUTRATOR DAY — What was the name of the Association? MR. KKRR— Tran^-Continental .\ssociation. The eastbound differentials weie practically the same with a])i)arently some slight changes. J^astl)(j\ind to ( iii'-ago— I dn not know why that was. but Chicago appears her.' on the record eastbound as first class 24 cents, second class. 19. third class. 16. fourth, 15, fifth, 1^^. sixth, 13. sev- enth. 13, eighth. 10. ninth. 9 and tenth, 7. There is a variation here in first and second class and ihird cbiss and fourth class. Tliis ditTereiilial was worked under until July, i88(). \vhen at a meeting held in Chicago be- ginning July 20th, the Southern Pacific Compaii}- moved for a reductinn of the Canadian Pacific differentiids, they claiming we had carried an undue proportion of wool from California. — fn)iu San h'rancisco to the east, .\fter considerable discussion pro and con the\ proposed and we accepted, the following reduced differentials: between San Francisco 1 and St. Paul Chicago Detroit Pittsburgh Atlantic S'b'd - 1 14^ '7 18 -'4 Wool in grease- 2» 12 14 15 17 10 I I 12 '4 5 A 1: Xo change 10 8 8 I I () <) 12 10^ 10^ 2 12 - 1 cents. '4 / 7 8 8 D !•: clr 5 / 8 .1 5 5 5 Masses cents It will be noted that the understanding on which these differentials were granted was that if they gave the Canadian Pacific an undue propor- tion of tomiage the differentials should be reduced, as soon as it could be ascertained, to a ])oint that would give that company a reasonable traffic. On the other hand, if the differentials as agreed upon did not give it a fair an ount of traffic then they should be increased by agree- ment, as soon as possible, to a point that would accomplish that end. Therefore, the Canadian Pacific Company entered the .\ssociation on 12 iliffcreiitials that after a fair trial did tint i^ivc tlK-ni a reasonable aiiudint of business, and t)n application the 'J"rans-( ontinental lines allowed them an increase. Ajrain, in July. i88y. it beinji^ claimed that the increased differentials s^ave the Canadian Pacific an undue proportion of traffic, a change was again made in order to hold their proportion of tonnage at the proper figure; the first differential being fixed to run for three months. Sub- sequently, they were extended to October ist, 1890, and as a matter of fact did extend until the end of the year. Tn the year 1891, a new propo- sition was made by the American lines to the Canadian Pacific, whereby the latter was to receive an allowance in lieu of their difTerentials. This allowance arrangement lasted through the year 189 1, when the Canadian Pacific again reverted to their differentials, by resolution of the Asso- ciation at the Xew York meeting, January 14th. 1892. At the end of 1892, the Trans-Continental Association was dissolved and the Canadian I'acific adopted the basis of 10 per cent difTerentials, concluding that / to be the fairest basis on which to work, as it had been demonstrated during the life of the Association that fixed arbitrary difTerentials did not work to the satisfaction of any one, but were a constant source of discussion and re-arrangement; therefore, by adopting the present scale, it being elastic, moving upwards or downwards with the regular changes in rates, the Canadian Pacific concluded it would prove much more satisfactory than the other plan of fixed differentials. Thereft)re. before entering the Association, we worked on the percentage plan. While in the Association we worked on the fixed arbitrary i)lan — j,j)ecific — so many cents per hundred pounds, which was not satisfactory U) anybody. During the years 1888 to 1892, inclusive, that (piestion of ditiferentials was never quiet; not that the Association lines, — the American lines — were unwilling that we should huve a differential, not that they fought on the principle of our having or not having a differential, but the question was always, on their side, that we were getting too much, and on our side, that we were getting too little. Therefore, our experience in that res])ect. and I think the experience of most all the lines who are differ- ential lines, or who have to deal with flifferential lines, is that the fixed differential is a source of worry and trouble all the way through, and that, if an e(|uitable percentage could be struck which will rise and fall with the rates, it is more satisfactory, nuire proper and right than strug- gling with a fixed arbitrary figure that stands rigid under all conditions and creates trouble all the way through. .\t the end of 1892 the Trans-Continental Association was dissolved, and since that time, having adopted this elastic scale of percentage, we have worked very close, and you might say as harmoniously as possible for rival lines to work together, although not now being in any of the Piureaus or .\ssociations that are at present in existence. At every meet- I '3 ingot the lines C()ni])risinii tiu- rran>-L'' intincnial l-'rci.^lit I'urcat. we are represented. We are there by invitation, which is always sent antl always responded tf). We are there and sit in their nieetin.ns to discuss ami give our views and we have always worked with the most ])erfect harmony. We have sim])ly ii^one alont:^ takinsj: our difi'erentials of lo ])er cent which ha- l)een practically undisputed until within a recent period when it seemeeight Rate Conmiittee in iS*),^; the .Vorthern I'a- cific, (ireat Xorthern and Canadian Pacific not bein.L;- mend)ers. 'Jhat L"ommittee coniprised what is known as the California lines. The tana- dian Pacific, Xorthern Pacific and the ( ireat Xorther" were not mem- bers Init they kept iti touch with the ITeij^ht Rate C ommittee through the medium of the L'nion l^acific. by which means they received prompt information of the changes in rates, and were enabled to govern their rates accordingly and prevent misunderstandings and needless reduction in revenue. This I'Veight Kate Committee was dissolved in i(S()7 and the Trans- Continental JUireau took its place with the Xorthern Pacific and (ireat Xorthern as members. 'Jhe Canadian Pacific did not join the hVeight liureau. but worked in harmony with the members of the I'ureau: at- tended all their meetings by special invitation, and governed its rates by the rates made by the lUireau, on the basis of lo per cent differentials. Then, in pursuance with this very interesting history of the Canadian Pacific in corniection with the Trans-Continental Association we have to drop back a year. \n March, icSyf). a meeting of all Trans-Continental lines, including the Canadian I'acific. was held at the Windsor Hotel. Xew ^'ork, and an agreement made for the formation of a new association, Subsecpiently. a further meeting was held in Milwaukee, in Ajiril. where all details pertaining to the formation of the association were completed, and rates were checked in by the hVeight C(jnnnittee. P»ut eventually -dl ])rocee(lings were sto])pe(l owing to the objection (jf the Receivers of the I nion i*acific. Xow, that is the general history or sketch of the relations the C'ana- dian Pacific Company has borne to the other 'J'rans-Lontinent'il lines. both inside and outside of their .\ssociations and liureau. I do not know that there is very nuich for me to dwell on in that history and 1 will now ])roceed to deal with the (|uestion of om Xew York. Boston and Portland (Me.), the differentials allowed these lines are — that is ocean — from the starting point of the goods to the connecting point with the rail, thence rail to destination — the differ- •intial allowed these lines is: 1 2 .^ 4 5 6 classes lO 8 6 4 4 3 cents the perceiitaj^e ranj^iiijn from 3 1-3 ])er cent to 12 per cent. In order to accentnate tins differential (juestion. and to show and prove its general a])plication and acceptance, we find here in the Joint 'J'raffic Association i)roceeding"s of the iJoard of Manaj^ers, Sept. i.Stli, i8oston and Duluth by all-rail is 1382 miles, aj^ainst 2195 miles via Newport News and Chi- cago, 58.82 ])er cent longer by the broken route. The Southern Pacific Co., or System rather, in connection with the Morgan Line steamers carries business, via New York, New ( )rleans and l-'ort Worth, to Utah ])oints at a differential rate. The distance from New "V'ork to Denver via water to New ( )rleans thence rail to I'^jrt Worth is 3155 miles against 1940 miles by the direct all-rail line, showing it to be longer via New Orleans 62.61 per cent. Now. this is a case we would like to im])ress u])on the minds of the Arbitrators as one of great importance and establishing a precedent, which we have never followed in its entirety, for claiming differential rates in favor of broken water-and-rail routes. Here we have a line operated around thiough New Orleans to Denver, we will say, that is over 62 i^er cent longer in distance, than the all-rail line and that line is operated imder very heavy differentials, — and bear in mind, gentlemen, that that line is operated and controlled by a company who at this present hearing is one of our chief opponents and who is here to tell you that the Canadian Pacific Company is not entitled to any differential rates in competing with them, and as their representative here is a gentleman of very frank and open disposition, I am perfectly sure he will admit to you and give you the reasons why, in opposing us and trying to take away our differentials, he should be willing to acquire and hold a relatively much greater diflferential as against his rail competitors into Utah and Colorado, around so long and circuitous route. Now, the history of this differential enjoyed by the Southern Pacific Co. on their New York-Colorado and Utah line, via New Orleans, as reported to me runs as follows : When they opened their line some years ago thev began by taking the canal-and-lake rates to Chicago and local rates of the line from Chicago to Colorado common points, and then charging 80 per cent of the canal Chicago rates added to the rates beyond which gave them a differential of 1 2 43 35 3 32 4 22 5 A B C D E classes 17 14^ 10^ 13 13 13 cents 19 Xow, I am also advised that altliouyli thi-so diffiTi'iitials ucrr l)asi'd on the canal-and-lakc rates, tlio Southern I'acific insisted upon applyin.u; them all the year round during;" the period when navifration by canal was closed — and very naturally their action in that respect caused a very threat deal of trouble and friction. But in December, i8(;7, they yot tot^ether and held a meetiny; and discussed the situation, anancisco. on numerous commodi- ties, as against the all-rail lines from Xew York City, thereby enabling the Sunset line to control a very large tonnage from Xew ^'ork City and to reach otit into the interior against the all-rail lines. \Vc submit a list of the commodities and rates taken from the current tariffs published by the Trans-Continental Freiglit P>urcau. showing differentials allowed to the Sunset line of the Southern Pacific Company. (Mr. Kerr here sub- mitted to the Board the paper marked "Exhibit 1.") That list, gentlemen, speaks for itself and is abstracted from the current tariff of the Trans- Continental Freight Bureau, the Southern Pacific Company taking ground in their discussions with their associates that whatever rates arc 20 made from Chicago, if they are g^radcd less than the rates from Xew York, that tliey, the Southern Pacific Company by their Sunset Hue will adojjt from Xew York Tier, — the Morgan Line pier in Xew Y'ork, — the same rates that the other hues make out of Chicago to Cahfornia points. In that way, as we show you, tliey obtain a differential greater than ours, — the CanaS. hctween the Trans-Pacific lines, Xorthern Pacific Company, Tacoma and Portland lines, Pacific Mail line, Occidental & Oriental Company to San I'rancisco, the Nippon Yusen Kaisha Company to Seattle, and the Canadian Pacific Railway for the purpose of advancing and maintaining rates on freight and cargo generally, from China and Japan to all points in Canada and the United States of America. The Nippon Yusen Kaisha Company, in connection with the Great North ?rn Railway, are enjoying the following differentials (I see this is not :in abstract of the Agreement, but it is a statement). :MR. STUBBS— I just wanted to get it before the J5oard, but I think you and I can agree upon it. 'SIR. KERR — We can file it. of course. iMrst. on raw silk cargo (these are the terms), the Nippon Yusen Kaisha Co. and the Circat Northern Railway are allowed a differential of $1.00 per hundred pounds. e(iual to 162-3 per cent, the Nippon Yusen Kaisha Co. rate being Jf^s.oo per hundred pounds, the other lines having $6.00 per hundred pounds on raw silk. ARBITRATOR WASHBURN— :\Iay I ask why that was granted; was it because their line was longer than the other lines? MR. KERR — Because their line was weaker, and slower time and poorer ships, less chance of doing business on equal terms and that was recognized,— recognized by the Canadian Pacific and recognized bv the Southern Pacific and Northern Pacific— all acknowledging that thevWcre stronger lines and better able to secure and obtain traffic than that weak line with poor ships. ARBITRATOR DAY — When was that Agreement entered into' MR. KERR— March 23rd, 1898. ARBITRATOR DAY— Where? MR. KERR— At Hong Kong. ARBITRATOR DAY— By whom? JMR. KERR — By the respective representatives of the lines. Second, on tea and all other cargo the Nippon Yusen Kaisha and the Great Northern Railway are allowed to charge a differential rate of 5 per cent lower than the other lines, under the Trans-Pacific Agreement. I was going to say, Mr. Chairman, and I would like to impress it upon the minds of you gentlemen, that not only did the Canadian Pacific enter into that xAgreement to allow the weaker line a differential on traffic in 22 order that tlii} slujiild secure their fair share of husiiiess to the I'liited States and also to C'ana(hi. and bear in mind also that Ilonji^ Konj,^ is a British Crown Colony and Canada a I'.ritish Dominion — and there is no (juestion raised, or distinction made as between one ])oint to another in the r.ritish jjossessions. or one ])oint to another from a Uritish point to an American ])oint. i just wanted to make that jujint because I will have further to say on that subject later on. AKIllTRATOR DAY— I would like to ask before .ijcMnj,^ further, who are the parties to that Uon^ Koiifj Agreement? MR. KKkR — The representatives of the Pacific Mail, the Oriental & Occidental Steamship lines, in connection with and as rejjresentinjf the Southern Pacific Co. on this side, and the representatives of the Xorthern Pacific Steamship line. ARl'.rrR.\T( )R DAY — The point 1 was tryinjj; to get at is who arc the parties to the Agreement. .MR. KERR— 1 am telling you. AR1>1TR.\T( )R DAY — ^'ou were speaking of representatives. I\1R. I\I"JS — I would like to ask the gentleman whether he will close or whether he will take up all the afternoon or not. T suppose it is desirable to get through as quickly as possible. ARBITRATOR WASHP.URX— C)n the other hand. 1 think it is desirable, and my colleagues think the same, that each party to this arbi- tration should have the fullest opportunity to present its case, so that we may have all the facts before us. ^IR. STUPBS — The object of my question was to find out whether I should come here prepared to take up our case during this afternoon or not. ARBITRATOR WASH BURN— I do not know whether any one else than Mr. Kerr proposes to address the Board or not. MR. STU1>1>S — I am the servant of the Board in this, and if you want to keep up until late, it is all right with me. ^IR. KERR — I am a slow speaker and a slow thinker. MR. STUBBS — I do not wish to hurry you at all; all day and all 23 iiij4:lit. fnr that matter, will suit iiir. I \\a\c notliiiiji;' i-lsi' to (h) hut attend to this. AKi'.rrK.\'l( >K WASIII'.IUX— Will ihiRl)i' auy ..ni' t.. i..ll..u \..i', on your silk' of the case. Mr. Kerr? MK. Kh'.Kk— Mr. i>os\vorth may have s(iuuthiu|Li- to >ay. MR. !'.( )S\\()kTII — I think not. At 1 :i() r. M. an adjournment was taken to 2:30 o'clock l'. M. and all Afternoon Session, ( )ctol)er ijth, iJ^tjS. Ji^o I'. M. The Mectintj heinjj^ called to order hy the Chairman, Mr. Kerr con- imued his arj^ument as follows: MR. K1''RR — Mr. Chairman and (ientlemen: In closing; at the noon hour I dealt with the (|uestion of differentials to the (ireat Northern Road in cotmection with their Asiatic business. I now |)ro])ose to show that the (Ircat Xorthern and Xorthern Pacific lines enjoy dit'fereniials ou Trans- Continental business from I'^astern points to the North Pacific Coast. Portland and North. I'y the tariff that 1 have here. nund)ere(l S. R. i_'8, An;'"-.iiment No. i to Westbound TaritY No. i-C.: "Differential Rates via Lake-and-Rail a])i)lying' durin.ir the season of Lake navii;ati(»n, via Cireat Xorthern Railway. Northern Pacific Railway, ( )re<;()n Railroad & Navigation Company, via S])okane and Wallula junction, in connection with the Erie iS: Western Transjiortation C'ompany (.\nchor Line). North- ern Steamship Company. Port Huron. Washburn cK: 1 )uluth Line, Cnion Transit Lompany. Western Transit Company, Canada Atlantic Transit Company, (jcorgian P)ay and Lake Superior Steamshi]) Line and I'.astern Roads named on page 2 hereof."' "h'rom iM)ints in territ<;ry described below to North Pacific Coast Terminals, namely: Portland, h'ast Port- land, Albina and Astoria, Ore., and points north thereof, taking ' Terminar rates (as described on pages i. 2 and 3 of Tariff No. i-C.)." When the through all-rail class or commodity rate ])er 100 ])ounds is j-, to 7<; cents, inclusive, the differential allowed to the (Ireat Northern and Northern Pacific rail-and-lake lines is 5 cents, and they go on in an increasiug scale that you can easily refer to. I do not need to burden the minutes with them, because they are right here. They go o'l in increasing scale, up to 25 cents per hundred. The same dififerentials are shown in ."supple- ment No. 2 to Trans-Continental Westbound Tarifif No. i-C. lUiffalo to Milwaukee (821 miles), and lUifTalo to Chicago (889 miles), in comiection with the Union Pacific. Atchison. Topeka &: Santa J-'e and (jther Western roads. Xow. gentlemen, we maintain that on their own showing these lines who complain of the Canadian Pacific differentials, that they are. for a 24 larjj^c portion of the year, — that portion of the year when a very larj^c. probably the hirgest tonnaji^e nioves. (hirini^ open In.kc navigation — they are cnjoyinjj, by their broken rail-and-watcr route a complete system of differentials, every one of them, the Southern Pacific included, with the exception of their Sunset line, which, of course, cannot take business that way. They all f^et the benefit of these differential rates that ap])ly in con- nection with the lake-and-rail lines. We have now cited a sufficient number of cases of differentials as ap])lied all over the various sections of the United States in cotmection with United States traffic. I now propose to show you that American lines enjoy a very larj^e differential in connection with purely Canadian traffic, traffic shipped from one point in Canada to another, via American lines and their Lake connections, broken water-and-rail routes, and I hope also to show you that the averai^e distance as I)etween the ])oints in Canada traveled by the Canadian Pacific and by the all-rail American route are practically the same. In fact. 1 think they are a little in favor of the American lines. We have here a memorandum accompanied by the tariffs that prove our statements .' at the following differential rates are enjoyed by lake-and-rail as against all-rail from Montreal to Wmnijieg. and when 1 say Montreal, that covers everything west of ^Montreal in the province of Quebec and in Ontario, up to the Detroit River. The present rates, ^lontreal to Winnipeg, are (the ninth is not in there for the reason that it is live stock and of course it does not go by the lake): I 2 3 45678 lo classes All-rail 198 170 135 105 88 80 70 70 62 cents Lake-and-rail 143 123 103 87 -ji 70 55 55 47 showing a range of differentials from 55 cents first class to 16 cents, fifth class, and 15 cents, tenth class or lower. Then we have from ^Montreal to Kootenay points, British Columbia, Canada : I 2345678 10 classes All-rail 405 t^},}^ 300 248 205 199 169 156 131 cents Lake-and-rail 375 321) 283 242 200 194 164 151 126 " showing a range of dift'erentials from 30 cents first class down to 5 cents on fifth and lower. ARBITRATOR DAY— Mr. i. C. being a conunon point and center, the extreme outside point. From Toronto to \'ictoria by the Canadian Pacific, the distance is 3067 miles; by the United States lines, through Seattle, the distance is 2821 miles. Im-oui London to Victoria, the distance by the Canadian Pacific is 3182 miles; by the United States lines. 2745 miles. I'rom St. Thomas to \'ictoria, by the Canadian Pacific, the distance is 3188 miles; by the United States lines, 2710 miles. From AFontreal to \'ictoria, by the Cana- dian I'acific, the distance is 2986 miles; by the American lines 3154 miles. So I do not think, frotn that showing, any argument would stand, if made, that the .\merican lines should have a differential on Canadian business, anv more than the Canadian lines should have a ditiferential on Pugct Sound. / 27 4 L I ARIUTKATOR DAY — ^Fr. Kerr, liow nuu-n shorter wDuld it ho in the distance froi7i Toronto to W'lncouver. if yt)U carried yotir traffic hy way of North Hay rather than hack east to Carlton Junction; how much would it shorten the line? MR. KERR — 215 miles. lUit, of course, we must look the facts in the face, as they exist. We have j^ot no line hy X-orth Hay, and do not expect ever to have one, and we are working to have our frei,i,ht and passenj^er business run through Carlton Junction and Smith's I'alls. a section you are no doubt familiar with. Mr. Chairman, with your permission, T shall file this memoranda show- ing the differentials on Canadian business (producing paper marked "I'-x- hibit 2"), and this a«? showing the relative distances between Canadian ])oints (producing paper marked "Exhibit 3"). Having shown that there is a general system of differentials allowed by the American all-rail lines to the broken water-and-rail routes, and in allowing such have admitted that there are good reasons for it, we claim that there arc greater reasons why the differential rates should be contin- ued to the Canadian Pacific rail-and-water line to and from San hrancisco and the East. We operate a rail line to X'ancouver, thence steamer to San I'Vancisco. ( )ur distance from Xew "^'ork to San I'rancisco is 4,023 miles as against 3270 miles by all-rail, thus showing that we have a greater distance by 2t^ per cent. I'Vom Chicago the Canadian Pacific dis- tance is 3,053 miles, as against 2357 miles by all-rail, making the C"anadian Pacific line 21 per cent greater in length, l-'rom St. Louis the (."anadian Pacific distance is 3,233 miles, as against 2,433 niiles by all-rail, showing that our distance is 32.88 per cent greater. Our steamer service is infrequent, that is between N'ancouver and San Erancisco. sailing only once in every five days. ( )ur time is long, averaging — in fact, not averaging in our case — oiu- minimum time from New York is 25 days and from Chicago 19, as against the average time of the all-rail lines from New York 10 days and from Chicago 14. The Sun- set line from New York io San I'rancisco averages 14 days. In fact, 1 have been told that that is their outside, really; they do not ever take any longer time than 14 days and often less. The Santa h'e, in comiection with the ^lallory line, makes 15 days, (^wing to the infref|uency of our steamer sailings, goods often arrive at \ancouver right after the sailing of a steamer, and consequently lay in that jiort 4 or 5 days before they can go forward. The steamer route between San I'rancisco and \'ancouver is a stormy one; steamers have to riui along the Coast, in doing so tliev encounter a heavy beam sea which causes them to tund)le and roll. Cioods are handled from car into the vessel and again hoisted out of the vessel at San ]'>ancisco. These various handlings coupled with stormv weather which fre(|uently prevails makes freight liable to a large percent- age of chafing and damage, whereas goods shipped by all-rail are loaded 28 into a car and not disturbed until they reacli tlieir destination. The dis tance from Vancouver to San Francisco by sea is 840 miles direct, but the steamers we operate in our connection, do not run direct. They first go to Vancouver and take on such freight as we have to offer them, then they run down into Puget Sound and take on such further cargo as may be for them in the various ports in Puget Sound. They remain in Puget Sound about two days, then sail from Seattle to Victoria and thence direct to San Francisco. A steamer leaving \'ancouver on the ist day of October, that is with Canadian Pacific freight, will not reach San Fran- cisco until the 7th, so that the time occupied for a ton of freight, from the time it leaves our car at Vancouver, is six full days before the ship reaches San Francisco. Now, the distance from \'ancouver to Seattle is 150 miles and from Seattle to Victoria, 87 miles. The distance from \'ictoria to San Francisco is 760 miles, which makes a total distance that goods car- ried from Canadian Pacific point? are carried by sea of 997 miles, say, in round figures, 1,000 miles those goods are carried by sea after they leave Canadian Pacific cars. Now, in the time made here, the Canadian Pacific Company ordinarily averages as fair time to Vancouver as the other all- rail lines to their various termini, that is, I think we get to Vancouver about as quick as the rail lines get to San Francisco, or the other lines, say, the Northern I'acific or the Great Northern get to Seattle and Tacoma, or Portland, as the case may be, but the great break and hitch is the water portion of the route. Say, it takes the direct lines 19 days to run from New York to San Francisco; we may do that in 19 days from New York to Vancouver and "'len we reach A'ancouver. we may be just one day behind the sailing of a ship which results in a delay at \'ancouver before the goods can go forward, of at least 4 days, to which add the 6 days which it occupies after the ship takes the goods before it reaches San Francisco and you have 29 Jays, so that when we make 25 days, it is when we make close connection with the steamer sailing. Now. these are all obstacles in the way of obtaining business; very serious obstacles. No man is going to ship his goods by a long broken route for the same money that he can have his goods carried by a short, direct and all-rail route or by another broken water-and-rail route that delivers his goods into San Francisco in one-half the time that the Canadian Pacific can do it. When you go to that man and ask for his business, you must have something tangible to offer him as an ofifset to such serious disadvan- tages aiid if you have not got an ofTset to ofifer him, do not waste your time in canvassing him or calling on him, because you will not get his business. I think that is very plain and a simple statement of facts that every one in this room knows to exist. Now, in the various discussions that have arisen on this subject, statements have been made in arguments that the Canadian Pacific by its broken route has got a dilYerential on Trans-Continental business and why should not tht Sunset route have a difift the the steal the Orle and (lela\ half' The The dis irect, but riicy first icm, then cargo as cmain in id thence 2 1st day »an Fran- froni the p reaches 150 miles ctoria to oods car- 's, say, in ley leave n Pacific other all- ancouver ler lines, :ittle and md hitch ) days to ivs from be just Micouver d the 6 les San is when are all es. Xo e same all-rail s goods can do st have sadvan- te your get his cts that ussions unients itial on have a 29 differential on its broken rail-and-water line? The answer to that is that the circumstances concerning each are entirely different. There is nnt the slightest similarity in the case. In the first ])lace. they operate their steamers bet\»een Xew York and Xew ( )rleans, their water route being the initial line on which goods are shipped. Those steamers nm to Xew Orleans where cars are waiting cargo. That cargo is quickly transferred and dispatched over-land to San J'rancisco and there is no ([uestion of delay whatever. They make, as is shown, faster time, in fact about one- half the time that we can make and very much less than the all-rail. The Sunset line makes 26 ])er cent shorter time than the all-rail. Xow, in connection with accunndating business by the Sunset line, their water line being the initial, it is well known that steamer lines in securing business are not at all ]iarticular as to classi- fication or weight. That is the history of the manner in which the steamer lines carry on their business usually and shi])pers often think they see an advantage in using the water lines as against all-rail, in order to evade the classification and weight as much as possible. It is also well known that the .Southern Pacific Co. are pretty well hedged around in California and in large sections of the state they enjoy a monopoly. This is particularly so with regard to San Francisco, as all lines entering the city, with the exception of the Canadian Pacific and the Oregon Railroad & X'^avigation Co. must use the .Southern Pacific tracks. Being in this position, they are enabled to infiuence busi- ness in various ways to the Sunset Line, in which they have been very successful. ^Merchants are naturally chary of unnecessarily antagonizing a railroad company who has control of their business, and on the other hand, the Southern Pacific are in a position to ofTer various local induce- ments to merchants, thereby tying their business to the .Sunset Line. This is one of the chief reasons why the Sunset Line has been enabled to hold such a large share of Trans-Continental business and ])rovcs that their circumstances are so entirely different from the Canadian Pa- cific that they are not entitled to differential rates as against all-rail lines, although, as we have already shown, they do enjoy differentials on numerous and very important lists of conmiodities. It l"'s been stated that the Canadian Pacific, being a long and cir- cuitous route, between San Francisco and X'ew York and other eastern l)oints. are not entitled to participate in traffic against the short and direct line; but we have shown that :nuch more circuitous and broken .American lines do participate in traffic in competition with their di;.'ct all-rail rivals. Whatever argument may be advanced against long cir- cuitous routes participating in passenger business as against tlu' short direct lines, the same reasoti cannot be ap])lied in connection with freight. The only ]X)int to be considered is. can a long and circuitous line obtain 'ates sufficient to leave a margin of profit and in that connection the 30 m :;*i question of balancing traffic- cast and westbound enters larj^^cly into con- sideration. At certain times tbe volume of paying traffic may be moving eastward, when it may pay the road to accejit very low class freight west- ward at rates that under other conditions they would not be justified in doing. Again, a road may be capable of moving on its trains a much larger proportion of tonnage than its local business provides, to fill those trains to the hauling capacity of its locomotive. Such trains nuist be kept running with regularity in order to give a reasonable service and if its regular business will not provide a sufficient tonnage equal to the hauling ])ower of its engines, then every extra carload that can be obtained to fill uj) within the hauling power is so much gain, even at rates which under other circumstances would not be profitable. All these points must be carefully considered as the circumstances arise, in order that maximum results may be obtained. Consequently broken and cir- cuitous routes are justified in seeking for business from all sources, provided the traffic is judiciously and intelligently handled and governed by circumstances that arise from time to time. It will be noticed that in various places — that in the various plana formulated for the organization of Trans-Continental Associations, the Panama Route ofifers the basis from which all such organizations start and the plans adopted from time to time have always been in the nature of a subsidy, or in fact a differential in another form. Now, this is a long, circuitous, broken rail-and-water route, operating its railroad through a foreign country. The basis of difference as between the Panama Route's rates and the Trans-Continental Association tarifT, is, under ordinary cir- cumstances, about 30 per cent. In other words, the Panama Route make their rates under ordinary and similar circumstances, — they arc not doing it now, — about 70 per cent of the Trans-Continental Association rates. The principle of subsidy or differential in dealing with them has always been advanced and acted upon and it appears to us that the Canadian Pacific Company has as good ground for asking to be allowed to operate in American traffic, having differential rates, as the Panama Route or any of the numerous American water-and-rail lines who enjoy that privilege. Xow, I do not think it is a breach of confidence to cite the remarks made by the President of the Union Pacific Company at the Denver meeting in August last, in conne'^tion with this question of Panama subsidy and the relations the Panama road bears to the Trans- Continental California lines. In discussing the question of gaining the co-operation of the Panama road, in connection with the proposed re- formation of the Trans-Continental lines into an association, it was pro- posed to endeavor to subsidize the Panama line steamers operating be- tween Xew York and San Francisco, via the Isthmus of Panama, and in the discussion. Mr. lUirt, the President of the Union Pacific, said: 31 ly into con- ' be moving rciglit west- justified in ins a mucli to fill those ns must be service and xjual to the hat can be ven at rates All these se, in order cen and cir- all sources, id governed :irious plans nations, the nations start 1 the nature lis is a long, 1 through a mia Route's )rdinary cir- Route make e not doing ation rates, has always e Canadian to operate a Route or enjoy that to cite the lany at the juestion of the Trans- gaining the •oposed re- it was pro- erating be- ima. and in aid: "I could not for the I'nion Pacific ex])ress an intelligent ojiin- ion on that matter" — (that is. referring to the subsidy ])r()p(ised to be given to the Panama road) — ."until 1 had a copy of the agreement and had time to study the general proposition. 1 think T understand but I could not express an iiUelligeut opinion or bind our Company in any way, until I had carefully studied it. It seems to me another way of paying differentials. I presume the Canadian Pacific Company might be subsidized, and thereby secure maintenance of Trans-Continental rates — if not in the same manner, in some manner which would take revenue out of our treasuries and put it into theirs. I i)resunie they are not anxious to perform the service but that they would be willing to accejJt the money and maintain the rates, or maintain the same rates. It seems to me that we are departing too far or getting entirely away from the idea which we started out with here and which was so clearly enunciated by some of the speakers on the subject of dif- ferential rates. I cannot regard this as anything else than a differ- ential under another form. If we do this for the Panama Route, we may after a while have the Xicaragua Route, and that will not at all discourage the building of other routes or ])utting them on. After a while we will have to admit the claims of railroad lines which have part rail and part water routes from the Atlantic Sea- board to the Pacific, although those cases would not be exact parallels. It seems to me that we are entering upon a very broad and unknown expedition when we are going into anything of that kind, and I, for one, will have to study it very carefully before I give an opinion for our people. I do not say that we would not give our consent, but I would like to look around and see where we are likely to come out, and have an opiiortunity to talk with our traffic ofificials and our connections who would be interested in the adoption of any such policy." Xow, I will not burden you with quoting through this. T understand the arbitrators have a copy of it, but you will see that in following through the line of argument pursued there, ARBITRATOR WASIIP.URX -If you desire to make that a i)art of the record I think you had better do so. To my knowledge we have no copies of that. MR. KERR — I supposed you would have, I did not know: I sup- posed it would be natural you would have a copy. ^IR. STCI>I>S — I pro])ose to file one with the I'oard. MR. KERR — You will see that the general trend of the argument is that the proposed subsidy for the future and the subsidies that have been paid in the past to the Panama line are simply another form of differ- 32 entials. Tlierc you Iiavc a broken water-and-rail route which these ii^en- tlenicn are at all times willing to subsidize with hard dollars, are willing now, if they can make a bargain on which the lines could get together and conserve revenues, but at the same time they arc unwilling to allow us a reasonable differential to overcome our disabilities. In our case, it is no cjuestion of rates. 1 do not think they will charge us. and if the\ do. I do not believe they can substantiate their charges, that we are rate dis- turbers. T am sure that they cannot prove that we are law-breakers and they come here to you and ask you to do away with our differential rates, in order that we shall be removed from the field as a comjietitor. Xow, a good deal of talk has been made on the question of robbing the American workman by every ton of freight and every dollar of revenue earned by the Canadian Pacific Railway on American freight. The peo- ple who raised that cry do not stop to explain that from the districts out of which the Canadian Pacific obtain their largest tomiage of freight, that over half the distance that the freight is hauled it is carried on American Railways and by American ships. They do not stop to explain that for about every dollar that the Canadian Pacific obtain on .American busi- ness they pay it back many times over and over to the .\merican people in other ways. They forget that the Canadian Pacific Railway Company is a very large purchaser on the American market, and that they spend millions in the year with the American people. ARBITRATOR :\1IDGLEY— You spoke this morning alxnit an allowance made at one time to the Canadian Pacific. \\'as tliat in the nature of a subsidy? MR. KERR — Yes. that was in the nature of a subsidy. ARBITRATOR MIDGLEY— At so nnich by the mcMith or per year as the case may have been. / MR. KERR — During the year 1891 the California lines, or the Trans- / Continental lines, rather, elected to pay the Canadian Pacific Com])any ' a subsidy as a matter of experiment. The proposition emanated from the American lines. The proposition was made and. after the usual dis- cussion pro and con, an agreement was made whereby in lieu of the differential the Canadian Company should receive a cash subsidy. That agreement ran through the year 1891 and expired with the year, when at the beginning of 1892 we again resumed work under our differential rates. ARBITRATOR WASH BL'RX— During that time did you have in no tariffs? MR. KERR— Yes. ARBITRATOR WASHBURX— Did you handle any business? MR. KERR — During that time we had equal tariffs with the .\meri- can lines and during that time we handled comparatively no business. I might explain that it was agreed that whatever business the Canadian Pacific carried, the revenue derived therefrom should be credited up to this It t( not wav 33 these i,a'n- this subsidy and durintv January we carried $18,000 worth of business, are wiUing ^t took that long- for the people to find out I presiniie, that they were ffetherand not getting any special advantage on the Canadian Pacific road in the allow us a ^vay of differentials. The agreed subsidy was $500,000 >e. it is no ARBITRATOR MIDGLhA— That is per year? they do. I 'Slli. KRRR — For each year, yes sir. e rate dis- ARBITRATOR MIDCJLEY— You said a moment ago that the >akers and earnings or revenue would be credited against the subsidy :itial rates, • MR. KERR— Yes. or. Xow, j ARBITRATOR :\IID(;LI:Y— That was the way on business put on )bing the I the Pacific Mail Steamship Company's lines at tiie discretion of the )f revenue ] railroads. The peo- I MR. KERR— Yes. stricts out * ARP.ITRATOR MIDCLEY— And the earnings or revenue of your .'ight. that road during such time would be charged up against the subsidy'^ ' American ; MR. KERR— Yes. n that for i ARBITRATOR WASHBURX-Were tiie gross earnings charged can busi- up against the subsidy? an people MR. KERR— I believe so in the case of the Panama Route; Mr. Company Stubbs or Mr. Morton or Mr. Trucsdalc can tell you. The gross earnings ley spend ,, on any business carried by the Panama Route under the old arrangement I were the gross earnings charged up against the cash subsidy, about an | MR. STUBBS — Will you allow me to correct vour statement"-" lat in the MR. KERR— Yes. MR. STL'BBS — It was not a subsidy. MR. KERR — Space rental. • per year ■ MR. STUBBS— I will explain it fully when I get on the floor. I ^^1^- KERR— The Arbitrators asked for the information, le Trans- | MR. STUBBS— Whatever the steamers earned was credited to the Jompany 1 guaranty. ted from \ ARBITRATOR WASHBURX-I think, Mr. Stubbs, we will wait isual dis- for your statement, until you make your address. u of the J .MR. STUBBS— If that is agreeable to the Board. I will do so Lv. That I ARBITRATOR WASHBURX -All we want is to get the informa- when at :; tion some time; that is all. :ial rates. | MR. KERR— We earned that vear, on business carried $->8 O/s ^4 have in ARBITRATOR DAY— During what time? ' *-w:)oq- MR. KERR— $28,07 S04 during the vear. AR15ITRATOR WASHBURX-CVf that you earned $18,000.00 the ess." • first month? > Ameri- J MR. KERR— Of that we earned $18,471.64 in the month of lanuarv mess. I 5 ni Pebruary we earned $6,453.85: in March $2,940.52; in April we did anadian | not get anything; in May we earned $180.53; in Jnne $3.50; in Tulv wc 'd up to I 3 ' " ' 34 did not earn anything; in August \vc earned $10.70; in September $14.80. and that settled it. We did not earn any more after that. ARBITRATOR WASIil'.l'RX— Did you maintain agencies in San Francisco? MR. KI<,RR— Yes sir. ARBJTRAT( )R \V.\SI I I'.L'R.V— During the entire year? MR. Kl-'RR — \'es sir. we maintained agencies. W'e cUd not with- draw any agency. ARBITRATOR \V.\SI I B.^RX— Vou used the same effort to get business? MK. KKRR — I would not say that, naturally: but we did not refuse any bu-iness that came to us. We had the same facilities, our agents were out in the market working for other business, 'i'hey would take San I-'rancisco business at even rates, but as you see. they could not get it. The differential off, we were out, clean out of the business. ARBITRATOR WASH BL'RX— They did solicit the business dur- ing that time? MR. KKRR — \'es. in a line with their other business, a canvassing agent going around canvassing for other freight, naturally, if he heard of any business going to San Francisco, he would take it. he would ask for it. he would want it. "What is your rate?" "Our rate is the same as all- rail." "( )h, no, you cannot have it; we will give you the other. l)ut we will not give you that." Xow it seems to me that the whole history, all the way through, in- dicates and emphasizes the fact, that a broken rail-and-water line of the same nature as we operate by the Canadian Pacific, cannot get business without some material advantage to offset the distance and other things. The (juestion of Canadian roads being permitted to participate in American traffic has been a subject brouglu under frequent discussion and in some quarters strong efforts have been made, through the press and by various other means, to prejudice the rights and privileges of Canadian roads in that respect, the motive being to work up public opinion to a point that will enable our opponents to procure legislative action against us, in order that the Canadian roads be removed from the field as competitors in American traflfic. But, in taking such action, our opponents apparently lose sight of the fact, or at least they do not touch upon it, that American roads participate in purely Canadian traffic as freely as the Canadian roads share in American traffic. In fact, they have received every encouragement from the Canadian ( iovernment and in no case has any block been put in their way. American roads have re- ceived bonuses to aid them in building roads iii Canada to act as feeders to United States lines, and they do carry a very large tonnage of traffic between Canadian points, through the United States. The tonnage can- not be ascertained. That is, it could be ascertained, but not in time for f y: »CT $14.80. ics in San not willi- )rt to get not refuse ents were take San lot get it. ness (lur- anvassing .' heard of ask for it. ine as all- ■r. hut we )ugh, in- ne of the l)usiness r things. ici])ate in ispussion the press ileges of p public egislative from the tion. our lot touch tratific as hey have t and in have re- s feeders of traffic age can- time for this hearing, because it wouhl involve great clerical labor, for the statistics liave never been jnit together. \o records have ever been kept by either the Dominion (Icn'ernment or the Railways, but the Dominion (lovern- ment Statistician. Mr. (leorge Johnson, prepared figures for the year> i adopted hy the American Trans-Continental Railways as shown in 'rrans-LOntinental I'rcij^ht liurcaii Westhountl Tariff No. i-C, be it Resolved: That a Connnittec consistini^ of <»ne froni each and every joijhint,^ interest represented at this niecl- h\^ be selected by the Chairman to j^ive expression to these, onr views to the Canadian Pacific Railway Coinpan> . through its President. Sir William C. \ an llorne. and ti> request that said Company adopt a system of ratc-makinjL; tf) San I'rancisco that will relieve the situation of the i)res- ent precarious conditions and maitUain Trans-CoiUinental freijT^ht rates on a firm basis, believintj that such an arrange- ment will redound to the best interests, not alone to the mercantile connnunity of the I'acific Coast, but to the Canadian I'acific Railway as well.' All of which is respectfully submitted, w ith the re(|uest that you kindly acknowledge receii)t of this conununication. and thereb} oblij^e, \'ours truly. II. D. Lovcland, For Wholesale Clrocer Assn. of Cal. W. R. Wheeler. For Pacific Coast lldw. & Metal Assn. Chas. R. Havens, For Wholesale Dry Goods Traf. Assn., S. 1". L. Guyj^enheim, F'or Wholesale IJruj;- Trade of California. A. G. Towne, I'or Wholesale Paper Trade of Pac. Coast. Prace llayden, Chairman of General Meeting." Now j^entlemen, this is a document issued by the geiulemen named, who say they represent the trade of San I'rancisco and California. In some cases they cover the whole state; in other cases they are more modest and cover only San Francisco. And amon^' other thins;s they state that other lines are maintaining^ the published tariff of Trans-Con- tinental rates and that the differential rates of the Canadian Pacific are a disturbing element in the market: that were it not for that, these gen- tlemen would have a very happy time of it. They would know just ex- actly what they had to pay, nobody else was reducing rates or carrying at less than the Trans-Continental tariffs and, therefore, they desired a stability of rates that they might know just where they were all the time. Xow, it seems to me an odd thing that some of these gentlemen while they were forwarding a statement of this kind to our President were the rates lilways as Vi'stl)(tiin«l otic tri)in this iiK'ct- II to these. Company, lie. and to tc-niakin.u t the pres- ontinental 1 arrange- me to the ut to tlu- ■t that you d tlierel)\ isn. sn., S. F. liMiia. Coast. n named, irnia. In arc more n^s they ans-Con- ific are a icsc .c^cn- just ex- rrying at lesired a the time, en while cnt were 1 0/ ,il the same time ver\ aetivel} nt-s^otiatiiiiLi' with our representative in .^au hraiiciseo, with a view of hreakiiijn down his (htYeretUial rates. In other words, he couhl not j;et their business at his ret^ular (HlTerential rates because the other fellows were meetiutj those differential rates and knookiu}:^ them out. Xow, in a statement from our re])resentative in San Irancisco in this connecti available from one end of the country to the other. It is. however, an estab- lished fact that whenever there has been a searching in(|uiry before any Conuuission or Traffic Association these charges have been exploded, and in no single instance has the Canadian Pacific been found to be the aggressor. "S'ours truly. (Signed) T. (1. Shaughnessy. Vice-President." Xow. as against this petition or communication forwarded to our President, as representing the trade of San Francisco, and in some cases the whole trade of California, we have a long list of letters here stating that without a differential inducement, we have no hope of getting busi- ness in San Francisco. The Arnold Hardware Company, of San 1 "rancisco. write as follows, under date of Septembe; 13th: "We hope that the report circulated that your Company is to be deprived of its differential rates into San Francisco is not true, as we are very much in need of such competition. You certainly cannot expect us to route any freight traffic over your lines at the same rates as carried by all-rail lines, for the reason that a longer time is required in delivery, and the infrequent service by steamer from Vancouver to San I'rancisco! We would very nnich regret if this comi)etition should be discontinued. Kindlv advise us." 40 William Davis & Son, San P'rancisco, Manufacturers and Importers of harness, saddles and saddlery, write us: "We desire to patronize the Canadian Pacific Railway Company in freight matters into San Francisco. We like some competition — an escape valve of some kind — but we think since the route over your line is long and circuitous that your rates should be less anyway. If we have to pay your company the same rates as the direct lines, we could not promise you any business." From ^I. I'2hrman & Company, Importers and Wholesale (jrocers: '■Replying to yours of even date inquiring 'if this company were deprived of its special differential rates on freight trafific westbound on the class of goods that are got in by your firm, could you consistently ship your freight over our line at same rates as by standard lines?' — We would say that owing to the fact that it requires a longer time to deliver goods by your company than by all-rail lines, we cannot consistently do so." From W. P. Fuller & Company, Paints, Oils and Glass, San Fran- cisco: "Replying to your inquiry as to whether we could ship freight over your road at the same rates as all-rail routes, we beg to say that taking into consideration the length of time required for delivery and the danger from damage and leakage over your road, owing to the transfer, we would not care to give you the business at the same rates." PVom George W. Gibbs & Company, San Francisco: "In answer to your inquiry of today as to whether we would ship by Canadian Pacific Railroad providing the rate is the same as American Roads, we answer, no, for the reason that merchandise in transit via Canadian Pacific Rail- road consumes about three weeks, whereas the American roads average delivery in about 15 days. The transfer at Vancouver from rail to steamer necessitates a certain peril to the class of material which we are in the habit of shipping by rail." From E. A. Howard & Company, Carriage Materials, Hardwood and Lumber, San Francisco: "It is reported that your company will not be permitted its differential rates. Should such be the case, we can- not continue our ptesent relations with your company. You cannot expect our business at even rates with the all-rail lines. It takes your company ten days longer to deliver goods here, and the infrequent steam- ship service between Vancouver and San Francisco will certainly compel lis to ship by other lines. We find your competition very necessary here, but at even rates you cannot secure any of our traffic, which we regret very much." From W. H. Stanley, Pacific Coast Selling Agent. Eastern Manu- facturers: "You will please be advised that it is rumored an attempt is '■i here. Importers ronize the ['Vancisco. we think tes should tes as the Ijrocers: deprived the class ship your ^ould say ffoods by o. an Fran- p freight say that ' and the transfer. nswer to 1 Pacific answer, fie Rail- average steamer e in the U'dwood any will we can- cannot es your t steam- compel ites you Manu- empt is i 41 being made to deprive the Canadian raciric Railway of its differential rates of freight tariff for San Francisco. 1 hope that such is nt)t the case and that you will be allowed the usual dift'erential. so as to enable the competition of your company to continue in making San ]""rancisco de- livery, as such competition is very much needed in the interest of trade. Trusting that your com])any will be enabled to continue business here, as they are the only competitive company, I am. Yours very trulv." From Stevenson & Company, l-'ancy (loods. Stationerv, Cutlery. No- tions and Toys. San Francisco: "We hope that the re])ort circulated that your company is to be deprived of its differential rates into San I'rancisco is not true, as we are very nuich in need of such competition. You cert^iinly cannot expect us to route any freight traffic over your line at the same rates as carried bv all-rail lines, for the reason that a lontrer tune IS required in delivery and the infrequent service by steamer from \ancouver to San Francisco. It would be very much regretted should such competition now offered by you be discontinued, as the trade circles in San Francisco are very nmch in need of the Canadian Pacific competition into San Francisco. Please advise." From Woodin & Little, San Francisco, Gasoline Fngines, Road Pumps, Windmills and Tanks: "Tt is reported that an effort is being made to deprive your company of the differential rate. We should be very sorry to see this, as we very often find it very important to our trade to avail ourselves of this 10 per cent less rate than on all-rail lines. Under the one rate we could not patronize your company, owing to the longer time it requires to deliver your goods here, and the steamship transfer from \'ancouver." I'rom Phelps & Arnold. San Francisco: "We understand that an eft'ort is to be made to deprive your compan>- of its differentials on over- land through freights. We sincerely hope that this may be avoided and that you will be able to continue to make us the usual 10 per cent allow- ance from Trans-Continental tariff, otherwise it would be to our interest to ship entirely from the East via shorter and all-rail lines that are able to make better time and bring us our through freight in slightly better order, as one transfer and one extra handling is thus avoided." Then we have merchants in Chicago and Milwaukee who do not agree with the statements made by these gentlemen of San Francisco, that the Canadian Pacific differentials shoidd be done away with. The Fdward P. Allis Company. ]\Iilwaukee: "Referring to the ques- tion of differentials on traffic to San Francisco would state that if vour company withdraws such differentials to San I'rancisco it will not be 42 possible for us to ^ive you any of our business, l)ecause the cost of boxing such articles as may be injured by sea-water would not warrant us in giving you such trafific. You are doubtless aware that when you ship by all-rail the entire distance to San Francisco our machinery can be loaded on ''ars at the warehouse and go through without transfer, but where your line is used and steamer beyond we have to make an allow- ance in cases of boxed articles that are liable to rust if they come in con- tact with salt water. So that if you desire to secure any portion of our San I'rancisco business you nuist not attempt to withdraw your differ- ential." The American Cereal Conijiany. ^lanufacturers of Oatmeal Flour and Cereal products, Chicago, 111.: "Answering yours of Sept. 13, relative to forwarding business via your line for San bVancisco, we do not feel that we would be justified in sending business by your road if the present dif- ferentials were withdrawn." jLJlVl tom idCc Ow sliip N. K. Fairbank & Compan\', Chicago: "Replying to your favor of the loth inst., we do not think that on San h'rancisco business from Chi- cago and St. Louis, we could consistently pay you all-rail rates, when you break bulk and use water for part of the distance: we would naturally expect some kind of a water differential." National Linseed (!)il Company, Chicago: "I am in receipt of your favor of the 12th of September, and have noted contents. In reply will say that if your differential should be withdrawn we could not consistently favor you with any of our business to the Pacific Coast, on account of the longer route and the water haul. Should the differential be withdrawn we will have to give our business to the all-rail lines." The Schlitz Brewing Company, Milwaukee: "We refer to your com- munication regarding beer shipments to San I'^ancisco via \'ancouver. We are unable to ship beer to San Francisco via your line if rates are the same. Without your differential we do not think we can induce our San F'rancisco customers to allow shipments to come your way as it takes from 13 to 16 days for a car of beer to reach that point via \'ancouver. and besides this there is three times as much handling of shipments via your line as there is if the shipment went via one of the direct lines. The beer has to be unloaded from the cars onto the boat, and unloaded again from boats at San Francisco which always causes more or less damage, and you can readily see why we cannot promise you any business without your diflferential." Stein llirsh & Company, Chicago, Corn. Wheat. Potatoes and Starch: I "Replying to your favor of the Qth inst. During the past we have been 43 he cost of ot warrant wlien you lery can be ansfer. but * an allow- mc in con- ion of our our (lifTcr- Flour and relative to It feel that resent dif- r tav(jr of from Chi- when you naturallv it of your reply will nsistently nit of the ithdrawn i i our coni- mcouver. rates are duce our 5 it takes ncouver. lents via es. The ed aj^ain damage, without Starch : ve been 1 giving you our shipments to San Francisco although man> of our cus- tomers urged us to ship by other lines. We have tried to change their ideas, but could not do so except with the usual ditiference in freight. Owing to this fact we are sorry to say we could not very well route our shipments via your line without said differential." Washburn & Mocn ^lanufacturing Company, Chicago. Manufactu- rers of Iron. Steel and Copper: 'Tn reply to your letter of September tjth, addressed to the writer, will say that as a general proposition it will l)e impossible for me to favor your line with any of our shipments to San Francisco, especially when contemplating the water haul on c(|ual rate with the direct all-rail lines. This position we think you will agree is a most natural one on our part, otherwise can assure you of our deep obligation to you and our highest appreciation for all favors that you have extended to us during the past." The American Straw Board Company, Chicago: "Replying to vours of the 9tli. There is a very serious objection to routing business Cana- dian Pacific on account of the delay necessary in getting goods through on the roundabout road that you follow, and for that reason we cannot give you any business at equal ])rices with the Southern Pacific or any of the other direct roads to the Coast." American Steel and Wire Company. Chicago: ".\nswering vour personal favor of the 9th inst., asking if we could continue to give you a share of our business to San Francisco in case your present differential of 10 per cent over the all-rail routes were withdrawn. Under normal conditions I would say on an even basis you could expect very little ton- nage from us because we find your route is too slow, and our shipments reach destination in much worse condition than when we ship by the direct all-rail routes. ( )ur trade on the Coast object very strongly to our shipping via your line as it is. Our Pacific Coast Agent writes under date of August 27th as follows: 'Regarding the various routes and advantages or otherwise the Canadian Pacific is decidedly objectionable, owing to the various handlings which rack and break up om Barrett ^famifacturing Company, Chicago: "Replying to yours of the 9th inst., concerning San Francisco business, will state that your line is .so much longer and requires at least five davs more time 44 than the all-rail route and (nvin,i^ to the fact that you transfer to a water line which damages our goods more or less, we certainly w'ould not favor you with our business on an even basis against the all-rail lines. The policy of our institution is to ship all-rail for the reason that the goods reach destination in much better condition and quicker time. Un- less there is enough difiference in the charges to force us to ship via rail- and-water in order to market our goods against our competitors, we would use the all-rail route." From Crane Co., Chicago: "In reply to the question asked in your personal letter of the 9th inst. beg to say that in the event of your not having any differential on San Francisco business, we could not. in justice to our branch house at San Francisco, favor you with a share of our busi- ness as against the direct all-rail lines. Even with your differential, our San ]'>ancisco people have frequently in the past, objected to shipments by your line, on account of a longer time en route, and the transfers." Fr< ,. . jbert Crooks & Co., Chicago: "Referring to your personal note (- > ^ . .-ih in connection with San Francisco business. Know'ing as we do, that you at the present time enjoy a differential rate on account of the longer r< ut'^ and the necessity of trans-shipping, I can state to you deliniteiN th;it ii'il-^s^. such a differential existed we could not afford to send a single package of our goods by your line, for if we could for- ward at the same rates all-rail, it would save three handlings, which is a very serious matter in connection with tin plates." From Fraser & Chalmers: "Answ-ering your letter of .September 9th, regarding San Francisco business and business to points in Califor- nia via San Francisco. We do not believe at even rates we could get any of our customers to consent to the shipment of their freight via Van- couver, thence via boat to San Francisco, as aside from the difference in time, this route would involve two transfers at least, which, with the heavy machinery such as we ship, is objectionable, whereas by the direct line there would be no transfer of carload shipments. In view of this we do not believe, if the differential is withdrawn, you could expect to do any of our business for California points." From The Glucose Sugar Refining Company: (W. J. Gorman, Traffic Manager.) "Replying to your favor of the 9th inst. with reference to San Francisco business. In the event of your withdrawing your dififeren- tial rate to San Francisco we will be unable to favor your line with any business to this point." From Pabst Refrigerator Line: (By T. F. Howe, General Manager.) "Your favor of the 9th inst. at hand, asking if we would be agreeable to shipping beer to San Francisco at the same rates as via the direct lines. in I llic ihe l\iu as a I 45 to a water would not lines, n that the inie. Un- p via rail- titors. we d in your your not in justice our busi- :ntial, our shipments sfers." personal Knowing- I account state to ot afford ould for- which is ;pteml)cr Califor- ould get /ia \'an- rence in le heavy rect line s we do do anv . Traffic cnce to lifferen- nth anv I I In reply would state that wc certainly would not he in favor of making- shipments via your line to San Francisco at the same rato as made hy tlie direct lines." From Swift & Company: "Answering \our cn(|uiry of the ijth; if the C. P. R. Line did not have a differential rate fn)m Chicago an \..ur favor of the Oth, we should be sorry to hear that you did not have a differential to San Francisco as it would be impossible for us to give vou anv business to that point if we had to pay the same rate as the all-rail lines charge. The water transfer spoils our packages to some extent and we should not w-ant to undertake it unless some saving were to be had, to sav nothing of the longer time which often would be an important factor." ^IR. KERR continued: ]\Ir. Chairman. I will not be able to get through to-night. As I am not accustomed to talking so long at any one tmie my throat is getting pretty well played out. If it would be agreeable to the Board to adjourn until to-morrow morning— if not. of course 1 will continue. It is now 5 o'clock. ARPFFRATOR DAY-AIr. Kerr, yoi, referred, as a part <,f vom- case, to an affidavit. Did you file it or did I overlook itr MR. KERR— I have not filed it, I am looking for it now. It is an affi- davit or a statement. The word "affidavit" is used in our representative's memorandum, but I question whether it is an affidavit reallv. It is not an affidavit. The word affidavit is used here in Mr. Shaughnessy's letter and the word "affidavit" was used in the memorandum of our San Fran- cisco representative, but in reading it 1 qualified it bv saving, "an affi- davit or statement," because I knew pretty well it was not an affidavit. It was a statement of some kind. ARPITRATOR \\'ASHPCRN-\\'ell. if vou haven't it handv, per- haps we had better adjourn and you can hand it to us in the morning. MR. KERR— It would be a relief to us, sir, if vou would adjouni ARPITRATOR WASH I'.URX-We will then adjourn until, o o clock to-morrow morning-. inagcr.) 'able to t lines. 46 Morning Session, October i3tli, 1898, 10 A. M. The Meeting' convened pnrsnant to adjournment. AKIMTRATOR WASniiL'RX— Mr. Kerr. I think at last evening adjournment you were looking for a statement that ]\Ir. Day had asked for, a statement or affidavit. MR. KI'^RR — Mr. Chairman and (lentlcmen of tlie Arbitration Board: When wc closed last evening, I had been citing the correspondence that had passed between certain San l-'rancisco merchants and the Executive of the Canadian I'acific Com])any, and in reading the letter of our Vice- President in connection with a statement received from W'ellman, Peck & Company, the word "affidavit" was used. The reason it is used in Mr. Shaughnessy's letter is that in a memorandum from our representative in San Francisco, he calls it an affidavit — I might say he mis-calls it an affidavit, and in that way the wrong term crept in. I stated last evening that before I found the document I felt pretty certain it was not an affidavit; it was simply a statement. Therefore, with your permission I will read and file the following communication (marked "Exhibit 4") from Wellman, Peck & Company, Crocers, San Francisco, to the rep- resentative of the Canadian Pacific Company at San Francisco: "On account of other Trans-Continental roads meeting your differential rates, and as shipments routed by Canadian Pacific Railroad have always cost us ten per cent less than when routed by other lines, we cannot give you the business we would like to. Respectfully yours. Wellman, Peck & Co., Per W. B. Wellman, Treas." wilt I ^ t'erei I certi ., —I tion vukU Now, is that in line with the statements made by these gentlemen who say they represent the San Francisco trade, that the other lines were maintaining rates, their published tarifif rates, while our differentials were a disturbing element on the market, and as they desired a stability of rates, they would like very much if we would withdraw our differentials — this is the inference of it, of course, — and allow the other lines to carry all the business? Xow, I do not suppose it will occur to the P>oard that this document is the voluntary, unsolicited act of this body of men. as certainly it does not occur to us in that light. This is the result unquestionably of the inspiration of other people, other railroad people. 47 lo A. M. St cvcnini»" had asked ion Board : dcncc that Executive our Vicc- uan, Peck sed in Mr. •esentative calls it an St evening as not an )ermission xhibit 4") ) the rep- tm^ your n Pacific ^n routed d like to. 1, Treas." men who lies were ials were ibility of erentials lines to c I'oard of men. le result I people. ■ ! who are opposed to the Canadian Pacific Company maitUainins; their dif- ferential rates into San I">ancisco. and with the document itself, or a certified copy of it — anyway it bears the genuine signatures of the people — I also desire to file the reply of our \'ice-Presi(leiU to this connnunica- tion and also the further reply of these gentlemen to our Nice-President, under date of September 17th: (marked "Exhibit 5.") "San i'Vancisco, C;'.l.. Aug. 20, 189S. Sir William C. \ an llorne. President, Canadian Pacific Railway Company. Montreal. Canada. Dear Sir: At a meeting of duly authorized delegates from the ])rincipal jobbing interests and Associations of this City, held on the i8th of this month, the fi)llowing resolution was unanimously i)assed: "Whereas, the present system of rate-making on 'trans- continental shipments to San I'rancisco enforced by the Canadian Pacific Railway is. in our opinion, prejudicial to the business interests of San Francisco and the Pacific Coast generally, inasnuich as said system occasions in- stability of Trans-Continental freight rates, thereby placing the value of our stocks of goods in jeopardy, and Whereas, the other Railways occupying a p(jsition. so far as San Francisco traffic is concerned, analogous to that of the Canadian Pacific Railway are maintaining the rates adopted by the American Trans-Continental Railways as shown in Trans-Continental Freight Pureau Westbound Tariflf Xo. i-C, be it Resolved: That a Committee consisting of one from each and every jobbing interest represented at this meeting be selected by the Chairman to give expression of these, our views to the Canadian Pacific Railway Company, through its President. Sir William C. \'an Flornc, and to re(|uest that said Company adopt a system of rate-making to San Francisco that will relieve the situation of the present pre- carious conditions and maintain Trans-Continental freight rates on a firm basis, believing that such an arrangement will redound to the best interests, not alone of the mercan- tile community of the Pacific Coast, but to the Canadian Pacific Railway as well.' All of which is respectfully submitted, with the request that you kiiully obligee, 48 :ickn(nvk(lj4c rfct-ipt of this coiniminicaii.jii, and thereby Yours truly, (Sio-ned) II. I). Lovclaiid, For Wholesale Clroeer Assn. of fal. \y. K. Wheeler, For Facific Coast FIdw. c\: Aletal Assii. Chas. K. 1 lavens. I'or \\holesale Dry (loods Traf. Assn.. S. F. L. Gugj^enheini, I'"or Wholesale I )ru,g- Trade of C'alifornia. A. ( ;. Towne, For Wholesale Paper Trade of Fae. Coast. (Cominittce.) Frace llayden. Chairman of General Meetinj ig- ( I '■^lontreal. 29th August. [808. Brace Hayden, Esq., Chairman of (icneral ]\[eetine- Messrs. H. D. Loveland, Chairman Connnittce. W. R. \Miccler, F. Guggenheim, Chas. R. Havens, A. G. Towne, San Francisco. Cal. Dear Sirs: Referring to your letter of the 20th inst., addressed to the Presi- dent of this Company in which you refer to a resolution passed at a meeting of delegates from the principal jobbing, interests and Associations of San Franci .0. The preambles to the resolution as quoted in your letter recite the fact that the present system of rate-making on Trans-Con- tinental shipments to San Francisco enforced by the Canadian Pacific Railway, is, in their opinion, prejudicial to the business in- terests of San Francisco and the Pacific Coast generally, inas- nnich as the said system occasions instability of freight rates.' there- by placing the value of your stocks of goods in jeopardy, and that the other railways occupying a position, so far as San Francisco traffic is concerned, analogous to that of the Canadian Pacific are maintaining the rates adopted by the Trans-Continental railways, and the resolution itself is in the nature of a request that thi.s Company adopt a system of rate-making to San Francisco that will relieve the situation and maintain Trans-Continental freight rates on a fair basis. id thercbv vsn. s, ■isii.. S. F. ni. rnia. Coast, mimittce.) t. 1898. •0. C'al. lie Presi- u passed interests ter recite 1 lis- Co 11- Janadian liness in- ly, inas- -s. there- and that rancisco icific are "ailways, :hat this SCO that 1 freight 49 I beo- to sa\ in reply that this eonipany heartilv i.Miuur> in tile o])inion that these ])erio(lieal (listurhanees in rati-; an.' not only a source of serious loss to the railway eoinpanies Kut are injnrions to general trade interests, and we shall he glad at all times to co-operate with you and others in endeavoring tn >ecin"e something m the nature of stahilitv. We take exception, however, to the statements made in your resolution. The Canadian Pacific l\ailwa\' has not now and never has had any system of rate-making different frcMii that of the other Trans-Continental lines, and the instability of 'i>ans-C"ontinental freight rates, jjast and i)resent. cannot in any manner be charged to this Com])any. The rates to and from San hrancisco and other I)oints in California were agreed ui)on by the several railways and tariffs were published in accordance with that agreenieiu. The Canadian Pacific, which is an important factor in all I'acilic Coast business, was. because of certain disabilities under which it labored in competition with the all-rail lines, accorded the right by unani- mous consent to (|Uote Trans-Continental rates to and from Cal- ifornia points on a basis of io9f lower than the all-rail lines. The Canadian Pacific has done this and nothing more: indeed, it has lost thousands of tons of traflic because its trafific ofificers were not permitted to disregard the published tariff and (|Uote rate^ suffi- ciently low to meet the improper and illegal concessions and re- ductions made by the other railways centering on San h'rancisco. Surely your Committee is aware that the other railwavs oc- cupying a position, so far as San l'>ancisco trafific is concerned, analogous to that of the Canadian Pacific Railway, are not main- taining the tariff rates, and have not been for some time past. One at least of your Committee must have known this from the fact that when he had a carload of enamel goods to be shipped from Wisconsin, about two weeks before the date of your meet- ing, and was quoted by our Agent in San Francisco a rate of ninetv cents per hundred pounds, being our agreed tariff rate, he in- formed our Agent that if the Canadian Pacific desired to get the business, they must quote a lower rate because the all-rail lines had made him a ninety-cent rate, a reduction of 10% from the tariff of the all-rail lines. We have in our possession the affidavit of a prominent member of your Association, although not a member of the Committee, that he is unable to do any business by wav of the Canadian I'acific, because that the all-rail lines are disre- garding their tariffs and quoting differential rates. \\'e know quite well that the unfortunate conditions to which vou refer do exist, and we are in sympathy with your efforts to change them, but you will pardon nie if I mention the fact that you are com- 5" mcncin^' at tlu- wronj^ I'tid. 'I'lie retiu-dy slunild he applied rip^lit at hoiiic. If the iiu-rohants of Sail I'VaiicMscn will notify tlu' Smitli- t-ni I'acirtc and all otlit-r rail lines they will decline to ship any j^oods over their lines at rates below the published tariff there will be no further difticulty. It will be rather a novel manner in which to deal with this vexed (piestion. but 1 have no doubt that it will be effective. It has been the fashionable tliinjj^ for many years with certain other railway companies to attempt to make the Canadian Pacific the scapefi^oat for the demoralization jieriodically res ^ from their own unbusinesslike and dishonest practices, and for this pur- pose they have resorted to every avenue of publicity available from one end of the country to the other. It is. however, an established fact that whenever there has been a searchinj; incpiiry before any Commission or Traffic Association these charp^es have been e\- ])lode(l. and in no sinjj^le instance has the Canadian Pacific been ft)und to be the a^ji^rcssor. Yours truly. (vSigned) T. (I. Shauj^^hnessy, Nice- President." THE PACll-K COAST HARDWAKK AND MW ASSDCIATIOX. San ]''rancisco. Sept. 17, i8(;H. (Copy.) "T. < 1. Shau<^hnessy. Esq.. Nice-President. The Canadian Pacific Ry. Co., Montreal. Canada. Dear Sir: — We are pleased to note that your Company heartily concurs in the opinion that these periodical disturbances in rates are not only a source of serious loss to the Railway Companies, but injurious to general trade interests as well, and we will appreciate your co- operation in the endeavor to secure something in the nature of stability. We note that you take exception to the statement made in our Resolution concerning the system of rate-making to San Francisco via your Line, and that you state that the Canadian Pacific Railway has not now and never has had any system of rate-making different from that of the other Trans-Continental lines. Our understanding of the case as set forth by your tariffs, is. 4 rs. IS. liowcviT. t(t tlu' i-(intrary. iiiasimu-It a< y(»u (K'(lu(.-t lo'v from tlu' American Liiu- rates — whatever they ma\ hi'. If the Amerieaii Lines rechtee their tariff, you rechiee yours eorrespc (hii.L;l\ ; it the Amerieati Ijiies advatiee their tariff, you advance yours eor- responchnj^ly. maintauiiut;- in any event a (hfferential via your hue of 109^ from the rates of tiie American Lines, thus forcing- the latter to charj^je a rate of more than i 1'/ in advance of your rate>. or to meet your rates, therehy causing a rate war. We note that \ou state that the rii^ln is accorded you 1)\ TUianimous consent (])resnmahly of the .\nierican Lines) to 'jUote 'I'rans-C'ontinental rates to and from Cahfornia points on a hasi> 109^ lower than the all-rail lines. ( )ur information on this point fails to corroborate this statement. It so happens that five of the six t;entlemen C()m])risin^- this C'onunittee were in attendance at the meetinj.,^ of the Trans-Continental h'reimht Ihireau. held in Milwaukee last May. We are informed, on what we consider un- (|Uestional)le authority, that at that meetin.y- a most earnest and vif^orous protest was entered by certain representatives of the .American Lines aj^ainst the system of differential rates enforced by yoiu- road. We note that \ou apparently fail to correctly interpret the analo,t;y referred to in our letter 01 August 20th. whi-rein we state that, "other railways occupyiny- a position, so far as !^an h'rancisco traffic is concerned. analos.ious to that of the Canadian Pacific Railway are maint.iinins- the rates adopted by the American Trans- L"ontinental Railways, as shown in Trans-Continental l-'reij^ht Ihi- rcau Westbound Xo. i-C".' To our knowle(l}.jc. there are hut two Railway Lines, whose position, so far as San b'rancisco traffic i> concerned, is analogous to that of your road — viz.: The Xorthern Pacific and the (ireat Xorthern Railways, both of which, as von are aware, terminate on I'ny^et Sound, and use the Steamships of the same Company used by your road for conveyinnr Trans-Con- tinental freight to San bVancisco. We reiterate that, to our knowledge, these railways have been, and are today, maintaining the freight rates to San b>ancisco as shown in Tariff Xo. i-C. In addition to the above lines there is another railwav, viz., that of the Oregon Railroad & X'avigation Co.. whose position, so far as San bTancisco traffic is concerned, is nearly analogous to that of your own line, the only difference being that the O. R. & X\ Co.'s rails do nt)t reach as far east, and they use their own steamers for landing freight in San bVancisco. This Company, as well as the two first mentioned are. to our knowledge, maintaining full tariff rates to San Francisco. We would also call attention to *he fact that the Southern Pacific Company does not claim any rifi^lit to differentials via their Sunset Route, which, as you are well aware, involves a much lonj^er sea voyage, and is (|uite as in- direct a route to San I'rancisco as is yi.ar own. Concerning' that ])art of your letter wherein you refer tt > one of our Conmiittee, his reply to you. dated September 6lh. iSijtS. fully covers and eliminates this as a subject matter of consider- ation. We are thankful for the suggestion as to the ajjplicatiijn of the remedy for existing conditions, and would ask if it would noi perhajjs be well for the merchants of San hVancisco to appl\ same by withholding their ])atronage from any Trans-Continental railway line. American or I'oreign. that insists ujion a dififerential rate, therel)y jeopardizing the stability of rates, and making the conduct of business in this city extra hazardous. We agree with you that this would be a novel manner in which to deal with this vexed question, and are glad to note that you have no doubt that same would be effective. I'lainly speaking — we consider that "it is a poor rule that won't work both ways.' and if in your opinion, it would be effective when applied to the Southern i'acific, and all other all-rail lines, why would it not be ecjually effective when ap- jjlied to the Canadian Pacific Railway ? In our opinion, the Canadian I'acific Railway, and its con- nections, should be u\ e(|ually as good a position to serve San Francisco in the carriage of Trans-Continental freight as is the Sunset Route, and. we are led to believe would, at e(|ual rates, get a fair share of San l""rancisco business, but at differential rates we doubt if it will be able to maintain its past volume of business to this citv. We have noted, by recent press dispatches, with no inconsid- erable interest and satisfaction, that your road has agreed to the abolition of differentials on Trans-Continental passenger business, and sincerely hope that you will, in the immediate future, take a like stand as regards Trans-Continental freight traffic, believing that such a course would be to our mutual interest. Hoping that we are not presuming too much upon your time and good nature, and that you will give this communication your kind consideration, we remain Yours very truly, {•"or VVliolesale Grocer Assn. of Cal. For Pac. Coast Ibhv. & Metal .\ssn. For VVliolesale Dry Goods Traf, Assn., S. 1". For VVliolesale Drug Trade of Calif. For Wholesale Paper Trade of Pac. Coast. CHAIR.MAN <.f GKNFRAL MEETING." H. D. EOVELAND. W. R. WHEELER. C. R. HAVENS, C. GUGGENHEIM. A. G. TOWNE. BRACE HAYDEN. In '(.tten "cUer: ,1 Ch .ppos :iMn These Mtes. • .I th( iHisitii ■until ( ■ vider \y i 53 as you arc- <|uite as iii- uu w'icr u > ?r6tli. iSyS. ;)f coiisidcr- plicatiijii of t would not to apply Continental differential uakins^ the agree with al with this usiness to inconsid- eed to the ■ business. ire. take a believiny your time ition vour ssii. ssii., S. Coast. ting; 111 that coiuiection it is (juite proper that I should tile the original X tters (marked "Exhibit 4^") received by the Canadian Pacific Company. i( tters from representatives and lari;e business houses in San I-'raticisco. Ml Chicago, in Milwaukee and in St. Charles. Illinois, who all take the ip])osite view of the case to that of the gentlemen who put in this i)eti- :ion (as representing the San J-'rancisco trade) against our differentials. These letters that were read over to you last night, and are on the min- iites. all exj)ress in a strong way. and with no uncertain sound, the desire •if the trade.— a large ixirtion of the trade— that the Canadian Pacific position as it stands today, with its differentials iti o])eration shall be ■'intinued and not (listurl)ed. (ientlemen. in weighing one. we ask you to weigh the other side of the < \idence. W^e desire to file: Trans-Continental Association Tariff Xo. 6. Westbound, effective March 6th. 1888 (marked 'T^xhibit 6"). Supplement .Vo. 1 to Westbound Freight Tariff .Vo. 6. effect- ive June 2odi. 1888 (marked 'T-Lxhibit 7"). Supplement Xo. 8 to Westbound Tariff Xo. 18. effective . Au- gust 20th. i88(j (marked "T^xhibit 8"'). Trans-Continental .\ssociation Tariff X\). 36. Westboimd. ef- fective July '8ih. 189J (marked "Ivxhibit eedle"- I'^reight Tariff." It is a stuall vest pocket affair used for ready referent It is used by a great many traffic olificials and is considered reliable in it- information. Tt is dated March nth, 1898. In connection with the point 1 endeavored to make yesterday of tlu frecjuent sailings of lake steamers from lUift'alo and Lake Erie port>, steamers operating in connection with railroad companies, many oi them ■ — I think most of them — owned by railroad comi)anies, forming what i- known as the lake-and-rail lines, I desire to file a letter from R. 11 Hebard, General Manager of the Mitmeapolis. St. Paul it lUiffalo Steaii! ship C'om])any, lUiffalo, dated Se])teml)er 8th. i8(j8, (marked "Exhibi: 13") which gives with a good deal of detail the operation of the laki steamers and shows or rather bears out my statement of yesterday, that lUiffalo during the season of navigation has pretty nearly a daily sailing;, a daily boat service westward into Lakes Huron, Michigan an! Superior. J'efore leaving the subject of differential lines and again referriiiL.: to the point so often made by those who are ()pi)osed to us on this quo- lion, that whatever mav be done in the east, in Tnud< Line and C"entral Tr niz SCA va eat a th. we d\\ tin if ve .-»? ociation paii (1 during thr tlie revemU' lies who hai! ted from tli< ^injj. I think ^ou deem r l>ut we havr showinjT^ for ed, what wi I each niontli ile with thi larked "En ith our office orked uiukr rile cliang\ he offer ami (hd not seek er the usual all laniiliar. , each i)art\ >onie point- 'x\ yesterdax ei^ht Tariff "ileedle^ y referenoi . liable in it> rday of tin Erie jiort.-, my of them inj^ what i> rom R. }l. falo Steani- d "Exliihi: i)f the lak^ erday. th;it lily sailing,, hij^an aii'I 1 referring this Ciller- lid Central Traffic Association rates in rej^^ard to differentials, they are not recog- nized out in the west by anybody, T endeavored to cite to you yesterday several cases to show that that position was wrong. Differentials do pre- vail out in the west and in the south, and in the east and in the north, and each ])oint of the com])ass, whichever way you look, you are staring at a differential line somewhere, and just to further accentuate, we have the Morgan Line differential rate, via Missouri Pacific Line to St. Louis; we have a Savannah line, working up to Kansas City. 1 do not want to dwell on these points or enlarge upon them, or any further take up your time; I thought I would just cite them and mention them to strengthen, if possible, our position and the statements we endeavored to make clear yesterday. Xow. gentlemen, with your permission, we get back to Canada. We have roamed all over the United States pretty much, now I am glad to get back home. In support of the statement made yesterday of the per- fect freedom of working enjoyed by American lines in Canadian traffic without bar, let or hindrance. T think I stated yesterday every imi)ortant town in Canada and many that are not important, carry the signs of .\nierican Railroads, their offices being scattered on the main streets of said cities and towns; they are there doing business with i)erfect free- dom; they are there under a welcome aiul no man dare or desires to make them afraid. They are there as 1 showed you yesterday, with differential rates; and as you walk along the streets you will find the old familiar names that are so familiar to you and to me and to the rest of us. of the "iUirlingtcMi"; The Chicago c\: Xorthwestern : The Atchison. To])eka & Santa Fe; The Xorthern Pacific; the Creat Xorth- ern; The Cnion Pacific; and so on — -you can go tt) the end, it is simply a list of the eastern-middle states and many of the Western .\mericaii lines. \\m will find them all there, not a word being said about preying or trespassing on Canadian traffic. In support of the statements 1 made concerning the value of the goods carried by American lines, from ou'- ])oint in Canada to another point in Canada, through the Cnited .States, J desire to file a letter (marked 'T-'xhibit 14"') from the statistic ijin of the Dominion (iovernment, Mr. (ieorge Johnson, who treats (tii the subject, and also a copy of an open letter friMii Mr. I-'dward l-'arrar, addressed to the Honorable, the Chairman of the Committee on Inter- State Commerce, United States Senate, and dated "Toronto, March 31st. iH()7,"' wherein you will note the values — that these two together will give you the values and the manner in which those values are arrived at. The tonnage cannot ])ossibly be ascertained as it involves too much clerical labor to get it ready in time for this hearing; in fact, it could not be gotten ready in time for this hearing by any possibility. It is a long job. T will have this typed for you, gentlemen. T meant to have «t done this morning, but other things intervened. It shows the man- 56 ncr in wliich \vc arrive at the perct'iita^es and g;t't at tlic value of goods carried, from those dociiiiients. ARBITRATOR W'ASlliiL'RX— It is a small matter. I do not think it is necessary to have it typed. J)o you want tnat attached to the last d(jcument you filed? MR. KKRR — If you please. 1 intended to have it typed. 1 do not like to ])resent you with a rough thing like that. I desire to file the proceedings of Tran.s-Continental Association, rieneral Meeting, New ^'ork. March i6. i8(j6, (ieneral Meeting. Mil- waukee. April I. i8i'em to bear that out in its entirety. 1 have a list of Trans-Continental tariffs here (tuarked "I^xhibit i6") that it might be well to file in order that you may have any information \ou desiic to take from them. Westbound Tariff Xo. 14. eft'ective September ist. i(S88. ! Westbound Tariff Xo. 18. effective January isi. i88<). Westbound Tariff .\o. 20. effective May 27th. i88(j. Westbound Tariff Xo. 22. effective ( )ctober ist. i88ij. Westbound Tariff Xo. 26. effective June 18th. i8(p. Westbound T:\riff .Xo. 30. effective January 15th. i8yi. Westbound Tariff Xo. 34. effective September 21st. i8()[. Westbound Tariff Xo. T — 1. effective .Ajiril 1 ith. 1893. Joint Westbound Tariff of Xorthern Lines, effective ( )ct. 2otli, i8(j4. Westbound Tariff Xo. T — 5. effective March 5th. 1895. Joint Tariff of the Xorthern Lines, effective I'ebruary 22n(l, i8(/>. Westbound Tariff X'o. T — 10. effective I'ebruary 22n(l. i8(/). Sunset Route Tariff Xo. C — 13. effective Xovember 17th. i8(;r). A\'estbound Tariff X'o. 1 — .\. effective June 24th. i8()7. Joint Tariff of the Xorthern Lines, effective August 15th, \H<)J. Westbound Tariff Xo. 1 — P. effective December 13th. \H()j. I Westbound Tariff Xo. i — C\ effective June 25th. i8(j8. j l-'astbound Tariff X0.7. effective March loth. 1888. J^astbound Tariff Xo. T — 2. effective April 1 ith. i8()3. K-xstbound Tariff Xo. T — 7. effective June 17th. 18(^5. I'.astbound Tariff Xo. 3 — .\. effective Jamiary loth. i8(;8. 58 Eastbcjund 'J'ariff No. 3 — 15, effective July i6tli, 1898. Canadian Pacific Railway Circular Xo. 10, effective Jan. 5th, 1892. AKIMTKATOK W'ASHIiCRX— Do these include all those? MR. KI'^RR — "N'es sir. Now it occurs to nie that the lioard might do- sire to have copies of the proceedings of the Trans-Continental Associa- tion during its life. — that is during its term while we were connected with it. We have the volumes here and I thought that we might give yf)U tlu references and if you desired to use them you can get them from Mr Countiss' office; or if you prefer I will give you the volumes to be re- turned to me later as they are the onlv record we have. ARJ'.ITRATOR WASHP.CRX— We think we - Continental Association. It was the i)eri()d at which the Trans-Con tinental Association was re-formed. It had been an Association before', but had gone to ])ieces, had dissolved for some reason or another and this was the jjcriod at which they re-organizA'd their .\ssociation and invited us to come in. ARBITRATOR WASH r.L'RX— Can you give us that reference on a sheet by itself? MR. KERR— Yes sir. ARBITRATOR WASl 1 lU'RX— Instead of our having to pick it oui from the proceedings. MR. K1-:RR— Yes .sir. The list of references (marked "['Exhibit 17") was filed with the l>oard MR. KICRR — The several points 1 have endeavored to make in pre senting this case may be summarized as follows: I'Mrst. 1 endeavored to treat of the general principle in connection with application of differential rates via broken rail-and-water routes. Second, 1 dwelt with the history of differentials allowed to the Can- adian Pacific since they were invited to join the Trans-Continental .\sso- ciation organized in Xovember, 1887. Third, 1 have explained the guarantee of an agreed amount during the vear i8(ii in lieu of differentials and the subsequent resumption (M i till n\ 11 C C oil fij differentials. East, the substitution of a percentage scale of ilifferentials in plac' 59 5tli, 1802. lose? ■d might (k- tal Associa iiK'cted witli ;:ive you tin 11 from Mi- es to 1)0 rv- nced those. untiss; von L>m ? al Assdcia or won- al- tht' Traii-- Frans-C on ion helort', iiothor and •iation and 'fcrc-ncc <>ii pick it oiii the Hoard. il -iiips , rn I i-aii (I Tacoi i.nni and The A M A .-iii)pi) M A ' Vnier I \ I )U SI ^ Mt tliis ; ;iiiytlii M' :' c\actl f nient 1 ilK'la' IM b(.' 1 iliat (1 .\l A iluit? '' '!K'nt> ,1 .iLjree 63 rs into ARrUTRATC )K I)A^■ — And the i»)nv<.T>c iiips are permitted to carry C'anachan traffic. l''or instance, the Xorth- rrn I'acitic steamer. "City of Kingston." an American rej^istered. Ameri- •an ownership, is permitted to carry Canadian floods from .*>eattle or Tacoma to X'ictoria. They take those }j;oods out of Montreal, Toronto, London, in ( )ntario and Ouebec. and carry them into Tacoma or Seattle and transfer them to American ships and they are landed in N'ictoria. The exception is made there, too. .\Ri',ITRAT()R DAY— That is an exception? .MR. KKRR— Yes sir. ARI'.ITRAT( )R \).\\ — That is made by the ^noverniny council, I .-uppose? .MR. KMRR — Somethinii- (.f that kind. \Rliri'R.\T( )R DAY— As a jjart of your ca.se you have charged the American lines with violatinjj;^ the law and you referred to an affidavit, and \i)U subsequently stated that the affidavit was this statement or this letter ni this ]iarty. Was there anythinm; else that would respond to an affidavit, anything more than was containecl in that brief letter? .MR. I\1"'RR — ^'ou will remember, of course, that I explained to \uii exactly how the word affidavit came to be used. ARIUTRATOR DAY— Yes. you did. .MR. KKRR — I did not use that knowinj^^ly or williiiiih . ARIUTkAT()R DA^' — 1 do not mean to make an\ ])lay on that. MR. KICRR — it simply fell in the way explained. ARBITRATOR DAY— We all understood it that way. that y(.u re- lied (Ml an affidavit, of makiiii;- chariies that the .\merican line had vio- lated the law. MR. KERR — That was the letter that Mr. .Shau.y^hnessx wrote. .VRIUTRATOR DAY— Mr. .Shau.s,dmessy makes use of the state- iKiit in this letter that the .\merican lines, or some of them, are violatiiii' iIk- law — have violated the law in the way of cuttinp- rates. Do vou want t'l be understood as makini^- that charj^e aijainst all the .\mcrican lines iliat do business out of San I'rancisco? MR. Kl^RR — Xo sir: I am making no charj^es at all. ARBITRATOR D.\>' — Then will you specify why vou introduced ;liat? What is the purpose of the alleg-aticju' MR. KKRR — Simply as part and ])arcel of the record of this case. The p(jint is this; these gentlemen of San h'rancisco make certain state- neiits; — they make a statement that the .\merican lines are maintaim'ng agreed rates and that were it not for the Canadian I'acific differentials he market in San l""rancisco would be steady and stable and they would i 1 r,4 know what tlu'v wi-ri' ahuut: could put ])r(»])ir prioos on tlu'ir floods and bf sure that their next door ncij^hhor would not undi-rsi-ll thcni to- morrow by reason of j^a'ttinjj^ lower rates, and tiiat the Canadian I'acitir differentials were rate disturbers. That is the reason \vh\ we put that full record in; to disprove, and alotif;" with it we filed the letters that we received on the other side from merchants of ecpial standing with tiu- jj;entlemen who signed the petition. It is all put in there intended to ,lj<» together. We are makinjj; no charges; we are simply puttinj.,^ in such points as we thiid< may be in support of our case. .\ki;rrKA'l"()k dan— The time that you devoted to that subject yesterday afternoon, without any doubt, impresses ui)on my mind — and 1 think it must have done so u])on the minds of the other Arbitrators, al- thou}j[h 1 do not atteiri)t to si)eak for them — but it did upon my mind, that you made that a part of your case; char}.jes of violation of the law. that is to say that the American lines were solicitinj^" and carrying traffic below their ])ul)lished tariffs. .\t that time I could not (|uite see that the allega- tion that the American lines were violating the law was germane to the matter we have to in(|uire into; but on sul)se(|uent reflection it came to my mind that there was an aspect in which it might be germane, and [ want to get at precisely what you meant. And. I also felt that if there were any of these gentlemen who were not violating the law you should excul])ate them, or in other words name the roads that are violating the law. That is all that 1 care to say. ARBITRATOR WASIinURX— Does the Canadian Pacific Ry. de- sire to be heard further at this time? If not. we will then call upon the American lines to present their side of the matter. MR. wSTUI)I>S — Mr. Chairman, it is now twenty minutes to 12 o'clock: undoubtedly the l)oard will want to adjourn at half-past I2 or i o'clock for luncheon, and while I am ready to proceed, I dislike to. because I will certainly not get under way before you will want to adjourn, and unless the lioard has a decided preference or objection to adjourning until 2 o'clock so that 1 can begin and have some hours without inter- ruption. 1 would prefer not to begin now. but I would like to have it understood that I am entirely in the hands of the I5oard in that respect and will begin if vou like. ARBITRATOR MIDCILEY— Well, we will cons 't ^ ,r wishes. Mr. Stubbs. ARBITRATOR WASHBCRX— We will a urn then uiud 2 o'clock this afternoon. 65 fj^oods and 1 tlu'iu to- ian Tacirii- c put that ■rs tliat \w ? witli tin- idt'd to yit 1^ i'l such lat subject nd — and I rators. al- uiind. that ^w. that is iffic below :Ik' alk'j4:a- ane to the it canic to me. and I at if there ou should latinj^- the c l<\ . de- upon the 2 o'clock : f o'clock )ecause I uin. and journin^- >ut inter- :> have it t respect 'lies. Mr, Uhill _' Afternoon Session. ( ictober 13th. iSoS, j I'. M. The nieetins;' convened pursuant to adjournnient. ly [o pro AUIUTR.\'1( )R WASlllU'KX— Mr. Stubbs. are yon r cced now? MR. STI'IjT.S — Mr. Chairman and Cientlenien of the I'.oard: While I have been selected by the Committee api)ointcd at the Denver nieetinj;- [o represent the American lines in the presentation of their case and while all of the UKMuber.s arc not present I thiid< it fitting that I should stale that they all have contributed in the preparation of our case. All desired very much to be here, but havinj:^ done their i)art. they have tliouoht that they mifj;ht well leave the presentation of the case in the hands of myself and the metubcrs of the Committee that were resident in Chicajj^o. or at k'ast that they were so safe in it that they woidd not be justified in ignor- ing other important and jjressing enma.u:ements that detained them. Necessarily, the statements and arguments which we will submit have been largely prepared in advance in anticipation of the case that would be made by our adversary. 1 am not. nor is any member of our Committee accustomed to this sort of work. This is the first time in my life that I have ajipeared before a ]k)ard of Arbitration or a Coiunu'ssion to represent our own interests or the interests of other lines, unaided by counsel. It was very early agreed between the Canadian Pacific and ourselves that it would be better all around if we as traffic men, having to deal with this question in the future, having always handled it, know- ing each other, should undertake to make the case before this l>oard. Xaturally then, our case has been pre])ared without much reference to the order that would be pursued by the other side. It is customary in proceedings of this character for the negative before opening its case to briefly review the points made by the affirmative in its opening, but owing to my not being accustomed to this procedure and believing that we have pretty fairly covered all their points, T have decided that it would be better to go forward with the case as it has been written out and take up such points as have been made or presented by the Canadian line in the order, not as they were presented, but as they will fit in with the arrangement of our case, so that while I may take things up out of their order as prescribed by their case, T think before the statement or present- ation is finished we will touch upon every point. Our statement was also prepared and well under way before we knew wbat the constitution of this Hoard would be so that if there is anything in the opening which 66 would seem to discredit the knowledge and intelligence of the railroad experts who constitute this IJoard, you will understand why it appears so. I will not attempt to omit it or wrest it from its logical connection; if I did I might become confused, so 1 shall go ahead in the order that the case has been prepared. This contention is between the Canadian Pacific Railway Company, on the one hand, and on the other hand, what are known as the American Trans-Continental lines, being the transportation lines owned or oper- ated by the following named companies: The Atchison, Tt)])eka & Santa I'e Ry. Co. The iUulington & Missouri River R. R. Co. in Xeb. The Chicago, Rock Island & i'acific Ry. Co. The Colorado Midland Railway Co. The Denver & Rio Grande R. R. Co. The ^lissouri, Kansas & Texas Ry. Co. The Missouri Pacific Ry. Co. The Xorthern Pacific Ry. Co. The ( )regon Railroad (!^ Xavigation Co. The 'Oregon Short Line Railroad, i lie Rio ( irande Western Ry. Co. 'J'lie St. Louis & San I'rancisco Railr(v>d Co. The Southern Pacific Company. The Texas &• Pacific Railway Co. The Cnion I'acific Railroad Company. The Canadian Pacific Railway Coni])aiiy will hereafter be referred to as the Canadian line: the other parties as the .\merican lines. The lines of all these parties are delineated on this map ("Exhibit Z") in red. The lines of their several connections, for the purpose of illus- tration, are delineated on this map in blue. These connections (the blue lines), while useil to make through routes and through rates between San Francisco and their own ])oints. are not parties to the dispute, being supposed not to be interested. The fact of their non-interest is largely a sui»i)osition, because it must be that, since the claim is for a differential untler the rates t)f .\merican lines — under their through rates, and as the through rates embrace the charge for the transportation service of these connecting lines, neces^'arily, they jire interested. That is to say, that if a differential operates so as to turn traffic from any of these (blue) line.-, to this line (indicating on the map the Canadian Pacific Ry.), of course it turns it from these direct lines; but, from the beginning, it has been the custom for all the connections of what we call the Trans- Coi to(h wha arra heei tioii rat it to iiitei (^7 railroad pears so. ion; if I that the onipaiiy, ^luerican or opcr- forrod to Iiihit Z"') of illiis- oiis (the between te. heinj; ■; larj^ely iferential (1 as the of these \ that if le) lines ^y.). of niini::^, it Trans- I ("ontinental lines to leave larinely, at tiic outset altoj^^ether. and even today, they leave larj^ely to these lines, the ([uestion of deterniinini; what the thronj^^h rates shall he. Heretofore, in all discussions and arranj^enients. contracts for the purpose of maintaininjc;" revenue have been entered into by these lines without nutch reference to their connec- tions. At times their connections have been consulted and they have ratified or objected, as the case may be. but it has been connnon enough to justify me in saying' that as a x\\\<^ they are sujiposed not to be interested. The contention is in res])ect to freight rates and freight rates oidy. That is to say. between, in either direction. San hVancisco on the one hand, and on the other hand ])laces in the L'nited States and Canada east of an imaginary line, which is also shown on the ma]) here in red. but ill order to make it more marked we have it in different colors (indicating on map). This line forms the eastern boundary of the Trans-Continental Association. It will hereafter be referred to ;is the Missouri River line, as that is the common phrase with us in referring to it. It means that any business to or from San I'rancisco which passes this line — crosses it. en route, is subject to the Trans-Continental Association, or was when it was alive, and is now subject to this controversy, no matter whether it originates in I'dorida or in Maine or in the province of Ouebec. or whether it originates on this line — whether it originates on it or goes across it from any of these points. — to or from .San I'rancisco — it is the subject of this controversy. I think it unnccessar\- for me to describe this line any further than it is delineated on the map. although 1 have described it, or written it out in my manusv-ript as it appears in the pro- ceedings of the Trans-Continental .\ssociation, and I will give it as written to the reporters so that the record ma\- be straiglit. At a meeting of the chief traffic officers of the .\iiierican lines and the Canadian line at Denver, Colo., on the jjikI of .\ngust, icScjS. the following resolution was unanimously adopted. (L omit the proviso.) "Resolved, that the lines here represented will submit to arbi- tration, the (juestion of whether the Canadian Tacitic Railway is. or should be entitled to a differential under the rates made by the United .States lines for the carriage of the freight in (piestion," — just stated as freight to or from .San I'rancisco atul these points — (pointing to map) "and if any differentials, what these differentials shall be. The lloard of Arbitration to consist of three members; one to be selected by 'Jie Canadian Pacific Railway, one to be selected by the American lines interested, they two to select a third and that the decision of two members of said Hoard of .\rbi- tration shall be final, conclusive and binding upon all." 68 It is in pursuance uf this resolution that we are here. It ])rcsents two ([uestions for dctcrniination In- the Board. L'irst: Whetlicr the Canadian Hue is or should be entitled to a ditifer- ential under the rates made by the American lines for the carriatje of freight interchanged by San h'rancisco with places on or east of the Missouri River line. Second: If it is so entitled, what shall these differentials be, — that is to say. in what territory shall its differential rates obtain agauist the American lines and in what sum shall consist the difference or differences in its rates compared to those of the American lines. If the first question is decided in the negative, that decision will also dispose of the second question. In railroad parlance, when two or more carriers agree that a pre- scribed difference shall subsist between their res])ective rates, that dift'er- ence is called a "differential rate". When however this difference is made without agreement it is called a "cut", and the lower rate is termed a "cut rate." This must not be confused with so-called differences in rates, for example the rates from the Atlantic Seaboard around Cape Horn to San Francisco arc lower than the rates across the continent or via the Isthmus. That is not called by railroad men. a differential rate. The rates via the Isthmus of Panama arc likewise lower than rates by rail. These differences originate in the main from the difference in the cost of car- riage and are accepted as natural. There can be no "differential" in the sense that term is used by practical railroad men except by agreement, ])etween on the one hand, the carrier or carriers whose rates are the standard, or assumed to be the standard, and on the other hand, the carriers whose rates are lower than the standard. The term "differential rate" always implies an agreement between the lines whose rates are contrasted by the use of that term. One line may adojit a lower scale of rates than that which is in use by another line for its service between the same points and the line carrying the higher rates may for reasons sufficient to itself ignore the fact that the other line is carrying lower rates, yet in such a case the term "differential" would n'^^t be applied by practical railroad men to the difference between the two sets of rates. There are several kinds of differential rates. I have thought it neces- sary to explain this in brief, because the term is so connnon that the idea is abroad that it is i)art and jxircel of the well settled, well considered liolicy oi railroad lines. Differential rates may be of different kinds, orig- inating in various conditions and having different objects in view. For exam])le. where several distributing centers of trade seek a connnon market of supply or consumption, the carriers, by agreement, sometimes fix different rates or esiablish a rule of difference to be observed in the rates to and from these different trade centers, respectively. An example of this kind of a differential is foimd in the rates from Chicago to lloston. \e\ Vo low ar- bara and San Diego where the service can be done entirely by rail or entirely by sea. In this class of cases it is not iniusual for the differ- ential to be in favor of the stronger line, — stronger in the sense that it carries the bulk of tonnage, — that is to say, that notwithstanding that the steamship lines between Xew ^'ork and Texas are favored by the differential, they carry the bulk of the trafific. The rail lines do not demand and do not get a differential in order that they may have a fair share, a reasonable share of the traffic. Likewise, on the Pacific Coast between San I'>ancisco and Portland, at Los Angeles and San Diego, respectively, notwithstanding that the steamship lines are favored by agreed differential rates, they carry the bulk of the traffic. The weak lines in point of taking power carry the higher rates. It is worthy of note that these two examples (and doubtless other similar examples may be found), quite upset the connnon notions that water lines always work at a disadvantage against the com])eting rail lines; that they always require an artificial advantage in rates in order to successfully compete with rival rail lines, and before we close it will be shown conclusively that such exceptions also obtain as between mixed rail-and-water lines versus all- rail lines. It might be well to notice also that when the water line is the stronger, carries the bulk of the tonnage, it never concedes to the all-rail competitor any differential in recognition of said all-rail carrier's title or right to a share of the business, and the same is true as between the mixed rail-and-water line as against the all-rail line, .\nother example of this kind of difi'erential is found in the lake-and-rail rates to Chicago from Seaboard cities. In the latter case, however, the principal railroad lines, by which I mean the Trunk Lines, own and operate in connection with their rail lines, the steamships which ply the lakes, and as the cost of tran>oard to the fact that while it is stated that the Sunset Route, which means the Southern I'acific route — • for we claim that trade mark — is not alone in the enjoyment of these lower rates. The Cromwell Line, in comiection with the Texas & T\'icific, and the ^lallory line, in connection with any of the rail lines from Gal- veston, particularly the Atchison, Topeka oard that this class of differentials is and always has been obnoxious. They have been always, and continue to be. re- garded as partaking of the ancient custom in certain countries of pay- ments to certain men who were allied to robbers to be by them protected from pillage. They have been denounced as a public wrong and an abuse of corporate power in that they coerce shippers to use inferior trans])ortation facilities and instead of promoting, were really in restraint of trade. Xo carrier ever submitted willingly to that sort of an agreement. The submission has always been under protest and rarely, if ever, liave such contracts been continuously performed in gocnl faith. In sui)port of these statements permit a reference to the findings of the Tnter-State Connnercc Commission, expressed in annual rei)orts and otherwise, after inquiry, namely: (Third Annual Report Inter-State Commerce Commission. i "By traftic arrangement between .American comi)anie> and Canadian companies diiTercntials are allowed to the latter which furnish an inducement to shippers to patronize those lines for trade for which the quickest transit is not urgent. These differ- entials are conceded to avoid rate wars and they involve a diver- sion of whatever business the reduced rates may invite." (Para- graph 3. Page 60.) (Fourth Annual Report Inter-State Commerce Commission. November 29, 1890.) "It is not uncommon to find that a road is able to compete for an important business, but is nevertheless at a dis.advantagc in the competition by reason of greater length of line or heavier grades or of other unfavorable circumstances, and that m con- sequence it is unable to obtain what it deems a fair share of busi- ness in open coni])etition with rivals who offer the same rates at every competing point. It is therefore compelled, if it would share the business, to make lower rates and their rivals recognize this necessity and allow an agreed division of business between all com])etitors to be effected by giving the carriers thus unfavor- ablv circumstanc^Ml what are called 'differential rates'. The con- has been onietinics opposing deniand- lat would ? or lines ^ the case edless for id always to be, rc- s of pay- ])roteeted ? and an ? inferior restraint jreenient. ver. have 1 support iter-State .ise. after on . 1 nies and er which lines for ^e differ- ci diver- ( Para- mussion. compete Ivantage • heavier ui con- of Inisi- rates at it would scognize between nnfavor- "he con- 75 ceding of a differential, however, is very likely nol to be made willingly, but comes under the stress of compulsion at the end of a disastrous rate war. \Mien once made there is constantly liability that under the feelings engendered by ct)mpetition or from a conviction that it ought not to have been granted, it will be dissented from and an unjirofitable rat(> offered b\ comiK'titors instead." (Pages 22 and 23.) I'urther, — "The differential lines are those wliich on account of longer lines and differences in facilities or owing to their through routes being partly by water, (jr from other disadvantages might not connuand, at even rates with the more direct lines, an amount of tonnage which under the customary methods of deter- mining such matters, would be considered a fair ])roportion." (Page 210.) The history of this dispute may be brietly stated as follows: The Canadian line was opened for business in June. 1886. At that time all of the principal lines which are parties to this contention upon the side of the American lines were completed, and had been for several years engaged in the carrying trade of San I'rancisco, with the exception of the Chicago, Rock Island & Pacific Railway Company in respect to its line between the Missouri River and Denver; the Colorado Midland Railway Company and the Missouri Pacific Railway Company in respect to its line west of Kansas Cit\-. These American lines were then involved in the most serious rate war of their experience; a rate war which had its origin in a claim of the same nature as the demand of the Canadian line in respect to all California traffic: that is to say. one of the Ameri- can lines had demanded cjf tlie other lines an adjustment of rates or a guarantee of earnings greatly in excess of what it had been able to take upon the merits of its service under an ecjuality of rates. The minimum rates caused by this war, which began in 1886, did not obtain all through 1887; a truce was agreed to some time in the spring of 1887, but rates were not and could not be restored to the normal basis inunediatelv for several reasons, one of which was the uncertainty of the effect which the Canadian line entering the field of cjm])etition would have and the dbtibtfulness as to the disposition of that line to join in the necessary co-operation to avoid a continuance of the unprofitable rates for Califor- nia business then prevailing on the American lines. Xow let me digress for a moment. With respect to 1886 and 1887 T wish to criticise a remai k made by the Canadian line representative — I will not refer to it — to the effect that previous to its entering upon membership with the Trans- Continental Association it observed the percentage scale of differentials. Tt never had differentials; it was not in it. The rates were too low. and 76 wIr'II tlu-rc was a tight oti it left the hunk-ii of the tij^ht to the AiiRTican liiu's. I read now from "Mxhihit T": it is the testimonv in a report from a Committee. — the Tnter-Statc Commerce Committee of the United States Senate Report for 1888. by an order of May 2nd, — that is tlie only date on it, May the 2n(l. 1889: "Sir William C. \'an Jlorne, I'resident of the Canadian Pacilic Railway was before the Senate Committee. The Chairman asked Mr. \'an lit)rne this question: 'I see by reference to your report of 1886 that in the first year of your through traffic your line suc- ceeded in securing a considerable share of the through traffic in competition with Trans-Continental lines of the Cnited States and mostly at rennmerative rates; does that still continue?' To which Sir William C. \'an Hornc replied: '\Vc get considerable through passenger traffic, very little through freight traffic; it does not i)ay and we do not seek it.' " Added to this was the fact that the Inter-State Connnerce law had just become efifective and few of the railroads in the country knew just where they stood, or would stand under that law. An officer of one of the California roads was delegated to visit the headquarters of the Canadian line to confer with its principal officers and obtain, if possible, its promise to co-operate in an organization having for its object the making and maintaining of reasonable rates for the carrying of traffic between the Pacific Coast and the eastern jiarts of the L'nited States. The result was a meeting of the Trans-Continental lines and a re-organization of the Trans-Continental Association. At this meeting the Canadian line demanded the right to discount the San Francisco rates of the American lines; indeed, this was understood to have been a condition pre-rcquisite to its attendance upon the meeting and joining and co-operating with the other Trans-Continental lines. I am the officer who visited the headquarters of the Canadian Pacific line at Montreal to invite, as its representative correctly states, the Cana- dian line to join with the American lines in maintaining rates — to join in a co-operative association designed to maintain rates, but I had to cou- ple my invitation w ith the assurance that we would in some way, how we oiu sim the (low (.f t inde strai of w offict have adjui of e(| in w pool and // American lines objected to it. hm they were made to nndersland that the demand of the Canachan hne was no more than what that hue pro- posed enforcing?, in so far as it conld do so. in the e\ent that the Ameri- can hnes imdertook to co-operate without its assistance. In other words, they were .qivcn to imderstand that if rates were advanced to an\- rea- sonable basis the Canadian line would nse the tariff of the American lines sim])ly as a maximnm from which to cut and that these cuts, if met by the American lines, would result in forcing- the whole scheme of ralis down to the level of the mininunn cost; that it woidd l)e a continuation of the battle from which they had just emer^i^ed for an indetinite tii' .■, if indeed there would ever be an end to it. If it had not been for tlu' re- straininj;- features of the Inter-State Commerce law, the exact measm\'s fif which they did not understand, and which, to most railroa ar- gument — see page 34 hereof;. "ARBITRATOR WASH 151' UX— Did you maintain agencie-> in San Francisco?" "MR. KERR— Ves sir." llis agent did not work freight business, he was a Passenger man: I dety the Canadian line to deny it.— (connnencing again U) read from transcript of Mr. Kerr's argmuent): "ARBITRATOR WASlll'.L'RX— During the entire year?" "MR. KICRR— \'es sir, we maintained agencies. We did not withdraw any agency." "ARBITRATOR \\'.\SI I I'.CRX— >'ouused the same effort to get business?" "MR. KI*]RR — I woidd not say that, naturally; but we did not refuse any business tb.at came to us. We had the same facilities, our agents were out in the market working for other business, They would take San Francisco business at even rates, but, as you see, they could not get it. The differential off, we were (JUt, clean out of the business." "ARIUTRATOR WASI I I'.LRX- They did solicit the bu.si- ness during that time?" "MR. KFRR — Ves, in a line with their other business, a can- vassing agent going around canvassing for other freight, naturallv, if he heard of any business going to San Francisco, he would take it, he would ask for it, he would want it. A\'hat is \(nir rate?' '( )ur rate is the same as all-rail.' *()h no. vou camiot have it; we will give you the other, but we will not give you that.' " 8o IMK. STLMU5S — (laying- a^idc tiic transcript from wliiih lu- liad been reading) — I submit, wliere would the l7nion Pacific that makes in con- nection with the Central Pacific the shortest and most direct line, that is the oldest line to San !''rancisco — where would tliat company be today if their agencies were to carry out the program indicated for his agencies by Mr. Kerr in that testimon\ •r Would it get any business that was competitive as between themselves and the "Santa Fe" or the Alissouri Pacific or "liurlington" or "Rio (irande" or Rio (irande Western roads? Tn three months, notwithstanding all its natural advantages, more than 50 ])er cent of its business would leave Us rails; if it would get anything at all that possibly c(jul(l go over another route. 'Jhe Canadian line did n(jt work for the bu.siness. It sat down on its subsidy and intended to do so when it was given to them and we expected it to do so. There lias ne\er been an\- test of what it can do at equal rates, 1)ut in this connection I would 'L'k, what does it matter? L'nder the submission in this case, what t'.oes it matter whether it carried a dollar's worth of business, or $500,000.00 worth of business? What has that got to do with the submission in this case? It is a fact that it did not enforce its right to tile business. Ts there any other conclusion to be drawn than that ihi.- bargain witli the Canadian line, this ])urchase (jf the neutrality of the CVtuadian line, shows the tremendous power of that company to destroy our business unless we bought it ofif? 1 have a. statement (marked "]'].\hibit l") that was j)repare(l by Mr. Countiss, which 1 will file with the Pioard : "Payments to the Canadian I'acific Railway Cd. during the year 1891, as finally adjusted, baseil on each road's actual ])roportion 01 gross earnings from east and westbound California freight traffic, as pro- vided by Joint Agreement between roads in interest, etifective Jamiarv 1st, 180L.' This statement slunvs the amoimts of the payments — the amounts paid monthly, by each particular line beginning with January and ending with Decend:)er, 1891. 'i"he total earnings of the I'urlington and Missouri River Railroad Company in Nebraska from all tlie Cal- ifornia business — we cannot se^in-egate the San h'rancisco b "siness, the way the records were kept — was $192.()26.24, yet the "P)Urlington" con- tributed $5,678.00 in order to give the Canadian Pacific $500,000.00. The total earnings of tlv Chicago, llurlington & Ouincy R. R.. in connecti(Mi with the i'.urlington and Missintri River R. R., were $1)7.082.00 and it C(<,Uributed $2,879.00. The cond)ined contribution of the ■■llurlingtou" lines was aboui $8,500.00 and their combined earnings was about $28(),- 000.00. 'i'liey submitted to that tax in order to give the Canadian line $500,000.00. .\Rr.lTK.\T()R DAY— Wnat did you say the Purlington & Missouri Kiver K R. was? MR. STUiniS— The P.urlingti.n .'t AEissouri River R. R. was $5,678.- 00 and the Chicago. I'.urliugton i<: (Juincx' R.R. was $2,87().oo. they should 8i he read to,t?etlKT. and the total caniiiiij of the lUirHiii^ton (!v: Missouri River R. R. was $192,900.00 and of the C. B. & O. $97,000.00. niakinj^- a total of aliout $290,000.00, and out of the t^ross earnint^ of $290,000.00 from all California business, they submitted to a tax oi somethint;" in the neig^hborhood of $8,500.00, in order to p^ive the Canadiati line $500,000.00. The Chicaj^o, Kansas &- Nebraska Railway Company's total earnini^s were $167,762.00 and the Chicap;o, Roek Island & Pacific $101 ,<;()o.oo which made a total earriinj;- during: the year from the California business — all California business — not San I'rancisco business, of about $269,- 700.00 and they contributed $8,000.00 towards givincj the Canadian line $500,000.00 for beinp; p^ood. The Denver & Rio Grande Railway made a total earning;' of $180,000.00 and contributed $5,000.00 in order to ,^•ive the Canadian line $500,000.00. The Rio (Irande Western earnings were $228,500.00 in round tip^ures, and it contributed $6,698.00 to feed and support the Canadian line, 'ihe Missouri i'acitic Railway made a total earning of $109,300.00 and it contributed $3,261.00 in (jrder that the Canadian Pacific mii^ht receive $500,000.00. The St. Louis & .San i'"ran- cisco Road made a total earning- of $86,700.00 and gave $2. 51; 1.00 to the Canadian line in order to swell its earnings to $500,000.00. The ( ireat Xorthern Railway line, which 1 believe at that time was a connection of the Canadian Pacific, I am not sure. Air. Kerr can correct me about that — its western business went out of this territory via the (Ireat Xorth- ern Ky. through (Jretna and up to \\'inni])eg. Its total earnings were $22,922.00 and it contributed $690.00 to the Canadian Pacific Railway to give it $500,000.00. Is it any wonder that the subsidy ceased with one year's trial? Is there any other conclusion to be drawn from that, than that it represents the tremendous force, the tremendous weight upon the minds of the officers operating those lines, of the tlireat, ihe fear of what the conse(|Uence would be if the\' did not buy the Canadian line's ].eace, its good will? In fanuary, 1892, the ditiferential scale in force in December, 1890. wa^ restored. Those wert. tlu: low, reduced differentials that were agreed to It the San bTancisco meeting, 1 think, in Ma\-, i88(), and contimied uiitil Xovember, 1892, when the dissolution of the Trans-Continental Association was forced b\ the withdrawal of several of its members. With the dissolution of the Trans-Continental Association, tlie differential with the Canadian line ended, h'arl' in i8()3 the Columbian .Steamship line iiut of Xew York, in connection with the Panama Railroad Cm ipany and the Xorth American X'avigatit)n company, operating a ste.imship line between Panama and .San I'^rancisco. i)egan cutting rates, and initiated the most violent and longest war in rates that the 'i'rans-Ci m- tinental traffic has ever been subjected to. That is the case I referred to by way (jf illustration a few moments ago. During this period the Canadian line was not much of a factor in the business between the G 82 Atlantic Seaboard and San I-'rancisco. During 1893, '^94 ''"<• 1895. the California lines organized and maintained a semblance of an organiza- tion, for the i^urpose of protecting that portion of their trafific which was not involved in the war of rates with the Panama line. That was the trafilic west of Ikiffalo and J'ittsburgh. This organization was called the Trans-Continental Freight Kate Conmiittee. The Canadian line was not a party to it. That line made such rates as it pleased and its opera- tions were ignored by the American lines in respect to San Francisco business. Why? The rates were so low that the Canadian line could not beat them. We could not agree with the J'anama route, nor among ourselves, and get rates up. We had no use for the Canadian line. We let it go alone. In 1896. an agreement was attempted to re-organize ilie Trans-Continental Association. In order to accomplish this i' i.>- sential to make a contract with the Panama route; second!}, a) come to some understanding with the Canadian line. The agreement failed of the necessary unanimous ratification for reasons which are not neces- sary to ex])lain; indeed. I do not know that anybody can explain them, except the Union Pacific people and they never have, but all the necessary arrangements had been completed up to the final ratification. They included a contract with the ]*anama route whcreunder the Trr.iis Continental lines leased from the Steamship Company sufficient space ii' their steamers to acconunodate a stipulated tonnage. The Canadian Pacific demanded, as the price of its co-o]ieration in this agreement, a differential of 10 per cent, but finally consented to take 9 per cent. The rei)resentative of the Canadian line, in his statement yesterday or today, alluded to a difference that arose between the American lines and the l.'anadian line, as between the New "S'ork meeting and the Milwaukee general meeting, and the later .Milwaukee freight meeting. I do not consider it necessary to traverse what he said. I do not think the Cana- dian Pacific came out of that controversy with very nuich credit. As I have said, this agreement failed of final ratification, so that there has been no agreement. ditYerential or otherwise, between the Lanadian line and the American lines since i8()2. ARl'.ITK.XTOR WASlir.CRX— Mr. Stubbs, I asked Mr. Kerr this morning, whetlur that concession of (; per cent — differential rr.te of 9 per cent — was agreed to by the .\merican lines and he said it was, but that tile agreement was never put into eft"cct. MK. STCi'>l'.S — \nu understand. Mr. Chairman, how these things go; that we will gel together and agree upon all details of a contract. btU that at thr last it nnist receive luianimous vote. .Xkl'.ITK ATOR WASMIU'k.X— I only mentioned that in connec- lion with ynuv remark a short lime ago. that tlie percentage differential was never allowed them, MR, STri'.ll.S— That is true. > 83 895. the irganiza- liich was was the illed the line was s opera- raneisco ne CGuUl r among ne. We \n\7.v the U) come nt tailed i)t neces- lin them. ; all the ;itication. e Trnii- space !!' .'anadian emcnt, a nt. The :>!• today. and the wankee do not e Cana- n. As 1 lere has ian line \err this r.te of 9 was, hnt e things ■ontract. connec- Terential A;ur,iTK.\T()k WASlllU'RX— Is it true that it was entered into? MR. STL'IUjS — It never was c1)S — ^'^'cs, it was agreed to, but — Xo, I have never said it was. ARIUTRATOR WASIllU'KX-l understood y.m to say so. MR. STL'IU'.S— Xo sir. ARlilTRATOR WASIllirRX— I understtuKl Mr. Kerr to ^ay this morning that it was conceded to him by t'le American lines and I under- stood you to say that the agreement was never consununated. MR. STL'IUkS — The Chairman nnist be very well aware, 1 know, from his long experience in the business, that no agreement of that character becomes complete until the hnal vote upon the ratification of it. We never got the final ratification of all these details. Tlie most that c;in be said is that, if the L'nion I'acific had voted, finally, to confirm that, it would probably have voted under a 9 per cent differential. That is the most that can be said in that direction. X\) one can say whether it was the 9 per cent dififcrential that moved the L'nion Pacific not to vote for it or not. Xo one can say that if the I'nion Pacific had voted for it, that some other company would not have failed to ratify it. So far as its binding effect upon either party is concerned, it is just the same as if the X'cw ^'ork meeting had nr. occurred, or that the Milwaukee meeting liad never occurred. As I have said, this meeting failed of final ratification, so that there has been no agreement, differential or otherwise, between the ("anadian line and the American lines since 1S92. I mean 1)\- that that since iS(;j the Canadian line has never had a difYerential on San Francisco business. They have made a difi'erence in rates, but a differential is essentially the product of an agreement and we have never agreed since that time to any differential rate with the Canadian line. There has been no time since icStjj, during which an\ one of the .\merican lines were violating any good faith or any agreement whatsoever with the Canadian line, or could not have made the same rates as the Canadian line. In practice, however, the Canadian line has followed the .American Trans-Continental lines in the publication of tarift's, by discounting the latter's rates to San I'ran- cisco 10 per cent, thus arbitrarily increasingthe difTerence between its rates and those of the American lines on the lower classes, which cover the bulk of the tonnage, almost 100 ])er cent as comi)ared with the ilifference prevailing by agreement in 180J. That the apparent differtiice between the publislied rates of the C'anatlian line and the ])ubh'she(l rates of the American lines was not in practice maintained, has l)ei'n for a long time manifest to every one concerneil in the business. I, nnself, ha\e re- ceived complaints from \ ice President I^hauglmess} . (if the Canadian line, alleging that he knew, as a matter of fact, that tiie American lines 84 were not observing that differential, so-called by him. Rate cutting, open and secret, has been {.j^cncral and frequent and it is the judti^nient of the American lines that primarily the attempt of the Canadian line to carry lower rates was at the bottom of it, although it must be con- fessed that the action of the Canadian line will not account for all the rate demoralization in the Trans-Continental business. However, it had so much to do with it that the call for the Aufjust meeting at Denver, which adopted the aj^reement to arbitrate this c|uestion, a copy of which, I believe, was sent to the Canadian Pacific Ry.. read as follows: "Westbound rate conditions have become so demoralized by attempts to meet Canadian Pacific differentials that I think the domestic Trans-Continental lines should innnediately decide upon a settled policy to be pursued uniforndy by all, either to abandon sporadic efforts to equalize Canadian Pacific rates and strictly maintain published tariffs, submitting to large diversions to Cana- dian line, or to formally notify Canadian Pacific that United IStates lines will no longer submit to its demand that they shall make higher rates, and then proceed jointly by published rates to meet whatever action Canadian T'acific takes. The importance of this (juestion merits the attention of the highest oi^cers of lines en- gaged in California traffic with the east. Will you attend a meet- ing at Denver on Monday 22nd inst., for the purpose of discuss- ing and disposing of this question?" And this telegram met with a general response. So much for the opening of the case. The first question submitted to the Board is: "Whether the Canadian line is or should be entitled to a differential under the rates established bv the other lines, meaning the American lines." Xow we submit that a differential, in the sense used here, is a pre-determined and acknowledged difference between the re- spective rates of two or more carriers by which the rates of one or more (usually denominated the "differential" line) are made lower than the rates of the others, connnonly referred to as the "standard" lines. A differential is therefore for the purpose of competition and advantage in rates, an artificial advantage. Mr. Kerr in his statement calls it a money advantage. Its purpose is to force an arbitrary allotment of traffic, or, to use the language of the Tnter-State Connnerce Connnission. an arbi- trary distribution of traffic. Here is what the Commission says on that Bubject: "The purpose of a differential is indoubtedly to enable a line to participate in traffic which it could not obtain if it were com- pelled to compete at the same rate as its rivals. It is in its essence 8s a device for the distribution of traffic. At the basis of every iiu|niry into the reasonableness of a differential, therefore, lies the question whether the line claiming it is entitled to participate in the traffic involved." (Inter-Staie Commerce Commission Opinion — "Cana- dian Pacific Passenger Differential." Page 8, Paragraph 2.) That reference is to the type-written copy that T had of that report and opinion, before I had received the printed copy. The Canadian line docs not rest its claim that a difference should subsist between its rates and those of the American lines; that the latter should charge more than it charges for moving traffic between San Francisco and this eastern terri- tory (pointing to map) upon the giound that it can perform the service at a less cost to itself than the cost to the American lines. On the contrary, its acknowledged grounds of contention indicate, prima facie, that its cost is greater than the cost to the American lines. It does not ground its claim upon the averment that the rates of the American lines are unreasonable and unjust to the public: nor that they prevent the largest and freest interchange of trade by the comnumities served by these carriers. On the contrary, it has confessed from time to time, and will not now deny that the rates of all the interested lines are unrea- sonably low. It simply avers that it presents certain physical charac- teristics which when contrasted with the physical characteristics of the American lines arc objectionable to the shipper; that if these objection- able physical features are not in some way counter-balanced, it caimot participate in the subject traffic. As a counter-balance to the alleged physical difficulties, it demands that the American lines shall submit to its use of a differential. That is to say, that the American lines shall give it an artificial advantage in rates, as a means whereby to force traffic to follow its line as against the American lines. It justifies this demand by the assertion of a right to a fair share of the subject traffic. It does not define the term fair share, whether it is more or less than any part of the whole; whether it is one per cent or more, or 99 per cent or less. The Canadian line's claim for the artificial advantage of a differential is therefore a demand for the arbitrary allotment to it of sotue portion of the American traffic in which the American lines have the natural advan- tage which the Canadian line claims it lack.'^. The design of the differ- ential is to turn the traffic from routes offering natural advantage to routes asserting natural disadvantage and its ultimate purpose is to assure to lb.. Candian line an arbitrary, but indefinite, allotment without inter- ference of the American lines; in other words, to remove that share of the traffic from rail competition and allot it to the Canadian line. We meet this claim by the general averment tliat the Canadian line is but one of several lines engaged in the traffic which are in like manner entitled to an allotment; otherwise ant line is protected by discriminating against 86 the rest. A])p()rtionnient by arbitrary means that does not provide Hke adjustment for each of the other hnes entraj^cd in the trafific. cannot be just and rij^du. In any trafific. natural right is inherent in natural ad- vantage. Natural advantage being urged against the American lines is an admission of their natural right in the trafific. If any arbitrary plan of right and all otment or distrniution of the trafific be feasible, it cannot 1: just unless giving recognition to the natural rights of the American lines and ])rotecting them therein. To proceed U]Kjn any other theory must sacrifice the natural right in the trafific of the lines having natural advantage, that the interest — not the right — of the Canadian line may be protected and advanced. The definition of the word "entitled," in the sense it is used in the Denver resolution, is, "Having a right or a just claim to." (Century Dic- tionary) The submission to the determination of this J'.oard proves that the asserted right is not absolute; otherwise they would not submit it to arbitration. The legal rights of the respective parties are defined by statutes; hence it must be that the term is used relatively, strictly in the sense of the term "equitable right," just and right under all the circum- stances of the particular case, fair and equal. Under this exposition of the meaning of the terms employed, the first (|uestion may be re-stated, in order to present in its clearest form the issue raised, in the following language: 1st: — Has the Canadian line a right which is equally fair and just to all concerned, under all the circumstances, to a share of the San Francisco traffic which warrants it in calling upon the American lines to force an undefined part of that trafific to seek the Canadian line instead of the American lines, by demanding higher rates than are accepted by the Canadian line? The right claimed, not being asserted as an absolute right or a legal right but an equitable right, must be determined by the circumstances and conditions surrounding and affecting the relations of both parties, the Canadian line and the American lines, to the subject trafific. There- fore, the Canadian line sets forth, as we have said, certain physical char- acteristics alleged to subsist with its line, which it denominates as dis- advantages or disal)ilities, to counter-balance which it claims the right to an artificial advantage over the American lines in tiie shape of a diflfer- ential. The physical disabilities alleged to subsist with the Canadian line by contrast with the American lines are — That its line is a broken one, meaning thereby, partly b\ water 87 and partly Ijy -ail. iK'ocssitatin,t;' the transfer cu rmiti' of ,i^oo(ls from car to vessel and vice versa ; That its steamer service on tlie Tacitic Ocean is infre{|uent. causing' delays as compared with daily service otifered hy the American all-rail lines; That it is the longest line between the Atlantic and Tacific Seaboards, as against the Sunset line in ]iarticular: That it has not yet demonstrated its ability to make time equal to the time made by the direct routes over the American lines and by the Sunset line; That it carries the goods through a foreign country subjecting the merchants to annoyances, custom reciuirements and delays. This last point, according to my recollection. Mr. Kerr has not treated. t gather this from our discussions in meetings on this subject. I have pretty generally used the words of the Canadian Pacific representative in stating their claims here. They (that is these disabilities) are necessarily asserted to subsist with the Canadian line as against all the American lines. — not against a selected one, or some, but against all of them; not against the all-rail lines alone, but against all of them. Therefore, we submit that the relative characteristics so asserted, nnist be established conclusively: that the physical features set forth as con.iparative disadvantages nnist be proven to be jK'culiar to the Canadian line and to it alone among all the lines concerned; otherwise they do not adequately support its contention, if. indeed, they afford any support whatever. If like ])hysical features are found to subsist with one or more of the American lines in the same or approximately the same degree, then in respect to them the C"anadian line is under no disadvantage conqiared with the American line or lines possessing substantially the same ph\ sical features and is not entitled to a ditTerential under their rates. If it is not entitled to a ditYerential against some of the .American lines, it is not entitled to a ditiferential against any of them, for this is the submission in this case: "Is the Cana- dian line entitled to a ditiferential under the rates of the other lines?" Xot under the rates of one or some of the other lines, but against all of them. The other lines, the American lines, stand as a unit, as o])p()sed to the claim of the Canadian lines. At the morning session. .Vrbiirator Day asked the Canadian line's representative the (|uestion: "Do yiju regard that you are entitled to charge a lower rate on California tratific than is charged by the Xorthern Pacific on California traffic." and his answer was, "Xo; if they use the water livios." — and yet his submission is that he is entitled to a ditYerential under the rates of all the other lines. Xow. assuming, for the i)urp()se of argument, that the conditions de- «cribed do subsist with the Canadian line and for that reason that line 1 88 cannot secure ri^^litfully the traffic which belonji^s to it. \vc submit, for the consideration of the l>oar(l, that there is, anioufj the American Hues on our side, a number of hues which are broken in the sense described; lines which are subject to the same delays incident to infrequent steamer service; lines which are as lon^ — and some of them longer — than the Canadian line; lines which, when measured by these alleg'ed hin- drances cannot make any better time with freight than can be made by the Canadian line; that against these lines the comparative disadvan- tages alleged to characterize the Canadian line do not subsist; therefore, there are no inequalities or disabilities as between the Canadian line and these of the American lines, to counter-balance by a differential or any other device. It follows, that if per se the physical features set forth by the Canadian line as characterizing its line, cf)nstitute substantial ground for a just claim to the artificial advantage of a differential as an i)ffset to the facilities offered by other lines, these American lines may justly claim the same consideration. Their title to a differential is quite as good as that of the Canadian line, and to give the Canadian line on account of the physical characteristics referred to, any artificial advantage over them, would be unjustly discriminative and inequitable in the high- est degree. It would be to declare that the Canadian line's right to par- ticipate in the domestic carrying trade of San I'rancisco is a prior right; its title a higher title, than the right and title of the American lines aft)re- said. The (ireat Northern, at Seattle, the Northern Pacific at Tacoma and Seattle, connect with the same steamers for San Francisco, as the Canadian line connects with at N'ancouver. The distance from Seattle is 804 miles as against 833 miles from \'ancouver. These are distances that are taken from the official schedule of distances published by the Pacific Coast Steamship Company. The Oregon Railroad & Navigation Com- pany connect at Portland, Ore., with steamers for San Francisco which are owned jointly by the ( )regon Railroad & Navigation Co. and the Pacific Coast Steamship Company. It also connects with the (ireat Northern Ry. at Spokane and with the Oregon Short Line Railroad at Huntington. Huntington is on the Oregon Short Line. The latter, in turn, connects at Granger with the L'nion Pacific; at Salt Lake with the Rio Grande Western, which, in turn, connects with the Colorado ^lid- land, and Denver & Rio Grande, and at Pueblo, Colorado Springs and Denver, they connect with all these systems. The distance from Portland to vSan I'rancisco is 653 miles against 833 from \'ancouver.- These steamship connections which are actual, and not merely possible, form the following through lines to San Francisco, which correspond to the Canadian line in the respects described and are therefore justly entitled to every consideration as an offset to the alleged better facilities of other lines, that the Canadian line is entitled to on the same ground, namely: 89 FROM MIXXEAPOLIS: FIRST, — The Great Xorthern R'y to Seattle ancl San Francisco. SECOND, — The Xorthern Pacific R'y to Taconia. Seattle and San Francisco. FROM OMAHA: There are three rontes from Omaha: FIRST, — The Union Pacific Railroad via (Iranfjer, the Ore<^on Short Line Railroad and Oregon Railroad & Xavigation Co. to Portland and San Francisco. SECOND, — The "Burlington," out through Denver, the Denver & Rio Grande, Colorado Midland. Rio Grande Western, Oregon Short Line Railroad and Oregon Railroad & X'avigation Company, to Portland, thence to San Francisco. THIRD, — The "Rock Island," following the same route through Colorado Springs and Denver, thence on via the Colorado ^Midland. Den- ver & Rio Grande, Rio Grande Western, Oregon Short Line and Oregon Railroad & Navigation Company, to Portland, thence via Oregon Rail- road & Navigation Company's steamships to San Francisco. FROM KANSAS CITY: There are three lines from Kansas City: FIRST, — The Union Pacific Railroad through Denver, Cheyenne, Granger, Oregon Short Line to Huntington, Oregon Railroad & Navi- gation Company, to Portland, thence via Oregon Railroad & Navigation Company's steamships to San Francisco. SECOND,— The Atchison, Topeka & Santa I-e R'y to Denver. Col- orado Springs or Pueblo, where they connect n'ith the Denver & Rio Grande and Colorado Midland, in connection with the Rio Grande West- ern, thence via Oregon Short Line Railroad and Oregon Railroad & Navigation Company to Portland, thence via r)regon Railroad and X^iv- igation Company's steamships to San Francisco. THIRD, — The ^Missouri Pacific Raihvav: the same wav. And now to illustrate: The Northern Pacific connections at Minne- apolis, these blue lines (indicating on map), are identical with the Cana- dian line connections at the same point. South and east of Minneapolis, the Northern Pacific, the Great Northern, and the Canadian Pacific, its "Soo" line, all conne'^t with identically the ?ame roads. Therefore, with respect to all traffic n oving via Minneai)olis, to or from San l-'rancisco. 90 tliesc two lines, the Xortlicrn T'acitic — I mij^^lit liavc said tlicse three lines, the Clreat Xorthern. the Xorthern I'acific and the Canadian line are upon an exact efjuality with respect t(j the service performed by their respective blue line connections. West of ^linncapolis their respective physical characteristics compare as follows: 'I'he Canadian line's mixed service via \'ancouver i is- Rail to \'ancouver, Steamship to San Francisco, 1802 miles. 833 " The entire service Minneai)olis via N'ancouver to San I'rancisco bein.u;', 2635 miles. The Xorthern Pacihc's service is- Rail to Seattle, Steamship to San Francisco, Total, 1922 miles. 804 " 2726 miles. about 100 miles longer. I'.oth lines have exactly the same connections at ]\linnea])olis for all this traffic; and both lines have identically the same connections here (indicating on map). That is to say, they connect with the same boats operated by the same Steamship Company. In other words the same boats carry the same freight for both lines. Both lines use the vessels of the Pacific Coast Steamship Company for the Pacific Ocean service. Both lines are broken in the sense described. Both are alike subject to infrequent steamer service, but the Xorthern Pacific is the longer line, yet there is no good operating reason why they should not make equally good time. The contrast between the Canadian line's mixed service between ^linneapolis and San Francisco, and the X^orthern Pa- cific's mixed service between the same points, will answer for a contrast between the mixed service of the Canadian line and the Great X'orthern, respectively, between the same points, as I have explained, save the im- material difference of 104 miles in the length of the Xorthern Pacific and the Great X'^orthcrn road, making the Great Xorthern a very few miles shorter than the Canadian line — I will give it to you, exactly; the Xorth- ern Pacific line is 91 miles longer than the Canadian line. The Great X'orthern is 13 miles shorter than the Canadian line between Minneapolis and San Francisco. From United States points through Minneapolis, obviously then, the Canadian line's mixed service is on a parity with the mixed service of the lines having terminus at Tacoma or Seattle, that is to say, the Gtvch ?Curthern and the Xorthern Pacific. Consequently, if the Canadian line is entitled to any differential as against the two lines 9> named, it imist be for its line cast of Minneapolis. Ilavinc: idontioally the same connections at Minneapolis as the Xortliern I'acitic an.l ( ircat Xortliern. there cannot he any difference as coni|)ared with tho-i lines with respect to all this country, (indicatinj.,^ on map) l'"or business from the Seaboard, from Portland. Me., from iJoston. Mass., from Xe\v N'ork City, from BufYalo, from I'.altimore, from Wheelinj;-, from I'ittsbm-i.,di. it has identically the same routes that the Northern Pacific and the ( Ireat Northern must use to ^'•et that business. If, then, for any pan ..i this business. New En,tjland. for example, it chooses to use its routes via Sudbury and Montreal, through Oj^densburo-. X. \'., (jr throuf^di Ptjrt- land. Me., is it entitled to a dififerential because it elects to use those routes as ap;ainst the very same connections of the Xortliern Pacific and the Great Xorthern. which are e(|ually open to its use at the same rates, the same division of rates? If it elects to use that line and if it can es- tablish that it suffers disability by usin,g- that line east of Minneapolis, docs it not create the disability? And, if it creates the disability can it come to the Xorthern Pacific and Great Xorthern and ask them to com- pensate it for a disability of its own creation by a money advanta.c^e? The Omaha lines do not make the identical connections with those made by the Canadian Pacific at ^Minneapolis, but the difference in distance between these blue line points (indicating- on map) and ( )maha and St. Paul and Minneapolis, as the P>oard well knows, is not material, while the character of the service cast of Omaha and east of Minreapolis is the same. Therefore, the Omaha lines (mixed rail-and-water lines via Port- land), compete, or should compete with the Canadian line upon equal terms so far as the service east of Omaha and Minneapolis, respectivelv. is concerned, for San Francisco's trade with this blue line territory (in- dicating on map). West of Omaha, the service of the broken or nu'xed rail-and-water line, via Portland, formed by the Union Pacific, Oregon Short Line and Oregon Railroad & Xavigation Company roads compares with the mixed service of the Canadian line west of Minneapolis as follows : Omaha to Portland, Rail service, Portland to San Francisco, Ocean service. 1823 miles 653 " Total, 2476 As T have already explained, the service from Minneapolis via \'an- couver. by the Canadian line, is 2,635 miles. The difference is 159 miles Both lines are broken and are in the same manner s steamer service, while the difference in distances. 1 = as the Board well knows, to make any material di required for movement of the traffic between shippins nt me l)oint and destina- IMAGE EVALUATION TEST TARGET (MT-S) 1.0 nil I.I 11.25 US 1^ 12.2 IIIIIM u mil 1.6 V] ^ ^>. Photographic Sciences Corporation V ?v ri>^ <^ 23 WEST MAIN STRIET WEBSTER, N.Y. MSSO (716) S72-4S03 ci^ 92 tioii. A comparison of the Canadian line's service west of Minneapolis, with the service of the broken mixed rail-and-water lines from Omaha via I'ortland, formed by the "Burlinj^ton," Rio Grande, Oregon Short Line and Oregon Railroad & Navigation Company's roads — (indicating on map) these lines arc the 15. & M. to Denver — Oregon Short Line — to Portland — will differ from that just made between the Canadian line and the L'nion Pacific line only in the respective distances between r)maha and Portland, the "lUirlington" line being 367, and the "Rock Island" line 321 miles longer than the L^nion Pacific line, which would make them respectively longer than the Canadian line by 208 and 162 miles. Like- wise the broken lines, mixed rail-and-water, from Kansas City, via Port- land—! have already pointed them out — which lines serve the same blue line territory with facilities which are, for the most i)art, equal to those offered by the Minneapolis and r)maha lines, respectively, as before de- scribed, compare with the Canadian line about as the Cnion Pacific's Portland line does. The difference is in the mii:.'age to Portland. This comparison shows the Kansas City lines via Portland, respectively, to be longer than the Canadian lines from Minneapolis as follows: The L'nion Pacific line total 2703 miles, —by 68 miles The Atchison, Topeka & Santa Fe line. " 2813 " — by 178 " The Missouri Pacific line " 2818 " — by 183 " From I'ortland the steamer sailings are, perhaps, more frequent than from \'ancouver and Seattle, but that would count for very little against the all-rail lines' daily service, in that they sail once in three days against sailings every five days from \'ancouver and Seattle — as stated by the representative of the Canadian line in his argument. These comparisons are just and a])plical)Ie to all the traffic which may, or can, move via Minneapolis, via Omaha, via Kansas City, to or from San h'rancisco, and the whole blue line territory shown on this map. MinneajKilis. Omaha and Kansas City, as the mend)ers of this board well know, are common base jjoints for San I'rancisco rates — connnon gate- W'ays through which the San I'rancisco trade with this blue line territory moves upon an eciuality as to rate. \*ery much the largest share of the subject traffic ])asses through these gateways. The Canadian line uses its Miimeai^olis connections for all of its traffic with this entire blue line ter- ritory (indicating on map) except the Atlantic Seaboard; hence, with that excej^tion, the Canadian line and the several American lines, so far as contrasted, are on a parity in res])ect to that ])art of their respective service or the service of their respective connections, east of these com- mon gateways, so that the contrast of these lines west of these gateways is final and complete. The Atlantic Seaboard traffic is moved by the Canadian line via Sudbury and Montreal. Newport, Vt., and Ogdensburg, 93 N. v.. but the American lines mentioned use the Minneapolis, Kansas City and Omaha jrateways for that traffic also. That is, thev use thoi' gateways for New r3nj;land and Middle States traffic as well as for tliis western traffic. The Minneapolis connections of the Canadian line, which are identical with the connections of the (ireat North.ern and the Xorth- crn Pacific, are open to the Canadian line for Atlantic .Seaboard traffic upon the same terms as they are open to and used by the Creat Xorihern and the X^orthcrn Pacific and we make the ])oint here that it follows, necessarily, that if the Canadian line elects to use the .Sudbury-.Montreal line instead, that is. instead of the same connections which the ( ireat Northern and Xorthern Pacific use via Minneai)olis — that if it thereby incui.- or subjects itself to any disadvantaf>es or disabilities as compared to the \merican lines, those disadvantaf^es are of its own creation and it cannoi' thereon build a just or reasonable claim that they should be counter-balanced by an artificial advanta,ije in rates. We will proceed with the cotitrast, however. l-Vom Xew Eni^^land and Middle States territories, the .Xorthern Pacific, Minneapolis-Seattle route is longer than the Canadian line's \'ancouver route from all ])oints save Philadeli)hia and P.altimore and in these cases the diflference in distance is not material. Tt would be en- tirely overcome, and the comparison reversed, the Canadian line being shown as the shorter, if the Canadian line would use this line (indicating on map the line via Minneapolis). The (ireat Xorthern, Minneapolis- Seattle route is longer than, or is j^ractically the same length as the Lana- dian line's \'ancouver route, exce])t from IMiiladelphia and Palliniore, but these differences would be overcome if the Canadian line would use the same connections, they being ecpially open to it east of Minneapolis, as are used by tlu Clreat Xorthern. The distance is practically the same, possibly a little shorter, about thirteen miles, ] think T stated, but as I said in the case of the Xorthern Pacific this distance would be overcome if the Canadian line would use the same comicctions east of Mumea|)olis that the Great Northern uses. The broken routes via r)niaha and Port- land, Ore., compare with the Canadian line's \'ancouver route, as fol- lows: The Union Pacific-( )regon Short Pine's Portland r<»ule is prac- tically of the same length as the Canadian line's N'ancouver route from Portland, Me., P>oston and Xe\x- "S'ork City and is oidy 260 miles shorter from Philadelphia, but these dififercnces would be reduced to insignifi- cance were the Canadian line to use its Minneapolis rf)ute. The "I'.ur- lington," Rio Cirande-( )regon .Sluirt Line, Portland route is longer from all New England and Middle States cities, except Paltiniore, where the difference is not material, and the conditions would be reversed l)\ the Canadian line's use of its Minneapolis route. The "Rock Island's" Rio (irande-C^rcgon Short Line. Portland route compares the same prac- 94 tically as tlie "r.urlinf^ton." Tlie MissDuri I'aciiic's Rio Grandc-Orcgon Slutrt Line, J'ortland route compares ])ractically llie same as the "Rock- Island's" route, and so docs the "Santa Fe's" Rio (Irande-Oregon Short Line. Torthuid route. In the foregoing we have contrasted with the Canadian Hne eight of the American lines. There are no disparities in respect to their facilities. i)hysical or other, on the eastern end. — say east of the ^lissouri River line; they are practically equal. ( )n the western end, the ex- tremes of difference are found to be American lines via Seattle against the Canadian line via \'ancouvcr. The American lines' rail haul is longer by 91 miles. Their Ocean liaul is shorter by 2^ miles. The American lines via I'ortland against the Canadian line via X'ancouver; the Ameri- can lines' rail haul is longer by 208 miles, Ocean haul is shorter, by 180 miles, lujuate the ( )cean haul with the rail haul by adding 15 ])er cent to the ( )cean mileage (which is stated in geographical miles, while the rail mileage is expressed in statute miles) and the extremes of difference are found to be — American lines via Seattle against the Canadian line via \ ancouver, (27 geographical miles) and the American line is longer by 60 miles. The American lines via Portland against the Canadian line via \'ancouver and the American line is longer by one mile. \\'ith perhaps th-j single particular of not being recpiired to move their traffic through a foreign country, the characteristics of these lines are l)ractically the same as those of the Canadian line. There is no natural advantage to counter-balance and an artificial advantage, a differential, against them in favor of the Canadian line, as we have averred, would be grossly discriminative and unjust, amounting to a declaration that the right of an alien to business in the United States is superior to the right of citizens. With respect to the disadvantage, if it would be a disad- vantage, by rea.son of having to transport the freight thnjugh a foreign country, which you will find given in the Denver discussion as one of the reasons why the Canadian line claims a differential and will also find it adverted to in the i)roceedings of the Trans-Continental .Association, or rather given in those proceedings by the representative of the Canadian line as one of the reasons, and as an important reason, why it should be given a differetitial. With respect to that disadvantage, if it is one, it will be sufiicient to say at this time that these .\merican lines which I have described to you, when working with the (Jrand Trunk or the Michigan Central Railroad east of Chicago, as they all do to a greater or less extent, encounter the same disadvantage. ARIUTRATOR DAY— Or the Wabash. MR. STCIU'S — (^r the Wabash. These American mixed rail-and- water lines do not exist merely on paper. 'JMiey are o])en and in daily use for both freight and passengers. They arc effectively worked against the all-rail lines for San I'rancisco trade with Oregon, Washington, 95 -Oregon c '"Rock m Short nc eight to their Missouri the ex- ■ against is longer imencan .' Anieri- •, by i8o ])er cent ^hile the ifference han line is longer Canadian ove their lines are natural fcrential, vouUl be that the the right a (lisad- i foreign s one of also find ation, or "anadian lould be s one. it which I : or the greater rail-and- in daily 1 against hington, Idaho, L'tah and Montana. Some of them arc preferentially worked for San I'Vancisco's trade with St. I'aul and Mimiea])()Iis and points further cast — ihc Circat Xorthern works tlicm. It matters not whether they have been worked more or less effectively for tlic subject traffic. The fact that the Canadian line has continuously, since iS<>3. been working o])enly on a lower scale of rates would alone be sufficient to account for their deficiency in that regard. The fact that they have elected to work u])on an e(|uality as to rate with the all-rail lines, regardless of the re- sult upon the volume of tonnage open to their competition, is to our mind, very strong evidence of the injustice of the Canadian line's claim. If the Canadian line jxjssesses a right to a share, defined or undefined, of San Francisco's trade, then these lines possess the same right to an e(|uivalent share. If the Canadian line cannot obtain a fair share, what- ever that may be, of that traffic at equal rates with the all-rail lines, then these lines cannot obtain a fair share at rates e(|ual to those charged by the all-rail lines, if the Canadian line Ijy the use of tlie differential can obtain traffic which it otherwise could not obtain then a differential would force to these lines, traffic otherwise unobtainable. If the Cana- dian line, under these circumstances, is entitled to use a ilifferential. then these American lines are entitled to use a differential. If these .\merican lines possessing the same right, whatever its origin, whatever its scope, to share the traffic that the Canadian line ])ossesses. ])resenting substan- tially the same physical features as tlujse presented by the Canadian line, suffering the same natural disadvantages, if they be such, when com- ])ared with the all-rail lines, as are attached to the Canadian line: if these eight lines voluntarily forego the use of an artificial advantage to coun- ter-balance the alleged natural disa a nnil. on tho other. Jf the claim of the Canadian line fails aj^ainst one of the Ameri- can lines, it fails against all of them. If the right of the Canadian lint' to a differential is not established a^ against the Xorthern Pacific, this Hoard will not award it a ditTerential against the Xorthern Tacitic, because ii may be of the ojiinion that its claim is not unreasonable as against the all- rail line of the Central anil Union I'acific. To do so would b.' to add to the disabilities of the Xorthern I'acific what is taken froiu the disabilities of the Canadian line. Will this iJoard work an injustice to the X'ortlurn I'acilic in order to satisfy a claim of the C"anadian line against the Cnion and Central Pacific all-rail line, no luatter how reasonable such claim ma\ be? In May. 1888. the right of the Xorthern I\acitic to make by its mixed rail and water line between Minnea]iolis and St. Paul and San JM-ancisco the same rates as were made by the Canadian line between the same points was recognized and conceded by the Canadian line by vote of its representatives at a meeting of the Trans-Continental .\ssociation in San [•'rancisco. but it long ago fell into disuse. The Xorthern Pacific found it would not work, for innucdiately upon the suggestion of the proposi- tion the ( )regon Railway & Navigation Co. came in and watited the same advantage. Since then the Creat Xorthern has been completed, (live the Xorthern Pacific a differential and can you withhold it from the (Ireat Xortherr.;' (iivc it to the Great Xorthern and Xorthern Pacific and how can you wiihhold it from the Oregon Short Line and L'nion Pacific? If you give it to them how can you withhold it from the Kansas City lines? The Cireat X'orthern. Northern I'acific. ( )regon Railroad 6v: Xavigation Co. in connection with the Un-'on Pacific, which lueans the l'nion Pacific, the "Burlington," the "Rock Island." the Missouri Pacific, the Atchison, Topeka & Santa I*"e, all in this market working a mixed rail-and-water line on a differential rate and where would rates be? How much business would the other lines get? What would the all-rail lines do with the San hVancisco conmiunity. who began with the use of the Cape Horn route, accustomed to subdivide its business and to ship a large part by water around Cape Horn: accustomed to divide it between the Cape Horn sailing vessels and the Pacific Afail Comjjany previous to the opening of the overland route; accustomed to ptU a large share on the sailing vessels, a small share on the I'anama route and a still smaller share on the overland roads simply to avail themselves of differences in rates? Touch this (|uestion. Introduce differetitial rates with anv of the American lines, and it must be manifest to any practical railroad man who knows the inter-dependence of these rates and these lines, that they will o])erate exactly as a cut rate. Let the rate be cut on the Great Xorthern and it goes down to the Gulf of California. Let it be cut on the Xorthwestern and it goes down to the Gulf of Me.xico. Let it be cut on 7 98 the New York C'otitral and it goes down to l'"lorida. Von cannot stop it. An attempt to introduce differentials among the American lines will result in no dififcrcnce at all in rates. All rail lines and the mixed rail-and-water lines will all he upon exactly the same footing. It may not he amiss here, although T shall get to it later, to call the attention of the Board to the fact that there is a very small volume of traffic to be distributed over the various lines that can serve San I'Van- cisco. There is not a single line leading out of San Francisco — take the Central Pacific, take the Atchi.son, Topeka & Santa Fc, take the Oregon & California in connection with the Creat Xorthern, or the ( )regon Rail- road & Navigation Co., or the Xorthern Pacific, or take the Southern Pacific line in connection with the Texas & Pacific, or take the Sunset line alone — any one of these lines can do the entire traffic and not tax the ca]Kicity of a well regulated, well conducted single-track road, which traffic now has to be divided with the Cape Horn sailing vessels, with the Pacific Mail, with all these various railroad lines. We have no great tide of tonnage that presses u])on these roads here (indicating on map) at Chicago and at St. Louis. At certain seasons of the year when the ca])acity of them all is taxed, at a time when there is such a pressure in the grain trade that although the canal-and-lake rates from Chicago are lower, are recognized to be lower sometimes by a cent a bushel, can tliey not just as easily get the full all-rail rates as they can their lower dilYeren- tial rates? That is a (|uestion to be seriously considered when you talk about customs of other lines as precedents. In reference to the e(|uality of rates as between the Xorthern Pacific and the Canadian line. j)roduced by vote in 1888, the Canadian Pacific concurring, that is to say. the Xorthern Pacific being given the same rates on business to and from Minneapolis via its ocean-and-rail line as the Canadian Pacific enjoyed by its ocean-and-rail line: That action pro- duced e(|uality at that time. If equality of rate for San Francisco's trade with j\Iinnea]>olis and St. Paul was just and reasonable then, as between the Xorthern I'acific and the Canadian line, which the latter admitted by its vote just referred to, is it any less so now? If at any time there were just and reasonable grounds for placing the Canadian line and the Xorth- ern Pacific line on a rate equality for San Francisco-Minneapolis trade, would not the same conditions demand that the same etpiality of rate should subsist between these two lines for all San Francisco business moving via Minneapolis? If there is anv disadvantage as between those two lines west of Minneapolis, I have demonstrated conclusively that the disadvantage is the Xorthern Pacific's and not the Canadian Pacific's. I have also brought to the attention of the Board, and the Board's own knowledge supports it — that the Canadian Pacific's and the Xorthern Pacific's eastern connections at Minneapolis for this trade, are identical. Then, if the Canadian Pacific concedes that as for business between San Irancisoi) ami Miniioapolis f(|uality of rate is proper as ht'twoen it and tile Xorthern i'acific, how can it say that ecpiality of rate is not proper between the Xorthern Pacific and the Canadian I'acific with respect to all this business passinji^ throuj^h Minneap(jlis from Atlantic Seaboartl. Middle, Southern, Western or Southwestern states? 1 think I have dwell enoufi^h upon the question of its own disability east of Minneapt^lis. The mere purpose in itself of turning- the traffic from the domestic to a forcij^ni carrier does not j^nve any title to a difTeretUial. ( )n the most radical theory favorable to such title, the differential can be allowed as a matter of rig^ht and title, only when the disability is real, not optional. If the contention of the Canadian line is not estal)lished ajj^ainst the Xorthern Pacific's broken line, how can it be established aj^^ainst the (ireat Xorthern 's broken line? As 1 have explained, they have identi- cally the same connections. The (Ireat Xorthern line is a little shorter than the Xorthern J'acific. but not more than 13 miles shorter than the (.anadian i^acific. it connects at Seattle with the very same steamers that the Canadian Pacific uses. Its line is broken; subject to infre(|uent steamer service, with con.sequent delays that are allej^ed to spring from that, in same maimer and degree. If not established against either of the mixed rail-and-water lines via Minnea])olis and Seattle, how can it be established against the mixed lines via ( )maha and Kan.sas City, respect- ively, via Portland, via the lines that we have described ? We now pa.ss from the American part water and part rail lines via Seattle and i'ortland. which work through Minneapolis, ( )maha and Kansas City gateways, to the consideration of other American ])art water and part rail lines, whose ocean service is performed on the Atlaiuic side and which work via Mexican (iulf Ports. Their San I'rancisco trade is confined almost wholly to that part of it which is done with the Atlantic Seaboard territory. They are. therefore, much more restricted in the territory laid oi)en to their competition than the Canadian line is. These lines, like the eight already reviewed, present physical features which are substantially similar to the characteristics of the Canadian line and pleaded by it in support of its contention. Tf there is a difference, it is of degree only and in degree the advantage is with the Canadian line as compared with them. They arc the — SOUTHERX PACIFIC "SLIXSET" LI XE: Morgan Steamship Line, X'ew ^'ork to Algiers ( Xew Orleans) i8cxi miles. Thence via rail to San Francisco -2489 Total 428.) " lOO TICXAS .\: TAC I1"K (il'Ll' I.IXR: Cronuvfll Stcanisliip Line. Now Nork to Ww < )rU';iiis. iSoo miles. Thetice via rail to San I'rancisou -'455 Total 4-55 'SAXTA l-i:' (iLLF LIXR: Mallory Steamship Line. Xew N'ork to ( ialveston 2300 nnles. 'riience via rail to San I'Vanoisco j66() Total v/'^) 'Jliey all ilo San J'rancisco business too at eciual rales. Tlie\' com- pare with the Canadian I'acific's line from Xew ^'ork in this wise: The "Sunset" line is longer by 240 miles. The Texas & Pacific (iulf line is longer by 206 The Santa Vv ( iulf line is longer by 917 From the territory north, northwest and east of Xew York City, the diflference in distance favors the Canadian line still more, because it takes the business up and forward directly by railroad, while we have to bring it down to Xew York and transfer it to steamer. l*"roni the territory west, southwest and south t)f Xew York City, the difYerences are the same as from Xew York City, as the trafilic moves via Xew ^'ork City, to reach any of the lines contrasted. Some of these (Iulf lines have been engaged in the San Francisco trade for a i)eriod which antedates the opening of the Canadian line by sev- eral years, but they all work on the dead-level of equality as to rate, except in the respects which have been already explained. One of them, as least, has demonstrated that a mixed or broken line can successfully compete with the all-rail lines for California business. We refer to the "Sunset-Gulf" line, that great bug-bear of the Canadian Pacific. The success of the "Sunset" line in competing against the all-rail lines has been remarked by all who have been associated with or associated in this business for the last fifteen years. Xo one is more familiar with it than Arbitrator Midgley. Jt goes very far toward proving that it is not wise always to accept, as the product of knowledge and experience, the not uncommon notion that mixed rail-and-watcr lines cannot successfully ctjmpete at ecjual rates with all-rail lines, or that an artificial advantage in the shape of a dififerential or other device, is essential to participation in a conunon traflfic by the rail-and-water lines as against all-rail lines. The success of the "Sunset" line, and the fact that our Canadian friends roi miles. Iiavi' ht'cn ai-(.-usttinic'(l Kt cilc it as a line a|L;ain>i which, in particular, tiie Canadian line ncodcd a ditTcrcntial. suj^j^csts the pcrtiiutu-v of a brief hi>- turieal statement. I'he ■"Siniset" line was opened for San l-'raneiseo traftie in iSS.^ At that time its officers believed that it ct)nld nt)t successfully compete at e(|nal rates with the older and well a tlu- last tliat tlic "Sunset Route" makes? We ask wlietlier the Canadian line has ever tried to make time e(|uahnjj: that of the "Sunset." TIas it built larj^je ami fast steamsliips of latest models to reduce the time of the sea-service? Has it scheduled its trains with special rejj^ard to San I'Vancisco service? Has it improved the method of transferrinjj;^ from shij) to car. so as to do it iti the minimum time, or has it continued to use slow and anti(|uated vessels which serve many intermediate ports with much consequent loss of tiiue, instead of runnitifi^ throuj^h direct from \'ancouver to San I'rancisco. or perfcctinfj its arranp^cment to use a rail connection? Has it schedided it«. trains first with regard to San Francisco business, or has it cjiven ilie preference to its way-traffic, and to its Oriental trade? It was opened more than ten years ago and has since been continuously operated. I las it improved its service? In that regard, has it done anything like what the .\merican lines have done, and whicii was e(|ually |)ossil)le to it? Rather, has it not depended wholly upon lower rates to seciu'e traffic? Its rail-and-water line is shorter than the "Sunset-( Julf" line by more than 200 miles. The ocean part of its line is less than !i:ilf as long as the ocean part of the "Sunset-( lulf" line. Why. then, in the name of all that is creditable in railroad management, has it not demonstrated that it can e.xcel the "Sunset-( lulf" line in despatch? fs it not reasoiiabU' to re(|uire that the Canadian line .should first do for itself, what the "Sunset" line has done for itself, before asking the American lines to help it against the "Sunset" line? If the "Sunset" line — a broken line — has demonstrated. by means which are as ready to the hand of the Canadian line as they were within the reach of the "Sunset" line, that it can cl()ynieiit u])on the part of l)oth of the same skill and cncrgv. 'riien, if the JJoard please, what weight should he given to the Canadian line's plea in this respect as against the "Simset" line or any of the American lines? Should the shareholders of the Southern Pacific, or other roads in the "Sunset" line, after havhig taxed themselves heavily to "<)ring the "Sunset" service to the maximum of efificiency. on that ac- count be subjected to another tax, an assessment which re(|uires them to surrender a portion of their business to the Canadian line? The Inter- State Commission justly says: "A dififerential is but a device to partition trafific." To suffer the Canadian line to use a differential against the "Sunset." is to turn traffic Troni the "Sunset" line to the Canadian line. It is taxing the "Sunset" line for the benefit of the Canadian line. The builders of the Southern I'acific received no governmental or other aid. but a land-grant of doubtful value, by which I mean that much of it has been forfeited to the (iovernment and there is doubt as to much that re- mains. The testimony of Sir Wm. C. Van Home, President of the Canadian Pacific Railway, before the Senate Committee on Inter-State Connnerce. shows that the value of the various aids received by the Canadian line from the Dominion (iovernment was $35,000,000.00 in money, 18,000.000 acres of land, valued at $3.50 per acre, and 714 miles of road, which cost $35,000,000.00. Sir Wm. C. \'an Home acknowl- edges that for some of their land tluy received $3.50 per acre, and a statement that I saw (and which 1 cannot prove is from any authentic source, though it is said to have been compiled from official records), shows that the Canadian line sold their land, what has been sold, at prices ranging from $3.00 to $6.00 per acre. This testimony I refer t(j is in Report Xo. 847. 51st Congress, ist Session, which I will file as one of the Exhibits. The Southern Pacific shareholders have never received a dollar in dividends. The shareholders of the Canadian line were guaranteed and received for ten years, an annual dividend of three i)er cent. Manifestly, our poor Canadian friends ought to be further assisted: but ought they nt)t to i)ut their petition upon more substantial and creditable grounds? ARIUTRATOR DAY— You stated a moment ago that there was an aiun.al dividend of three per cent guaranteed. \)y whom was it guaran- teed? MR. STClUiS — It was guaranteed by the Covernment. I was under the impression it was a subsidy by the (iovernment. but 1 find that the testimony of Sir Wm. C. \'an Home is to the efifect that the money was deposited by the Company with the Government to provide for that divi- dend, but 1 did not go deep enough into it U) be certain as to that. I did not think it was very important. There have been filed with you the i)roceedings of the Trans-Con- tinental .\ssociation. and of the Denver Meeting and various other docu- lo: incuts, and if you (.-xaniinc those, yon will find, as I have prcvionsK stated, that amonjT the reasons urj^^ed why the Canadian line shonld have this differential, is the fact that they transported their j^oods through a toreij^n country under customs regulations. If the jjjentlenian of the Canadian I'acitic who presented its case here alluded to that. 1 did not hear it, but antici])atin<;- it. and knowinj,^ that the I'.oard will tind it in the record. ] am ])ersuaded to answer that point. In respect to the annoyances and delays arisinj; from customs rcju'it lations incident to movinj^ domestic traffic throu.i,di a forei.i;n coimtrv and alleged by the Canadian line as i)rejudicial to it. we submit that thev are largely imaginary, and the shipper is relieved by the carrier to such an extent that the alleged disadvantage is unimportant. Section 3006. of the j^toms control. Xo fees are paid, 'i'he broker's charges or salary, and the per diem of the Inspector are the onI\ expenses, and these the shipper has nothing to do with. In the move- ment, westbound, similar ])apers are ])repared and presented at Morris- town, X. v., and ''ortal, .\o. Dak., the cars proceeding under lock and seal to \ancouver. where the lading upon steamer is supervised bv the inspector stationed there. W'e contend that th- deterrent effect of the necessarv custom regula- tions upon the otherwise natural movement of tratilic is immaterial. Tlie io6 American lines snffer it in like manner and degree when working a^ they do in connection with the Grand Trunk and Michigan Central, both of which lines have agents resident in San Francisco, actively competing for Trans-Continental traffic. The Michigan Central moves its great traffic between Chicago and lUifTalo and points farther east or west under like customs regulations, in keen competition with the "Lake Shore" and "I'ennsylvania"' lines, which are free from such regulations, yet the Michi- gan Central makes no claim of disability on that account, and neither receives nor asks any compensating advantages in rates. Whereupon an adjournment was taken to lo o'clock A. M., October 14, 1808. [Morning Session, October 14, 1898, lO A. M. The meeting convened pursuant to adjournment. ARBITRATOR WASHIIURX— :\lr. Stubbs, will you proceed with your argument? MR. STCBHS — Mr. Chairman, and (Jentlemen, Members of the Hoard: I wish, first, to revert to an acknowledgment on the part of the Canadian Pacific that their contention is for a differential under the rates of all the American lines, jn answer to a question by Arbitrator Day. at the morning session yesterday, the Canadian Pacific representative answered, "Xo, our contention is that whatever the agreed rates of the Trans-Continental lines may be, that we shall be permitted to charge a differential rate below those rates." In answer to a question from Arbitrator Day: "Do you regard that you arc entitled to charge a lower rate on California traffic than is charged by the Northern Pacific on California traffic?" The reply was. "No, if they use the water lines. We are on record over and over again, that in the case of the Northern Pacific and Great Northern, that where- ever they use the steamer line from Puget Sound to San Francisco, they shall have the differential, if they want it. liut they are out of San Fran- cisco business: they do not claim to be San Francisco lines; they do not work for San I'rancisco business. In other words, they have made a trade." i()7 He who affirms nnist prove. There is no trade; there never has been a trade between the Northern Pacific and the (ireat Northern on the one >ide, and the other San Francisco Hnes on the other side. They do w(M-k for San Francisco bnsiness. The Northern Pacific is in the trade and I may say daily takes business to and from San Francisco, nsins--. however, for the most part, its all-rail line. The Great Northern takes business 'or San Francisco in connection with its ocean line from Seattle, it matters not how much they take, they are in it. lUit. assumino; that all that is .aid by the Canadian line is true, how does it bear on this case further than to accentuate the position of the American line?, if, for any reason, the Great Northern and the Northern Pacific other than a trade, find that it is to their interest — and their interests are involved with the interests of the other lines — not to use a dififcrential, because of conse(|uences, the inevitable consequences to traffic as a whole, — what does that argue as against the claim of the Canadian line for a differential? Reverting to what was said yesterday, as indicating the reason why a diiiferential had not been used in favor of the so-called weaker Cal- ifornia lines, let me repeat that T am talking to experts in the transporta- tion business. Put a differential of lo per cent on the Canadian line: put it upon the Great Northern line: put it upon the Northern I'acific line, and I assert that you cannot refrain from putting it upon the Oregon Railroad & Navigation Co. and ( )regon Short Line. The Kansas City gateway, the Omaha gateway and the Minneapolis gateway must be upon an equalitv with respect to this business. No one would stand it. Xo line would stand any disparity between those gateways, and. espt "h11\ is it reasonable, because all of these lines have like physical disabilities. Allow these lines, the Canadian Pacific, the Great Northern, the Northern Pacific, the Oregon Railroad & Navigation Co. with its Union Pacific, the "P>urlington." the "Rio Grande." the Missouri T'acific and the "Kock Island" connections, to enter this territory with a to per cent differential and what would be left for the line, the direct all-rail line via Ogden? Where would the "Santa I'e" be? Where would the Texas i^- Pacific be? Where would this nnich vaunted "Sunset Route" be? Is it not apparent to every practical man that there vnouUI be no differential: that there could Oe no differential; that dead level of equality of rates w(ju1(I necessarilv subsist? The only difference would be that instead of being upon a basis of reasonable rates, something that would afford reasonable compensation to the carrier and would contribute to the maintenance and stability of rea.sonable rates, we would all be down to the fighting basis, at cost, with no stability whatever to the rates. There would be open war until some one or more of the lines was exhausted, until stock-holders and security-holders stepjjcd in and said — "Stop!" We would come out at the same hole we went in at just as in the case of the great fight be- io8 twc'C'ii tlic "Atcliistin'" and the diIkt lines in \XH(> — (k-ad k-vcl of ef|iiality of rates. Revcrtin^^ n^ii'in to the comparison between the "Siniset Route" and the Canadian hne: the "Sunset Route" ccjuipetes in this Xew Enjj^land territory, the ji^reat manufacturing center for cotton piece j^oods, do- mestics, boots and shoes, nails and many other commodities with whicli you are all familiar. It coni])etes with the all-rail lines on a dead level e(|uality of rates. The Canadian line takes up ji^oods at l»oston, or at any of these Xew Enj^^land jioints or an\ of the interior Xew York jioints, in cars; transports them without breaking bulk to X'ancouver, transfers them from car to ship and delivers them at San Francisco. The "Sunset" line and all the (iulf lines take these j^oods from I'.oston. as a rule, and i)Ut them aboard of the steamers of the Metro])olitan Steamship Company; they are delivered by that company on their pier, in Xew \'ork City; they are then lightered to the Mallory Steamship pier or to the .Morgan .Steamshi]) pier, reloaded into the vessels of the (iulf lines, transported to Xew Orleans or to (ialveston, then transferred from vessel to car. and carried to San l-Vancisco. There is evidently a disparity between the ability to handle those goods; but in whose favor is that disparity? Is it the Canadian line? I feel obliged to refer to a reference, or a statement made by the Canadian line, which I am sorry to have to notice. It seems to me it is beneath the dignity of this proceeding. 1 cannot see what the cutting of rate.^, or the maintenance of rates, between these lines currently, has to do with this ])r(jceeding. lUit it was deemed to be necessary by the Canadian ])eo])le to refer to the "Sunset" line invidiously, 1 think, in order to account for the share of the traffic which it takes, wiiich has nothing whatever to do with this controversy according to our construc- tion of the submission. The advocate of the Canadian line says; "Xow, in connection with accunudating business by the Sun- set line, their water line being the initial, it is well known that steamer lines in securing business are not at all particular as to classification or weight. That is the history of the manner in which the steamer lines carry on their business usually and shiji- pers often think they see an advantage in using the water lines as against all-rail, in order to evade the classification and weight as much as possible." Out of the abundance of the heart the mouth speaketh; but I'rother Kerr forgot that on castbound business his steamer line is the initial line. I have at hand a ready illustration of evasit)n of classification upon the part of the Canadian line, but T do not think it is fitting to introduce it here. He proceeds; utq "It is also well known that the Soiitlicni Pacific Co. arc pretty well heds^ed around in California and in lari^c sections of the state tiiey enjoy a moiujpoly. This is particidarly so with rei;ard to San I'Vancisco, as all lines enterins^ the city, with the exception of the Canadian Pacific and the ( )re<;-on Railroad ^\: Xaviijation Co. must use the Southern Pacific tracks. P.eiuL;- in this positit)n. they are enabled to influence business in various ways to the Sunset line, in which they have been very successful." ('I'h.ank liini for that) — "^ferchants are natiu-ally chary of unnecessarih' anta,p;oni7.in.i;" a railroad company who has control of their busi- ness, and on the other hand, the Southern Pacific are in a posi- tion to offer various local inducements to merchants, therein tvins; their business to the Sunset line. This is one of the chief reasons why the Sunset line has been enabled to hold such a lar^e share of Trans-Continental business and i)i-oves that their circumstances are so entirely different from the Canadian Pacific that they are not entitled to differential rates as ajLi^ainst all-rail lines." I am not S*-*i''S' to take the time of the I'.oard in disputint; such pro])o- sitions. but for the sake of argument, suppose we admit that it is true- it is not true — but suppose that we admit it is true, that the Southern Pacific has a monopoly in California: that it has a tremenchnis ievera,y,e by reason of having' hedged California in. IJy lease and by ownership the Southern Pacific controls about 3.000 miles of railroad in the State of California. Xot all of them, but nearly all of those many miles of rail- road have been built by the Southern Pacific Company. — by the men who control the Southern I'acific Company. In nearly every case in constructing these roads they crossed virgin soil tenanted oidy by the coyote and jack rabbit; they opened those valleys; they discounted the future by many years; the;,- made this business. Shall they give it up to the Canadian line? Let them go down into Missouri with that same sort of an argument. Xow, again, returning to the question of the advantage to be derived by these Culf lines, the ".Snnset" line in particular, by under-classifica- tion of freight. J'rom ( )ctober, 1889. to January first. 1892. there was an inspection service at San I'rancisco over all the roads of all the Trans- continental lines controlled by the Association, the inspectors were ap- pointed by the Chairman of the Association, their salaries ])ai(l by the Association, they acted in ct)mplete subordination and under the entire, sole direction of the officers of the Association. l*>om April first, ^893. to April 30th, 1897. under the Trans-Continental ]">eight Kate Conuuit- tee. this system of ins]X'ction was employed for all the lines except the Canadian Pacific, Northern Pacific and Great Xt)rthern. I'rom jime first. 1897. to date, the Trans-Cancisco. or between Chicago and San Francisco, that it cannot also be j)art of an independent part water and part rail line. Xew York or Chicago to San Francisco, is equivalent to saying, that because the Xew York Central or the 'A\'est Shore" is part of an all-rail line, Xew York to San l">ancisco, it cannot be part of a mixed water and rail line between New York and San Francisco, of which the Canadian Pacific is also a part ; or that because the Chicago & Xorthwestern, or the Chi- cago, Milwaukee & St. Paul road, is part of a through all-rail line, Chi- cago to San Francisco, it shall not be a part of a mixed water and rail line between the same points, of which the Canadian Pacific is also a part. 1 1 I If this is sound reasoning, as we believe it to be, it necessarily follows that because one of the constituent roads in a mixed line via Portland, or via Seattle, or via the Gulf of Mexico, is also a part of an all-rail line, the latter being a competitor of the former line for San Francisco business, and which carries a more or less considerable share of that business, that fact cainot be fairly used aj^^ainst the right of the mixed water and rail line as a unit to i;)articipate fairly in the subject traffic as against the all- rail line as a unit. This is obvious. Otherwise those parts of the mixed lines which were not also parts of all-rail lines would be comi)letely cut off from any participation in the business. iMir example: between Chicago and Atlantic Coast cities, the 15altimore & r)hi() Railroad is a recognized standard all-rail line over which the standard rates i)rovail. Tt is also part of a rail-and-ocean line, and of a rail-and-lake line, respect- ively, over which differential rates are applied in competition with its own all-rail line. Again: who is to decide for these several American lines what is or what should be a satisfactory share of the San :^rancisco traffic? Cer- tainly not the Canadian Pacific. Tf the Canadian line is entitled to an undefined share of the traffic, which is equivalent to an unlimited share, then is there any limitation to be placed upon the shares of the several American lines, whether they be all-rail, or mixed rail-and-water lines? The claim of the Canadian Pacific is made because of its .so-called broken line. .\11 of its alleged disabilities which were dwelt upon by our adver- sary arise from its use of this broken line. Why docs it not use the all-rail line? In that case these troubles would disappear in a moment. If it elects to use a mixed watcr-and-rail line, can it be doubted it finds an advantage in so doing? Must we then as a matter of right super-add a monev advantage? The Canadian Pacific has an all-rail line over which to work to and from San Francisco, just as it works between Minneapolis and Chicago and Cleveland. Ohio, and Tullahoma. Tenn.. and Helena. Ark., over various connecting railroads. It uses its all-rail line as far as Portland, Ore., and from Portland to San Francisco there are open to its use the identical railroad facilities that are open to and used by the Northern Pacific upon the same terms. In that event, as we have said, if the Canadian line elects to use its ocean line instead of its rail line, is it entitled to anv consideration in the wav of a differential or other device to maintain, or counter-balance, rather, the alleged disadvantages it is under by working its ocean rather than its rail lines? On the contrary is it not manifest that there is an advantage, a real tangible advantage, resulting to the Canadian line by using the ocean line against the rail line? If there was not such an acb'antage, would it prefer the ocean over the rail line? As a matter of fact, we know that it uses the ocean part of its line from \'ancouver instead of the rail line from Sunias, because there is an advantage in it. 1 12 Xcjw, oil tin- otluT hand, if llic Xortlicni Pacific cKcts to use thf all-rail line from i'orllaiKi against tlic ocean line troiii Seattle, or from Portland, the same choice bein^ oi)en to the Canadian line, does it by so doin_t;- j^ive the Canadian line just grounds for demandini; a differential a.nainst it or for sayinj^" that it ou.ijlit to be satisfied with what it .yet^ because it u?es an all-rail line? Again: The Canadian line works for the Xorth Pacific Coast business; the business of Seattle, Taconia and of Portland — with all this blue line territory (iii(licatin}.j on map), upon a strict e(|uality of rates with the (Ireat Xorthern. the Xorthern Pacific, the ( )ref;on Railroad cS: Xavij^^ation (.'ompany, and the ( )rej^on Short Line. Permit some repetition as we wish this i)oint to be understood: l-'rom and U) each ])oint in all of this blue line territory east of the -Missouri Kiver line, the Canadian Pacific, the (Ireat Xorthern line and the Xorth- ern Pacific line, the ( )maha lines and the Kansas City lines, respectively, via (iranj^er and Pocatello. and via Ogden and Pocatello. work Portland business u])on a strict ecpiality of rates. This recojj^nizes aiul establishes e(|uality of rates as a ])rinci])le between these interested lines for the rail service east of Portland. Xow. then, as we have shown that the identical roads and facilities between Portland uud .San h'rancisco are alike ojjen upon ecpial terms to all the roads terminating on the Xorth Pacific Coast; to the Cireat Northern, the .Xtjrthern Pacific, the Oregon Railroad & Xavigation Com- pany, the Oregon Short Line and the Canadian Pacific, respectively, as part of their respective through all-rail lines to and from San Francisco, is it iK)t manifest that they are upon the same equality with respect to San i'Vancisco business, as subsists between them in resi)ect to Port- land business? If equality of rate is the rule with all these lines between eastern points and Portland, why should not equality of rate be the rule l)etween them in respect to San I'rancisco business, the conditions and facilities south of Portland being identical for them all? It may be that the Canadian line will give as a reason for not using the all-rail line, that the Xorthern Pacific between Seattle and Portland is not open to its use for San Francisco business upon reasonable terms, or upon terms which it can afford to pay. — It pays the terms from all these points in this country (indicating on map) up to Minneapolis — local rates — But we ask in reply, why this reason does not apply to Port- land business as well as to San hVancisco business? I do not know that they make much use of that line, but it is open to their use and they main- tain equality of rates. The Canadian Pacific line does use the Xorthern Pacific connection for Portland business, and does work u])on an tqualitv of rate with all the Xorth Pacific Coast lines for Portland business. \\'liether it does or not, is of little moment. It is upon an exact e((uality with these lines south of Portland. Then why should it not work with 113 them upon an exact equality as to rate for San I'rancisco business? 1 ask. in the second place, whether the Canadian Pacific has ever ap- proached the Northern Pacific with a proposition to use its line between Seattle and Portland for business which San Francisco interchanges with all these eastern points, coupled with the withdrawal of its demand for a differential advantage on that business. We are informed and believe that it has never done so. But whether this is true or untrue, we revert to the fact that it has established equality of rate basis to Portland for Portland business, which point it cannot reach all-rail except by using the Northern Pacific's road from Seattle. Then why siiOuKl it not work upon the same equality of rate basis for San Francisco business over the line which the Northern Pacific uses between Portland and San Francisco and which is open to the use of the Canadian Pacific upon the same terms? We submit a comparison of the all-rail lines referred to — of the Canadian line, the Great Northern, and the Northern Pacific: At Sumas (the International boundary line) the Canadian line con- nects with the Seattle & International Railroad for Seattle (125 miles). ARBITRATOR WASHBURN— Is that road controlled by any other road? MR. STUBBS— No sir. ARBITRATOR WASHBURN— It is an independent road? MR. STUBBS — I understand it is an independent line and that the Canadian Pacific, — you will find when you refer to the Denver proceed- ings, that Mr. Kerr there says that the Canadian Pacific has a traffic arrangement with the Seattle & International road. At Seattle, the latter connects with the Northern Pacific for Portland (185 miles). At Spokane, the Great Northern connects with the rails of the Oregon Railroad & Navigation Company for Portland (449 miles). At Portland, both the Northern Pacific and the Oregon Railroad & Navigation Company connect with the Oregon & California Railroad for San Francisco {^^2 miles). The business interchanged by San Francisco with New England and the Eastern Middle States, New York, Pennsylvania, etc., is fairly repre- sented by the cities of Portland, Me., Boston, Mass., New York City, Philadelphia and Baltimore. The distance between San Francisco and the several eastern cities over the all-rail line described, will be found fullv stated in "Exhibit N". According to this Exhibit the Canadian Pacific has all-rail lines to San Francisco, as follows: From Portland, Me., it is equal in length with the Great Northern and 125 miles shorter than the Northern Pacific. From Boston it is 55 miles longer than the Great Northern and 62 miles shorter than the Northern Pacific. 114 I'Voni Xew 'S'ork City its line is lonj^aT than tlic (ircat Xortlicrn and XortlRTii Pacific Vn- 163 miles and 46 miles, respectively. l-'rom I'hiladelpliia its line is JJ(j miles lon^aT than the Xorthern Pacific line and 346 miles lon.y^er than the ( ireat Xurthern's line, but this difference would be j^reatly reduced by the use of its line via Minneapolis. l">oni Baltimore its line is 3H5 miles lonj^er than the Xorthern I'acitic's line and 482 miles lon}.j;er than the (Ireat Xorthern's line. These differences where they show against the Canadian line, would almost disap])ear if it woidd use its Minneapolis and "Soo" line route, using the identical comiections for the business that the Great Xorthern and Xorthern Pacific are obliged to use. Its percentage of the entire haul ranges from 70 per cent to 63 per cent, while the Cireat Xorthern ranges from 48 to 45 per cent and the Xorthern Pacific from 50 to 47 per cent. Two factors of more or less relative advantage to the parties to this contention, or i)arties interested in the differential cpiestion are revealed by these comparisons: J'TKST: the percentage of the entire haul performed by the interested parties. SFX"()XD: the length of the route, from start to finish. The value of the first factor lies in this, that a line's ability to meet the demand, or secure the preference of connections — feeders — in the niatter of division of rates, bears some relation to its share of the total haul, though we do not wish to be understood as saying that the share of the gross through rate taken by any of these lines is in the ratio of their respective haul to the total haul. For example: l-'rom Portland, Me., tlie Canadian line has the shortest line against the Xorthern Pacific, and besides, would receive, upon a ])ro-rata ])er mile basis of divisions. 37 per cent more of the through rate than the Xorthern Pacific, with which to satisfy its connections. Taking 100 cents as the rate unit, it would have, in this case, zy cents more than the Xorthern Pacific would have with wdiicji to pay arbitraries or to jjcrsuade connections to give it the ])reference as against the Xorthern Pacific. Take, as another illustration. ISaltimore. These are extremes that I give you. The Xorthern Pacific has an advantage over the Canadian Pacific, in length of line, by 385 miles, or 9^ per cent — assuming that the Canadian line will use its Xew York route — but the Canadian Pacific, upon a pro-rata per mile basis of divisions, would receive 21 per cent more of the through rate than the X'orthern L^acific would receive; or, to state it in another form, out of the through rate of 100 cents. Baltimore to San •'"rancisco. the Canadian line would receive 13 cents more than the Xorthern Pacific, and would be by that much better able to satisfv its connections. If, on the eastern side, the Canadian line can go down tlicrn and Xortlicni line, but . line via Xortlicrn ilU'. lie, would inc route, Xortliern :he entire Xorthern 50 to 47 es to this : revealed interested : to meet s — in the the total the share e ratio of Portland, n I'acific, divisions, rific, with :e unit, it ific would IS to i^ive Mues that Canadian iiin^ that m Pacific, per cent reive ; or, Llaltimore lore than to satisfy go down 115 mto Teimessee and Arkansas, seekinj;- business for which it lia> to pay, out of the short-line throuf^h rate to San l-"rancisco, the puhlislu'd rales of connecting railroads for the haul of over 1.000 miles to Miuneai)olis, why can it not use the thousand Uiiles of railroad ncci.ss;iry to iDunoct it with .San l'"rancisco on the western s'de. no matter wliat the aibitrary is of the Xorthern Pacific? W'liat becomes o! its objection to usmg the Xorthern Pacific road from Seattle to i'ortland. because it cannot afford to? If the Canadian line elects not to do so. but for an\ reason chooses the steamship connection, in preference to the railroad conneclion. does it not thereby create whatever disability, if any. is attached to that choice? Is it imder such ci.-'nmistances entitled to a rate advantage ever the Xorthern Pacific, the « ireat Xorthern, and others? It takes business from 'rullahoma. and from Obion, Tenn., and from llelena. Ark., — takes it through up over this line; (indicating on map) — pulls it away from the Kansas City, more direct route. W'e think these illustrations ])rove conclusively that the Canadian Pacific has, and can work an all-rail line to and from San Francisco, quite as advantageously as the Great Xorthern or Xorthern I'acific; that it has the same alternative m the use of an all-rail line as any of the mixed all-rail and rail-and-water lines ]:>ossess and in that respect is under no disadvantage or disability whatsoever. Though it seems unnecessary, it may be well, for the purpose of reference, to delineate, so to speak, the alternative all-rail lines of the Texas & Pacific and "Sunset." The detailed showing under this head will also be found in "Exhibit O", if you care to refer to it. showing the authority and how these distances are made up. These all-rail lines compare with the all-rail line of the Canadian Pacific as follows: From Portland, Me., the Canadian line is longer than the Texas & Pacific line by 245 miles and shorter than the "Sunset" line, this line, (indicating on map) by 168 miles. l'"roni Boston, the Canadian line is longer than the Texas & Pacific line by ^^ij miles and shorter than the "Sunset" line by 21 miles— (all- rail lines I am speaking of now). From X'ew York the Canadian line is longer than the Texas & Pacific line by 446 miles and longer than the "Sunset" line bv 45 miles. ARBITRATOR DAY— Are you speaking of all-rail, now?^ MR. STC BBS— All-rail lines' altogether, now. From Philadel])hia, the Canadian line is longer than the Texas 8c Pacific line by 673 miles and 247 miles longer than rhe "Sunset" line. From lUiltimore the Canadian line is longer than the Texas & Pacific line by 842 miles and 296 miles longer than the "Sunset" line. We have a "Sunset all-rail" line as well as a "Sunset-Gulf" line. These wide disparities from Xew York, from Philadelphia and from Baltimore, in the distances via the Canadian line and the Texas & Pacific ii6 line would, as I have licrotofore explained with respect to the comparison with the (ireat Northern and Northern I'acific. be very much reduced if the Canadian line w(juld use its Minneapolis route; use precisely the same line the (Ireat Northern does, and which in part is used by the Texas & Pacific. The Texas & I'acific line is down through St. Louis, using the Trunk Lines up to St. Louis. The "Sunset all-rail" line is through Cincinnati and Louisville, thence over the Louisville & Nashville R. k. to New Orleans. The highest percentage of haul is: for the Canadian line. 70 per cent, the 'I'exas & Pacific 73 per cent, the Sunset 61 per cent. The low- est percentage of haul is: for the Canadian line 63 per cent, the Texas & Pacific 66 per cent, the Sunset 56 per cent. The principal object of introducing this last comparison is to illustrate what little account is taken of differences in distances as between the American lines as affecting or creating differences in rates. From the detailed statement found with '"Exhibit O", it will be observed that the difference in the respective distances of the Texas & Pacific and the "Sunset all-rail" lines, in favor of the former and against *he "Sunset" (comparing these two domestic lines now) — is as follows: From Portland, Me 415 miles Boston 319 " New York 421 " Philadelphia 426 " Baltimore 446 " Yet these two lines work upon an equality of rates. Compare these differences with the differences in the respective dis- tances already shown of the all-rail lines of the Canadian line and the Great Northern, in favor of the latter, namely: From Portland, Me 2 miles Boston 53 " " New York.... 163 " " Philadelphia 346 '' " Baltimore 482 " (the differences as between the Canadian line and the Northern Pacific are less than these.) and it will be seen that such differences in distance as exist respectively between the all-rail lines of the Canadian line and the Great Northern and Northern Pacific are not, either in theory or practice, regarded by the American lines as justifying a departure from what has always been, and is still believed to be, the necessary rule of equality as to rates for San Francisco business. 117 Take another example to illustrate the extreme in which difference in distance is disrejj^arded by the American lines in their adherence to the equality of rate principle: The shortest all-rail line from the cities used in the previous examples to San Francisco i- via Chicago, Omaha, and the Union and Central Pacific. Adopting the (irand Trunk route '"rom Portland, Me., and the average of the distances over the principal lines from the other cities as the measure of distance east of Chicago; also the average of distances over the four principal lines between Chi- cago and Omaha to measure the haul between those points, the shortest through all-rail line will be found to be as follows: From Portland. Me 3499 miles Boston 35 1 1 " New York 3344 " Philadelphia 3270 " Baltimore 3192 Compare these shortest all-rail lines among the American lines with the longest all-rail lines in same group, that is among the American lines, which are: From Portland, Me., via "Sunset" 4410 miles " Boston, via Northern Pacific 4387 New York, via "Sunset" 4221 " - " Philadelphia, via Northern Pacific. 4127 " Baltimore, via Northern Pacific. .. .4068 " and the difference will be found as follows: From Portland. Me 91 1 miles " Boston 877 " " New York 878 " " Philadelphia 857 " " Baltimore 876 " These differences are more than 25 per cent of the total short lines' all-rail distance, yet the necessity for maintaining for San Francisco business, the traditional policy of uniform and equal rates betw^een all lines, whether all-rail or mixed rail-and-water, hrs been so urgent that the American lines have continuously and consistently disregarded them. They have in the same manner, since the enactment of the Inter-state Commerce law, disregarded the distribution of tonnage — whether one line got more or less, a large share or a small share, as a factor in deter- ii8 mining the relation of their respective rates. In California freight traffic they have practically subscribed to the doctrine that a line is entitled to no less, and no more, than all it can secure by lawful methods on an e.|uality of rate with its competitors. If, as is true, it is the traditional policy of the American lines as between themselves to recognize and practice ecjuality of rates as the only reasonable and just rtde under all the circumstances, to govern the relations of their respective rates for San b'rancisco traffic with this eastern territory, regardless of the charac- teristics of their respective lines, whether all-rail or mixed rail-and-water, whether ecpial in length or widely differing, whether rich in local traffic or ])oor. whether relatively strong or weak, upon what equitable ground can the Canadian line maintain a demand or establish as a right that these American lines (many of whom present the same characteristics as are pleaded by the Canadian line in support of their demand), shall deal preferentially with a stranger, depart from a well settled policy, do for it what they dare not do for each other bv giving it a rate advantage in the nature of a differential? Are we not stretching the limit of hospi- tality when we admit it to such a share of the business which wc have developed, promoted and sustained (and which we must wi'i out its assist- ance, continue to promote and sustain), as it can do upon ecpial terms? Are we not — in pursuit of equity, that which is equally right and just to all concerned — by this showing, irresistibly led to the conclusion of the Inter-state Commerce Commission in the Passenger Differential case? We quote: "If this Canadian corporation comes into the United States to compete for traffic between points in the Cnited States it should be content to operate ujjon the same terms with its American competi- tors, unless those terms are clearly unjust and unreasonable. It ought not to come into this territory and insist upon a different order of things than it finds there unless its title to that demand is clear beyond question." As near as I can judge the Canadian Pacific rests its claim almost wholly upon custom, upon precedent, as between the American lines. If I were an arbitrator in this case. I might say that vL had made out a case but not this case. It has been urged in su])port of the contention of the Canadian line that it is customary among rail carriers to accord differentials to so-called weaker 'incs, meaning carriers partly by water and partly by rail. For the purjiose of reference and illustration we beg to file with the Board a statement of all the freight differentials now in effect through- out the country according to the records of the Inter-state Commerce Commission, prepared by the Secretary of the Commission. Although his letter stated that the list covered all, I do not think that it includes all. It is marked "Exhibit K". P>ut. in order to make up any deficiency in that respect I also beg leave to file Central TVeight Association Cir- IT9 cular, dated Chicaijo. November j6, 1807. pnblisliiiif^ rates to and from west bank Lake ^lichip^an, wbich are not shown in Secretary Moselev's statement. The latter is marked "Exhibit K-j". I also desire to file with tlie Hoard a statement of tlie existinj;- freijLjht differentials in the territory of vhe Joint Traffie Association, as shown bv its records furnished by Mr. ( ieorgc R. lUanchard. C'onunissioner. Tt is scheduled as "E.xhibit K-3". In respect to these customs the Canadian Tacific representative says: "Later. T propose to show the i;reat number in extant and the universal custom, law and rule. ]')revailini;- throuij^hout the whole United States and Canada, whereby broken routes, rail-and-water. ocean-and-rail, river-and-rail. all have differential rates in order to enable them to compete with their direct rail rivals. 1 will i;o into the detail of this matter later on." He did go into the detail of it. Xow. under the conmion law. the common law of Eufjland which has spread tluouj^hout that Empire over all its Provinces and Colonies and because of its wisdom has been adopted by almost every State in this .American I'nion.— custom is limited. Customs are territorial. Custom luust be universal; it must be of ancient origin; so long in the past that the "memory of man runneth not to the contrary." We contend, therefore, that the use o*^ this class of differentials is restricted to certain territories and to conditions which destroy its valid- ity as a general rule applicable to other territories and all conditions. .As we have already amply illustrated differentials are not now used an.d have never been used by the American lines between themselves for .San Erancisco business, with the single exception of the Xorthern Pacific to ^Minneapolis, which was drop|)ed very suddenly, although th ; resjiec- tive physical characteristics of these lines differ widelv. presenting every feature of relative advantage and disadvantage that enters into the alleged reasons for the use of different'als in other territories. 'Ihey are not used in the Southeastern Mississippi territory on business to and from Ohio and Mississippi River crossings, from Cincinnati to Xew ( )rle-ms. where the opportunities for mixed rail-and-water lines are frt'cpient. Tliev are not used for San I'rancisco traffic with Montana. Ctah and Colorado, as between the all-rail lines and the mixed water-and-rail lines. There is nuich valuable business in Montana. Colorado and Ctah. com- peted for by these direct Central T'acific. L'nion Pacific. Denver tJt Rio C.rande lines and by the Oregon Railroad & .Vavigation Co. an.d ( )regon Short Ivine, and for Montana by the (Ireat Xorthern and the .Xorthern Pacific, as well as the ( )regon Railroad iH: .Xavigation Co. and Oregon Short Line, but we all work on a dead level etiualitv of rates. In the I20 use of differentials, as in the classification of freight, in the relation of tile rate charjj^ed and the differences hauled, in the method of their association and co-operation, each group of carriers serving different territories is a law unto itself. It would not be argued that because the Central Freight and Trunk Lines use the ( )fi(icial Classification that the Trans-Continental lines should adopt it and abandon the Western Classification which they regard as more suitable to their traffic; or because the first class rate from New York to Chicago is 75 cents per hundred pounds, that the Trans-Continental lines should charge at the rate of 75 cents per hundred for hauling first class freight 900 miles; or that because the Central Freight and Trunk lines maintain a large and ex- tensive organization, to maintain just and uniform rates, having Commis- sioners. Joint-Conmiissioners. Hoards of Managers, I'oards of Arbitra- tors, that the Trans-Continental lines should effect and maintain the same kind of an organization. We submit that it would be as reasonable to argue in this manner as to contend that because differentials are used in other territories for reasons and purposes that may be wholly justifiable to tlfe carriers interested, that their use should be recognized and adopted as of right. — not expedienc\ — as of right between the American lines on the one hand, and the Canadian line on the other hand, in favor of the latter. The policies of the railroads, in dealing with each other, as con- nections or competitors, have not graduated from the formative period, nor by age, uniformity, or universality of use have they been hardened and polished into traditions and customs having the force of law. Again, we submit that the use of differentials by other lines is of no value as a precedent in this case, because that use is the product of an agreement between the lines interested. The term, itself, in railroad parlance, necessarily implies consent. It may be, and according to the dictum of the Inter-state Commerce Commission is. in all cases. "Consent against the will", which leaves the consenting party with regard to the (piestion of right or title, "of the same opinion still", but whether the agreement is founded upon an acknowledgment of the right of the differ- ential line or lines to participate in the traffic, or upon an involuntary concession, as a matter of ex])ediency. that it or they may partici])ate in the traffic, its existence always depends upon agreement between the interested ])arties. In the case at bar. the essential factor of consent, agreement, is absent. The .\nierican lines deny the right of the Cana- dian line to i)articipate in San I'rancisco business unless it can do so upon eijuality of rate with them. They refuse to concede the Canadian line a differential as a matter of ex])ediency. and are here to try the (pies- tion of the Canadian line's right to share the traffic if a differential is niccessary to enable it to do so. We are not here to try the question whether it is ex])edient to give the Canadian line a differential in order that it may share in the traffic. That is not the (juestion submitted for 121 determination by this Board. Therefore, we submit that the absence of consent, or agreement, nulHfies the customs of other Hues in other territories as precedents in this case. We further submit, that because differentials in other territories are the product of consent or agreement, it will be found that they are uniform in their application to all lines interested in the same business, which are alike circumstanced. By referring to "Exhibit K", it will be observed that the differential rates in use from western points to Seaboard territory, to IJoston and Providence, via rail-and-ocean, are used, alike, by seven different lines to Xew York and Jersey City, and to Philadelphia via rail-and-ocean, by four different lines. In like manner, from Boston to western points, via ocean-and-rail, they are used by eight different lines, from Providence by five different lines, from Xew York City l)y five, and from Philadelphia and Baltimore by three. The lake-and-rail and rail-and-lake differentials, as between Detroit and Toledo and Sea- board cities, in both directions, are applied, not by a single line, but by all lines via Cleveland and via Sandusky. Likewise, the differentials from Atlantic Seaboard points to Texas points are applied to all lines via Atlantic Ocean and Gulf ports, differing in amount as between the Atlantic Ocean and the dulf ports, it is true, but that is because there is a material difference in the ocean service. They are the same via all the Gulf ports, via New Orleans and the different lines. — via Galveston and the different lines. Likewise, the differential rates from Atlantic Seaboard points to Colorado points and LTah points, via Atlantic and Gulf ports, apply by all the several lines, whether through Xew Orleans or whether through Galveston. All the broken lines — mixed water-and-rail lines — use the same differential, regardless of whether they have an all-rail line or not. For example, the Union Pacific Denver & Gulf road forms a part of the Union Pacific all-rail line from Xew York to Colorado, and also a part of the mixed rail-and-water lines via Xew Orleans and via Galveston from Xew York to Colorado; the latter taking a differential against the former. The Chicago, Rock Island & Pacific, and the Atchi- son, Topeka & Santa Fe, respectively, particii)ate in both the all-rail lines, via Chicago, and the mixed water-and-rail lines via Xew ( )rleans and via Galveston, from Xew York to Colorado and Utah, the latter being so-called differential lines. Again, the lake-and-rail differential rates to Xorth Pacific Coast Terminals ai)i)ly through Lake 1 luron and the Straits of Mackinaw, via Chicago or Milwaukee, and through Lakes Huron and Superior, via Duluth. via Port Arthur, via Gladstone (the connection of the "Soo" line) and via West Sui)erior. 'I'hat is to say. they apply, alike, overall the rail lines west of Chicago. Milwaukee, West Superior, Port Arthur and Gladstone, in connection with Lake Steamer lines east of the Junction points named, and every one of these rail lines west of said 122 junctions lias rail connections making ihrougli all-rail lines over which they can work the same traffic. There is no disparity; every rail line to the North Pacific Coast participates in these differentials. If they choose to work with lake connections, the Union Pacific, via the ( )regon Short Line, the Union Pacific, over the (Jgden. Central Pacific and what is called the "Shasta Route" to Portland; the "llurlington" and the "Rio (Irande", over the Oregon Short Line or over the Central Pacific and the "Shasta Route", as well as the Canadian Pacific via Port Arthur, in connection with the "Soo" line from (lladstone, or in connection with the all-rail lines from Chicago and Milwaukee — all have the same rate; there is no ine([uality. In s(jme cases these differentials are allowed in part to cover the marine risks which the shipper takes. This is true of the differentials between the Atlantic Seaboard and Texas, and of those between Lake Michigan ports and Atlantic vSeaboard, and of the lake-and-rail differ- entials between North I'acific Coast points, and the territory cast and south of the lake ports, etc., but it is not true of the differentials between western points and Atlantic Seaboard territory and the Soti'th-eastern territory, in which cases the carriers relieve the ship])er of the marine risk and give him lower than the standard all-rail rates. Customs that differ in these imjiortant respects can hardly be said to have the uni- formity necessary to create a valid rule for the following of other territories. The Canadian Pacific cited also a differential as against the (jreat Northern line's contention or i)osition in this matter, in respect to Asiatic tonnage. He did not file the contract. It did not occur to me that that had anything to do with this case, or I should have brought a copy of the contract along. It relates to Oriental traffic, Asiatic traffic, east- bound, only; that is, inward to the United States, that is conducted by the I'acific ]\lail Steamship Company via the Port of San Francisco, the Occidental & Oriental Steamship Company via the Port of San P'ran- cisco, the (Ireat Northern Steamship Company, or rather the Ni])pon ^'usen Kaisha Company — the F.nglish of which is the Japan Mail Steam- ship Company — in comiection with the Crcat Northern, the Northern Pacifi.c Steamship Comjiany, in connection with the Northern Pacific and the Canadian line's Steamers through the Port of \'ancouver. Not only now. but for all time in the past, ever since that traffic was originally diverted from the Panama Route by the Pacific Mail Co. to the Central and Union Pacific line, the rate-making power has been lodged, neces- sarily lodged, in the steamship companies. We have to compete with the Suez Route and with vessels running around the Cape of Ciood Hope, auid have never been able to take half the tonnage that goes into the "United States and Canada; even with the multi])lication of lines of late "ears, we have not succeeded in diverting all this tonnage to the Pacific 123 ports. Xeoessarily, the liandlinjj^ of tlu'sc rates must be left with the agencies at Hong Kong and Vokoliania and Nagasaki and other ports there. All we have to do, that is so far as the roads which 1 am con- nected with are concerned, is to accept what rates are brought to ns. to honor their bills of lading. This contract that is referred to is a contract between the steamship lines, except that the Central Pacific an.l I'nion Pacific and its connections, the Atchison. Topcka & Santa i\'. etc.. are obliged to accept any rate that is found necessary to take that bnsmess. They are not parties to it. They are not signatory i)arties to the contract. Speaking for the lines via San Francisco. I never was consulted as to whether that contract should be made or not. 1 received a copy of the contract after it had been made. It originated exactly as most ditTeren- tials are originated— by the laying on of a line which had to be advertised. which had no business, but which was not i)articularly weak in anv other respect, as compared with the older lines. That line said: "(iive me some of this business or 1 will knock down your rates." The effect of that kind of competition was to bring the silk rates from $8.oo per cwt. down to $3.00 per cwt.,— was to reduce the average rate on tea from $3.00 per cwt. down to as low as three-quarters of a cent a pound or 75 cents per cwt. The Canadian Pacific Steamship Line, the Northern Pacific Steamship Line, the Occidental & Oriental Steamshiji Cv)mpany and the Pacific Mail Steamship Co.. naturally wished to stop that sort of business, so made this agreement. They made it just as soon as they could. It was a case of the stro.iger lines going to the weaker line and giving it an advantage in order that their business might not be totally —almost wholly— destroyed. The Nippon Yusen Kaisha. when entering upon this business, adopted the same tactics that the Canadian Pacific adopted when it first entered the same business. The Canadian line, at the outset, pursued the same tactics, which was simply the knocking of the bottom out of rates and, primarily, it is re?i)onsible for the reduction of the rate on tea from $3.00 to 75 cents per hundred and for silk from eight cents to three cents per pound. Afterwards, the Northern Pacific, which first entered the Oriental trade by using sailing vessels, but after- - ards put on a line of steamers, or to state it more correctly, afterwards r.ired the Agent, whom the Canadian Pacific had successfully employed to bushwhack the American lines in Asia— hired him away from the Canadian Pacific, Mr. Dodwell, the shrewdest and sharpest man in this traffic in Asia, who employed steamships and began the same tactics against the American lines in connection with the Xorthern Pa- cific that he had formerly used in connection with the Canadian Pacific. Then, and not till then, was the Canadian line ready to talk about an agreement to keep up rates. Meantime it had se- cured a large portion of the traffic: had diverted it from San Francisco to its own line. It wanted to keej) the business and 124 wanted to get reasonable rates out of it. Later, as T hav- said, when the Japan Mail Steamship Company laid on its steamer lint, it followed in the footstei)s of the Canadian Pacific and the Northern Pacific, bej?an to cut rates. Meantime the Xorthern Pacific, havinj^ secured a portion of this business, had become anxious to preserve it for its line and to get better rates out of it. Out of this experience came this agreement, — • that is to say, the Canadian Pacific Steamship Line, Xorthern Pacific Steamship Line, Occidental & Oriental Steamship Co. and Pacific Mail S. S. Co., all agreed that it was better to co-operate, to maintain rates, than to continue cutting against each other, but in order to make the co-operation efifective, it was necessary to bring the Japan Mail Steam- ;?hip Co. into the compact. The Japan Mail Steamship Co., being a new line and claiming that that was a disadvantage against the older lines, demanded the right to make lower rates. The other steamship lines yielded simply because by no other means could reasonable rates be had. That, briefly, is the history of that case. ARBITRATOR DAY— Who are the signers of that contract, Mr. Stubbs? MR. STUBP.S— Well, for the Pacific Mail and the Occidental & Oriental Steamship Companies, the General Agent over at Hong Kong or Yokohama. MR. KERR — It was signed at Hong Kong. MR. STUBBS — Then Mr. \"an Buren w-as the man. And for the Northern Pacific, Mr. Dodwell, and for the Japan Mail Steamship Co., I do not know. MR. KERR — By their ^Manager over there. MR. STUBBS— Now, I will venture to say that the Denver & Rio Grande, the "Burlington", the ''Rock Island" and the Union Pacific and "Northwestern", our connections, who participate in that trafific, do not know that there is any such agreement, which confirms that what I have stated is true, that it was made over there as between the steamship lines. In "Exhibit K" will be found a statement that the rates between San Erancisco and points on and east of the Missouri River — "Exhibit K" is a statement made up by Secretary Moseley of the Inter-state Com- merce Conmiission, I did not know where else to get it. In "Exhibit K" will be found a statement that the rates between San Erancisco and points on and east of the Missouri River via Canadian Pacific Railway and Pacific Coast Steamship Co. are lo per cent less than the rates via American lines. It so appears because that is the form in which the Canadian Pacific publishes its San Erancisco rates. The American lines have not conceded the Canadian Pacific a lo per cent differential, nor any differentials whatsoever since 1892. They have not a differential to-dav. Thev mav make a difference in rates, but it is not a dilYerentiaU, mUBM 125 A differential requires an ajj^reenient, — consent. As we have already stated the Inter-state Commerce Commission has repeatedly charac- terized the inirpose of a differential as essentially a device for the dis- tribution of traffic. That that is the purpose we think is obvious and that it is equally obvious that the existence of a differential deixMids upon an agreement between interested carriers. It follows then that an agree- ment betw .n two or more carriers that one or more of them shall use differentials against the others in competing for a given trafific. is an agreement between the same carriers to distribute the same traffic between them. The lawfulness of such agreement is therefore doubtful and we ask whether the (piestionable practice in this respect of other lines in other territories can create a rule, an equitable rule to be followed bv other lines in respect to other business? Wednesday morning the Canadian Pacific advocate said: "The law not permitting an agreement or combination whereby either physical division of tonnage may be made or a money pool, or any other grounds upon which broken rail-and-water lines can obtain a reasonable proportion of the traffic, as against direct rail line competitors. This being the case, numerous rail-and-water lines have been granted and for years have worked under differ- ential rates as against their all-rail competitors." In this language he confesses that the differential has the same object as a pool. Its object, its very essence is the distribution of traffic. For example: the Canadian Pacific says, "We can't get a fair share of this traffic unless we have a differential; ergo, the American lines must give us a differential so we can get a fair share of the traffic." That means_, that we must force onto its lines a fair share of the traffic : that means that we must allot to it a fair share of the traffic; that we nnist give to it a share of the traffic that it can enjoy exclusively and without inter- ference from us. It is not at all doubtful that pools of freight and pools of earnings between carriers are expressly forbidden by the Inter-state Conunerce law. Nor is it open to question that such pools are devices inire and simple to distribute the subject traffic, or the earnings therefrom which amounts to the same, among the lines parties to the pool. Their purpose is identical with the purpose of the differential. They were prohibited by law in response to a popular demand, and notwithstanding that the consensus of opinion among experts in transportation and legislative regulation thereof is that the inhibition of pools was a mistake; — that to legalize pooling would be the longest step Congress could take toward making the Inter-state Commerce Act what it was designed to be and what it is certain yet to become unless our political organization proves 126 a failure, a wise and beneficent (to public and carrier alike), regulator of coninierce between the States, public opinion seems to have crystallized aj^ainst them. A pool of freijj^hts would be far less obnoxious to the ship])injj^ public, if for no other reason, for this reason alone, that it leaves the shipper, who cares nothing^ about what the carrier does with the frei}.,dit money after he has paid it, free to use the line he prefers to ship his j^oods over, without the constraint imposed by an unfavorable differ- ence in rates. Jf the poolinj^ of freight is so obnoxious to public senti- ment as to make it impossible by legislative sanction, can it be said or fairly presumed that the use of the more inequitable device of differentials to accomplish the same end is less offensive to the public and a less dan- gerous expedient for the carriers to adopt? J"'or these reasons, therefore, we submit to the Board that the cus- toms of other lines in other territories in respect to the use of differentials arc of no value as precedents; are not safe guides to aid or lead the Board to a just determination of the question submitted; I will recapitu- late them, namely: FIRST, the differential is not used by all lines in all territories where the conditions measured by the circumstances governing their use in some territories are substantially similar. SECOND, in the territories which do employ them they are uni- formly applied to all lines interested which work under substantially the same circumstances and conditions, or to put it in another form, which are alike in their disabilities as compared with their all-rail competitors. In this case the Canadian line stands alone among all the lines interested in the San Francisco trade in its demand for a differential; and not only that, but it also demands that it alone shall enjoy the differential — for that is the submission — regardless of what Mr. Kerr says in his state- ment here about his willingness to give the Great Northern and the Northern I'acific a differential — it stands alone and demands that it alone shall enjoy the differential, regardless of the fact that many of the Amer- ican lines present the same unattractive features which are pleaded as rea- sons why the Canadian line caiinot participate in the trade unless accorded a differential. Take the examples that have been given. We are willing to stand upon the showing of differentials. We are willing to take the case as made out by the Canadian J'acific representative and stand before this Board on that. Has he given you one example of ineffable cheek on tlu' ^^art of an American line asking for an exclusive differential against the Canadian line or against another American line? Take the Canadian examples that he gave in response to a question from me on the Koot- enay business: "Don't you make the same differential rate by your mixed water-and-rail lines?" The answer was: "Certainly." Where is the advantage or the disadvantage on the part of any of the comp<-titors? The case is analogous to the case which I have latelv illustrated to the 127 North Pacific L'oast. Think of it. In this case he comes in and says, we alone want a (ht'fercntial atjainst tlie .American hnes on San I'rancisco business because (hfferentials are made to all these lake ])orts in connec- tion with all the lake lines to the Xorth Pacific Coast, lie admits enjoy- \u^ the same rate that every other line works on in that territory: he admits that they work upon an e(|uality of rates to the Xorth Pacific C oast by all-rail: he admits that they work upon an e<|uality of rates to the Xorth I'acific Coast by lake-and-rail. TFIIRD. .c^ettinjT hack to the question of custom, the nature of the differential is not uniform as between different territories. L'niformity is essential as well as ajje to make a custom valid as a ])recedent. In some respects it is in whole or in part compensatory for the marine risk to which the shi])per is subjected. In other cases, it is independent of or sujier-addcd to the assumption of this risk by the carrier. I-'OCRTH, there is a reasonable assumption that the differential is repufi^nant to the spirit of our laws and obno.xious to ])ublic sentiment. Returninji^ to the doubtful lawfulness of pools which, if judicially determined, mioard would jKomptly answer in the negative, if on no other ground, u])on the ground that the law forbids it. If it has no right or title to demand a pool, has it any right or title to demand any other less defensible device to secure the same end? If its title to a differential were undisjnited upon other grounds, would not the fact that it is in its essence a device to distribute traffic between competing carriers inject a fatal fiaw? The American lines protest against the use of differentials as a means of removing or equalizing, as the connuon phrase is, relative transport- ation disabilities, on the ground that equalization, merely, is not their real purpose. Their real object is to divert trafific from its natural to an 128 unnaUiral clianncl. 'I'o accoini)lisli this cml. tliorc is, and must always be, a surplus oi benefit or advantajj^e over and above the level of equality of service, to win the shipper from his accustomed and otherwise preferred line. They are. therefore, desiji:ned to give the so-called weaker lines a substantial thouj^li artificial advantage over the standard lines in respect to the subject traffic and we protest that the Canadian line has in no sense a right, legal or moral, absolute or equitable, superior to ours, in respect to the carrying trade of San Francisco. We protest against their use on the ground of inequity. This is ai)parent from the occasion of their use. The line which demands a difTerential rom its competitors, by that demand confesses that its route is one that tiio business will not naturally follow. It asks, therefore, an adjustment of rates that will force the business out of its natural chan- nels. To force business from a natural to an unnatural channel cannot be fair or equitable in any respect. It is not fair or equitable to the carrier, which is by this device deprived of its business. It is not fair to the shipper who is thus forced to use a route which he would not choose but for this device. We protest against them on the ground of inadequacy. If it be assumed, for the purpose of argument, that some portion of a common trafific, in the sense that it is open to the competition of all, ought to be of right secured to each and every line, even if it is necessary to force it out of its natural channels, then we aver that no differential or scheme of differentials has been devised, or can be invented which will distribute said traffic fairly between all parties. To do so, it must be made to act automatically, increasing its force and power of diversion as circum- stances require, until a fair share of the traffic is secured for the differ- ential line, then ceasing to operate further than is necessary to maintain the distribution thus effected. A rate that will induce a merchant to ship a certain amount of one class, or of all classes of goods over a differential line, will influence him to send all, or the greater part of the same class or classes of goods over that line. If a differential of five cents will turn one lot of nails, or one lot of cotton piece goods from its natural route, it will divert all of those goods from the same route. The differential lines assume at the outset that they are entitled to all the business obtain- able under the differential as fixed, no matter how large a share of the whole it may prove to be. Per contra, the standard rate lines from the beginning assume that the differential lines are entitled to no more of the business than the differential, as fixed, diverts to their line, be it so small that the earnings therefrom will not pay for the publication of the tariffs. I>etween these extremes there is and always will be constant friction, which tends, inevitably, to the very rate disturbances the device was in- vented to prevent. Here in the territory where differentials are most in use. east of Chicago, in the Trunk Line and Central Freight Association 120 territories, we all know that they are not maintained, except, perhaps. (Inrinpf a period when the pressure of tonnage upon all lines is e(|ual tn or above tlv.Mr capacity. When tonnaj^e is slack, when the hoys are on the streets hustlitifr for business, to fj^et something to till their cars, away goes the ditiferential. Those are the conditions that exist between Chi- cago and Xew ^'ork and other Atlantic Seaboard cities to-day. and are simply a repetition of what annually occurs, notwithstanding the mag- nificent organization that they have down in Xew York for the ])uri)ose of maintaining rates. Mr. (jcorge R. lilanchard. who. by reason of his long incumbency of the Chairmanship of the Central Traflic Association, and the Joint Traffic Association, respectively, within wlu)se territories the difYerential is in most common use, together witl< his great abilitx, qualities him to speak with authority on this subject, says, of differen- tials: "Their primary object being to secure to the weaker lines, only fair shares of a specific business contested for, I have already recorded my judgment, that in the first instance what is a fair share is undeterminable and usually unacceptable in its result, and. secondly, that no scales of differentials have ever accomplished their purpose. If a differential line gets less traffic than such rates were intended to divert, it proceeds to help itself. They either divert too much traffic avvav from the first lines, or too little." I confidentially submit that expression from ]\Ir. Blanchard, whom we all know, as being what every expert traffic manager will testify to. Get him on the stand, under oath, or not under oath, and ask him for his candid opinion as the result of his observation and experience, and that will be the answer. We protest against the use of a differential by the Canadian line, on the ground that its effect will be unjustly discriminative against places. It would make lower rates to San I'Vancisco than to other California and Pacific Coast conmion points. From the opening of the first over-land line, it has been the custom to make the same rates to and from Sacra- mento, Marysville, Stockton and San Jose, as were made to and from San Francisco. These points are connected with San Francisco by water lines of transportation and can use the ocean routes with but an inmia- terial difference in cost as compared with San I'rancisco's cost in using the same routes. When the rail lines were opened, connecting J'ortland. Seattle and Tacoma, and Los Angeles and San Diego, directlv with eastern cities, the same principle of ecpiality of rate with San Francisco was adopted, and has since been maintained with but very little variation. By the use of a differential on San Francisco business, the Canadian line upsets this custom, destroys the long established and just relations of the rates of common points to San Francisco, and introduces a discrim- 9 '3<> illation that ui- rc^^ard as unjust to the coninion points and as a (hsturbor of several conniK-rcial coiKhtions. Moreover, tliis (hscriniination is not invited hy the nierehaiits of San i'"rancisco. We object to the use of a differential hy the Canadian line, because it has no rijjtht to preference over any of the American lines, no superior ri}j[lit, no higher title to either a fixed and determined share of the San l'Vancisc(i carrying- trade, or to an unlimited, undefined share of that trade, than is possessed by each of the several American lines which stand opposed to it in this case. If by restraint of law, or for any other reason. we are debarred from distributing this traffic among ourselves in e(|uit- able and satisfactory proi)ortion. if we submit to these restraints, why should not the Canadian line not likewise submit? If we. as between our- selves, submit to the rule of rate e(|uality, regardless of its effect upon the volume of the traffic we respectively carry, is it unreasonable that we should ask the Canadian line to likewise submit to the rule oi rate e(|uality? In order to recognize the claim of the Canadian line in this case, we must admit that the Dominion (iovernnient of Canada has 'Teated a superior being in respect to the domestic commerce of the Cnited States, than the beings created by the Cnited States (Iovernnient. and the several State ( iovernments; a being with higher rights and .superior title. To the suggestion that our record is against us, that the .American lines have established a valid precedent for the claim of the Canadian line by hitherto conceding what it now asserts as its right, we reply that we are entitled to the consideration of the (|uestion submitted as from the l)eginniiig. because: I'MRST, this is the first time that the (juestion of the right or title to a differential of one line against (Jtliers competing for the same trade has been referred to a disinterested tribunal before which the parties could appear disarmed of all arguments save the justice of their cause, whose deliberations would be calm and dis])assionate and whose decision would be given without fear of loss or ho]K' of gain, after a patient hear- ing of both sides; the first time that the (piestion has been sul)mitted to the judgment of a tribunal whose conclusions will establish a sufficient precedent or valid rule. SECOND, the American lines have never admitted the title or right of the Canadian line to a differential under their rates, but, on the con- trary, have i)rotested against it, and submitted to it only under the con- straint of fear that the value of their San l''rancisco business anrl other intermediate and dependent business would be destroyed. Under the first head, we aver that originally, when the American lines yielded to the demand of the Canadian line for a differential, the questions sub- mitted and determined by the parties themselves, under the influences t3i of hope of iiiun, if tlu- (lifftTcntial was j^raiiti'd, and the fear of almost incalcnlahk' loss wcri- it (Icnifd. was: "Is it expedient to j^ive to the Laiiadiaii line a differential ?'" The American lines were never even asked to admit the title and right of the Canadian line to that advantage over them. L'nder the second head, we snhniit that the American lines consented to the freight differentials enjoyed by the Canadian line previous to iHancisco of the ' 'aradian line, via X'ancouver, and the .\orthern Pacific, via Seattle. Then the Canadian line was the longer by about <)i miles. The accpiisition or control of the Sault Ste. Marie line bettered its relations to the traflfic between San J'Vancisco and all the Xorthwestern States, and the .States south of the (ireat Lakes and west of the "Alleghenies." This improvement is not to be measured by the reduced length of haul: that is the smallest part of it. The Min- neapolis terminus, the getting ui)on an e(|uality with the Xorthern I'acific in res])ect to a direct connection with the great railroad systems leading from the south, southwest and southeast, and terminating at Minneapolis, was of far greater importance than the mere reduction of length of line. It has since extended its line from .\lission junction, P>. C. to Sumas. made a traf^c agreement with the Seattle & Interna- tional Ry., thus practically making ])hysical connection with the rails of the Xorthern Pacific over which and its connections, it can reach all Washington, ( )regon and California by rail. Then it could reach Puget Sound points. Portland and San I'rancisco by water only, from X'ancouver. It has demonstrated that being a foreign line, having to submit to customs regulations is not an insurmountable obstacle to its use by American shippers. It relines the shipper of all trouble arising therefrom. Tt has proven to be a good winter line, having never been obstructed by snow, while in 1889 the lines via ( )gden — the short line — were closed for weeks by a snow blockade in the Sierra Xevadas. In 1897 the "Sunset" line was stopped for several weeks by yellow fever. '36 In 1898 it is partiall} so and we do not know what day the quarantine will be closed down against us and we will be prevented from sending any goods over that line ("Sunset Gulf" or "Sunset all-rail"). The circunih-tance that it was a broken line did not enter into the considera- tion of the American lines as factors of influence. How could it have done so when among the American lines there were several lines pre- senting similar features in this respect? The question of time required to move the traffic did not receive consideration. How could it when the respective abilities of the several American lines in this regard varied widely? To have conceded the Canadian line dififerentials on these grounds would have been to ignore similar conditions among ourselves. It must be manifest, therefore, that the subordinate factors of influence, those which were confessed in justification of the act, were those con- ditions and circumstances which we have named and they have changed so materially as to lose whatever weight they ever had. Shall I proceed? This is a good stopping point, but I will continue if the Board so desires. ARBITRATOR WASHBURN— We will now adjourn, until half- past 2 o'clock. Afternoon Session, October 14. 1898, 2:30 P. M. The meeting convened pursuant to adjournment. ARBITRATOR WASHBURN— Mr. Stubbs will proceed with his argument, if he is ready. MR. STUBBS— Now. if it please the Board, we submit that so far we have met the Canadian line on its chosen grounds, its allegations of disability against its own line by contrast with the American lines, its plea that the American mixed lines have alternative all-rail lines, its reference to the customs of other lines in other territories as valid precedents, and its appeal to its arrangement with the Trans-Continental lines in 1888. We think that all of these contentions have been shown to be insufficient, not one of them has been established, not one of them furnishes a substantial foundation for the claim of the Canadian line to the right, an equitable right, to an artificial advantage over the Amer- ican lines, in order to share San Francisco's trade. Then, whence is the alleged right derived? larantitie sending '). The )nsidcra- it have ines pre- required it when rd varied m these »urselves. nfluence, ose con- changed continue ntil half- P. M. witli liis lat so far ations of lines, its Hnes. its as vahd ntinental n shown of them h'an hne le Amer- hence is The Canadian i'acific was not created for tho purpose of il(jiug San Francisco business. It is the creature of a foreign state. Its sovereign could confer u])on it no title, right or privilege, within the borders of the L'nited States, or with respect to the domestic conunerce of the "United States. It is. as has been said by a prominent writer on the subject, a political and military enterprise, conceived and executed to politically unite the several Provinces comprising the Dominion of Canada, to cause these Provinces to trade among themselves instead of trading with the United States; to serve as a line of military comiuuni- cation between the different parts of the J^ominion, to promote the scheme of British Imperial confederation. On account of its political and military objects, it was munificently aided by the Dominion Gov- ernment of Canada. To the extent that it was and is a iwlitical and mili- tary enterprise, its construction was and its operation is not anucable toward the United States Government. In war it is as powerful an engine of ofifense or defense as in peace it is a potential agent in develop- ing and promoting the conuiiercial and industrial resources of the Xation. In war it is a menace to the American Xation : in peace its primary object is to develop the resources of Canada and to pnjmote fJritish trade and British commerce as against all other Nations, and against the United States in particular. The object of its construction was not that of developing or promoting the commerce of the United States. Its participation in that trade is merely incidental. It is not subject to the laws of the I'nited States. It does not employ, to any considerable extent, American labor. Xo considerable part of its line is taxable in the United States. Did the Canadian line make, build, extend or sup- I)ort the trade of San Francisco and thus acquire a right tf) possess and enjoy it? It has had no part in creating San Franci.sco's trade. It in no sense contributes to it: does not promote nor sustain it. ( )n the contrary, the purpose and effect of its operation and construction was and has been to divert from and diminish the trade of San I'rancisco. ( )ne of the primary objects of its building was to take from San Francisco its trade with British Columbia and give it to Montreal and other Cana- dian cities. In part, its object was to divert, and it has succeeded in diverting from San F>ancisco. a very considerable amount of Oriental trade that formerly passed oiUward and inward through the ( lolden Ciate. It has given nothing in exchange for what it has taken from San Francisco. It has not had. and has not now. nor can it in the future have, anything to give. It has o])ened no new territory to the San h'ran- cisco merchants, nor to the California producer. This practically closed territory, formerly opened to the San Francisco merchant its entire ter- ritory throughout the length of its line, is closed to the San Francisco merchant as effectively as it would be were the Dominion Government and the United States at war. On the other hand, the American lines i38 are creatures of the L'nited States. The very object of their creation was to develop and promote the internal commerce of the United States, the industries and resources of the several States which they traverse, in order that the peoi)le of this American L'nion might be as free from industrial and commercial dependence upon foreign states, as they are, and always shall be. free from political subordination to other states. They were born of the necessities of our ])eople. They rank among the greatest industries of the Nation. They are the most potential factors in the industrial progress of the country. They are citizens of the L'nited States, .\gain, the American lines have, for the most part, created a trade for San I'rancisco. They have developed, promoted and sustained it. The duty of sustaining it, of further ])romoting and increasing it, also falls upoti and will forever remain with the American lines without aid or comfoi ' from our Canadian friends. In a br cnse, carriers, and especially railroads, may be classed among tlu i i (oductive industries, because they are among the most efificient agents of productive and manufacturing industries. On the Aniericau c; iitinenf they have superseded the pioneer, have i)ushed beyond the bor(i..;s oi virilization out into the wilderness and the desert; they have been followed, not preceded, by the husbandman. I'arm houses, villages, towns and cities with their varied manufacturing indus- tries, have sprung u]) in their tracks. This is peculiarly true of the terri- tory, the sup])lying of which has made San Francisco the metropolis of the Pacific Coast. Her chief trade is in distril>uting supplies to, and in distributing the products of, the States of California, Nevada and Utah, and the Territories of Arizona and New Mexico. That is her chief trade. The merchandise which she gathers from all the States east of the Rocky ^Mountains is for the most part distributed over the States and Territories 1 have named. The product of the field, of the forest and of the nn'nes, which she ships to the east in exchange for this merchandise, are for the most ])art the products of the States and Territories named. It is this merchandise and these products, the trans- jjortation of which is the subject of this controversy. The opening of this consuming and producing trafiic to San Francisco, the agencies which made it possible, which have developed, promoted and sustained it, are the American railroads. Whose was the courage, the daring, the skill, the perseverance to overcome what was conceived to be insurmount- able obstacles to railroad building presented by mountains and deserts? Who demonstrated the possibility of binding the Pacific and Atlantic Coasts of North America with bands of steel at the risk of fortune and of fame? It was the builders of the American lines. Who opened the l)roductive valleys of California that furnish over 75 per cent of the trade of San Francisco? Who climbed tlie Sierra Nevadas and the Rockv Mountains, revealing to the world their treasures of wealth of nation tatcs, se, in from arc, tales, g the ■ors in nited ed a ained "f? it. »^9 field, forest and mine? It was the Iniihlers of the American Railroada. The trade of San Francisco is of their creation. Without their agency m the development, promotion and sustainment of the productive indus- tries of the United States, territory whose trade is tributary to it. it would have speedily relapsed after the gold excitement of 1849 and the early 50's, into an inconsequential seaport town whose chief trade with the eastern states consisted in distributing su])i)lies to the cattle ranches and carrying their products — hides, wool and tallow, to Xew ^'ork. for which an occasional sailing vessel around Cape Horn would amply suffice. Permit us to illustrateJjy referring to the growth of California which is the principal source of San Francisco trade: In 1870, one year after the opening of the first Pacific railroad tlirough line, the ])opulation of the State of California was 56o,o") Letter of San Francisco Chamber of Com nierce, by its President, addressed to the l>oston Chamber of Commerce under date t)f August 29. 1898. Now. if that document is susceptible to the criticism or the imputation made yesterday with reference to another document, let me call your attention to the fact that it. and other petitions to Congress that I shall l)resent to you. originated in organized bodies of business men, which, in respect to all the conunercial interests of their cities, are the mouth- piece of the people. To accentuate this I call your attention to "Exhibit a," which 1 have just described. The Boston Chamber of Commerce desiring to have its views con- cerning the Inter-national treaty which is now the subject of negotia- tion between a Joint Commission composed of representatives of the Dominion of Canada and of the United States, sent a member out to San Francisco for the purpose of winning the Chamber of Connnerce's inlluence in favor of that ])rogram. This is a letter dated August 2yth: it is a copy, but certified. "Boston Chamber of Conmierce. (ientlemen: A short time ago Mr. Osborne Howes of your Chamber gave a very interesting and instructive address to us on trade relations and recii)rocity with Canada, and in the course of his remarks he spoke of the Fishing (|uestion. Klondike Mining laws. Boundary, Fishing and Navigation of the (ireat Lakes. l»eh- ring Sea Sealing matters. Alaskan boundaries, &c.. &c.. but the (|uestion of transportation in bond by the Canadian Ra'lroads was not commented on. A resolution was adopted by the meeting expressing the ho])e that the most friendly relations might exist between the two countries and that the Commission would make a satisfactorv solution of the difficulties. After the meeting was over, in conversation with one of our trustees the question of the bonding privilege of the Canadian Pacific Railroad was referred to and Mr. Howes expressed himself quite strongly in favor of the Canadian Pacific Railroad looking at it from the way it affected Xew England in her trade with the Middle west. Mr. Howes was then informed that a Committee of this Chamber had spent some time investigating this question last spring and that our views so far as the bonding question was concerned were very plain. That you may not by any chance misunderstand us we write so that you may clearly know our position on this subject. We enclose herewith copies of the report of the Committee which investigated this matter. We call particular attention to the quo- tation from the 6th Tnter-state Commission Report for 1892, 143 er of Com Chamber of I imputation le call your that I shall men, which, the mouth- to "Exhibit 1 views con- of negotia- tives of the iiiber out to Commerce's lUgust 29th: •wes of your Idress to us 11 the course dike Mining- Lakes. Beh- &c.. but the a'lroads was the meeting might exist would make meeting was sstion of the was referred in favor of the way it ■ west. Mr. Hiamber had ng and that jd were very stand us we this subject, nittee which 1 to the quo- rt for 1892, wherein tiie Commission say that "Xo such advatUage exists or can be given to the people of this country on the I'acitic Coast as is afforded the people of our Western and .Xorthwestern States.* Why should this advantage be given when we do not get a com- pen.sating benefit? It is the i)olicy of the Canadian Tacitic Rail- road to build up X'ancouver and Canada and divert the trade which would otherwise conic to and through .\merica. It is also the policy of this railroad to demand a differential to San I'rancisco. This may seem to be an advantage to us. but in the long run it is not. for it creates considerable unrest and disturbance in freight rates which would otherwise be firmly maintained. This Cana- dian Road demands the right to ([uote rates 10 ])er cent below those of the American lines without regard to the fairness and so obliges the American lines to collect i 1 per cent more than the Canadian I'acific. It does not base its rates on the cost 01 trans- l)ortation. but .says whatever rates the American lines make, we will cut theiu 10 per cent. There is not justice or reason in this. We trust this bonding ])rivilege will not be perpetuated or placed out of the reach of legislation by treaty, for should such an at- tempt to be made it may cause ojJiKisition to a treaty that might otherwise be beneficial." That is "Exhibit r>." ("Exhibit C") "Petition of Manufacturers and Producers .\s- sociation of California — Terms of Re-entry of Coods into the United States." I will not read them, preferring not t(3 take your time. These art- all addressed to Congress, or to our representatives in Congress. ARBITRATOR WVVSHP.CRX— You understand we are here to listen to anything you desire to say. MR. STCBBS — I did not want to take \our time, but thought that you preferred to go over these in your chatnbers. ARP.ITRATOR DAY — If you do not wish to read them you may just briefly state what they are. MR. STCBBS— Well, this exhibit which I have just referred to. the Petition of Manufacturers and Producers of California, after the 'Whereas," says: "Now, therefore, we. your petitioners do humbly pray you to, without delay, pass a law wdiich shall take away from and deprive the Canadian Pacific Railway, and all other railwavs or trans- portation lines of any sort or nature, of any and all right to 144 Iraiisjxirt j^oods. or passciiLjors from any one part of tlu' I'tiited States t(i any other, or further terms of re-enterini,' into tlie L'nited State.-, than those which exist and are apphcable to passenj^ers and j^oods coniin<^^ into the L'nited States from a foreijt^n ceight Differentials in the United States, prepared by Secretary of the Inter-state Commerce Commission, Sep- tember, 1898. "Exhibit K-2:" Circular Central l'>eight Assn., Chicago, show- ing rates to and from west bank of Lake Michigan ports, November, 1897. "Exhibit K-3:" EreiglU Differentials between Joint Traffic and Trunk Line territories and San J'>ancisco. "Exhibit L:" Report and ( )pinion of Inter-state Commerce Com- mission in re- Passenger Differentials by Canadian Pacific Railway, August, 1898. "Exhibit M:" Report of Discussion Canadian Pacific Differen- tials at meeting Trans-Continental Lines. Denver, August, 1898. "Exhibit X:" Comparison of Distances of the all-rail lines of Canadian I'acific, Clreat Northern and Northern Pacific. "Exhibit ():" Comparison of Distances of the all-rail lines of the Texas & Pacific and "Sunset Route" of the Southern Pacific Co. "Exhibit P:" Senate Report No. 847, 51st Congress, Eirst Ses- sion. "Exhibit Q:" Statistics of Railways in the United States in 1896, published by the Inter-state Commerce Commission. "Exhibit R:" Report of the Inter-state Commerce Commission, in the matter of the application of the Atchison, Topeka & Santa Ee Ry. Co., and others, for a suspension of the fourth section, decided Eebruary 24th, 1898. "Exhibit S:" Article in the New York Sun of July r6, 1898, entitled "War in Passenger Rates." "Exhibit T:" Report 1530, 51st Congress, ist Session, on relations widi Canada. Testimony taken by the Select Committee on Relations with Canada, L'nited States Senate. "Exhibit U:" Showing payments that were made to the Cana- dian I^acific Railway Company during the year 1891, that I read from vesterdav. I believe, if it please your Honors, that is all I have to present. I realize that I have, in a large measure taxed your patience. I ought to apologize. All I can say is, if you have suffered more than I have, you deserve a greater amount of sympathy and I extend you my most hearty thanks. Do vou care for this map as an exhibit? iSi ARBITRATOR WASI I lilRX— Vcs. MR. STL'UIJS — As many of these e.\liil)its that 1 have are original flocunients. and belong in my records, after you are throuj^jh with them. J suppose thev can he returned to me; they are my own exhibits. ARIUTRATOR WASH I'.L'RX— Yes." ARIUTRATOR MID(;LEV— Mr. Stubbs. mij^ht I ask you a (|ues- tion. please? MR. STL'l'.P.S— Yes. ARIUTRATOR MIDCiLEY— 1 think there has not probably been any statistics kept by the Trans-Continental lUireau for several years? 'mR. STLMV15S— Xosir. ARIUTRATOR MID(]LEY— Would you be willing to furnish a statement of the business since the time you suspended; all of the business by years, separating the eastbound and the westbound? MR. STULU5S — 1 would not, for the reason that it has nothing to dc with the case. ARIUTRATOR MIDGLEY— My object in making the inquiry, was. yon have complained of the past injury done you by reason of this com- petition with the Canadian i'acitic, and so, taking their traf^c. which we will call for at the same time, we would ascertain the ])ercentagc of the total they have carried. MR. STLTU5S — 1 beg the Honorable I board's pardon. I do not think it will be found anywhere in our statement that we have complained of injury done by the Canadian Pacific. W'c have claimed what was mani- fest, or what must be manifest to the Honorable Member, himself, that we have given this differential in the past *o the Canadian Pacific, through fear, or constramt — fear that there would be incalculable injury done to us. 1 have made no statement that the Canadian Pacific has damaged us in the past few years. ARIUTRATOR .Mn3GLEY — In looking over the proceedings, after 1 was appointed, and called for the record — in fact tot)k them home and read them, I recalled a speech of Mr. Mellen's at one of the meetings, in which he said, for example, that five per cent — that is as I remember — would not be an unfair amount for the Canadian Pacific to have carried. MR. STCIUIS — That probably would come under the second (|ues- tion submitted to the I>oard, possibly. If it please the IJoard, you will notice 1 have not touched the second (piestion, for the reason that the submission to this J>oard is the question of title and right. I do not believe, and cannot be made to believe, that this Hoard or any lUtard will decide that the Canadian Pacific, or any other line, has a title or right to a dififerential rate, or a title or a right to any portion of the traffic that makes a differential rate necessary in order to obtain it. When we get to the sectJtid (juestion, then I shall be verv glad to do everv- thing that I can in the way of giving information. 152 ARBITRATOR MIDGLEV— At the close of .Mr. Kerr's remarks for the Canadian I'acific, one of the Arbitrators asked him for certain information in the way of statistics, which lie said he did not have now, but would procure them. I simply wanted to comment on the differ- ence in ])osition. MR. STUBIJS— I have noticed what Arbitrator Day did at that time. Arbitrator Day, I suppose, knows what he is about. ARIUTRATOR 13AY— :\Ir. Kerr was talking about the volume of traffic, and he said, among other things, that if this Board of Arbitrators did not — this is the way I understood him — that if this differential was not granted the Canadian Pacific that it would practically result in their exclusion from the United States. I asked Mr. Kerr for tht total volume of Inter-state traffic which they carried. That is easily obtainable from the Treasury records of the l/nited States (lovernment, because they preserve them. I then asked him to separate them and divide his traffic, and let us know what portion of the whole was California traffic, either to California or from California. It was with that view, and to meet that point which Mr. Kerr himself made, that I asked for that information. Mr. Kerr did not have it and could not give me even an approximation in respect to any of it. 1 do not ask them to go to work and procure statistics. If he wishes to do so within a reasonable time, while the Board is together, I shall be glad to see them; but I asked for them only in reference to that particular point which he himself raised. ARBTfRATOR MIDGLEY— This Board has not anything to do in the submission of this Trans-Continental question, with shipments be- tween Chicago and Boston. It is simply confined to Trans-Continental traffic, and the diliferentials are not claimed nor applied on any other. ARBITRATOR DAY— That is what I thought. Mr. Kerr has made the statement that if this Board did not grant or concede their conten- tion, and grant them a dilTerential, that it would practically exclude them from the United States. ARBITRATOR .MIDGLEY— It would not exclude them from busi- ness between points in the States where it did not have ARBITRATOR DAY— You made your statement so broad that I thought I would ascertain the traffic and how it was applied. ARBITRATOR WASHB.URX— Mr. Stubbs. I understand you have finished? MR. STCB.B.S— Yes sir. I have closed. ARBITRATOR WASHBCRX— W ill there be any other speakers in behalf of the American lines? MR. STUBBS— 1 do not know of any. ARBITRATOR WASHB.URX—Then the Board is ready to hear the Canadian Pacific in its closing argument. MR. STUBBS— Mere is an exhibit 1 intended to put in. You may 153 not want it, and at the same time you may be very likely to need it It is the Proceedings of the Trans-Continental Association. I have had them taken out from the body of the books and everything that relates to those proceedings and the Trans-Continental Association, that relates to freight dififerentials. is presented here in form that is more ready for your examination, than if you were to go and search through those hooks. If you had rather have them I will file it with you. ARIUTRATOR WASHliURX— I would like to have them. MR. STUBI5S— I file this as "Exhibit \'." ARBITRATOR WASHBURN— Mr. Kerr, you may proceed. MR. KERR— Mr. Chairman, and gentlemen: As it is now after 4 o'clock, and the representative of the American lines has developed sev- eral points, covered with a very eloquent display of pyrotechnics and oratorv. T would ask that the Board adjourn until tomorrow morning. I would' like the opportunity of going through and picking the meat out of all this long discussion, in order to try and answer any points that have been raised that have not been already covered in my statement. A great deal has been said, and it will take from now until bedtime really to get at it. and I would like that opportunity of doing it ciuietly and leisurely, in order that I may be able to come before you in the morning with a proper statement of our case in refutation of their points. ARBITRATCJR WASHBURN- We will adjourn until 10 o'clock to-morrow morning. At 4:15 P. M. an adjournment was taken until October 15th, at 10 o'clock A. M. Morning Session. October 15, 1898, 10 A. M. The meeting convened pursuant to adjournment. ARBITRATOR WASH P.URN— Since we adjourned yesterday after- noon, a telegram has been received from Mr. Shaughnessy by Mr. Kerr, expressing a desire to be present before the hearing is closed, and I iufer, to possibly make ome remarks upon this subject, and I would like to ask the representative of the American lines, if he has any objection to that. He cannot be here, he states, until Monday morning. MR. STL'IUJS— Mr. Chairman. 1 do not know that we have any 154 objections. 1 think we are ])re])are(l to stand on our case as it is niar a postponement of the hearing, in order to coach their counsel. 1 responded to that by saying tlwt I sliould see that he was properly notified, and immediately atter it was concluded that I should make the presentation for the American lines, I wired Mr. Morton to consult with Mr. Truesdale and give notice to Mr. Kerr to the effect that it had been finally decided, so far as our part of the case was 155 concerned, that we should submit it hy traffic men. I'p'Xi 'ii> arrival here, I asked Mr. AI()rt(Mi if the notification had been sent. ui)on wliicli he informed me, as I have said, that it had. u])on receipt of my despatch, and that there was an agreement that the artjuments were to be made by traffic men on both sides, and 1 believe he stated that he notified the Canadian people that I was to rei)resent the American lines. Now. it has been intimated to me that the Canadian ]X'ople are under the impression that we have had the advice and aid of counsel. That is not true; not in any sense, nor in any decree. The presentation of the case that has been made by the .American lines, is my work, wliolly unassisted by any lawyer or any counsel by way of advice, reference or sup^j2^estion. The only assistance I have received has been on the part of the traffic men who are members of the Conuiiittee. I have supposed, and I think that the agreement so far reached necessarily implies, taking all the circumstances into consideration, that this submission was to be made by the traffic men; that it was to be made at this hearing without any unnecessary delay, to the end that we might go about our business, which the P)oard knows is very pressing; and T have purposely avoided anything that would in any way delay the case. Xow, the Canadian Pacific have had the same opportunities that we have had. They have been represented here by their traffic men; the men who have been familiar with this case from the very beginning. There is only one man that 1 know- of. who has ever represented the Canadian Pacific in any of our general meetings, or of our exclusively freight meetings on this subject, that is not present here, and that is ^Mr. George Olds, and he has been out of it for a long time. I think at every meeting, except perhaps the first one. Mr. Kerr has represented the Canadian line. He is the man who takes the burden of this business, with Mr. Bosworth ; — of handling this question with the American lines. He has taken charge of it from the very beginning. The Canadian line has no other man that is so well posted, or that, in my judgment, is as able to represent them before this Board, as Mr. Robt. Kerr. Coming in now, after their opening, and our submission of our case, and asking for time to bring in the \'ice-President — the active man- ager of their road — the man who controls the entire policy of the road, subject only to the President, it seems to me is a departure from the agreement. I should say that it was only reasonable that, if you accord this privilege — and I am not going to object to it — that I should have the right to bring our Vice-President here to answer Mr. Sh.aughncssy — General Hubbard; but in order to do that I should have to ask for further delay, for I do not know that he even knows that we are arbi- trating this case. I reported to our President the result of the August meeting at Denver, and wrote him, and just this morning received his reply in acknowledgment of the receipt of my letter advising him that 156 I had been selected to present the case of the American lines. I had h.,|)ed that we would present this speedily and that I should be able to get home; that is to leave for San I'rancisco tonight. That, I now see is not possible. Now, with that statement of the case, T propose to leave the matter entirely in the hands of the IJoard. and shall be satisfied. T do not intend to make any reservations, but leave our case in that respect entirely in the hands of the Board. AKIUTKATOR I).\Y— :\Ir. Stubbs, 1 unde-stand you say that you do not object. MR. STUliP>S — Yes sir; T say I am not going lO object. ARIUTRATOR WASHBURN— Mr. Kerr do you wish to make any further statement of the matter? MR. KERR — I do not think the subject calls for any statement from me. Mr. Shaughnessy is our chief traffic of^cer; in the same way. of course, he is also our chief operating officer. lie takes a very deep interest in all matters of traffic. All matters of importance that come up in connection with the traffic department must be passed in review before our \'ice-President. so that in asking that he should appear here before \ou. the Canadian Pacific Company are simply presenting to you their chief traffic officer. Heretofore you have been listening to one of the subordinate officers. Therefore, T take it as not wrong or amiss that the C anadian Company should be heard through their Vice-President. MR. STUPES — Why has he not been here from the beginning? Tt has developed by this statement you were not going to call him in; you ha.\\ no intention of bringing him in, in the first place. ARIUTRATOR WASHBURN— When I was first called into this case, we took up the matter of the manner in which the railroad com- panies should present their case to the Board, and I think a telegram was sent — certainly it was understood that one would be sent — by Mr. Countiss to both parties that they would be allowed to present their case in any way in which they chose, either by traffic officers, by other of their own officers, or by counsel, the desire of the Board being to get at the facts in the case. I was told the hearing would probably require two days. This is the fourth day and to remain here is to me a matter of considerable inconvenience. I have important matters for the road with which I am connected that require my attention, but it is the desire of the mendoers of the Board to get all the light upon this subject they can in order to decide the case intelligently, and as the representative of the American lines has offered no objection, we will consent to the ap- pearance of Mr. Shaughnessy as desired, and when the hearing is ad- journed today, it \A\\ be until Monday morning at 1 1 o'clock, at which time Mr. Shaughnessy says he can be present. Now, Mr. Kerr, are you ready to proceed ? 157 MR. STL'l'.r.S— Xow, :Mr. Chairman, yesterday I filed as an exhibit with the lUjard a eopy of a Decision of the Inter-state Commerce Com- mission in the I'assenj^er Differential ease. I had it in my mind at the time, hut it escaped, to file the Record t)f the hearing- in that case. 1 wish now to file it as a part of the submission yesterday. ( l'"ile(l as "i<"-xhil)it \.") I also omitted to file a document which I had with me. hut somehow it s<>t out of the list of exhibits, in support of the averment, on our part, that the opening of, and operation of the Canadian line was inimical tt) the commercial interest of the City of San I'rancisco. In su])port of that statement I beg leave to file as an exhibit a "Compilation of the Imports and Exports, Port of San I'rancisco." ( IMled as "Exhibit \\'.'"» It is sisfiied bv Edward A. Stevenson, who is our Custom House .Vttornev in San Erancisco, but it is taken from "Conunerce and Navigation of the United States." an official document issued by the I'nited States Treasury Dejjartment. I have not that document with me but it is a public docu- ment and if it is desirable the figures can easily be proven. Just for a moment, calling the attention of the IJoard to this showing "Com- merce between San Erancisco and I'.ritish Columbia for the years iSiSo, 1886. 1888, 1890 and 1897 — the years being the fiscal year ending June 30 — in 1880 the exports to British Columbia by San Erancisco were $866,000; in 1897, they were $550,000." Well, it will be found by ex- amination of the paper that the total exports of San Erancisco as between 1870 and 1897 increased three times. ARIUTRATOR WASHl'.URX— Those are practically the figures you gave us yesterday as I remember. MR. STUr.BS— Xo, I did not give these figures at all. ARBITRATOR WASHBURN— I do not know that you gave these figures, but I got that result from my own calculations of the figures you did give. :\IR, STUBF>S— I also wish to file, just to bring the matter before the Board so that in its consideration of the subject it may have had its attention called to this point and give it whatever weight the lioard thinks it is entitled to. a copy of the Evening Post of October 13. 1898. (I'lled as "Exhibit X.") ARBITRATOR WASHBURN— The Chicago Post? MR. STUBBS— Yes sir, yesterday's Post, calling attention to the special cable to the Evening Post under the general caption of "Republi- can Money Markets," in which is stated that at the meeting of the directors of the Grand Trunk Railway of Canada today the Chairman stated that negotiation with the Canadian Pacific for the restoration of local rates had proved abortive, the reason being that the Canadian Pacific wished to dis-associate the Cirand Trunk from connection with American lines in the matter of through business. Those were conditions to which the (irand Trunk could not consent. That is submitted in reply 158 to the assertion U])on tlic part of ihv other side that the participation m purely domestic Catiachan business by the American hues was welcome to the Canadian line. It is a matter of ])ul)lic knowledji:e that this brief statement found in the des])atch which 1 have referred to, refers to the fact that because the (irand Trunk line would not withdraw from its con- nection with American lines for purely Canadian business and work wholly and solely with the Canadian Pacific line, that the Canadian Pacific cut the local rates, instituted a war of local rates in Canada against the Grand Trunk to compel it to do that thing. ARHITRATOR WASHBL'RX— Mr. Kerr, are you ready to proceed now ? MR. KERR — ]\Ir. Chairman and Gentlemen of the Board : I'efore proceeding to the main case, 1 ask permission to make a short reference to the two exhibits that Mr. Stubbs has just filed with you. In the first place, in his remarks in connection with the filing of that trade report showing the exports from San Francisco to British Columbia Coast points, and showing that in a given number of years a falling off has taken place, that those exports have decreased, their values have decreased, in order that you should arrive at a fair conclusion as to just what that means, if the matter to your mind has any bearing on the sub- ject in hand, you should first obtain the returns from American North Pacific Coast points, the exports from those points, from Portland, Tacoma, Seattle and points on Pugct Sound, to British Columbia points, and see- if the markets of Canada have been shut out from the reach of the American seller. The chief exports from California to British Colum- bia in the past have been fruit, dairy products and cereals. British Columbia has opened out of late years by reason of the construction of the Canadian Pacific road. Its valleys are rapidly filling with an agricul- tural population, and they are very fertile and rich valleys that can pro- duce almost anything required for the use of man. for his necessities Now, the ])roducing power of those valleys is increasing evev \e., 'hey are ])roducing more and more, and they have more to 1' What more natural than that they should supjily their products I nviis and cit'cs of the coast in British Columbia? And what more nal than thai iiie exports, the sales of fioducts from San Francisco. >houM decrease? Surely, there is nothing \a that very natural course to influviue yor. or to bear on this subject in hand, nor to create in your minds any prejudice whatever. Concerning the filing of this new'spaper as a matter of record — oiKicial record before you — there is no one who has any greater regard and respect for the newspapers than I have. They are a mighty power for i5y pood, and tlicv arc a nii.nlity ]H)\vc'r for evil; hut wo all know that tlioy arc not always accurate in their statenunts of facts. 'Ihc very nature of thinjjjs, the rush and turmoil of this busy life, this busy period, this end of the l()th century, ])recludes the possibility of men, who arc devoted to the jj^atheriiif^ of news, the hurry and scurry, to do more than gather the points here and there. 'Ihey fj;^ct the skeletvUi. and they build on the body, and, in that buildinjj^, they are very. vcr\ frc(|Uently, out of line, and do not jj^ct their jiroportions right. Xow. even in niv wildest moments, I do not think 1 woidd ever dream o{ filinj^ a m spaper as evidence before a I'oard of intellij.jent. exjjen.'uce'l men. s..ch as I am standing before, to take it — such a report, as bein^ correct; and if it is correct, what does it mean? It has nothing' to do with this subject that is l)efore you. The whole question under discussion is the passenger mat- ter. It is a (piestion of restoration «)f jiassenger rates, with the hope of increasing i)assenger revenues. There have been various ])oints of dis- l)ute, as you all know, as between the Canadian Pacific and the ( Irand Trunk. Docs anybody mean to say that there are not also many points of dispute as between the American lines, one with the other? lias the Southern Pacific Company no disputes with their neighl)ors of any kind? Now, w.hy should a newspa])er rei)ort bearing on ])assenger difficulties, that may or may not exist, as between the ( Irand Trunk and the Canadian Pacific, the (Irand Trunk, and any other Company. Canadian or .\nieri- can. the Canadian Pacific and any other comjiany. Canadian or Ameri- can, on purely ])assenger matters, have anything whatever to do with this case? I do not see what light or information such a newspaper article as that can give to you gentlemen to aid you in deciding on a ptu'ely freight traffic question. The representative of the American lines has presented to you a most voluminous statement of his case. It is clothed in many words. Xo fox ever eluded his ])ursuers. ever doubled on his tracks with greater skill than the representative of the American lines in iterating, reiterating, presenting and re-presenting, in every form and phase, pretty near, that the English language is capable of being turned into; the same thing over and over again, with the idea of thum])ing and ])oun(ling and pound- ing the points so that they will be thoroughly clinched and stay. In doing this, he has shown a great deal of cleverness. Wc know that he is clever, but. in doing it. he also has obscured and be-clouded it to such an extent that it becomes at least to me. almost an impossibility to follow him through in anything like a connected manner. Therefore, I hope I will not exhaust your patience in endeavoring to follow him. I mav have to iterate and reiterate, on the same points, double and come back. The re])resentative of the American lines in the opening of his case on Thursday afternoon, makes use of this statement: "This contention is in resj^ect to freight rates, and freight rates only." meaning that the i6o subject ])ef(jn' tliis I'.oarcl is one pertaiiiinj^ cxclusivclv to freij^lit rates; but we find, during the course of his argument, he has again and again quoted and made reference to a decision — not a decision. — they do not claim it to be a decision — of the Inter-state Coiumerce Commission, it is an opinion that they gave in connection with the Passenger Differen- tial case, ile lias not only done this, but he has filed with your Board, the opinion of the Conmiission in connection with the case. Xow. it is not at all clear to me what bearing a passenger cjuestion which stands alone, by itself, can have on this freight (juestion, that stands alone by itself. We all know that ])recedents. customs, rules and regulntions. per- taining to the handling of passenger business ar»! very different from customs, rules and regulations ])ertaining to thij handling of freight business. Sometimes general ])rinci])les can be applied to both, but what may be done or said in a ])assenger matter, cannot possiblv have any connection with what you do and how you act in a purely freight matter, therefore. 1 have not the least fear that all these passenger records, that our opponent has filed with you, will have anv influence on vc^ur minds whatever in dealing with this subject. AJr. Stubbs makes argument that the so-called Pier rates in effect by the "Sunset," "Mallory" a.id "Atchison" lines, and "Cromwell" and Texas & Pacific lines, cannot be regarded as dififerential rates for the reason that th^ all-rail lines may make the same rates if the^ wish. The published rates as shown in Trans-Continental iM-eight B^ oau 'i'ariffs are made up by conference and agreement in fact '-ut not in theory. That may seem paradoxical. It is so. They are supoosed to be — tliat is these tariffs — these agreed published Freight P>ureau tariffs ar,.' supposed to be the individual rates of each of the lines, as according to their present interpretation of the law, the roads cannot legally combine for the pur- pose of making an agreement; therefore, each road is at liberty to change its rates at any time without regard to the others; doing it in a lawful way, of course, or else taking their chances on the law. Xow, if the all- rail lines decided to adopt and put into effect, from New York, the Chicago rates, being lower than published rates from Xew York, and the lower rates as 1 have already exi)lained from Chicago are the rates that are put in effect from the Xew York piers in connection with these Southern Ocean lines — ocean-and-rail lines — they are at liberty to do so providing they conform to the requirements of the law. Now, here we have a statement of differential rates, working and operating on the lines managed by the great champion of equality in rates, for Mr. Stubbs is ihe great chanqjion on that subject. lie is the warrior that is always put into the arena when a battle is to be fought, on that or any other subject, am\ as all of you know he is a very vigorous warrior. Xow. is it con- sistent to come before this Board, having the enjoyment of lower rates than the all-rail lines out of Xew ^'ork and the surrounding innnediate i6i coast territory? I think he lias exphiined to you that the all-rail lines, owing to tliei'r greater interests up in the middle and middle West States, cannot always afford to reduce their rates, o))enly, to meet these differ- ential rates that the "Sunset" and the other ocean-and-rail lines wrested — took from — the all-rail lines against their will. I say that deliberately and knowingly, for I liave been the witness of discussions and disputes on that subject as between the representatives of the ocean-and-rail lines and the all-rail lines in meetings. These differentials were not given voluntarily to the '"Sunset" line, and "Atchison." and to the Texas arons of old, who held up anybody that came their way, if he had any- thing on worth holding him up for. It is stated by the representative of the American lines that the Canadian F'acific was not projected or built for the purpose of developing, fostering or sharing in the carrying trade between vSan Fiancisco and the eastern part.^ of the Cnited States. Doubtless that is true as an initial idea. Will the representative of the American lines tell us or you that whenever a road is projected and built, that the full field it may ulti- mately be able to cover, draw traffic and revenue from, is always known and taken into account? Is there not in that, as in many other business propositions, an unknown quantity? Do not railways, small links at first, grow and develop and by process of evolution finally become great and long systems of roads that cover huge territories of countrv, by building, by absorption, by purchase, and the various other methods we recognize of building up great systems? A little road may be started * were not the originators of that plan. The Canadian Pacific Com- pany did not go to the other lines and say, "Pay us something to stay out." It was the other lines who came to the Canadian Pacific to nego- tiate and finally agreed that they would pay this sum and before the ex- piration of the year many of these lines were willing and anxious to i65 renew it — to renew the arran^i^enu-nt for another year, perliaps with some modification as to sum and so on, l)ut others of the Hnes — 1 think some of those that had the least interest too, in the arran,u^ement.— ohjected, and it fell through. It was not renewed after the expiration of 1891 . The question as to whether there had ever been an agreement as between the Canadian F'acific and the American hnes as to the Canaihan Tompany's differentials, has been discussed at considerable length and in the main denied by the representative of the American lines, even in the face of the records— the clear records — filed with your P.oard. of the New York and Milwaukee meetings held in '96— March and April, 1896. where they simply fell on a technicality, that because the act of one com- panv for reasons good and sufficient unto themselves, prevented the completion of the proposed association and confirmation of the agree- ments all around. I think you will agree with me. gentlemen, that that is a mere technical evasion. The records speak for themselves. There was an agreement. There was an agreement at the beginning— the agreement being the outcome of proi)er, honest business negotiations. \effotiations of that kind vou are all familiar with. It would be pre- ' * 1 * 1 sumptuous in me to enlarge upon the point. There was no idea m the mind of the Canadian Pacific as to shot-gun policy, or ruthless destruc- tion of revenue. .\t the inception, the (|uestion was one of ordinary busi- ness negotiations; at the close in 1896. when we may say our straight connections with the Trans-Continental lines ceased, by reason of the fall- ing to pieces of this proposed Association not being formed, there is a complete record of agreement, as between the American lines :\vn\ the Canadian Pacific. Since that time, although not associated with them directly in the various organizations that they have perfected, we have worked with them closely and in perfect touch all the time. When the old Association dissolved, at the end of 1892. as already explained, we adoi)te(l the flexible plan of differentials on a percentage basis. There was not any serious objections offered to that, at the time. We have been in meeting, off and on. with those lines ever since, and to my knowledge, f do not think there is any record of protest with this Comi)any against the adoption of the to per cent differential plan, until about one year ago. when, at a meeting in Chicago, something was said f)f rather an indefinite character on the (|uestion of our differentials. Again, in ;March and April of this year, the ciuestiut my recollection is that this call was not sent to the Canadian Pacific Company. The one that was sent to us was of very different wording, but it did say that the reasons for calling the meeting were to consider the situation in connection with the I'ana- dian Pacific differentials. The call is before you and I am not pretending to give the exact reading of it. Now. when we get into meeting at Denver, having been told what terrible fellows we were and the dreadful things we were doing, what do we find? .\fter the discussion had fairly gotten under way. pro and con, as to the situation, the representative and chief traffic officer of the Cnion Pacific pointed out that it is no secret at all that the roads east of the Missouri River and the Mississippi River, on Trans-Continental business, are in a very demoralized condition, and that the through rate from Xew York to San I'rancisco can be cut through causes entirely foreign to the Canadian I'acific differential. This was a fact patent to us all. We all knew it. and the following resolution was adopted: "RESOLA^ED. that a Conunittee of five of the Trans-Con- tinental lines be appointed to confer with a Conunittee or such organization as they have, of the Central Preight Association and the Trunk Lines for the purpose of arranging, if possible, to stop present demoralization in Trans-Continental California and Xorth Pacific Coast freight rates. If said Conunittee reports satisfactory arrangements, it then to be understood that all lines here repre- sented are pledged to restore rates from all territories on sucli day as Secretary Countiss may fix." Xow, here is a situation developed that shows that the Canadian Pa- cific differentials are in no way responsible for the demoralization of these rates. It is well and publicly known that the connecting lines east of the Missouri River do shrink their proportion of their earnings. It is well known that the Trans-Continental lines do accept those shrunken j^ropor- tions or earnings and add them on to the proportions of a through rate west of the Missouri River, with which to cut the agreed published through rates of the Trans-Continental Association, and in doing that naturally they wipe out and destroy the Canadian Pacific differential. Will anybody say that the disturbance on all these lines in the Central Ereight, in the Western and in the Trunk Lines' territory, is caused by the Cana- dian Pacific Trans-Continental differential on California business? i68 Surely, no man would say so who knows anythinjj^ about the situation. J-'urthermore. the demoralization caused by this condition of affairs in this territory east of the Missouri River, is not confined to California; it extends to the North I'acific Coast. It carries all alonp^ Portland and north ; points with which we have never had our rail line differentials, and never asked for them. Does the Canadian Pacific differential to San I'Yancisco cause all of these lines down here to shrink their rates? Surely, you W'ill never believe it. The rejiresentative of the American lines claims that the American lines are united; that they are welded tog^ether as one line on this subject; that the Canadian Pacific stands alone as the only one seeking for differential privileges. In making that statement he may be in a measure right, but he does not take you gentlemen into his confidence and tell you why it is so, if it is so. In the first place the American lines are not a unit on this subject, any more than they are a unit on many other subjects. The Great Northern Company and the Union Pacific Company are not a unit on this arbitration. The representative of the American lines does not represent those companies, as I understand it. They have withdrawn. In the first place, the Great Northern Com- pany refused their invitation to come in and join in this question of arbitration; for reasons, I suppose, that are good and sufficient unto themselves. The Cnion Pacific by their accredited representative, the chief trafific officer voted "'aye" on this arbitration resolution at the Denver meeting, but for reasons good and sufficient unto themselves, their President over-ruled his action. That put them out of Court so far as this arbitration case is concerned. What their o])inions are can cut no figure whatever in this case. The Great Northern never entered Court. What their opinions are can cut no figure in this case. The American lines are not a unit on this subject, as they are not a unit on many other subjects. Now, whv do we stand alone in asking differentials on California business? We stand alone for the reason that the differential is the only means whereby we can obtain any share of this traffic. The others, the Great Northern and Northern Pacific, cited so extensively by our friend on the other side of this case, receive their quid pro quo for keeping out of California business by the ocean route. The representative of the American lines, with a display of a good deal of feeling, denied that there was any such agreement ; denied my statement that there had been a trade and falls on the technicality that what w^as agreed to at the New York and Milwaukee meetings not having been confirmed could not be re- garded — a mere technicality. As a matter of fact we know, or rather we think we know — and pretty often you are right when you think you know — that that agreement of Milwaukee and New York in 1896 is being operated under today. i69 ARIUTRATOR WASHlirKX— In its entirety or iti part. Mr. Kcrr? MR. KKkk— To the extent, with i)ossihly some exceptions, that the CaUfornia lines do not work up into rufa;ct Sound, north of I'lM-thuul; they do not work actively: they do not care lor the business, so long as the Northern lines will not work actively for California business. Pre- cisely on the same basis, you niij^^ht say. for the same i^rinciple will ai)ply. when the Canadian Pacific Company had the subsidy they put their rates on a parity with the other lines with the result that it completely danuned up and stemmed the riow of traffic to and from California by the Canadian Pacific road. Conseipiently, the two northern lines maintain, in the same way, the full, publislied all-rail tarifif by their ocean-and-rail routes, and they get no business. ( )n the other hand, the California lines do not get very much business in Puget Sound; do not seek for it very actively, do not look for it. 1 beg permission to quote from the proceedings of the Trans-Continental Association. "(Jeneral Meetings Xew York and Mil- waukee, 1896." These are the meetings when it was i)roi>osed to form this Association and failed. On page 17— you have a copy of this tiled ^vith you — the resolution reads: "RESOLX'ED. that the California lines, i. e. those lines which must work through or via California, to reach Portland and other North Pacific Coast points, hereby agree not to publisii taritifs or to solicit business between Portland and North Pacific Coast points, on the one hand, and points in the eastern Trans-Con- tinental territory on the other hand, but. on the contrary, to with- draw from participation in said business. In consideration whereof, the North Pacific Coast lines, i. e. those lines which must work through or via Ncorth Pacific Coast points, from Portland U> X'ancouver — \ ancouver excepted — to reach California (it l)enig exjjressly understood that the Canadian Pacific Railway Com])any is excepted from this provision). herel)\ agree not to publish tariffs or to solicit business between Califor- nia points and itoints in tlu' eastern Trans-C'ontinental territory, but. on the contrary, to withdraw from participation in sucii busi- ness. It being understood that either party may call upon the other to publish tariffs on a sufficiently higher scale than those carried by the direct lines, to give full force and efifect to the agreement em- braced in this resolution." MR. STUB BS— Was that resolution adopted? MR. KERR— That resolution was adopted at that meeting. It says: 'After full discussion, the following was offered and adopted." 170 MR. STL'MBS— T just wanted to j,a't it fully l)cf(jrc the Board. That was at the Milwaukee meeting, as I understand? MR. KERR — That was the Milwaukee meeting. Xow, my under- standing is that the Northern lines are acting on that; the California lines are acting on that today, with possibly some modifications. I think there has been an arrangement made whereby the Northern Pacific works certain lines of traflfic. all-rail, out and into San Francisco, via the "Shasta Line" of the Southern Pacific Company, from Portland to San l<"rancisco. Possibly there may be, also, an arrangement whereby the Great Northern line may work certain lines of traflfic, through Spokane, over their con- nections, the Oregon Railroad & Navigation Co. to Portland, thence to San i'Yancisco. There is a large fruit traffic that will not take the ocean route. There are various kinds of traffic that must have an all-rail outlet; that catmot be handled otherwise. Now. the Canadian Pacific can get no advantages of this kind. They are up on the extreme north. The suggestion was made by Mr. Stubbs that we should seek an all- rail inlet and outlet on the San Francisco traffic. Mr. Stubbs was not in earnest when he said that, I am mind-reader enough to know that. He knows the impossibility, the practical impossibility of the Canadian Pacific Company making an arrangement to work their traffic all-rail over three companies and pay each one of those individual companies a proportion out of what is a very low and ])ractically non-paying througli rate on many of the lines of traffic that we now have to carry. To use that through line, would mean a loss to the Canadian Pacific Company and if those three coimecting lines from Huntington, B. C. or Sumas, Wash., — those are the two points of junction where the Seattle & International road, and the Canadian Pacific road join. — from that point down, if they were willing to accept their proportion of the pro rata per mile, or pro- rata per rate, it would not pay them, they would not make any money; they would be better without the traffic and so would we. Now, Mr. Stubbs ignores all practical workings in dealing with this cjuestion. and endeavors to create the impression on the Board that that all-rail line froni Sumas to San Francisco, is a very easy proposition for us to come in and accept. If we pay those three companies a reasonable proportion, sufficient on which to give them a margin of profit, we would sufifer a dead loss; and he asks the question why, if we can reach 1000 miles in the south and east for business, and pay the rates up to our connection at St. Paul and Minneapolis, why cannot we also pay for carrying our business an- other 1000 miles on connecting roads at the western end. The published rate on rails from Pittsburgh to San Francisco is 75 cents. That is the published rate. ARBITRATOR DAY— How do you carry that traffic, Mr. Kerr? MR. KERR — If we had to take even that 75 cents and pay for 1000 171 •d. That y under- alifornia I think fie works i "Shasta 'rancisco. Xorthern heir con- :hcncc to he ocean lil outlet ; m p:et no jk an ali- as not in hat. lie m Pacific iver three roportion 1 rate on use that ny and if s, Wash., ■rnational n, if they l', or pro- It' money; vow, Mr. ;tion, and 1-rail line ; to come oportion, Per a dead the south ; St. Paul ;iness an- isco is 75 Kerr? for 1000 miles haul on the one end and kxdo miles haul on the other, would not we be better without the business? ARBITRATOR DAY— What is your route from Pittsburgh? MR. KERR — Oh. various lines. We p^et u]) in the usual way, just as the others do. ARBITRATOR DAY— Up to St. Paul? MR. KERR— Yes, to Chicap^o and St. Paul. ARBITRATOR DAY — I was wonderinp; whether you carried that business by way of Detroit? MR. KERR— Oh, no. Therefore, we must look at this question from a ])ractical standpoint and stop theorizinp^. We could not possibly afford to carry the business by the all-rail line, under even very favorable ofYers of proportions and division. Furthermore, we have other obstacles in the way. I think the representative of the American lines stated — if he did not do so he can correct me — that we had an all-rail line into Portland. Ore., and that the Northern Pacific line was open to us; that we had it at the start and we have it now. MR. STUBBS— Xo. I did not say you had it at the start. T said quite to the contrary. MR. KERR— Well, when the rails were connected throuoh from Sumas. MR. STUBP.S— Yes. MR. KERR — We could not have it: of course, if the rails were not there we could not have it. T meant when the rails were comiected. Xow. the information that he has gathered on that head is wronj^:. We have not had an all-rail line into Portland: not for freight business. We have no passenp^ers. The Xorthern Pacific would not take our business into Portland. The very best that the Xorthern Pacific would ever do with us was to let us, for a period, into Tacoma. 42 miles from Seattle and two or three years aj^^o they cut that ofY, and they will not let our cars roll one foot south of Seattle on their tracks even by paying their local rates. Now, assuming that Mr. Stubbs in charge of the Southern Pacific Company, should say to the Canadian Pacific Company: "Come and form a rail-line over our "Shasta Route" and we will give you such propor- tions as you can work under." We have no means of bridging that 185 or 187 miles between Seattle and Portland: we could not accept his kind ofifer, and today we cannot move business south of Seattle on the Xorth- ern Pacific road, and we never have been able to move business south of Tacoma on the Xorthern Pacific. I am speaking purely of freight, of course. Now, I think that fairly disposes of the question: "Why do you not come and form an all-rail line?" ARBITRATOR DAY— What objection can the Northern Pacific in- terpose to your getting in there? mmmimi i/j MR. KI*".Kk — They will not have anotluT oonipt'titor in territory that they eati hoUl to themselves. Akr.ITkATOR DAY— Did you offer to do it? You heard Mr. Stnhbs' statement yesterday. MR. KI^RR — We have never discussed the i)ropriety of working San Francisco business, but the Xorthern Pacific would never allow us to work into I'ortlan*!: it never would allow us to use their line. They will not today. They would not take a car of San h'rancisco freight from us today any more than they would take a car of Tacoma or Portland freight from us today. They will not do it, because they do not want another competitor in the territory that they have kjcal to themselves. MR. STLTJli.S— Well. now. is not that new matter Mr. Kerr? MR. KERR— Xo sir. MR. STt'l>l)S — I have not said anything about that business. MR. KERR — ft is in connection with this whole cpiestion. 'MR. STL'lUiS — T make the distinct assertion that you never have api)roached the Xorthern Pacific Company to form an all-rail through line to San FVancisco. equitably, with an offer to abandon your differen- tials. I have not discussed Portland business or your relations with the Xorthern Pacific into Portland, except on the basis that you work there: on the basis according to rates. MR. KERR — I do not know that it is an important point but the statement was made that the Seattle & International Ry. was an inde- pendent road. In order to make the record accurate. I would .say that the Seattle & International Ry. is owned and controlled by the Xorthern Pacific Railway Company. They acquired the control of that road some months ago — T have forgotten how many, but it was some months ago — in the beginning of the year, T think. Previous to that the Seattle & International Ry. was an indejiendent road for a period and during that period the Canadian Pacific Company made a traffic contract with it for the handling of traffic between Seattle and other points on its line. Our connection is at Sumas, and the contract or agreement, which has still some years to run, covers both through and local traffic, passengers and freight. Were it not for that. I am not so sure but what we would not be able to i^ut our cars into Seattle today over that road. In connection with the statement that the X'orthcrn Pacific and Great. X'orthern by their ocean-and-rail lines, do not demand a differential, but that they actually operate those lines on a parity of rates — equality of rates — with the all-rail routes — Trans-Continental roads. I explained the reason why the Great Xorthern and X'^orthern Pacific published equal rates by their ocean routes and to show you how very effectually that, plan is in stemming back traffic if you demand the same money for carrying an amount of goods by that broken ocean-and-rail route, as against the other fellow who has a direct rail line to offer, I quote fronr; ^7i a statcMiK'iit of "J"'xiRMisos »»f Inspection of W'fsthoiiiKl 'rrans-C'ontinental shipments readiinj^ San I'Vancisco via Pacific Coast Steamship Company .•;n(' Urej^on Kailroad i*t XaviiL,^'ltion Company Steamers:" — tliat is. handed to this steamer line by the C'ana(han Pacific, the (ireat Xorthern and the Xorthern Pacific and the ( )re<;(»n Railroad iS: \avii,^ation Com- pany — theirs is a railway uj) to their ( )cean Division. I mijL;ht add that it was afjreed that we would submit to the ,t,a'neral system of inspection tliat obtains in California in order to check classification and \vei.i;Iits and to charjj^e up and all that sort of thinj^ that you are familiar witli. We and these other lines named ap^reed to go in under this insj)ection and share on a certain basis in the expenses in connection with the inspection — the salaries and so on. 1 (piote the ft)llowing percenta}4;es of business carried : i8y8 Can.i'ac.kv. Ct.Xor.Rv. Xor.Pac.Rv. O.R.c^X.Co January .9274 .0307 .0419 February .9924 .0007 .006.S .0004 March .9814 .0185 .(XX) I April .9906 .0009 .(XJ85 May .9498 .0502 June .9848 .0007 •0145 July .9846 .0002 .0152 Xow, it will be seen from that statement that those lines are prac- tically all out of Trans-Continental San Francisco business. They are not "in it." Why? Ik'cause they do not want to be in it; it is not to their interest to be in it. The Cnion Pacific will not work San I'rancisco business through their Portland water gate-way; if they did, would they not at once get into serious trouble with our esteemed friend here? If the Denver & Rio Grande system began working San Francisco Inisiness through the Portland gate-way, would they not get into the same trouble? The fact of the matter is, that these various lines are either influenced by a club or they are bought ofY. In the case of the Xorthern Pacific and Great X'orthern, they are bought ofY. In the case of the Cnion Pacific and the Rio Grande System — (Speaker here made motions as if swinging a club) — that accounts for why the Canadian Pacific stands alone on this question of differentials. ARBITRATOR WASHBURN— Have vou finished on that point? MR. KERR— Yes sir. ARBITRATOR W^ASHBURX— As it is nearly one o'clock, we had better adjourn until half past two o'clock this afternoon. An adjournment was here taken to 2:30 P. M. of the same day. 174 Afternoon Session, Octol)er 15. 1898, 2:30 P. M. The meeting convened pursuant to adjournment. ARBITKAT( )R WASHBURN— Mr. Kerr will resume his argument. MR. KI*1RR — Mr. Chairman and (lentlemen: When we adjourned 1 iiad disposed of the case and given you the reasons why the Cana- dian Pacific stood alone on the (luestion of differentials into San Fran- cisco, and now with your permission 1 will touch upon a point raised. Mr. Stubbs in his argument stated that we were suffering under a dis- ability on the east end of our line. Mr. vStubbs says that the .Atlantic Seaboard trafific is moved by the Canadian Pacific via Montreal and what he calls its Sudbury line, meaning its main line via the north shore of Lake Superior through L'ort William and Winnipeg to the west. If I understand him correctly, he is trying to pull us from the west end where our disabilities really exist down into the east where the^ do not exist and hv states that although ostensibly we are asking differentials in connection with our ocean line, that really they are to overcome dis- abilities in connection with our all-rail line around the north shore of Lake Sui)erior. That is my understanding of his meaning in the manner in which he puts the case and I want to say right here that 1 think he knows l)etter than thiit. We do not claim to liave any disabilities on the east end of our line, where we are operating rail and wheel ; we do not claim disabilities and consequently we do not claim differentials. Our disability rests on the west end with our ocean coimections. The broken route, the extra handling, the prejudice in the minds of shippers as against using such a route, the necessarily longer time that it takes to get goods forward on such a route and the various other reaso-s that I have already specified. I will not take up yoiu" time to recount them. The next point I desire to touch upon is that of equality in rates. As baldly stated without explanation rmd without regard to circumstances surrounding particidar cases, it looks fair and it is fair when not a])plie(l practically as between broken rail-and-water lines and direct all-rail lines and of eciuality in rates by every line crossing this continent; by all lines throughout this whole country east and west of the Missouri River section that are traversed by \n..h lake-and-rail and by all-rail lines; sections that are filled full with diffiiential lines; differential lines because they suffer .inder these disabilities tliat I have described over and over again. Now. ca'-ried to a logical conclusion what is the effect of equalit\ in rates between all of these broken rail-and-water lines and all-rail lines? Will it not have the effect of throwing the tonnage and the revenue over 175 onto the strong" all-rail lines? Will it not have tlie effeet of largely de siroying the weaker rail-and-watcr lines? Will it not have the effect of taking- from the weak and giving to the strong; to the lines that are already strong- and increasing the weakness of those that are already weak and what becomes of the people who have their money tied up in those weak lines? What becomes of the people who are served by these line*^ through which they enjoy a competition in traffic? (lentlcnien. J hold that the whole argument as advanced by the representative of the Ameri- can lines in this case is fallacious and wrong. I do not agree with him on the point and I do not think that he can make any level headed traffic man believe that the ])erfect equality of rates does not mean just what [ have said, if carried to its logical conclusion. Xow. taking that to be correct, what becoiues of the Canadian Tacirtc line in connection with vSan I'rancisco traffic? If we are forced to adopt equal rates with the strong direct lines? It goes without saying, that we must aban mean agreed rates, and when rales are agreed to they shoidil be- maintained. The stattnient has been made Miat agt;'f(l rates, differential and all-rail, full tariff, being on the market at the same time, the inducement to the man who represents the all-rail line in canvassing for business is so great in his greed and grasp for business for his line, that he is never strong enough to resist the tempta- tion to use the differential rate of his weaker brother and apply it on his own strong line. .\nd this principle is advanced as an argument, ha<; 176 been on many occasions, why the (liffcrcntial rates of the Canadian Pa- cific should l)c done away with, because they were a temptation — too great a temptaticjn — to the representatives of the other lines to maintain their tariffs. Those gentlemen can withstand anything except tem])ta- tion, and 1 do not think it is a good argument, not if these strong lines in- tend that tlu)se rates shall be maintained, and the executive and chief traffic officers of those lines make their orders imperative to their sub- ordinates that they must and shall be maintained, so that those sub- ordinates thoroughly understand that their weak brother here on the right, W'ith his lake-and-rail line, has been accorded a differential, and that that shall be respected. Will that man disobey orders? Not if he values his job. 'i"he trouble is, they do not receive those orders, and ♦^n representative of the strong line falls under the temptation. lU uses the differential rate and that is the destruction of the whole revenue on the traffic. 'J'hat is not the fault of the differential line. It is the fault of the other fellow, yet they would seek to hold us responsible for the con- ditions. This morning Mr. Stubbs took exception to my mentioning Portland rates, on the ground that it was not in the case and should not be v ferrcd to. I find, on his own record that he makes a very plain refer- ence to Portland. Mr. Stubbs says: "It may be that the Canadian line will give as a reason for not using the all-rail line, that the Northern Pacific between Seattle and Portland is n'^t open to its use for San Francisco business upon reasonable terms, or upon terms which it can afford to pay. It pays the terms from all these points in this country (indicating on map) up to Minneapolis — local rates — But we ask in reply, why this reason does not apply to Portland business as well as to San Francisco business? 1 do not know that they make much use of that line, but it is open to their use and they maintain equality of rates." I have already explained to you that the Portland line is not open to us and we do not take business into Portland. Further, Mr. Stubbs •says: "The Canadian Pacific line does use the N^orthern Pacific con- nection for Portland business, and does work upon an e(|uality of rate with all the Xorth Pacific Coast lines for Portland business. Whether it does or not, is of little moment. It is upon an exact equality with these lines south of Portland. Then why .should it not work with them upon an exact equality as to rate for San ]'"rancisco business?" 177 T just mention this in order to set the reeonl rij^ht. that the (juestion of Portland btisiness is in the record and consecjuently it was quite proper for me to speak on the subject. I desire to revert to the case of the Hong Kong agreement. That is a point pretty weU covered, l)Ut the point is this: The agreement was made in Hong Kong as ^Ir. Stubl)s correctly states, by the representa- tives participate in their domestic traftic, thntwing nn restrictions around American roads in their efforts to compete for business between points in the Dominion. Agencies nf leading American lines are estab- lished in the larger C'anadi.ui cities which strive hard with the Canadian Pacific Railway for the transportation of traffic between strictly Cana- dian points. l'"or example, between (Juebec and ( )ntari() on the one hand, and the Northwest on the other. Those interchanges cannot 1k' caniid on without the co-operation of .\mcrican lines, such as those west of Chicago and St. T\'ufl. In reply it is asserted that no diffei-enlial is claimed i8o by American lines doinj; a Canadian business, therefore the Canadian Pacific Railway should be j^lad to share in American traffic on even terms. JUit the assumption first described is not correct; when the lakes are used in connection with American lines on Canadian traffic, differ- entials are invariably used; in other words, whenever a broken route, that is part water and part rail, is used on traffic carried either between Canadian points or between American points, all roads engaginj;' in the business claim and apply differentials, and the universality of the rule not onl\ disposes of the point in this direction sought to be established by American lines, but clearly establishes the contention of the Canadian Pacific Railway in the case under consideration. j\lr. Chairman and Gentlemen, I feel that I have trespassed upt)n your patience very largely, and 1 know that you will be glad to hear that I have now finished, and in finishing I thank you most heartily for the very patient and kind consideration and hearing you have given me in this case. 1 thank you. ARBITRATOR DAY— IMr. Kerr. I ought to have asked you a ques- tion earlier in the hearing" when you were discussing it, but it seemed that it embarrassed you for me to ask questions, but this is one of the facts that 1 would like to know: I would like to know how^ you carry jour Trans-Continental traffic, that is to say, the traffic that reaches the Mis- souri River common points from New York to the Pacific ; how you get that to your rails from New York City, chiefly? ]\1R. KERR — We bring it to Prescott by the rail line. New York Central and Rome & VVatertown roads. ARIMTRATOR DAY— To Ogdensburg? :MR. KERR- Yes. ARUrJ RATOR DAY— Is there a ferrv there? .MR. Kh:RR— Yes. ARUITR.ATOR DAY — .\nd you ferry the cars right over 1o your road? MR. Kl'.RR— Yes. MR. STUP>1>S — Now. Mr. Chairman. I wish to say that in the reply of the Canadian Pacific, there have been some issues as to facts between their side and ours. 1 do not know how you are going to determine those (]uestions, unlos you take testimony. For example, notwithstand- ing the answer of the American lines, to the effect that there is no trade with respect to .North Pacific Coast business, between the .Vmerican North Pacific lines, and the California lines, the Canadian Pacific advocate reiterates his statement. Now. I must insist, under the submission of the case, that his iteration and reiteration, of that statement cannot stand. In order to have any influence with this Board against our denial, he nuist prove it. If you are going to consider that matter, we demand that you •shall take (("itimony on that point. i8i ARBITRATOR WASHBURN— I do not quite catch the point that you refer to. MR. STUBBS— The Canadian Pacific averred the reason why the Great Northern and the Northern Pacific, and the Oregon Raih-oad & Navi.t^ation Company did not participate in San Francisco traffic: (hd not insist upon the use of their rail-and-ocean fine on a differential l)asis was that there was a trade. ARBITRATOR WASHBURN— T understand now, what you mean. T understand what you refer to. MR. vSTUJiBS — I answered that by sayinj.': there was no trade. Not- withstancHng that fact, the Canadian Pacific or Canadian Vine, today reiterates the statement that there is a trade. He has no founchuion whatsoever for it. except the fact that they carry but httle business, lie introduces evidence in the shape of ARBITR.VTOR WASHBURN— He said lie thought he knew. ^JR. STUBBS — He said that he knew. Tliat is an opinion. That is not evidence. The point I wish to make is this, that he nuist i)rove his statement; that it caiuiot stand; is entitled to no consideration by this ])oard. in the face of our dem'al. h'or, when we deny, we speak the truth in regard to the matter. We demand that he shall be ])ut to the test on that point, or that the statement shall be thrown out. The Board should re(|uest or demand that witnesses who ought to know all about this thing, shall come before it and lestify. under oath, if you please, to the fact as to whether there is any such trade or not. 1 wish further to make the point, that you may search the statement of the .\merican lines through; you may analyze every ])hrase. dissect every sentence and define every word, and you will not find one per- sonal expression in it. So far as the personal representatives of the Canadian Pacific here, and wherever they have represented that Com- pany, are concerned, they have always been received and treated with the utmost courtesy and they have personally received such treatment as to make it surely beyond question that, as men. they were esteemed and respected. ]ilaced upon an equality with the oldest and the most ex- perienced and the best men among us. When the American lines speak in their argument of an "alien:" when they speak f)f themselves as "citi- zens." they are referring to the artificial person of the Canadian Pacific road, the Canailian Pacific Railway Company, and the artificial person in law. just as when tlie\- refer to themselves as "citizens." they refer to the cor])oratious which they represent, as officers, as artificial persons — "citi- zens of the United States." There is no occasion for any dramatic effort on the part of the repre- sentative of the Canadian line to win sympathy or to ])oint his argu- ment, by saying that the Traflic Manager of that road is an .Vmerican citizen, that he, himself has fought under the "stars and stripes." There l82 is no one wlio will honor him more as an ox-soldier of the L'nited States, whichever side he fought on in the Civil War, than the representatives, the individual (officers of the American lines. -Ml honor to the soldiers of our country, whether they be in the em])loy of an alien or whether they he in the em])loy of a citizen. It is not fair to bring personalities into this controversy and we wish to disavow the idea that we, in our individual personalities, in our per- sonal characters, in our services in the past to the public, or to the Na- tion or Dominion under whose flag we live today, have anything what- ever to do with this case. \Vc arc here, not as Air. Robert Kerr and Mr. Bosworth and Mr. Stubbs. We are here as the Canadian line, our identity merged with that corporation. We are here as the American lines, the corporations that were named to the Board in the opening made by their representative. Our identity is merged with theirs. ARBITRATOR WASHBURN— Mr. Stubbs, of course I suppose vou understand without its being stated, that on Monday after Air. Shaughnessy has said what he has to say, you will have an opportunity to reply to him as in the first instance. AIR. STUBBS — 1 do not understand, I wanted to understand it, that is why 1 spoke this morning. ARBITRATOR AllDCLEY— Oh. certainly; if they bring in any one else you should certainly have an opportunity to be heard again. AIR. STUBBS — It is all right; I guess we can stand it if the Board can. ARBITRATOR WASHBURN— Have the parties to the hearing anything further to say this afternoon? AIR. KERR — Air. Chairman, just one word more. If the Board desires any fuller information than they have with regard to the New York and Alilwaukee meetings held in Alarch and April, 1896, Air. Sec- retary Countiss has one copy of the proceedings, the record, the ex- tended notes of the discussions had, and it might possibly be of advan- tage to you to ask him for it. ARIUTRATOR WASHBUTiN— If we find we want that we will call upon him for it; of course with the understanding that we will return it. MR. STUBBS — Alay I ask whether there can be any light thrown upon the question as to the likelihood of our being able to get away Monday night? AIR. KERR — Oh, I imagine so. AIR. STUIUiS — 1 did not know but you knew something about what Air. Shaughnessy might have to say and whether it was going to throw the thing wide open again for discussion. AIR. lU)S.WORTH — Oh, no; I think he will not occupy more than an hour. MR. S'rL'I>I)S— You know hrin^inj^- in reserves is a little (lanf;er- ous; I may want to come in with si)nu' reinforcements. /vKIUTRATOR WASl 1151' KX— The American lines will he ,i-iven any reasonahle time that they may retiuire. MR. S'[T'1»1)S — Any one of the American lines that we choose to brin^ forward to represent us. barrint^^ coimsel — any orie of the Ameri- can lines to represent us? ARBITRATOR WASI IIU'RX— ^•es sir. Then we will stand ad- journed until Monday morning- at i i o'clock. Morning Session, October 17, 1898. 11 A. M. The meeting convened pursuant to adjournment •ARBITRATOR WASHBLVRX— (lentlemen. on Saturday we ad- journed until this hour, to give \'ice- President Shaughnessy, of the Cana- dian Pacific, an o])portunity to appear before the I'oard, and make an argument, and if he is now pre])ared to speak, we will listen to him. MR. SHAUCiHXESSV— Mr. Chairman and Gentlemen of the Board of Arbitration: I thought it was quite distinctly understood, in the be- ginning, when this arbitration was decided upon, that the questions to be discussed before the Board of Arbitration were strictly of a business nature, involving arguments and exhibits necessarily technical in their character, and we thought it best that our Company, at any rate, — and we quite understood that the other com])anies intended to adopt the same course, — should be represented by our traffic officers: — our chief traffic officers, who deal with these subjects day by day and who have all the necessary information at their finger ends. I was surprised to learn by telegraph Friday evening, that the American lines, represented by Mr. Stub1)s. had made a new departure, — had introduced national issues, and had endeavored to make this subject one of national importance, and, indeed, had rather "appealed to the national anil patriotic sentiments of the Arbitrators than to their sense of right and justice; and, inasmuch as I was unable to learn just what Mr. Stubbs had said, I decided I would come here today, having learned first tl' at 1 would be given oppor- tunity to speak, for which I thank you. T decided that I would come here today to make such answer as the circumstances of the case might de- 1 84 mand. T liad no intention then, nor liavc I any intention now, of introduc- ini^ any new issues here, or sayinjj;^ anythinj^- that may tend to prolonjj your session. I merely desire in as few words as possible to answer the ])ar- ticular remarks of Mr. Stuhbs, with reference to the Canadian Pacific, its history, its destiny, its conduct, and so forth. I had no opportunity, tmtil f saw the stenographers' notes yesterday, to ascertain just what Mr. Stuhbs had said, and, indeed, in the limited time I had after I re- ceived the notes, I could j^ive his remarks but little more than a cursory examination. T must, before I proceed, express my resa^ret and my suriMMse, that Mr. Stubbs, with all his tact and his ])olicy, and his experience, should have thouji^ht ])roper, when a business cpiestion of this kind was heto'."<. the iJoard of Arbitration for discussion, to dis])lay what I must be ])ardoned for calling exceedingly bad taste for making the attack — an unwarranted, unreasonable attack upon the other j^arty to the discus- sion. I can only account for it upon one ground and that is that these gentlemen, having canvassed the situation, having brought to bear every possible argument that they could from a business standpoint, felt so un- certain as to the outcome — or rather felt so certain as to the outcome — knowing that they had no case, — that they decided to appeal to your sympathies. lUit. 1 have not the slightest doubt that long before this the Arbitrators have decided that it would be quite improper in dealing with this question to give any attention whatever to such appeals. [ may say. further with reference to these a])peals that they are not un- usual; that the same gentlemen whose sentiments Mr. Stubbs voiced here the other day have for years ])ast. by every possible trick and stratagem; by the employment of counsel: by the subsidizing of the press, and in every other manner endeavored to impress those views upon the people of the L'nited States, but entirely without avail. The sections of the country of the L'nited States served by Canadian avenues, by Cana- dian railways, are too large and too important to permit of any inter- ference with existing conditions, and day by day as the discussion goes on the feeling in the United States. I am satisfied, against anything" like interference, becomes more ])ronounced. The Canadian Pacific l^ailway Company, organized under the laws of Canada has about 7,000 miles of railway in Canada. Its i)aramount duty and its prime purpose, as ^fr. Stubbs stated in his remarks, are the development of the resources of Canada, the ex])ansion of Canada's trade, and the Canadian Pacific has endeavored and is endeavoring to perform that duty faithfully, and in ])ursuing that policy, in establishing new con- nections, in creating new routes, the Canadian Pacific, like a progressive institution as it is, anxious to increase its earnings year by year, has made investments in the United States representing upwards of $60,000,000.00, by means of which it has secured close working arrangements with nearly 2,000 mi':\. of railway in the United States, so that even in this country, i«5 Mr. Chairman, no .i^cntlcnian is warranted in callintj the Canaihan Pacific an alien institution. It is true that the C'ana(han I'aeitic received sub- sichcs from the Canadian (loveniment for the construction of its line. Subsidies in the way of cash, lands and some miles of completed railway, because, without this aid, it would have l)een (|uite im])ossible for the Canadian Pacific to have built its line from ocean to ocean, and the vast areas of land belonjj^ini;- to the Dominion (lovernment, which are now producing food for the people of the world, would have remained un- productive, lint the policy of the C'anadian (lovernment in this respect, does not differ materially in dealinj.;- with the pioneer ])ortions oi the west. In this respect the Cnited States was (|uite as liberal, and 1 think I may safely assert that the fijj^ures will show that the lines represented here today received far more liberal aid from this (lovernment than the Canadian Pacific received from the Dominion (lovernment. Mr. Stubbs has mentioned another matter. Mr. Chairman, I am goinj^ into these matters only in answer to Mr. Stubbs. I do not con- sider them essential arguments in dealing with this subject — 1 am only going into these questions because the issue was forced upon us. There is another little matter about which Mr. Stubbs made no reference. The Railways of Canada representing a length of about 18,000 miles, and serving a population of about 5,000,000 or 5,500.000 of people — I speak of the length of miles oi road in iSc;/, — received in that year tor the carriage of mails the sum of about $1,350,000.00. The Railways of the State of Ohio, during the same year, received for the same services, $4,350,000.00; the State of Ohio having 1 i.ooo as against 18,000 miles of railroad, and the ]K)i)ulation of the State being somewhat less than 4,000,- 000; so that the Railways of ( )hio received for the carriage of the mails nearly three and one-third times as much money in the year 1897, as did all of the Canadian railways; and we find that in the little .State of Nebraska, the railways received during that same year, for the carriage of the mails, more than all the railways of Canada received, for serv- ing that vast country, and that population of 5,000,000. Another sec- tion of country, where the (Government in paying these mail subsidies was also very liberal, — ^1 refer now more directly to some of the territory traversed by the lines represented here; — the railroads in Texas, .\rizona. New Mexico and (."alifornia with a poi)ulatioii nearly e(|ual to that of Canada, received about $4,200,000.00, for that service, about three and a half times as much as the Canadian Pacific and all other railways in Canada combined received for the same service in that time. I say, 'Sir. Chairman, I am not mentioning this matter for the pur])ose of im])ressing on the people of the Cnited States that their rail- ways are being overpaid; on the contrary, 1 do not believe that they are being overpaid, but that we are seriously un(leri)aid. At the same time I desire to impress on you the fact that there are subsidies and subsidies, IMAGE EVALUATION TEST TARGET (MT-3) // ^ 1.0 1.1 1.25 ■50 ™^^ MI^H us 1.4 m 1.6 Hiotographic Sciences Corporation 23 WEST MAIN STREET WEBSTER, N.Y. 14580 (716) 873-4503 <^ II J 86 and of a necessity subsidies are not always piiid in the nature of a lump sum. Then when they refer to this alien corporation that is preyinj^ upon the traffic of the American lines, these gentlemen forget some other ex- ceedingly important factors, i venture to say that none of them have mentioned here that the Xorthern Pacific Railway Company owns 250 miles of railwiiy in the Province of Manitoba; that they not only re- ceived from the Provincial (lovernment and the liritish Columbian Gov- ernment the necessary franchises to enable them to construct this rail- way, but that they received in cash every dollar of the amount neces- sary to construct these miles of railway. Then they have not mentioned that the dreat Xorthern have received in addition t(^ that, large grants of land from the Government of British Columbia. Por what purpose have those lines been utilized? Por the purpose of competing with the Canadian lines. These American lines are preying on the Canadian traffic, and surely if the Canadian lines are competing for the American traffic the honors are quite easy. X either party has any ground for com- plaint upon that score. There is another difficulty about which the United States lines co^nplain. They say the Canadian i'acitic is in the jurisdiction of the Canadian Government; it is not amenable to our Inter-state Connuerce Act; it "s not required as the United States lines are, to obey the re- quirements of that Inter-state Conmierce Act. On this point we desire to take direct issue with them. The American lines in the United States will naturally, and as a matter of fact do, take liberties w ith their lines at home that the Canadian i'acitic would not think of doing abroad in a foreign country, i feel confident that if upon this point the opinion ef the Inter-state Commerce Commission were asked, and that those Com- missioners told you the candid fact, they would say that every line in this country, every United States line has from time to time beeti guilty of infraction of that Act. Indeed, i might tell you, and 1 think 1 could tell you without danger of contradiction that today every line represented here, except the Canadian i'acitic line has violated the inter-slate Com- merce Act; and that the inter-state Commerce Connnission would state to you that the Canadian i'acitic has obeyed its requirements more closely than any other line on the continent. However, gentlemen, as 1 said in the beginning, you have no doubt already decided that all of this discussion upon International issues is rather beside the question, and i do not intend at this time to enlarge upon it. 1 prefer in a very few words to outline the position of the Canailian Pacific from the practical standpoint, and for that purpose and in view of what 1 said as to the evenness of the competition between the lines on the one side or the other I should not discuss the practical question before yovi obliterate the international boundary line. Imagine i87 that tlicrc was no hoimdary line tluTc and considt-r that all these railway companies are railway companies of a eomnion nationality, all within the same conntry. I'pon no other .i^round can the (piestion he jintperly discnssed. There are the Atchison. Topeka (Jv Santa l'"e. the Southern Pacific and L'nion Pacific and other lines rnnninj;- alont;- throu.uh the United vStates, direct all-rail lines, with their connections to San h'ran- cisco and other points of California. 1"here is the Canadian Pacific line runnin.e: to the north, with its Trans-Continental line and its connections. Sivin.ij it access to all of the Xew Knj^^land States and indeed most of the States of the east, to the western States and northwestern States. The Canadian Pacific has no rail line south of Wancouver. ft has no line reaching- the cities of the Pacific Coast in the United .States, and as a con- sequence, for the purpose of conducting- its husiness between \'ancouver and San l-'rancisco it uses an American Steamship line. This does not lielong to the Canadian Pacific; it is not. as stated in the Inter Ocean of this morning, suhsidiz.ed by the Canadian Pacific line or any other line. It is purely a steamship line engaged in conmiercial trade between San Francisco and points in Canada and on the Coast. The Inter-state Connuercc Commission in. their opinion or report or ruling upon the passenger rate war recently, made the jjoint that the Canadian Pacific, because of its long, circuitous route, shoidd not be a particii)ant, should not be a competitor for passenger business between New York and other ])oints on the Atlantic Coast and San iM-ancisco; and. while I do not consider their o])inion entirely sound ui)on that point, it has some merit, because there can be no doubt that a ])assenger, re- quired to travel a long additional distance, several hundred miles, to use a broken route, part rail and ])art water, will hesitate about going that way. unless he is offered some extraordinary inducements. Put no similar theory can obtain in connection with the transportation of freight. It does not matter, in the slightest degree, to a carload of iron, or a bale of merchandise, whether it be carried a thousand miles, more or less. It is quite impervious to sea-sickness and indigestion and is not incon- venienced by trans-shipment from rail to boat and from boat to rail. The same theory cannot obtain to the transportation of merchandise, but the shipper, or the owner has a very important interest in the (luestion of route. If he can send his carload of nails, or 1 is carload of merchandise, bv a direct, all-rail route, from a point in the east to San I'rancisco, and from San l<>ancisco to a point in the east, with the same saving of time, without trans-shipment, at exactly the same rate he is re(|uirerevent demoralization, it has been the practice for years and years, on this continent, to ^rant to the inferior route the privilege of making a lower rate than the stronger route, or all-rail route, and that privilege is known in railway parlance as a "differential." Thev have been accorded the right of quoting a differential rate. At the present time the Canadian Pacific business is by an all-rail line to \'ancouver, thence a steamship line from \'ancouver to San l>ancisco, and it is quoting a differential rate. It has been iov some years past, by agreement with its competitors, the all- rail lines, ajid we maintain that agreement is in force today. VVe maintain thn the dissolution of the Trans-Continental Association has had no effect whatever u])on the regulations that were established by the Trans-Con- tinental Association, and that have been observed in the past, and up to the present time. Xow, the getUlemen representing the all-rail lines recently con- ceived the idea that with this dift'erential, the Canadian Pacific had pos- session of an undue advantage over the all-rail lines. A meeting was called in 1 )enver for the purpose of discussing that subject, and the parties, imable to agree, decided to refer the question to arbitration. I am sure that oiu" traffic officials — Mr. P>osworth and ATr. Kerr — have given you all the necessary evidence to show that at even rates the Canadian Pacific would be forced out of tlic business, and that the freight business between San Francisco and all eastern points would be practically in the control of one single railway company. 'J'hey have given you illustrations to show that, under like circumstances, it is the common practice, indeed the universal practice, in the United vStates to permit the rail-and-water car- rier to (|uote dift'erential rates, the Southern Pacific itself being no ex- ception to this rule because by some of its routes they enjoy such a dif- ferential. They have exi)lained that the C"anadiau Pacific with no acces:i to the American cities on Puget Sound, except over the lines of active competitors, have no territory to set off on a trade with the San l*'ran- cisco lines, and that therefore the Canadian Pacific is. with reference to San I'rancisco. in a ])osition radically different from either the Xorthern Pacific itr the (Ireat Xorthern. It is not my intention to recapitulate or eidarge upon what they have said; but I shall only ask you to consider this matter purely from the standpoint of recognized railway practice and precedent, under similar conditions, giving no heed to extraneous state- ments or sentimental buncond)e. We are prepared to compete with the i89 American linos for inter-stato or inter-])rovincial traffic in exactly the same manner as they compete with each other, llu' establishment and regula- tions of rates to be determined by exactly the same meastu-es, the same practices that they use when dealiui,^ with each other in the several sec- tions of the country. W'e do not ask that our f()rei<;n position, our C'ana- dian position, pve us any advanta,ye: but we bei;- you that it shall not prejudice us in dealinj^: with this subject. \\e see no earthly reason why it should under the circumstances. Ily the laws of the country, and by common consent, we are exercisinj^^ in the L'nited .States, transit privilej^es that American railways enjoy in Canada, and while that continues to be the case we shall deal with those very railways, and shall expect them lo deal with us. without reference to the (piestion of nationalitv. Now. .t,aMitlemen. I have nothing more to say. With this T am j)re- pared to .submit to you the case of the Canadian IMcitic. If. in vour deliberations, and in view of the te.stimony that has been offered here, you find that the present differential enjoyed by the Canadian Pacific is insufficient. I have no doubt that you will increase it. It is the duty of the Arbitrators to increase it if the circumstances show that it be insuf- ficient. If it be excessive, it will be the duty of the Arbitrat(M-s to decrease it. I can see no possible ,q-rounds, and I hope that you will see no grounds, upon which that differential shall be abrogated. Its abrogation means a serious thing to the Canadian Pacific. It means, if yt)u decide that it shall be abrogated, that the Canadian Pacific shall practically with- draw from San !• rancisco and California business, and that it shall entirely avoid that territory, because it can secure no business on even terms with these Trans-Continental linos, and it will be making that .sacrifice; vou wir be compelling it to make that sacrifice without giving it one single thing in the way of return, either in the matter of territory or anything else. So that, to us. to the Canadian Pacific, the abrogation of that difi'er- cntial would be a most serious matter indeed. I thank you. gentlemen, for having listened to me. ARBITRATOR DAY— Mr. Shaughnessy, what is the capitalization of the Canadian Pacific road? M R . S H Al'C, H X ESS Y— $65 .o(jo,ooo.oo. ARBITRATOR DAY— That is represented in shares^ MR. SHAUGHNESSY— In shares. ARBITRATOR DAY-At the par value of $100? MR. SHAUCHXESSY— Yes sir. ARBITRATOR DAY — What dividends were paid last year on the Canadian Pacific capitalization: on the capital stock' MR. SHAUGHNESSY— 4 per cent. ARBITRATOR DAY-:Mr. Kerr. I would like to ask you another question: On your traffic for points on and west of the Mi.ssouri River 190 from r.oston — I nu'an Intcr-statc trafifi(,' now solely — how docs llio traffic from IJoston rcacli your rails? Ml\. K]''RU — It j^ot's up and connects with us at Newport, \'t.. all- rail, over the JJoston &; ]\Iainc. ARIilTRATOR DAY — Do you have any water connection with your rails cjn the Atlantic Seaboard? MI'J. Kl-lRk — There are from Xew ^'ork. in connection with the Canadian I'acitic Dispatch. That does not operate Trans-Continental, but o])erates up into this section of the country, Chicago and St. Paul. AR 15 1 TR ATOR DAY— I thank you. ARIilTRATOR WASH I5URX— The I'.oard is ready to listen to any re])ly that the representative of the American lines desires to make to the remarks of Mr. Shauf;;hnessy. ]\IR. STU1V15S — ]\Ir. Chairman, and (lentlemen of the Board: I do not know that T have much to add; indeed, I am somewhat embarrassed by the turn the discussion has taken. T really do not know how far my rij^ht extends to reply to ^Ir. Shaufi;hnessy. If I err, you will have to call me to order. J-'IRST. the Vice-President of tiie Canadian Pacific savs, that in the matter of the subsidy granted to the Canadian Pacific line, or referring to that matter, that some of the American lines represented in this contro- versy were quite as well dealt with by the United States Government. It is a matter of public knowledge that the Canadian Pacific did receive $35,ooo.cx)o.oo in cash MR. Sll Al'( IIIXESSY— $25,000,000.00. !MR. STUI)I)S — $35,000,000.00. The Canadian Pacific received $25,- 000,000.00 and 25,000,000 acres of land. The Canadian Government then took back 7.000,000 acres of land at One Dollar and fifty cents an acre; which, while it reduced the land subsidy of 25,000,000 acres to 18.000,000 acres, it increased the money subsidy $io.ooo.ocx3.oo. You will fintl that all exjilained fully in the published documents which I filed with you. The\- received $35,000,000.00 in cash from the Canadian Government, iS.ooo.ooo acres of land and 714 miles of railroad. That is acknowledged. None of the American lines received a dollar of cash subsidy from the Cnited .States Govermnent. The Government loaned them monev. and issued bonds and paid the interest, but those lines have got to repay. 1 lit- I'nion I'acific has already, in its settlement with the (Jovernment. paid the debt in full. Every one who is familiar with the agitation in Congress now, over the settlement with the Central Pacific, which is far more serious than the I'nion Pacific, knows that the Government is pressing and will press for the refundment or re-payment of the full amount ad- he traffic , \t., all- Ait h your with the iitincntal, \'iul. en to any make to rd: I do barrassed w far my ive to call lat in the ferring to is contro- nient. It d receive ived $25,- nent then ^ an acre; 8,000,000 find that \vitli you. /ernmcnt, jwledged. from the oney. and pay. 1 he lent, paid Congress far more i pressing iiount ad- 101 vanced. principal and interest. Their land subsidy — T am not able to tell you how nnich it was, in gross: it was every odd section within twenty miles of the road. \\'hat that aggregated. I do not know: much of it has been forfeited. Now. the representative of the Canadian line this morning says, that the Xorthern I'acific and the Creat Xorthern, referring ti) both ol them, have extended up into the Province of Manitoba, built into that portion of the Canadian territory, for the ])ur])ose of sharing in Canadian com- merce: that connuerce which is purely domestic to Canada. Xo one denies that, but can he demonstrate to this Hoard that they entered that territory asking an advantage over the Canadian line? I endeavored to impress it upon the minds of the I'.oard. that the American lines did not say to the Canadian line: "Keep out of this territory." In fact, when there were filed with you the ])etitions from the Chambers of Commerce of the principal cities on the Pacific Coast, (and I did not file all that were filed with Congress, for Portland, I know, sent in a like petition, and 1 think Seattle and Taconia did the same thing). — 1 -exijlained to the IJoard tliat while these Chambers of Commerce petitioned the United .States Congress to suspend and abrogate the bonding privilege, which would effectually cut the Canadian line off from competing on any terms with the American lines, we did not go so far: I explained that we welcomed tlie Canadian line in this territory, if it came here upon equal terms with us. J'urther on. the Honorable \'ice-r'resi(lent of the Canadian line says: "W'e are pre])ared to compete exactly as they compete with each other," —meaning the .American lines. That is all we want him to do. Xow, competition does not consist alone in competition of rates. There is such a thing as competition in service: comi)etition in facility, which every railroad man and every shipper uiiderstands. The Canadian line has not competed, never has, and is not now competing in service. This 1 illus- trated to the Pioard, by contrast with the "Sunset" line, that it was evi- dent that it had sat down on its differentials, and depended wholly upon its differentials, in order to get business with San h'rancisco, instead of doing what the "Sunset" line had done. Xow, the X'ice-President of the Canadian Pacific says, that they have no line from \ancouver running into San h'rancisco or into the United States territory, but that there is an American Steamshi]) line there with which they are com])elled to work. Now. we know that that is not so. Why does not the Canadian Pacific line go into this territory on the west Coast? What is to hinder the Canadian line from building into San I'rancisco? Then its question of disabilities would disappear. If American lines put in their money to build a railroad. ])Ut up that investment, thereby creating an advantage over the Canadian line who has the same field open to it. who will say that they nnist necessarily compensate it by giving an advantage in rate? UJ2 Why should not the C'aiiachan line be less like the Chitianian wlio ccmies into tliis country, hrinj^inj^ nothinj;' with him, and scndinj;- every dollar that he j;:ets out of the country; even conies under a contract that his hones nnist he taken hack to the Celestial Kinjj^doni? 'Jliat is what the Canadian line does with respect to San hVancisco business. It can build railroads into the I'nited States territory exactly as the (ireat .\'(jrthern, or ac(|uire railroads exactly as the (ircat Xorthern and the Northern Pacific ac(|uired roads in Manitoba; do it. exactly as the American lines have done it. V>\ usinj^; the same means, the same methods, the same skill, the same energy, they can du])licate the lines of the American roads. There is no (|Uestion about that. I think it is preposterous for any line havinjj^ this field and this o])portunity o])en to it to come into the United States and say. "because we elect t(j use an inferior route because of the money that it briiifi^s into our pockets, the i)rofit we make by so doinj;, and do use a steamer line from X'ancouver to San Francisco, that the American lines shall pay us something in addition by giving- us — (as its own re])resentative said) — a money advantage." What we are contend- ing against is the claim of the Canadian I'acific line, an alien — for it is an alien — for an advantage over domestic lines with respect to domestic business, 'i'hey are not entitled to the advantage. The \"ice-l*resident of the Canadian Pacific road refers to a fact that 1 fully expected the Ceneral Traffic Manager and his assistant would have referred to here, viz., that they are in this country by the sufferance of the laws of this country; that the laws of this country admit them u]:)on an equality with the American lines. He did not use the word "equality" but said that they have the same privileges in this country under the laws that the American lines have. What he refers to is that section of the United States statutes which gives to the foreign line, or gives to the shippers, the right to send their domestic business from one point in the l.'nited States to another point in the United States, through a foreign country without tfie payment of duties upon re-entry into the L'nited States. That law was passed by Congress for what j)urpose? Was it passed in order to give the Canadian line an advantage over the American lines? Xo sirs. It was to put them upon an eciuality. and that is all that we ask. Suppose it had been said to Congress at the time, that they are foreign lines; that they are circuitous lines, and that this mere sus- pension of the collection of duties, as is pioposed will not enable them to do any business. Do you suppose Congress would have added a subsidy or any additional privilege which would have overcome the natu- ral disadvantage they labored under? Now. moreover, that privilege that was given, I think it is in Section ^^006 of the Statutes of the United States, was given not for the jiurpose of benefiting a foreign corporation. It was given for the jiurpose of benefiting the domestic shipper. It was recijjrocal. It gave to the Canadian people by the operation of their laws 193 the right t(i ship Canadian ooninierce through the Tnitod States hack into Canada and it gave the American shipper the right to ship American freight through Canada back into tlie L'nited States. It was because it gave a short hue. It goes away back to 1864. The Act was passed for the purpose of legaHzing the ruling of the Treasury Department. When the Suspension llridge was built a shorter route could be made to tlie Peninsula of Michigan and the Creat Xorthwest througli Canada than could be made by any of these lines I indicating on map) and the privilege was given for the benefit of our own people. Now then, when the Inter- stale Conniierce law was passed — dealing still with this (piestion of equality— when the Inter-state Conuuerce law was ])assed— Seciion 6. I think it is. provides that tariffs shall be published — certain tarififs shall be published and posted and that all through tariffs shall be filed with the Inter-state Commerce Conuiiission. It was found that the Canadian cor- porations were not subject to that law. They therefore could evade that law if they chose to do so. so that in order that they might not have an advantage over the domestic carriers — (Congress exercised itself to pre- vent there being any advantage over the domestic carriers) — a section, or paragraph, rather, was introduced into that section that made it obliga- tory upon the Secretary of the Treasury, upon demand of the Inter-state Conuuerce Conmiission. to suspend the bonding ])rivilege in any case where a Canadian corporation or a foreign corj^oration failed to comjjlv with the provision of our own laws. That shows that it was not in the mind of Congress that the Canadian line should have any advantage over our own. It is the spirit of our laws, equality, and we want that spirit applied to this business. Xow, it is intimated that it seemed necessary to bring the chief o])erating officer of the Canadian Pacific road here for the purpose of answering an allusion that we made or an appeal that we made to the patriotism o* the Poard of Arbitrators. That section »jf our argument was introduced by the fact that the Canadian line had opened the cjues- tion. If I remember rightly the advocate of the Canadian line said something to this effect — I cannot take time to refer to the record. I will only attempt to give the substance of it — that the American lines had harried the Canadian lines — that they had agitated and sought by legis- lation through Congress and by every way tliat was within their power to prejudice the Canadian line and shut them out of this territory. It was to answer that suggestion plainly made for the purpose of prejudicing this Board against the case of the American lines — it could have no other pur- pose than to impress you gentlemen with the idea that we were not play- ing fair in this matter: that we had been the strong man abusing the ])oor man. I then appealed to this Poard if it were not true, if it was not the right of every Englishman as well as for every American to agitate any question that affected his personal or his property rights. It is funda- 194 nu'iital ill the principles of hotli judvi-niiiiciUs. l-'vcrv American citizen h.'is that rit^ht. and every i'jij^lishnian will assail Parliament if Parliament passes a law which is inimical t«», or fails to enforce a law which is pro- tective of that i)erson's rights — which atYects his projjerty. if \vc have (lone what we were charj^ed with, we only exercised the inalienable ri^ht of American citizens. 1 stated, further, that this tliini;" had become u ])ul)lic (luestion; not that we had made it so; that it had bcct)nie a na- tional (piestion. I said this was evidenced by the fact that the Inter-state Conunerce Connnission had treated of this (piestion in its several Annual Keports to which I have referred the Honorable Uoard. [ said that the Inter-state Commerce L"ommission had investij^ated this cpicstion with resi)ect to passenj^er business, and had made a report and rendered an opinion upon it in which notwithstandiny; what the Honorable \ ice-Presi- dent of the Canadian Pacific road says it plainly states— and its dictums are full of it — that the Canadian line is not subject to the laws of the I'nited .States. I have not raised the (juestion here as to whether the Canadian line obeyed those laws. That is ajiart from this (piestion so far as this differential case is concerned. I do not care whether they are (|Uotinsj[ a reduction of lo ])er cent or 25 per cent or 50 jkt cent below owr rates, it has nothing to do with this case, but it is a pidjlic question. It is a national question and I stated to this I>oard that it would continue to be so. so long as the ISritish flag floated over Canada and the Canadian line, and the American flag was unfurled above the American lines; so long as the Canadian line is an alien corporation coming into this coun- try and demanding what? To work upon an equality with us? Xo, to work with an advantage over us. Now, it is all right to narrow this ques- tion down to business principles. We want it to be considered from a business standpoint, but when you take considerations of business, of the conducting and extension of trade away from any province or dependency of the Pritish Clovernment, you take away its very life and spirit. i>rother Kerr referred to the open door policy of England; calls this evidence, in- tends to be understood that we shoidd extend an advantage to the Cana- dian Pacific in order that we may be in harmony with the open door policy of (Ireat liritain. There was a little speck of war in the horizt)n a little while ago. What was it aliout? It was because Russia had gained a railway franchise in China instead of (ireat l>ritain. What did Great Pritain care es])ecially about that railway franchise, per se? Xothing. but it was because if that railway franchise was given to Russia and not given to an b^nglishman, the territory or provinces served by that railroad would be closed to llritish trade, and so jealous is (ireat P>ritain of her I'ritish trade that she threatened to go to war with Russia rather than that thing should come to pass. Take away business principles. Rob this question of its national aspect bv saying that it is not business. Take the extension of British J95 in citizen arlianicnt 'Ii is pro- \ve liavc iblc ri,<;lit )ccoiiie u me a na- iitcr-stato il Annual that the :i()n with dercd an ce-Prc'si- dictiinis vs of the .'ther the on so far they arc nt below question. continue k'anadian ines; so [lis coini- Xo, to us c|ues- froni a . of the endencv iJrother ence. in- e Cana- en door orizon a gained d Great Nothing, itul not railnjad 1 of her er than lational British tratle away from the policy of the r>ritish ( lovermnent. and her lleet, which is built for no other ])urpose than to maintain that trade, and which is now e(|ual to the combined navies of the world, will disappear inside of ten years. Take business principles, as shaping and governing gov- ernmental ]M)licy. away from (ireat I'.ritain and the Uritish l-lmpire per- ishes from the face of the earth. Take business principles awa\ from the governmental polic\ (jf the L'nited States, and wlu're will this agitation end. or how far will this agitation go with res])ect to whether we shall retain the l'hilii)])ines or Cuba or IV^rto Rico? Is not the business senti- ment of this coimtry crying out to the (lovermnent and forcing the liov- ernment to a jiolicy of retention of the Islands in the I'acitic ( )cean as well as those in the Caribbean Sea? J low can you rob it — this (piestion — of its public aspect? lUisiness ]irincii)les? dreat llritain was against slavery, fundamentally; was active in its destruction all over the world, until the Civil War in America broke out. and then (Ireat Britain sym- pathized with and aided the South. Why? Uecause the American people controlled the conmierce of the oceans at that time. She saw her chance and. against her settled ])rinciples. she e(|uip]ied the Shenandoah and the Alabama, and allowed them to sail forth, fully equipped and armed, to prey upon American conunerce. and she destroyed our commerce and took it to herself and today controls it. and she has got these combined navies — this enormous navy — for no other purpose than to maintain it. Now. this is a public question: it is a national question; and while we who are called the Irans-Continental lines — meaning the lines west of this Missouri River line — take ui)on ourselves the burden of contesting this question with the Canadian line, all these lines are interested in it. (Pointing to the map.) As illustrated, if, by the use of a differential freight is taken from New York out over the Canadian line, that traftic is diverted from the New York Central, or from the Pennsylvania or the Jlaltimore & Ohio — from all these direct lines. Nearly all the important railroads in the Cnited .States are interested in this question. We claim that under the circumstances the Canadian line has no right to share in the traffic if it cannot share in that traf^c upon equal terms with us. The cpiestion. sim- mered down. is. "Shall the American lines adopt a policy wliich will force a ])art of this trallfic on the Canadian line?" Prima facie, that is in restraint of trade. Prima facie, that is an inducement to the Canadian line not to improve its service; not to build lines into the Cnited States and take its place where we are. having to pay taxes as we do. and be subject to our laws as we are. Right on its face, it shows that that is an inducement for the Canadian line to occuj)y the same relative posi- tion to this trafific. so far as the physical operation of its road is con- cerned, as it has occupied from the beginning; and that must neces- sarily be in restraint of trade, for the public, as 1 have said, is deeply i(j6 iiitorc'stt'd in liaviti}^. not only a(k'(|uati' but efficient service, and I do not believe that it is possible to convince a l)usiness man. an intellij^ent man, who thinks upon this subject, tliat there \>. any justification, whatever, in }^nvinjj^ the Caiuuhan Pacific a money advantaj^e over the American Unes because it elects to use tliis steamshi]) line, (pointinj^ to ma])) when it can }jfet franchises and can build down into San l"'rancisco. as readily as any of the American lines, and if the American lines have built these roads at j^aeat expense to themselves, they ou,y;ht not to be asked t') pay the Cana- dian Pacific, by forcinj;" a ])ortion of the trafific on that line ft)r using an inferior route. It seems to me to be an "A, P.. L" ])ro])osition. The \ ice-President of the Canadian Pacific, referred to auvl dwelt upon the fact that he. or his representative, had shown that the Canadian line was only askinj^- for what was rec().q;nized as a settled principle over the I'liited States, both with respect to domestic trafific and with respect to international traffic. .Vow. I think I have shown this I'oard. clearly, J'irst: that the customs to which he refers, and which were elaborately set forth by his representative in the first instance, do not meet this case. 'J'ake the differentials by lake-and-rail to North Pacific Coast ])oints that were dwelt u])on with emphasis. Those differentials apply by every line that reaches the North Pacific Coast. Take the differentials, lake-and- rail. with the Atlantic Seaboard; or, Atlantic Seaboard, ocean-and-rail, to Texas; or. Atlantic Seaboard, ocean-and-rail. to Colorado. Take them all. every example that he ^iwe you: and in no case has the differential been limited to one line, but all the lines which were similarly circum- stanced in each territory use the same dift'erential. Now .he Canadian line adheres to its allejj^ation of [)hysical dis- abilitv by reason of beinjj; a broken line, as its chief and almost its only dependence in its case here. The "Sunset" line has been shown to you — and I take it as the extreme case; I take it because the "Sunset" line is the great bug-bea- in the eyes of the Canadian line — has been shown to you to be physically, in respect to the disabilities described by the Cana- dian line, a weaker line than the Canadian line. In the first ])lace. the ocean haul from Vancouver to San l""rancisco. is eight hundred and some odd miles — I have forgotten — eight hundred and fifty or sixty miles. It is 1800 miles from New \'ork to .\ew ( )r- leans, — more than double. Comi)are the line. New ^'ork to San b>an- cisco via the "Sunset." New York to San Francisco via the Canadian line and Pacific Coast Steamship Company, and it is 200 miles kjnger this way. (pointing on map to "Sunset" line). There is a comiiarison. Nar- row their contention down to that physical disability and there you have a graphic comparison; a picture of the two lines. Now. where does the Canadian line stand under that? What is its answer? "Oh. well, the 'Sunset' line has been operating so successfully that it has demonstrated its ability to take the business, and it has got all it should have." 197 1 I (Id tioi ^t'lU man, latcvcr. ill ■icaii lines hen it can as any of roads at the Cana- nd dwelt Canadian •iple over li res])ect 1, clearly, ahorately this case. )ints that very line ake-and- -and-rail, ;d\e them fferential circnni- ical dis- its only n to yon t" line is hown to le Cana- ancisco, hundred :c\v I )r- n I'Van- lian line Ser this 1. Xar- i have a Iocs the clI, the istrated That is a fine argument, isn't it? If the "Sunset" line can build steamships, improve transfer service, run trains 2400 or _'3oo miles from New ( )rleans to San Francisco, and take a fair share oi the business; so much of the business that the Canadian line and no other line would be wiilinj^' to jfive it any more, and it has double the ocean haul; and in total length of haul it is 200 miles longer than the Canadian line, tell me why the Canadian line cannot do it? Mr. Chairman. I know that you could do it, anfl while 1 am not an operating man. if I were on the Canadian line, 1 could do it. All I should ask would be that my backers should put u]) the money, as they did in the case of the "Sunset" line. I'.ut. in- stead of ])utting u]) its money to make its line effective as a com])etit()r with the "Sunset" line, the ("anadian line coines in and says; "(iive us a money advantage;" that would be a tax on the ".Sunset" line after it has imi)roved its service in that way. ( )r it says. "( )h. the owners of the "Sunset" line have hedged California in with railroads and by reason of its local intluences there is able to control the business." \ery well. Let the Canadian line come down into California and build about 3500 miles of road: develop virgin territory; open it u[) to the outside world; invest money for which it has to look thirty-five to fifty \ears beyond in expectation of a return. Do not let it come and .say; "I'ecause von have done this, because you have made this business, at this great expense to yourself, and it is there, you have got to give me a share of it." Xow. one word more and I will close. I insist, in the name of the American lines, that back of this whole demand of the (.anadian line, behind it and underneath it, there is nothing that gives it any force in the mind of the Nice-President of the Canadian line, any more than it does in my mind, or any more than it does in the mind of this lioard, than the unconfessed but existing consciousness that if you do not give them tliis money advantage, they can come in and will come in and destroy this traffic. If it were not for that condition of things, the Cana- dian line never would have asked for a differential. Why does it work upon an e(|uality up here in Oregon with the American lines? It is the more amazing to me since 1 got some information from Mr. Kerr's state- ment of his relations with the Xorthern Pacific road. He savs he cannot work in over the Xorthern Pacific to Portland. I know he does business to Portland, for I was present at the hearing of the Inter-state Comnierce Connnission held in Portland not more than a year ago, and heard it tes- tified to from the stand there, that shippers did use the Canadian line into Portland. Did he run it around by steamer? I took it. as a matter of fact, that he went in over the Xorthern Pacific line. I did not know how else he could get there. He works upon an equality there. Perhaps he does not do much Portland business. He says he does not do much Tacoma, but gets into Seattle by trafKic arrangement with the Seattle & Interna- tional Ry. Xow, there must be some subsisting arrangement. 1 do not 198 know but it may be that this lino has a traffic arratigemcnt with rcspcci to X'ancouvcr; an uiulcrstandinj;- that if the (ireat Northern and Northern Pacific will keep out of \'ictoria and X'ancouver it will keep out of Taconia and Seattle. 1 do not know that that is the case, but that is the only reason that T can think of. .\s I have said before, if you will just reverse conditions, and that is the test, I do not care what is said ; what arj;uinent is made beyond that. Picture in your minds San Francisco with the State of California back of it up here (indicatins^ on map) at \ ancouver; X'ancouver down here at San Francisco with British Columbia at the back of it, all these rail lines existing just as they do today, would the Canadian I'acific be here asking for a differential in order to get into \'ancouver, any more than we are asking a dififerential to get into \'an- couver today? Why are they here? l»ecause here (i)ointing on map to San l-"rancisco) is a great volume of business that they did not create, nor contribute towards its creation. They do not su])port it nor sustain it, never will assist to support and sustain it until they do as they ought, build a road down into that territory, (pointings to map) then they will not be like the Chinaman, they will build uj) American territory and American industry; they will contribute to the trade of San Francisco; they will open up new territory; they will have a right to some share in it, but they do not do that. This trade is made by others, sustained by others, and they come in and say, "We want a share in that, we have a right" — that is what they say — "we are entitled to it." We say. "Vou have not that right." What is their right founded on? The mere position that they occupy, of being able by reason of the comparative barrenness of population of their country west of Winnipeg, by reason of the small business interests up there, to reduce rates at San Francisco and destroy the value of that business to the American lines, and by so doing destroy the value of intermediate and dependent business. If they did not have tlTat power they would not be here; if they were not conscious of that power they would not be here. Now. we hold that to be the imderlying reason in this case and ♦^hat this is not a ([uestion of expediency — not a question of whether we will make more money by trading with them than we will by not trading with them — also that that is the form that all these differentials in this territory (pointing on map to Central Freight and Trunk lines) take; — that they are mere questions of expediency. The Trunk Lines accede to dififerential demands so as to stop the demor- alization of rates. Analyze the statement of the other side a:.d get down to the under side of it. and you will find that their own testimony veri- fies what I say. We do not acknowledge the question of ex];)ediency. We are here to determine the question whether they are entitled to a share of this business if they can get it only by a money advantage, and they are here under the submission to j^rove that right. We are not obliged to prove that they do not have it. It is their business to prove that they have 199 it, and necessarily in that aspect oi the (|iiestion. the whole ranj^o of the argument that the American lines sul)niitted seems to us to he t;ennane. I am o])ligC(l to the IJoard for this attention. ARBITRATOR WASTllJURX— ^fr. Shauohnessy, if you desire to make any further remarks on this subject confinin_ij yourself to Mr. Stubhs' argument, you ma\' do so. ]\1R. SlJAL'ClllXESS^'- — 1 shall say but a very few words because there v,as nothing in "Mr. Stubbs' remarks today, I think, that are not practically a portion of his previous address to the Board. There are only two ])oints that T consider of sufficient importance to deserve an answer, and the first of those points is the very last that he made, that the Canadian Pacific comes here ])ractically with a threat that unless the American lines accord to them what they demand, they are in a position and they will utilize that position to destroy the rates to San Francisco, and ]^lr. Stubbs asks if it was not for this fact, would they be here today. Why, Mr. Chairman, if that is the fact, would we be here today? Would we at the Denver meeting have acceded to this arbitra- tion? Would we not have said to the gentlemen, we have that differ- ential and we will keep it? If that was the policy of the Canadian I'acific, and no one knows better than Mr. Stubbs that that is not its jiolicy — no one knows better than Mr. Stubbs that in relation to a forced policy of that kind, whenever one is attempted, it originates not with the Canadian I'acific but frequently with some of the gentlemen connected with the Southern lines — 1 will not except the Southern I'acific from it. The fact that the Canadian Pacific is here today and is submitting its case to you — stating to you that it only asks in dealing with this (piestion, that you should act towards the Canadian Pacific route, not the Cana- dian Pacific Railway, but to the route, with the same consideration that you would to a road existing anywhere in the L'nited States; deal with it in exactly the same way as if the C"anadian Pacific was an An'.crican line and not a Canadian line. I say th.e fact that we come to you and submit our case to you is the very best evidence that Mr. Stubbs" allegation that we are attempting to force something has no foundation in fact whatever. Xow, one further point. Mr. Stubbs refers to the Xorthern Pacific and says that they have built lines up into the Winnipeg country com- peting for strictly Canatlian domestic trafific and he says that the Xorth- ern Pacific by competing with the Canadian I'acific does so on exactly the same footing. MR. STUP)BS — Xo. I did not say that was the case. I asked you the question. 200 MR. SHAL'ClHXlvSSY — I beu: your pardon, I will answer the qiics tion; they do. The Xorthern i'aoitic Coni])any makes exactly the same rate from Toronto or Montreal as the Canadian J'acific makes, both hav- injj; ail-rail lines to Winnipeg;;, but on business, rail to ( )wen Sound and by water to Port Arthur, thence via rail to Winnij^ep^, if the Canadian Pacific uses its rail-and-lake route, it makes a lower rate and the Xorthern Pacific consents to it and the Canadian Pacific reciprocates by giving to the Xorthern Pacific the right, if it takes business by its lake-and-rail route from any point in Canada to Ouluth — it recijirocates by permitting them to ?Make a lower rate. Xow, if the condition.; were the same; if we had this all-rail line, to which Mr. Stubbs referred, to San b'rancisco. and if we were in as good a position to enable us to do an all-rail business as the Southern Pacific. I readily grant it would be absurd for us to come here and ask you to concede us a difYerential — it would be absurd, but we must take the road as it is today — a combined rail route and a water route, and from that standjjoint we consider it just as the other roads of a sim- ilar character are considered throughout the L'nited States. T know of nothing else that 1 care to say — there is one matter, but I think it was probably an error on the j^art of Mr. Stubbs — I did not say. or at least I did not intend to say. with reference to the rights of the Canadian Pacific in this country, as stated bv Mr. Stubbs. What 1 intended to say was, that the Canadian line had the same right and priv- ileges with reference to traffic in ])ond that L nitetl States roads have in Canada with reference to bonding. 'J'hat is our case. ARP.ITR.VrOR WWSHIU'RX— The hearing is closed, and the r>oard, after giving the matter i)roper and conscientious consideration, ^ill render its decision. We stand adjourned. At 12:45 i*- ^f- the Board adjourned. 201 DECISTOX OF BOARD OF ARl'.rrRATIOX. The following is a copy of the decision rendered bv the Board: Chicago. October iQ. 1898. J. C. Stubbs, Esq.. Representing the I'nited States Lines. T. G. Shaughnessy. Esq.. \'ice President. Canadian Pacific Railway Co. GEXTLE:\IEN:— The undersigned who were appointed Arbitrators under the following resolution adopted at a meeting of interested hues which convened at Brown Palace Hotel. Denver. Colorado, August 2Jn(l. 1898. viz.: ••RESOL\'ED, That provided the Canadian Pacific Railway will join with the Cnited States Lines in a co-operative agreement designed to secure the maintenance of reasonable rates on the freight traffic interchanged with San Francisco. Cal.. by o '-.'r points in the United States and Canada, that the lines here repre- sented will submit to arbitration the question of whether the Canadian Pacific Railway is. or should be entitled to a differential under the rates made by the Cnited States lines for the carriage of the freight in c|uestion.and if any differentials, what those differen- tials shall be. The Board of Arbitration to consist of three mem- bers; one to be selected by the Canadian Pacific Railway, one to be selected by the American lines interested, they two to select a third and that the decision of two members ot said I'oard of Arbitration shall be final, conclusive and binding upon all." after hearing the evidence and arguments of the interested ])arties anfl having duly considered the '^ame. respectfully submit their decision as follows : The Canadian Pacific Railway is not nor should it be entitled to a differential under the rates made by the Cnited States lines for the car- riage of the freight in question. Signed: Edw. .S. Washburn W. A. Day 1 do not concur in the above conclusion; Signed: J. VV. Midgley.