,V O OT <& IS PROCEEDINGS AT Hearing before Board of Arbitration ON QUESTION OF Canadian Pacific Differentials AT AUDITORIUM HOTEL, CHICAGO, October 12, 1898. DECISION OF BOARD OF ARBITRATION (See Page 201 hereof.) COMMITTEE REPRESENTING AMERICAN TRANS-CONTINENTAL LINES. CHICAGO, December 10, 1898. In view of the fact that the Canadian Pacific Railway Company has, through its Vice-President, addressed to the Executive Officers of the American Lines a letter, copy of which will be found on the following page, it has been deemed proper by the Committee in charge of the case of the Ameri- can Lines to print and distribute the arguments as they were presented to the Arbitrators in order that the Railway Com- panies of the country and the public at large may for them- selves judge the merits of this case. This is the answer of the American Lines to the unwar- ranted inference of the Canadian Line, as stated in Vice-Presi- dent Shaughnessy's letter, that "the question turned upon a technical interpretation of the word 'entitled' which was taken to mean 'inherently entitled' instead of 'equitably entitled." Note that in their submission, the American Lines stated their construction of the term "entitled" to be that 'The term is used relatively, strictly in the sense of the term 'equitable right,' just and right under all the cir- cumstances of the particular case, fair and equal." (See page 86 of Proceedings.) J. C. STUBBS, B. CAMPBELL, Following is a COPY of Vice-President Shaughnessy's letter, referred to on the preceding page. "CANADIAN PACIFIC RAILWAY COMPANY. MONTREAL, 27th October, 1898. "To THE EXECUTIVE OFFICERS OF TRANS- CONTINENTAL RAILWAY LINES: "We have been notified of the award of the Arbitrators in the matter of freight differentials claimed by this Company between Eastern points and San Francisco. "The decision of two of the arbitrators is, That the Canadian Pacific Railway is not, nor should it be, entitled to a differential under the rates made by the U. S. lines for the carriage of the freight in question/ "The Arbitrators do not mention the grounds upon which the decision is based, but we are informed that the question turned upon a technical inter- pretation of the word 'entitled' which was taken to mean 'inherently entitled,' instead of 'equitably entitled.' "To believe that the word 'entitled' was introduced by the framers of the Denver resolution in any other than the broad sense in which it is used be- tween railways, would be to believe them guilty of trickery, and we refuse to entertain such a thought. We never claimed to be inherently entitled to differentials. Our contention was based upon common usage and upon the practice prevailing among railways under similar circumstances and conditions. "If we be correctly informed that the decision turned upon the interpre- tation of a word, and not upon the evidence as presented, ordinary fairness would require a re-submission of the case for determination upon its merits. If the other lines interested be unwilling to join in this simple act of justice, we have nothing to do but submit to the decision as rendered. "The question of a differential having been settled, circumstances will determine the best and most expedient course for the protection of this Com- pany's interests. "Notwithstanding the combinations for that purpose, the American lines can scarcely expect to deprive us of participation in inter-state traffic while they are competing freely for the inter-provincial traffic of Canada, nor can they reasonably complain if we seek to make good out of the former what we may lose of the latter. (Signed) T. G. SHAUGHNESSY, Vice-President." INDICES. PAGE BOARD OF ARBITRATION, 5, 201 REPRESENTATION, 5 QUESTION FOR CONSIDERATION OF ARBITRATORS, 5 CANADIAN PACIFIC RAILWAY Co.'s ARGUMENTS, - - 8, 158, 183 AMERICAN LINES' ARGUMENTS, 65, 190 DECISION OF ARBITRATORS, . - - - --. - 201 ARGUMENTS OF AMERICAN LINES, 65, 190 ARGUMENTS OF CANADIAN PACIFIC RAILWAY Co., 8, 158, 183 BOARD OF ARBITRATION, 5, 201 DECISION OF ARBITRATORS, - 201 MR. ROBT. KERR'S ARGUMENTS FOR CANADIAN PACIFIC RAILWAY Co., 8, 158 MR. T. G. SHAUGHNESSY'S ARGUMENTS FOR CANADIAN PACIFIC RAILWAY Co., 183 MR. J. C. STUBBS' ARGUMENTS FOR AMERICAN LINES, 65, 190 QUESTION FOR CONSIDERATION OF ARBITRATORS, 5 REPRESENTATION, - - - - - - 5 475488 PROCEEDINGS AT HEARING BEFORE BOARD OF ARBITRATION ON Question of CANADIAN PACIFIC DIFFERENTIALS AT AUDITORIUM HOTEL, CHICAGO, OCTOBER 12, 1898. BOARD OF ARBITRATION: MESSRS. W. A. DAY, EDWARD S. WASHBURN, J. W. MIDGLEY. CHAIRMAN. REPRESENTATION: AMERICAN LINES: CANADIAN PACIFIC RAILWAY: MESSRS. J. C. STUBBS, MESSRS. ROBT. KERR, PAUL MORTON, G. M. BOSWORTH. W. H. TRUESDALE, B. CAMPBELL. QUESTION FOR CONSIDERATION. At a meeting of executive officers of Trans-Continental lines held at Brown Palace Hotel, Denver, Colo., on August 22, 1898, the following resolution was adopted: "Resolved, that provided the Canadian Pacific Railway will join with the United 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 other points in the United States and Canada, that the lines here represented 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 United States lines for the carriage of the freight in question, and if any differentials, what these differentials shall be. The Board of Arbitration to consist of three members, 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 5 W *? 44 'ft *. o i that the decision of two r:<-ribers of said Board of Arbitration shall be final, conclusive and binding upon all." Mr. W. A. Day was selected to represent the American Trans-Con- 'tinental lines on the Board of Arbitration ; the Canadian Pacific Railway selected Mr. J. W. Midgley as its representative, and Messrs. Day and Midgley selected Mr. Edward S. Washburn as the third member of the Board. Pursuant to the resolution above recited, a hearing before the Board of Arbitration was arranged to convene at Auditorium Hotel, Chicago, October 12, 1898, at n o'clock, A. M. The meeting was called to order by Arbitrator Washburn, who offi- ciated as Chairman of the Board. The appointment of Mr. E. S. Stephens, as Secretary of the Board, was announced. ARBITRATOR WASHBURN Objection having been made to the sessions being in public, it has been decided that only railroad officials will be permitted to be present at the hearing. The Board of Arbitrators selected to consider the question in dispute between the Canadian Pacific Ry. and the American lines as regards dif- ferentials in freight rates have organized and are now ready to proceed with the case, but before doing so we would like an expression of opinion from the interested parties upon one point. The resolution under which the Arbitrators were selected does not limit or restrict the arbitrators in any way as regards methods of gathering information from which to decide the case, and we would like an ex- pression from the interested parties as to whether they prefer that we should decide the case upon the evidence and facts presented at this hearing, or whether, if the Arbitrators deem necessary after the hearing, they shall obtain information through other sources. Also whether they desire or prefer that we should or should not in considering the question, use any knowledge that we now have of the matters in dispute. I will first call upon the Canadian Pacific Ry. MR. KERR 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 such 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 are necessary in order to get at a proper decision of the question. Therefore, we think that the Arbitrators should be unrestricted in any way and should seek light from any source in order to guide them to a proper decision. Our idea with regard to the procedure might be this: We would like after putting in our oral evidence here to have the privilege of later submitting our full written statement in order that nothing may be left uncovered. Sometimes in excitement of a discussion points are left out here and there, which afterwards in other moments we see and we would like the opportunity, if after the close of the hearing it seems advisable, to put in a written statement of our case. ARBITRATOR WASHBURN Now, we will ask the representa- tive of the American lines, if they have any preference on the points I have stated. MR. STUBBS If the Board please, this question is submitted on a resolution passed at a meeting of the lines interested. The American lines and the Canadian line. That resolution states two questions that are to be determined by this Board. We think that it should be sub- mitted and received by the Board of Arbitrators at this hearing. It is, as Mr. Kerr has well stated, a very serious question; at the same time it is not a new question. It is not a new question to the parties in contention. It is not a new question to the members of the Board. We have, after a good deal of wrangling among ourselves, finally reached the conclusion that there was but one way to determine this matter. That is by referring it to a Board of three disinterested arbitrators, before whom we should appear and make our showing for or against, as it may be, the questions stated in 4hat resolution. At the original meeting where this arbitration was decided upon it was manifest to all that it was so important that we ought to get it out of the way as soon as possible. We contemplated there that we might get this before the Arbitrators and possibly reach a decision previous to October loth, day before yesterday, so that following the determination of this Board we might go about intelligently to adjust the rates and get upon a reasonable working relation that would be conducive to harmony and peace, just so far as that is possible between competing lines, but to follow the suggestion of the Canadian Pacific representative would make this an interminate contest. It would hardly be just to either side. We believe that if after the statement made here the Board should feel that it required testimony in support 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 produce 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. For my own part, it seems to me that the questions are clearly and explicitly stated in the resolution. What we have to submit to this Board is there stated. There is no roving com- mission at all. 8 ARBITRATOR WASHBURN As there is a difference of opinion between the contending parties, this is a matter that the Board will have to determine later; but we hope that all the evidence that will be neces- sary will be produced at this hearing. At a preliminary meeting of the Board yesterday, to determine modes of procedure, and so forth, it was decided that we would not adopt any- thing more than necessary to bring the matter properly before the Board, and it was decided that, as the Canadian Pacific Ry. has the affirmative side of this question, that company will open the case; that the American side will then reply, and that the Canadian Pacific will close the case; but only in their closing argument to answer points made by the Ameri- can lines, not to introduce anything new. It was also decided to call upon the parties to the controversy, to present each its case in full, and make a full disclosure of its case in the arguments that will now be made. We will now call upon the Canadian Pacific Ry. MR. KERR Mr. Chairman, I will not take up the time of the Arbi- trators in any preliminary remarks, oratorical display, and all that sort of thing, even though I were equal to it. It is not applicable to the subject nor to the time and place. The general principle of granting differentials to broken rail-and-water routes is admitted and applied as between American lines in various sections of the United States, as being the only means left under the law \vhereby weak routes may obtain a share of business, the law not permit- ting 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 differential rates as against their all-rail competitors. Later, I propose to show the great number in extant and the universal custom, law and rule, prevailing throughout 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. I will go into the detail of this matter later on. I am now only sketching generally, the principle. The history of the Canadian Pacific differentials extends over a period of ten years. On November 5th, 1887, a meeting of the chief traffic officers of the Trans-Continental lines was held at the Grand Pacific Hotel, Chicago, at which it was decided to organize an association to be called the Trans-Continental Association, the organization to take effect December, 1887. The meeting adjourned to meet in New York for the purpose of having conference with the representatives of the Canadian Pacific Railway Company, which was had, and resulted in an agreement on certain differentials in favor of that road. On November 28th, 2Qth and 3Oth, a general meeting was held in Chicago where through rates were agreed upon, and some of the Canadian Pacific differentials were fixed. The first differentials fixed ran: From i 2 3 4 56 7 8 9 10 n 12 13 14 classes New York 30 25 20 15 15 12 12 10 7 5 5 5 5 5 cents Chicago 20 15 12 12 12 10 9 8655555 The eastbound differentials from San Francisco to New York and Chicago were fixed on the same figures. A meeting was held at St. Louis on Dec. I9th, 1887, when the question of differentials for the Canadian Pacific Ry. to Detroit, Toledo and Buffalo not having previously been decided on, the Chairman was authorized to base the differentials for Buffalo by making the Buffalo rate for them 90 per cent of the New York rate, and Toledo and Detroit 85 per cent of the New York rate. Then the question of the Canadian Pacific differentials on business between St. Paul and Minneapolis and San Francisco was brought under discussion when the following differentials were allowed to the Canadian Pacific from St. Paul: i 2 3 4 56789& lower classes 15 12 10 10 10 8 8 7 5 cents The Northern Pacific Ry. claimed the same differentials through Tacoma by rail-and-water and their claim was allowed and agreed to. In connection with the formation of the Association an agreement was made with the Pacific Mail Panama Route whereby certain space was rented in their steamers; the Association agreed to fill such space or to pay for it if not filled, the Pacific Mail agreeing that the Pacific Coast rates should be controlled by the American roads. On May I7th, 1888, a meeting was held in San Francisco, when owing to the differentials awarded to the Canadian Pacific Ry., not giving that company a reasonable share of the traffic, they applied for an increase of differentials to the basis of 40 cents on first class and 10 cents on loth class and lower between San Francisco and New York. A committee was appointed to consider the question, and brought in the following report : "Resolved, that it is the sense of our committee that the differ- entials allowed the Canadian' Pacific Railway Company should at all times be fixed upon such a basis as will secure to that Company a fair and reasonable share of the overland tonnage, and that if 10 the present figures do not accomplish that result, they should be so modified as to bring it about. To this end the Chairman is authorized to negotiate 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 differentials shall apply to St. Paul and Minneapolis traffic via the Northern Pacific as may be awarded the Canadian Pacific Railway Company; it being understood that these differen- tials shall apply via the Ocean routes only." This report was adopted. Now, gentlemen, here was a principle that was evolved by this Com- mittee right in the early history of our connection with the Trans-Con- tinental Association that is very irpportant. This Committee, consisting of representatives of the Southern Pacific Company, the Atchison, Topeka & Santa Fe Company and the Northern Pacific Company advanced and accentuated in this formal resolution and report to the general meeting of the Association, that the differentials allowed the Canadian Pacific Railway Company should at all times be fixed on such a basis as will secure to that company a fair and reasonable share of the overland ton- nage. I would like the minds of the Arbitrators to dwell somewhat upon this, in view of the fact that of late years we have been chased and harried in various ways in order either to force our company out of the business of this country, or to give up our differential rates. Of course, the one means the other. If we have to surrender the small money advantage that we now have to offer in order to secure a reasonable tonnage to our line, as an offset to the broken character of our route, then, if you do say we shall not have these differentials, you say, in the same breath that the Canadian Pacific Company shall withdraw from the trade of the United States, and in doing that, of course, you will remove a com- petitor; you will remove a line that can be fairly claimed to have done good, and is of advantage and great advantage, to the commerce of the United States. I do not think that is a desirable object to attain, and we have a great deal of confidence, gentlemen, that you will not lend yourselves to attaining any such object. This report of the Committee that I have just read was duly adopted in the general meeting, giving the Chairman authority to arrange with the Canadian Pacific, for an arrangement and re-arrangement, from time to time, of their differentials, in order that they shall have a fair and reasonable share of the overland tonnage, and the Chairman finding that the Canadian Pacific was justified in their application for an increase of differentials, granted the same, and they were accordingly increased to the following basis: II From 123456789 10 classes New York 40 35 25 2O 20 15 15 12 IO 74 cents Buffalo 32 27 23 18 18 H H ii 9 7 M Detroit 30 25 21 17 17 13 13 IO 8 7 tt Chicago 25 21 17 H H ii ii 9 7 7 tt St. Paul 1 Minneapolis f 15 12 IO IO IO 8 8 7 5 5 ARBITRATOR DAY Mr. Kerr, what year was that, if you please? MR. KERR That was in 1888. On May I7th, 1888, was when the San Francisco meeting was held at which the differentials were changed. ARBITRATOR DAY What was the name of the Association? MR. KERR Trans-Continental Association. The eastbound differentials were practically the same with apparently some slight changes. Eastbound to Chicago I do not know why that was, but Chicago appears here on the record eastbound as first class 24 cents, second class, 19, third class, 16, fourth, 15, fifth, 13, sixth, 13, sev- enth, 13, eighth, 10, ninth, 9 and tenth, 7. There is a variation here in first and second class and third class and fourth class. This differential was worked under until July, 1889, when at a meeting held in Chicago be- ginning July 2oth, the Southern Pacific Company moved for a reduction of the Canadian Pacific differentials, they claiming we had carried an undue proportion of wool from California, from San Francisco to the east. After considerable discussion pro and con they proposed and we accepted, the following reduced differentials: Between San Francisco i 2 345 ABCDE classes and St. Paul No change Chicago '7* Hi 12 IO IO 8 8 7 5 5 cents Detroit 21 17 14 II II 9 9 7 5 5 it Pittsburgh 22 18 15 12 12 ioj IOJ 8 7 5 " Atlantic S'b'd 28 24 17 H H 12 12 8 8 5 tt Wool in grease 7^ 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 tonnage the differentials should be reduced, as soon as it could be ascertained, to a point that would give that company a reasonable traffic. On the other hand, if the differentials as agreed upon did not give it a fair amount 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 Association on 12 differentials that after a fair trial did not give them a reasonable amount of business, and on application the Trans-Continental lines allowed them an increase. Again, in July, 1889, it being claimed that the increased differentials gave 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. In 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 differentials. This allowance arrangement lasted through the year 1891, when the Canadian Pacific again reverted to their differentials, by resolution of the Asso- ciation at the New York meeting, January I4th, 1892. At the end of 1892, the Trans-Continental Association was dissolved and the Canadian Pacific adopted the basis of 10 per cent differentials, 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 differentials 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. Therefore, before entering the Association, we worked on the percentage plan. While in the Association we worked on the fixed arbitrary plan specific so many cents per hundred pounds, which was not satisfactory to anybody. During the years 1888 to 1892, inclusive, that question of differentials was never quiet; not that the Association lines, the American lines were unwilling that we should have 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 respect, and I think the experience of most all the lines who are differ- ential lines, or who have to deal with differential lines, is that the fixed differential is a source of worry and trouble all the way through, and that, if an equitable percentage could be struck which will rise and fall with the 'rates, it is more satisfactory, more proper and right than strug- gling with a fixed arbitrary figure that stands rigid under all conditions and creates trouble all the way through. At 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 Bureaus or Associations that are at present in existence. At every meet- 13 ing of the lines comprising the Trans-Continental Freight Bureau we are represented. We are there by invitation, which is always sent and always responded to. We are there and sit in their meetings to discuss and give our views and we have always worked with the most perfect harmony. We have simply gone along taking our differentials of 10 per cent which has been practically undisputed until within a recent period when it seemed to have become a burning question with some of our friends. The California lines in order to carry on their business formed the Trans-Continental Freight Rate Committee in 1893; the Northern Pa- cific, Great Northern and Canadian Pacific not being members. That Committee comprised what is known as the California lines. The Cana- dian Pacific, Northern Pacific and the Great Northern were not mem- bers but they kept in touch with the Freight Rate Committee through the medium of the Union Pacific, 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 Freight Rate Committee was dissolved in 1897 and the Trans- Continental Bureau took its place with the Northern Pacific and Great Northern as members. The Canadian Pacific did not join the Freight Bureau, but worked in harmony with the members of the Bureau; at- tended all their meetings by special invitation, and governed its rates by the rates made by the Bureau, on the basis of 10 per cent differentials. Then, in pursuance with this very interesting history of the Canadian Pacific in connection with the Trans-Continental Association we have to drop back a year. In March, 1896, a meeting of all Trans-Continental lines, including the Canadian Pacific, was held at the Windsor Hotel, New York, and an agreement made for the formation of a new association. Subsequently, a further meeting was held in Milwaukee, in April, where all details pertaining to the formation of the association were completed, and rates were checked in by the Freight Committee. But eventually all proceedings were stopped owing to the objection of the Receivers of the Union Pacific. Now, that is the general history or sketch of the relations the Cana- dian Pacific Company has borne to the other Trans-Continental lines, both inside and outside of their Associations and Bureau. I do not know that there is very much for me to dwell on in that history and I will now proceed to deal with the question of differentials as applied in other sections of the country, showing that not only is the principle of differentials admitted and acted upon, but that there are strong prece- dents, very strong, that support us in our contention that neither the Canadian Pacific line nor any other broken line of like character can hope to participate in any reasonable share or portion of traffic in competition with their direct all-rail rivals the rail lines being almost exclusively H shorter in distance, I think in every case, there may be an odd excep- tion, but I think I am right in the general statement, in every case the rail lines are shorter. The time is shorter with the exception of two ocean-and-rail lines that I shall refer to later on. In proof of the general principle of differentials as admitted and worked under as between numerous American lines operating both in water and rail routes, we submit a list of those now in operation. All the established lake-and-rail lines operating steamers on Lakes Huron, Michigan and Superior, have differential rates allowed them as against the all-rail lines, between the East and Milwaukee, Chicago, Duluth, St. Paul, Minneapolis and points beyond. The character of those lines is undoubtedly very familiar to you and I doubt whether it is worth while for me to take up your time or burden you with an enumeration of those various lines. They are very numerous and they supply a daily service I do not think there is a day during the season of navigation but what steamers leave Buffalo for Lakes Michigan, Huron and Superior, so that the water carriers on the Lake supply practically a daily service during that season of the year. These lines operate rail between the Atlantic Coast points to the lakes, thence by steamer and then rail again wherever they are going to. Now the differentials accorded to these lake-and-rail lines as against their all-rail rivals average from 28 to 20 per cent below the all-rail rates. At present the tariff rates from New York to Chicago are: 123 4 5 6 classes All-rail 75 65 50 35 30 25 cents per 100 Ibs. Lake-and-rail 54 47 37 27 23 20 showing a range of differentials of from 21 cents per 100 Ibs. on first class to 5 cents on sixth, equal to the percentage I have just named, 28 to 20 per cent. Also, the routes of the Atlantic Port lines have a differ- ential. Their rates are first class, 65; second, 57; third, 44; fourth, 31; fifth, 26, and sixth, 22, showing a differential of 10 cents on first class to 3 cents on sixth, being a range equal to 13 1-3 to 12 per cent differentials. ARBITRATOR MIDGLEY What do you mean by Atlantic Port lines? MR. KERR The lines that operate, say, from New York to New London, Ct., by ocean and thence by rail. The present published rates from New York to Texas common points are: i 2 3 45ABCDE classes All-rail 190 158 133 113 89 95 85 73 60 52 cents via Atlantic Port lines 170 143 121 100 84 91 78 66 54 45 " The differentials allowed to Atlantic port lines between New York and Texas common points range from 20 cents, first class, to 7 cents 15 un Class "E," equal to from IO-J to nearly 13^, or 13.46 per cent. Then the rates via Gulf port routes are still lower, running: i 2 3 45ABCDE classes 155 J 33 JI 3 I0 3 79 8 6 75 63 50 42 cents the differential ranging from 35 cents, on first class, to 10 cents on class "E," equal to from 19.23 per cent to 18.42 per cent. ARBITRATOR DAY Who enjoys that differential? MR. KERR The broken water-and-rail routes as against all-rail- routes from New York to Texas common points. Then we have rates to Vicksburg and Natchez, via Atlantic port routes. I am reaching around here, gentlemen, in order to show you the ramifications and extent of country over which these differentials are applied, apparently all over, and as we hold rightly, so it should be in the case of broken routes that have to contend with all-rail routes. The rates to Vicksburg and Natchez are: i 23456 classes via Atlantic Port Routes 100 90 75 61 50 42 cents via Gulf Port Routes 86 81 68 56 46 41 " showing apparently a difference or differential in favor of Gulf Port routes as against Atlantic Port routes of from 14 cents on first class to 5 cents on fourth, and i cent on sixth class; the percentage range being from 14 per cent to 8 per cent and 2.38 per cent. That is the high and the middle and the lowest. Then we have a large number of lines operating to and from New York, Boston, Baltimore and Portland, Me., via Ocean-and-rail, as fol- lows : The National Despatch; Canada Atlantic; from New York via ocean to New London, Ct., thence rail. The Baltimore & Ohio Railroad; Can- ada Atlantic; Canadian Pacific Despatch; Cumberland Gap Despatch; Kanawha Dispatch; National Despatch; Norfolk and Western Despatch; Rome, Watertown & Ogdensburg Line, from Boston and Common Points, via ocean-and-rail. Then the Cumberland Gap Despatch the same Despatches really Kanawha Despatch; National Despatch; Norfolk and Western Despatch from Boston via ocean-and-rail. Rome, Watertown and Ogdensburg Line; Great Eastern Line; Canadian Pacific Despatch, from Portland, Me., and points taking Portland rates. From New 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- ential allowed these lines is: i6 i 23456 classes 10 8 6 4 4 3 cents the percentage ranging from 31-3 per cent to 12 per cent. In order to accentuate this differential question, and to show and prove its general application and acceptance, we find here in the Joint Traffic Association proceedings of the Board of Managers, Sept. I5th, 1898, Rule 184, "Differentials Westbound, via the Chesapeake & Ohio Railroad, Norfolk & Western Railroad and Baltimore & Ohio Railroad," which states: "At a conference between Messrs. O. G. Murray and Albert Fink, April 27th, 1889, it was agreed that the following differentials below the established all-rail tariffs should be used by the Chesa- peake & Ohio Railway, via their water-and-rail line on insured bills of lading: From 123456 classes. Boston and New York 10 8 6 4 4 3 cents per 100 Ibs. Philadelphia 864322 " Baltimore 864322 " Then it goes on to state that this order or resolution rule it is called the above differentials shall be subject to change from time to time when either party calls for a change, and that the statistics of the relative amount of tonnage forwarded via the several lines shall be the basis of adjusting differentials from time to time in case of disagreement. In case of dis- agreement the question shall be decided by arbitration. The foregoing water-and-rail differentials are also applied from all the cities named via the Norfolk & Western Railroad, and from Boston via the Baltimore & Ohio Railroad, and to points west of 71 per cent points. Then, under Rule No. 185, we have differentials from Boston via ocean-and-rail routes to Pittsburgh, and so forth, treated of, and it reads: "The following agreement was reached at a conference held October 2Oth, 1893, between the Boston Freight Committee and the General Manager of the Merchants and Miners Transporta- tion Company, and is still effective : That to Pittsburgh and all points taking 60 to 71 per cent inclusive, of Chicago rates, the differentials of the Merchants and Miners Transportation Company and roads connecting therewith shall be: 123456 Classes 654322 cents per 100 Ibs. respectively, below the standard all-rail rates from Boston and Boston points.' ' Then we have Rule No. 186 which treats of differentials from New York via the Central Vermont route (National Despatch Line) : "The following differentials are applied by the Central Vermont route (National Dispatch Line) from New York via New London, insured, to the Detroit River and points west: i 23456 Classes 10 8 6 4 4 3 cents per 100 Ibs. except that slightly reduced differentials are applied to points taking 78 to 8 1 per cent of New York-Chicago rates." I do not want to weary you, gentlemen, by reiterating all these points. I think I have given you enough of these records to show that the differ- ential as applied in the east is very general in its character; that the differential applied in the south is pretty general in its character; and I hope to show you before I finish, that the differential is pretty general all over, and that, apart from the equities and merits of the Canadian Pacific Ry. having differentials on this particular business, precedent after precedent has been established, and our reasons for asking a con- tinuance of the established differentials on this traffic are at least equally as good as any reasons that can be advanced by those lines that do enjoy that privilege, and we think in most instances very much better. The Chesapeake and Ohio have the same differential rate from East- ern Seaboard points to Chicago as the National Despatch, of which I have just been treating, these differences applying on the standard rates from the Seaboard points to the Mississippi River points. Now, a great deal has been said, chiefly on the outside, about the Canadian Pacific Ry. seeking by its long, circuitous and broken route to share in a ton- nage as against more direct and shorter lines all-rail, and I propose to show to you gentlemen that not only have we a precedent on which to claim differentials, many of them, and that we also have numerous prece- dents to show that there are numerous broken circuitous water-and- rail lines operating all over the country that are longer and more cir- cuitous than ours, and still they do operate with more or less success, and among those lines we will be able to show you, I hope, that some of the roads, known as Trans-Continental lines are engaged in operating broken, long, circuitous routes in competition with direct all-rail rivals. In saying this I do not wish to be understood as criticising the right of any road to go anywhere, even with a broken and circuitous line, to seek for busi- ness, so long as they are satisfied that taking all the circumstances into account such business will afford them some small measure of profit. i8 Therefore, I will take up a little of your time, if you please, on the ques- tion of distances over which these circuitous and broken routes operate. The distance by the Chesapeake & Ohio Road, Boston to Newport News, is 544 miles by water, Newport News to Chicago, 1071 miles, total 1615 miles from Boston to Chicago, against 1020 miles by the shortest all- rail line from Boston, showing the line via Newport News, 58 per cent longer. The distance by the Chesapeake & Ohio from New York to Newport News is 305 miles, to which add 1071 miles Newport News to Chicago, total 1376 miles against the shortest all-rail line of 912 miles, 50.87 per cent longer. Again the distance between Boston and Duluth by all-rail is 1382 miles, against 2195 miles via Newport News and Chi- cago, 58.82 per 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 Orleans and Fort Worth, to Utah points at a differential rate. The distance from New York to Denver via water to New Orleans thence rail to Fort 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 impress upon 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 through New Ofleans to Denver, we will say, that is over 62 per cent longer in distance, than the all-rail line and that line is operated under 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 differential 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 they 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 ! 2 3 4 5 A B C D E classes 43 35 3 2 22 1 7 Hi I0 i J 3 J 3 13 cents 19 Now, I am also advised that although these differentials were based on the canal-and-lake rates, the Southern Pacific insisted upon applying them all the year round during the period when navigation by canal was closed and very naturally their action in that respect caused a very great deal of trouble and friction. But in December, 1897, they got together and held a meeting and discussed the situation, and finally agreed that the following differentials under the all-rail rates, from New York to Denver, would be allowed to the Southern Pacific lines via New Orleans : _i 2345ABCDE classes 39 30 26 16 14 ii ii ii ii ii cents Now, it has been maintained and stated very frequently, that what- ever differentials applied in the east, in Trunk Line and Central Freight territory, that with the exception of the Canadian Pacific, that there was no precedent established west of Chicago that there was no such thing as differentials anywhere west of Chicago; that the lines did not partici- pate in them in any way. But, we find in the face of these statements, that these differentials accorded to the Southern Pacific Company on their New York-Denver and Utah points, have been assented to by the lines west of Chicago, the lines east not participating in any way. Now, that being the case it seems to me it establishes a precedent and does away with the argument that in no instance, with the exception of the Cana- dian Pacific Company, are differentials allowed acknowledged in any way by the lines west. Now, having touched on the differentials enjoyed by the Southern Pacific on their Colorado and Utah line, I would like to point out that they do enjoy differentials via their Sunset line on Trans-Continental busi- ness, and by the list that I propose to submit to the Board, prove that on a very large tonnage, a very large proportion of their Trans-Continental business, via their Sunset line, they enjoy a higher differential than the Canadian Pacific Company today. The Southern Pacific Company by their Sunset line, through New Orleans, have differentials averaging 10.94 per cent from New York Pier to San Francisco, on numerous commodi- ties, as against the all-rail lines from New York City, thereby enabling the Sunset line to control a very large tonnage from New York City and to reach out into the interior against the all-rail lines. We submit a list of the commodities and rates taken from the current tariffs published by the Trans-Continental Freight Bureau, showing differentials allowed to the Sunset line of the Southern Pacific Company. (Mr. Kerr here sub- mitted to the Board the paper marked "Exhibit i.") 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 are 20 made from Chicago, if they are graded less than the rates from New York, that they, the Southern Pacific Company by their Sunset line will adopt from New York Pier, the Morgan Line pier in New York, the same rates that the other lines make out of Chicago to California points. In that way, as we show you, they obtain a differential greater than ours, the Canadian Pacific, and as you can see by looking over the list, it involves a very large tonnage, a very large proportion of the whole; it covers numerous staples. Yet, gentlemen, they are here to argue that the Canadian Pacific differentials should be abolished. Now, just to step aside for a moment from the direct line, it may not be amiss to state that the Great Northern Railway, the. great stickler against the Canadian Pacific differentials, are themselves today enjoying, and by consent, a differential below the Canadian Pacific rates, below the Southern Pacific rates, and below the Northern Pacific rates in connec- tion with their Asiatic traffic. The Asiatic Steamship line known as the Nippon Yusen Kaisha Company, a Japanese line operating with the Great Northern Railway Company to and from Seattle and China and Japan ports, to points in the United States and Canada, have a differential as against the Canadian Pacific, the Northern Pacific and the Southern Pacific of 1 6 2-3 per cent on silk traffic and 5 per cent on tea and other merchandise. They enjoy this differential and by the means of it they are able to get their proper and reasonable share of traffic as against the stronger lines of the Southern Pacific, the Northern Pacific and the Cana- dian Pacific. ARBITRATOR DAY Between what points, Mr. Kerr? MR. KERR China and Japan ports to all points in the United States and Canada. ARBITRATOR DAY Let me ask where you get that informa- tion; what is the source? MR. KERR By an Agreement to which we are parties. ARBITRATOR DAY Is that a public tariff, that you speak of? MR. KERR No, it is a percentage tariff allowed by agreement, of which I have here an abstract, and will read it to you so that you will ARBITRATOR DAY Pardon me, but I do not want to break up your argument, yet what I want to know is if this is a tariff that is printed and filed according to law filed with the Inter-State Commerce Com- mission? MR. KERR There is no such tariff as I understand, tariffs are not filed with the Inter-State Commission as between China and Japan ports. ARBITRATOR DAY This does not apply between Atlantic points and Pacific points? MR. KERR No; it is eastbound; so far as we are concerned it is from China and Japan ports via Seattle and the Great Northern road to any point in the United States and Canada. 21 ARBITRATOR DAY It is a through tariff; it is not a local tariff from interior points? MR. KERR No. MR. STUBBS Have you a copy of the Agreement? If so, I suggest you file it for the use of the Board. MR. KERR I have not the Agreement, but I have a copy here. It states here an Agreement dated Hong Kong, March 23rd, 1898, between the Trans-Pacific lines, Northern Pacific Company, Tacoma and Portland lines, Pacific Mail line, Occidental & Oriental Company to San Francisco, 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 Northern Railway, are enjoying the following differentials (I see this is not an abstract of the Agreement, but it is a statement). MR. STUBBS I just wanted to get it before the Board, but I think you and I can agree upon it. MR. KERR We can file it, of course. First, on raw silk cargo (these are the terms), the Nippon Yusen Kaisha Co. and the Great Northern Railway are allowed a differential of $1.00 per hundred pounds, equal to 162-3 per cent, the Nippon Yusen Kaisha Co. rate being $5.00 per hundred pounds, the other lines having $6.00 per hundred pounds on raw silk. ARBITRATOR WASHBURN May 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 by the Southern Pacific and Northern Pacific all acknowledging that they were 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? MR. 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 Agreement to allow the weaker line a differential on traffic in 22 order that they should secure their fair share of business to the United States and also to Canada, and bear in mind also that Hong Kong is a British Crown Colony and Canada a British Dominion and there is no question raised, or distinction made as between one point to another in the British possessions, or one point to another from a British point to an American point. I just wanted to make that point because I will have further to say on that subject later on. ARBITRATOR DAY I would like to ask before going further, who are the parties to that Hong Kong Agreement? MR. KERR The representatives of the Pacific Mail, the Oriental & Occidental Steamship lines, in connection with and as representing the Southern Pacific Co. on this side, and the representatives of the Northern Pacific Steamship line. ARBITRATOR DAY The point I was trying to get at is who are the parties to the Agreement. MR. KERR I am telling you. ARBITRATOR DAY You were speaking of representatives. MR. KERR The men who signed the Agreement? ARBITRATOR DAY Yes. MR. KERR I was just telling you. Which of course has been con- firmed by the Executive Officers of the railway companies interested. The first party, as I say, was the Pacific Mail and the Southern Pacific Co., the second was the Northern Steamship Line and the Northern Pacific Company and third is the Canadian Pacific Steamship Line and the Canadian Pacific Railway Company, with the Nippon Yusen Kaisha Co., a Japanese Company operated with and in connection with the Great Northern Railway Company, and we three as first stated accorded to the weaker line this differential. MR. STUBBS I would like to ask the gentleman whether he will close or whether he will take up all the afternoon or not. I suppose it is desirable to get through as quickly as possible. ARBITRATOR WASHBURN On the other hand, I 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. MR. STUBBS 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 WASHBURN I do not know whether any one else than Mr. Kerr proposes to address the Board or not. MR. STUBBS I am the servant of the Board in this, and if you want to keep up until late, it is all right with me. MR. 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 night, for that matter, will suit me. I have nothing else to do but attend to this. ARBITRATOR WASHBURN Will there be any one to follow you on your side of the case, Mr. Kerr? MR. KERR Mr. Bosworth may have something to say. MR. BOSWORTH I think not At i :io P. M. an adjournment was taken to 2:30 o'clock P. M. Afternoon Session, October i2th, 1898, 2:30 P. M. The Meeting being called to order by the Chairman, Mr. Kerr con- tinued his argument as follows : MR. KERR Mr. Chairman and Gentlemen: In closing at the noon hour I dealt with the question of differentials to the Great Northern Road in connection with their Asiatic business. I now propose to show that the Great Northern and Northern Pacific lines enjoy differentials on Trans- Continental business from Eastern points to the North Pacific Coast, Portland and North. By the tariff that I have here, numbered S. R. 128, Amendment No. I to Westbound Tariff No. i-C.: "Differential Rates via Lake-and-Rail applying during the season of Lake navigation, via Great Northern Railway, Northern Pacific Railway, Oregon Railroad & Navigation Company, via Spokane and Wallula Junction, in connection with the Erie & Western Transportation Company (Anchor Line), North- ern Steamship Company, Port Huron, Washburn & Duluth.Line, Union Transit Company, Western Transit Company, Canada Atlantic Transit Company, Georgian Bay and Lake Superior Steamship Line and Eastern Roads named on page 2 hereof." "From points in territory described below to North Pacific Coast Terminals, namely: Portland, East Port- land, Albina and Astoria, Ore., and points north thereof, taking 'Terminal' rates (as described on pages i, 2 and 3 of Tariff No. i-C.)." When the through all-rail class or commodity rate per 100 pounds is 75 to 79 cents, inclusive, the differential allowed to the Great Northern and Northern Pacific rail-and-lake lines is 5 cents, and they go on in an increasing scale that you can easily refer to. I do not need to burden the minutes with them, because they are right here. They go on in increasing scale, up to 25 cents per hundred. The same differentials are shown in Supple- ment No. 2 to Trans-Continental Westbound Tariff No. i-C., Buffalo to Milwaukee (821 miles), and Buffalo to Chicago (889 miles), in connection with the Union Pacific, Atchison, Topeka & Santa Fe and other Western roacjs. Now, gentlemen, we maintain that on their own showing these lines who complain of the Canadian Pacific differentials, that they are, for a 24 large portion of the year, that portion of the year when a very large, probably the largest tonnage moves, during open lake navigation they are enjoying, by their broken rail-and-water 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 get the benefit of these differential rates that apply in con- nection with the lake-and-rail lines. We have now cited a sufficient number of cases of differentials as applied all over the various sections of the United States in connection with United States traffic. I now propose to show you that American lines enjoy a very large 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 average distance as between the points in Canada traveled by the Canadian Pacific and by the all-rail American route are practically the same. In fact, I think they are a little in favor of the American lines. We have here a memorandum accompanied by the tariffs that prove our statements that the following differential rates are enjoyed by lake-and-rail as against all-rail from Montreal to Winnipeg, and when I say Montreal, that covers everything west of Montreal in the province of Quebec and in Ontario, up to the Detroit River. The present rates, Montreal 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 10 classes All-rail 198 170 135 105 88 80 70 70 62 cents Lake-and-rail 143 123 103 87 72 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 405 353 300 248 205 199 169 i^S 131 cents Lake-and-rail 375 329 283 242 200 194 164 151 126 showing a range of differentials from 30 cents first class down to 5 cents on fifth and lower. ARBITRATOR DAY Mr. Kerr, where do lake steamers get that traffic? MR. KERR They get it at Sarnia and at Owen Sound. ARBITRATOR DAY Is that the same on the Winnipeg traffic you spoke of? MR. KERR Also at Parry Sound by the Canada Atlantic, thence to Duluth and thence by American lines on to destination. 25 ARBITRATOR DAY On that lake-and-rail traffic from eastern Canadian points, from one Canadian point to another Canadian point, take the one you have illustrated from Montreal to Kootenay, is the lake traffic exclusively carried in Canadian or British bottoms or in American vessels? MR. KERR It is carried in Canadian bottoms, in connection with either American or Canadian roads. We have our own line by lake-and- rail via Owen Sound to Fort William. The American lines, the North- ern Pacific and Great Northern and also the Union Pacific (Yes, they can get in there via the Omaha), but the Great Northern and Northern Pacific I cite them as the chief ones they carry from Duluth on to Winnipeg, to Kootenay and the British Columbia Coast. MR. STUBBS Do I understand the Canadian Pacific Ry. carries the same differentials? MR. KERR Certainly, certainly. From Montreal to British Columbia Coast points the rates are : 12345678 10 classes All-rail 325 283 240 208 180 173 138 113 108 cents Lake-and-rail 315 275 233 202 175 168 133 108 103 giving a range of differentials of from 10 cents on first class down to 5 cents on sixth and lower. Now, that brings out the fact that the American lines enjoy their share of purely Canadian traffic at differentials when they use a broken route as against the unbroken all-rail route. Now, there have been discussions and arguments both formal and informal on the question of American lines enjoying purely Canadian traffic and the point has been raised that, "yes, they enjoy Canadian traffic but on a strict equality with Canadian lines." To that we say, "yes, because the circumstances are precisely similar. You have as good a line from Ontario and Quebec, all-rail, to those points named as we have; you have as short a line and in many cases shorter." On the average the American lines are shorter than the Canadian. Their time is just as good; their facilities are equal; their environments are practically the same as the Canadian Pacific and con- sequently they do not ask differentials any more than we do where our circumstances are similar in connection with American traffic. We run into Puget Sound. Our distances are relatively the same; may be, ice miles or so different, something like that. We do not ask differentials there because we feel that we are on a parity with our neighbor, and there is no special ground for us asking a differential on Puget Sound business any more than there is a ground for the American lines to ask a differential on purely Canadian business. Now, I just want to trouble you with a few of the distances here in support of my statement and to, if possible, allay that ghost that has been raised on various occasions, in answer to our statement that American 26 lines enjoy Canadian traffic on a perfect equality, and later on I propose to deal with the subject at greater length. The distance from Toronto lo Winnipeg by the Canadian Pacific is 1505 miles, by the route traveled and by which freight is hauled; by United States lines through Chicago and St. Paul, 1377 miles. ARBITRATOR DAY Is that by way of North Bay? MR. KERR By way of Carlton Junction, the route by which we do our business. ARBITRATOR DAY That, you mean, is back towards Smith's Falls? MR. KERR Yes sir; around Smith's Falls. That is the way we do both our freight and passenger business. That is our route. We have got to go around that way. From London to Winnipeg the Canadian Pacific distance is 1620 miles; by the American lines through Chicago and St. Paul, 1301 miles. From St. Thomas to Winnipeg by the Canadian Pacific line the distance is 1626 miles; by the American lines through Chicago and St. Paul, 1266 miles. From Montreal to Winnipeg the dis- tance by the Canadian Pacific line is 1424 miles; by the American lines through Chicago and St. Paul, 1710 miles. Now, you see that throughout the whole province of Ontario, which produces the largest proportion of traffic, in tonnage, going into the Northwest, the American line has quite an advantage over us in distance. On the other hand we have an advantage out of Montreal. Taking the average together, I think they beat us. Now, from Toronto to Nelson, B. C., which might be called the capital town it is the chief town in the mining district of the Kootenay, the central point, the commercial center of that district, that great mining district. From Toronto to Nelson by the Canadian Pacific the distance is 2786 miles; by the American lines through St. Paul and Spokane 2586 miles. From St. Thomas to Nelson by the Canadian Pacific the distance is 2907 miles; by the American lines 2475 miles. From Montreal to Nelson by the Canadian Pacific the distance is 2705 miles; by the Ameri- can lines, 2919 miles. Then take the relative distances to the Coast, Vic- toria, B. C., being a common point and center, the extreme outside point. From Toronto to Victoria by the Canadian Pacific, the distance is 3067 miles; by the United States lines, through Seattle, the distance is 2821 miles. From London to Victoria, the distance by the Canadian Pacific is 3182 miles; by the United States lines, 2745 miles. From St. Thomas to Victoria, by the Canadian Pacific, the distance is 3188 miles; by the United States lines, 2710 miles. From Montreal to Victoria, by the Cana- dian Pacific, the distance is 2986 miles; by the American lines 3154 miles. So I do not think, from that showing, any argument would stand, if made, that the American lines should have a differential on Canadian business, any more than the Canadian lines should have a differential on Puget Sound. 27 ARBITRATOR DAY Mr. Kerr, how mucn shorter would it be in the distance from Toronto to Vancouver, if you carried your traffic by way of North Bay rather than back east to Carlton Junction; how much would it shorten the line? MR, KERR 215 miles. But, of course, we must look the facts in the face, as they exist. We have got no line by North Bay, and do not expect ever to have one, and we are working to have our freight and passenger business run through Carlton Junction and Smith's Falls, a section you are no doubt familiar with. Mr. Chairman, with your permission, I shall file this memoranda show- ing the differentials on Canadian business (producing paper marked "Ex- hibit 2"), and this as showing the relative distances between Canadian points (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 are greater reasons why the differential rates should be contin- ued to the Canadian Pacific rail-and-water line to and from San Francisco and the East. We operate a rail line to Vancouver, thence steamer to San Francisco. Our distance from New York to San Francisco is 4,023 miles as against 3270 miles by all-rail, thus showing that we have a greater distance by 23 per cent. From Chicago the Canadian Pacific dis- tance is 3,053 miles, as against 2357 miles by all-rail, making the Canadian Pacific line 21 per cent greater in length. From St. Louis the Canadian Pacific distance is 3,233 miles, as against 2,433 miles by all-rail, showing that our distance is 32.88 per cent greater. Our steamer service is infrequent, that is between Vancouver and San Francisco, sailing only once in every five days. Our time is long, averaging in fact, not averaging in our case our 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 19 days and from Chicago 14. The Sun- set line from New York to San Francisco averages 14 days. In fact, I 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 Fe, in connection with the Mallory line, makes 15 days. Owing to the infrequency of our steamer sailings, goods often arrive at Vancouver right after the sailing of a steamer, and consequently lay in that port 4 or 5 days before they can go forward. The steamer route between San Francisco and Vancouver is a stormy one; steamers have to run along the Coast, in doing so they encounter a heavy beam sea which causes them to tumble and roll. Goods are handled from car into the vessel and again hoisted out of the vessel at San Francisco. These various handlings coupled with stormy weather which frequently 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 reach their 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 Vancouver on the 1st 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 Vancouver to Seattle is 150 miles and from Seattle to Victoria, 87 miles. The distance from Victoria to San Francisco is 760 miles, which makes a total distance that goods car- ried from Canadian Pacific points 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 Pacific 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 when we reach Vancouver, we may be just one day behind the sailing of a ship which results in a delay at Vancouver 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 days, 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 offset to such serious disadvan- tages and if you have' not got an offset to offer 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 differential on Trans-Continental business and why should not the Sunset route 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 not the slightest similarity in the case. In the first place, they operate their steamers between New York and New Orleans, their water route being the initial line on which goods are shipped. Those steamers run to New Orleans where cars are waiting cargo. That cargo is quickly transferred and dispatched over-land to San Francisco and there is no question 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 per cent shorter time than the all-rail. Now, in connection with accumulating 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 particular as to classi- fication or weight. That is the history of the manner in which the steamer lines carry on their business usually and shippers 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 & Navigation Co. must use the Southern Pacific tracks. Being in this position, they are enabled to influence 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 offer 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 proves 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 commodities. It has been stated that the Canadian Pacific, being a long and cir- cuitous route, between San Francisco and New York and other eastern points, are not entitled to participate in traffic against the short and direct line; but we have shown that much more circuitous and broken American lines do participate in traffic in competition with their direct all-rail rivals. Whatever argument may be advanced against long cir- cuitous routes participating in passenger business as against the short direct lines, the same reason cannot be applied in connection with freight. The only point to be considered is, can a long and circuitous line obtain rates sufficient to leave a margin of profit and in that connection the 30 question of balancing traffic east and westbound enters largely into con- sideration. At certain times the volume of paying traffic may be moving eastward, when it may pay the road to accept 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 must 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 power of its engines, then every extra carload that can be obtained to fill up 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 plans formulated for the organization of Trans-Continental Associations, the Panama Route offers 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 tariff, is, under ordinary cir- cumstances, about 30 per cent. In other words, the Panama Route make their rates under ordinary and similar circumstances, they are 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. Now, 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 connection 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 New York and San Francisco, via the Isthmus of Panama, and in the discussion, Mr. Burt, the President of the Union Pacific, said : "I could not for the Union Pacific express an intelligent opin- ion on that matter" (that is, referring to the subsidy proposed to be given to the Panama road) /'until I had a copy of the agreement and had time to study the general proposition. I think I understand but I could not express an intelligent 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 presume they are not anxious to perform the service but that they would be willing to accept 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 Nicaragua Route, and that will not at all discourage the building of other routes or putting 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 w r here we are likely to come out, and have an opportunity to talk with our traffic officials and our connections who would be interested in the adoption of any such policy." Now, I will not burden you with quoting through this. I understand the arbitrators have a copy of it, but you will see that in following through the line of argument pursued there. ARBITRATOR WASHBURN If you desire to make that a part 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. MR. STUBBS I propose to file one with the Board. 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. There you have a broken water-and-rail route which these gen- tlemen 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 are unwilling to allow us a reasonable differential to overcome our disabilities. In our case, it is no question of rates. I do not think they will charge us, and if they do, I do not believe they can substantiate their charges, that we are rate dis- turbers. I 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 competitor. Now, 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 tonnage 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 American 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 MIDGLEY You spoke this morning about an allowance made at one time to the Canadian Pacific. Was that in the nature of a subsidy? MR. KERR Yes, that was in the nature of a subsidy. ARBITRATOR MIDGLEY At so much by the month 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 Company 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 WASHBURN During that time did you have in no tariffs? MR. KERR Yes. ARBITRATOR WASHBURN Did you handle any business? MR. KERR During that time we had equal tariffs with the Ameri- 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 33 this subsidy and during January we carried $18,000 worth of business. It took that long for the people to find out I presume, that they were not getting any special advantage on the Canadian Pacific road in the way of differentials. The agreed subsidy was $500,000. ARBITRATOR MIDGLEY That is per year? MR. KERR For each year, yes sir. ARBITRATOR MIDGLEY You said a moment ago that the earnings or revenue would be credited against the subsidy. MR. KERR Yes. ARBITRATOR MIDGLEY That was the way on business put on the Pacific Mail Steamship Company's lines at the discretion of the railroads. MR. KERR Yes. ARBITRATOR MIDGLEY And the earnings or revenue of your road during such time would be charged up against the subsidy? MR. KERR Yes. ARBITRATOR WASHBURN Were the gross earnings charged up against the subsidy? MR. KERR I believe so in the case of the Panama Route; Mr. Stubbs or Mr. Morton or Mr. Truesdale can tell you. The gross earnings on any business carried by the Panama Route under the old arrangement were the gross earnings charged up against the cash subsidy. MR. STUBBS Will you allow me to correct your statement? MR. KERR Yes. MR. STUBBS It was not a subsidy. MR. KERR Space rental. MR. STUBBS I will explain it fully when I get on the floor. MR. KERR The Arbitrators asked for the information. MR. STUBBS Whatever the steamers earned was credited to the guaranty. ARBITRATOR WASHBURN I think, Mr. Stubbs, we will wait for your statement, until you make your address. MR. STUBBS If that is agreeable to the Board, I will do so ARBITRATOR WASHBURN All we want is to get the informa- tion some time; that is all. MR. KERR We earned that year, on business carried, $28,075.54 ARBITRATOR DAY During what time? MR. KERR $28,075.54 during the year. ARBITRATOR WASHBURN Of that you earned $18,000.00 the first month? MR. KERR Of that we earned $18,471.64 in the month of January; in February we earned $6,453.85; in March $2,940.52; in April we did not get anything; in May we earned $180.53; m J une $3-5o; in July we 34 did not earn anything; in August we earned $10.70; in September $14.80, and that settled it. We did not earn any more after that. ARBITRATOR WASHBURN Did you maintain agencies in San Francisco? MR. KERR Yes sir. ARBITRATOR WASHBURN During the entire year? MR. KERR Yes sir, we maintained agencies. We did not with- draw any agency. ARBITRATOR WASHBURN You used the same effort to get business? MR. KERR I would not say that, naturally; but we did not refuse any business that 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 out, clean out of the business. ARBITRATOR WASHBURN They did solicit the business dur- ing that time? MR. KERR Yes, 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." "Oh, no, you cannot have it; we will give you the other, but we will not give you that." Now 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 question of Canadian roads being permitted to participate in American traffic has been a subject brought 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 traffic. 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 Government and in no case has any block been put in their way. American roads have re- ceived bonuses to aid them in building roads in 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 35 this hearing, because it would involve great clerical labor, for the statistics have never been put together. No records have ever been kept by either the Dominion Government or the Railways, but the Dominion Govern- ment Statistician, Mr. George Johnson, prepared figures for the years 1868 to 1894, showing the average value of goods carried by American roads from one point in Canada to another, through the United States to be $7,500,000.00 per annum. Taking the same basis of figuring, indi- cates the value for 1897 to be $8,000,000.00; that is, it will get at the value of the goods carried, but they cannot tell us the number of tons. ARBITRATOR DAY Is that the goods carried through the United States between points in Canada? MR. KERR Yes sir; goods carried by the American roads through the United States. The Northern Pacific; Great Northern; Michigan Central; Chicago & Grand Trunk; Wabash; Chicago & Northwestern; Chicago, Milwaukee & St. Paul; Burlington; Chicago Great Western; Spokane Falls & Northern, all participate largely in purely Canadian traffic, moving between the eastern points and the northwest and British Columbia, there being no cry of foreign corporations preying upon Cana- dian traffic; therefore, in all fairness and for the true interest of the United States, the Canadian roads should continue to be permitted to participate freely in the American traffic, conforming as they do, to the American laws governing its carriage. In August, during the time of the Denver meeting, certain of the merchants of San Francisco, claiming that they represented the trade of San Francisco, addressed to the President of the Canadian Pacific Com- pany, Sir William C. Van Home, a document which reads as follows: "San Francisco, Cal., August 2oth, 1898. Sir William C. Van Home, President, Canadian Pacific Railway Co., Montreal, Canada. Dear Sir: At a meeting of duly authorized delegates from the principal jobbing interests and Associations of this city, held on the i8th of this month, the following resolution was unanimously passed: 'Whereas, the present system of rate-making on Trans- Continental shipments to San Francisco enforced by the Canadian Pacific Railway is, in our opinion, prejudicial to the business interests of San Francisco and the Pacific Coast generally, inasmuch as said system occasions instability of Trans-Continental freight rates, thereby placing the value of our stocks of goods in jeopardy, and Whereas, the other railways occupying a position, so far as San Francisco traffic is concerned, analogous to that of 36 the Canadian Pacific Railway, are maintaining the rates adopted by the American Trans-Continental Railways as shown in Trans-Continental Freight Bureau Westbound Tariff No. i-C, be it Resolved: That a Committee consisting of one from each and every jobbing interest represented at this meet- ing be selected by the Chairman to give expression to these, our views to the Canadian Pacific Railway Company, through its President, Sir William C. Van Home, and to request that said Company adopt a system of rate-making to San Francisco that will relieve the situation of the pres- ent precarious conditions and maintain Trans-Continental freight rates on a firm basis, believing that such an arrange- ment will redound to the best interests, not alone to the mercantile community of the Pacific Coast, but to the Canadian Pacific Railway as well/ All of which is respectfully submitted, with the request that you kindly acknowledge receipt of this communication, and thereby oblige, Yours truly, H. D. Loveland, For Wholesale Grocer Assn. of Cal. W. R. Wheeler, For Pacific Coast Hdw. & Metal Assn. Chas. R. Havens, For Wholesale Dry Goods Traf. Assn., S. F. L. Guggenheim, For Wholesale Drug Trade of California. A. G. Towne, For Wholesale Paper Trade of Pac. Coast. Brace Hayden, Chairman of General Meeting." Now gentlemen, this is a document issued by the gentlemen named, who say they represent the trade of San Francisco and California. In some cases they cover the whole state; in other cases they are more modest and cover only San Francisco. And among other things 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. Now, 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 37 at the same time very actively negotiating with our representative in San Francisco, with a view of breaking down his differential rates. In other words, he could not get their business at his regular differential rates because the other fellows were meeting those differential rates and knocking them out. Now, in a statement from our representative in San Francisco in this connection, he specifies Mr. Wheeler, who signs this document on behalf of the Pacific Coast Hardware & Metal Association and states that not more than two weeks prior to the date of this docu- ment he called upon our representative and informed him that he was figuring on having a car of enameled ware shipped to his firm from Wisconsin and desired our representative to name the lowest rate via our Vancouver route. Our man named him our regular differential rate of 90 cents per hundred pounds, carload. To this he remarked that hie would be obliged to do better than that because the all-rail lines had made him a 90 cent rate already. And this is the emaculate gentleman who subscribes his name to a document asserting that the other lines were maintaining rates and the Canadian Pacific differentials were a disturb- ance on the market. Mr. Wellman, who is a director of one of these As- sociations, has asserted that he cannot continue patronizing the Canadian Pacific Company, owing to the all-rail lines meeting our differential rates; in other words, they meet the differential and then we do not get any business. Now, I am going to trouble you with the reply made by our Vice-President to this communication: "Montreal, 29th August, 1898. Brace Hayden, Esq., Chairman of General Meeting. Messrs. H. D. Loveland, Chairman Committee, W. R. Wheeler, Chas. R. Havens, L. Guggenheim, A. G. Towne, San Francisco, Cal. Dear Sirs: Referring to your letter gf the 2oth 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 Francisco. 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 interests of San Francisco and the Pacific Coast generally, inas- much as the said system occasions instability of freight rates, thereby placing the value of your stocks of goods in jeopardy, and that the other railways occupying a position, so far as San Fran- 38 cisco traffic is concerned, analogous to that of the Canadian Pa- cific are maintaining the rates adopted by the Trans-Continental railways, and the resolution itself is in the nature of a request that this 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. I beg to say in reply that this 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 are injurious to general trade interests, and we shall be glad at all times to co-operate with you and others in endeavoring to secure something in the nature of stability. We take exception, however, to the statements made in your resolution. 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, and the instability of Trans-Continental freight rates, past and present, cannot in any manner be charged to this Company. The rates to and from San Francisco and other points in California were agreed upon by the several railways and tariffs were published in accordance with that agreement. The Canadian Pacific, which is an important factor in all Pacific 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 quote Trans-Continental rates to and from Cal- ifornia points on a basis 10% lower than the all-rail lines. The Canadian Pacific has done this and nothing more; indeed, it has lost thousands of tons of traffic because its traffic officers were not permitted to disregard the published tariff and quote rates sufficiently low to meet the improper and illegal concessions and reductions made by the other railways centering on San Francisco. Surely your Committee is aware that the other railways oc- cupying a position, so far as San Francisco traffic 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 meeting, and was quoted by our Agent in San Francisco a rate of ninety cents per hundred pounds, being our agreed tariff rate, he informed 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 39 of the Committee, that he is unable to do any business by way of the Canadian Pacific, because that the all-rail lines are disregarding their tariffs and quoting differential rates. We know quite well that the unfortunate conditions to which you refer do exist, and we are in sympathy with your efforts to change them, but you will pardon me if I mention the fact that you are commencing at the wrong end. The remedy should be applied right at home. If the merchants of San Francisco will notify the Southern Pacific and all other rail lines they will decline to ship any goods over their lines at rates below the published tariff there will be no further difficulty. It will be. rather a novel manner in which to deal with this vexed question, but I have no doubt that it will be effective. It has been the fashionable thing for many years with certain other railway companies to attempt to make the Canadian Pacific the scapegoat for the demoralization periodically resulting from their own unbusiness-like and dishonest practices, and for this purpose they have resorted to every avenue of publicity available from one end of the country to the other. It is, however, an estab- lished fact that whenever there has been a searching inquiry before any Commission or Traffic Association these charges have been exploded, and in no single instance has the Canadian Pacific been found to be the aggressor. Yours truly, (Signed) T. G. Shaughnessy, Vice-President." Now, 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 Francisco, write as follows, under date of September I3th: "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 Francisco. We would very much regret if this competition should be discontinued. Kindly advise us." 40 William Davis & Son, San Francisco, 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 M. Ehrman & Company, Importers and Wholesale Grocers: "Replying to yours of even date inquiring 'if this company were deprived of its special differential rates on freight traffic 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." From 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 present 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 us 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 being made to deprive the Canadian Pacific Railway of its differential rates of freight tariff for San Francisco. I hope that such is not the case and that you will be allowed the usual differential, so as to enable the competition of your company to continue in making San Francisco de- livery, as such competition is very much needed in the interest of trade. Trusting that your company will be enabled to continue business here, as they are the only competitive company, I am, Yours very truly." From Stevenson & Company, Fancy Goods, Stationery, Cutlery, No- tions and Toys, San Francisco: "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 line 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 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 much in need of the Canadian Pacific competition into San Francisco. Please advise." From Woodin & Little, San Francisco, Gasoline Engines, Road "Pumps, Windmills and Tanks: "'It 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 Vancouver." From Phelps & Arnold, San Francisco: "We understand that an effort is to' be made to deprive your company 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 should be done away with. The Edward P. Allis Company, Milwaukee: "Referring to the ques- tion of differentials on traffic to San Francisco would state that if your company withdraws such differentials to San Francisco it will not be 42 possible for us to give you any of our business, because the cost of boxing such articles as may be injured by sea-water would not warrant us in giving you such traffic. You are doubtless aware that when you ship by all-rail the entire distance to San Francisco our machinery can be loaded on cars 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 Francisco business you must not attempt to withdraw your differ- ential." The American Cereal Company, Manufacturers of Oatmeal Flour and Cereal products, Chicago, 111.: "Answering yours of Sept. 13, relative to forwarding business via your line for San Francisco, we do not feel that we would be justified in sending business by your road if the present dif- ferentials were withdrawn." N. K. Fairbank & Company, Chicago: "Replying to your favor of the loth inst., we do not think that on San Francisco 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 Oil Company, Chicago: "I am in receipt of your favor of the I2th 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 Francisco via Vancouver. 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 Francisco customers to allow shipments to come your way as it takes from 13 to 1 6 days for a car of beer to reach that point via Vancouver, 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 differential." Stein Hirsh & Company, Chicago, Corn, Wheat, Potatoes and Starch : "Replying to your favor of the gth inst. During the past we have been 43 giving you our shipments to San Francisco although many 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 difference 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 & Moen Manufacturing Company, Chicago, Manufactu- rers of Iron, Steel and Copper: "In reply to your letter of September 9th, addressed to the writer, will say that as a general proposition it will be impossible for me to favor your line with any of our shipments to San Francisco, especially when contemplating the water haul on equal 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 yours of the 9th. 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 prices with the Southern Pacific or any of the other direct roads to the Coast." American Steel and Wire Company, Chicago: "Answering your 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. Our 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 our kegs badly, and shipments arrive in bad form. This applies to both nails and wire. The direct all-rail routes, of course place stock here in the best condi- tion.' This I think will fully answer your question." From Barrett Manufacturing 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 days more time 44 than the all-rail route and owing to the fact that you transfer to a water line which damages our goods more or less, we certainly would 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 difference 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 Francisco people have frequently in the past, objected to shipments by your line, on account of a longer time en route, and the transfers." From Robert Crooks & Co., Chicago: ''Referring to your personal note of the I2th in connection with San Francisco business. Knowing as we do, that you at the present time enjoy a differential rate on account of the longer route, and the necessity of trans-shipping, I can state to you definitely that unless 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: "Answering 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 differen- 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. 45 In reply would state that we certainly would not be in favor of making shipments via your line to San Francisco at the same rates as made by the direct lines." From Swift & Company: "Answering your enquiry of the 9th; if the C. P. R. Line did not have a differential rate from Chicago and St. Paul to San Francisco, we would not be inclined to give you any business as against all-rail lines." From St. Charles Condensing Co.: "Replying to your favor of the 9th, 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 you any 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 want to undertake it unless some saving were to be had, to say nothing of the longer time which often would be an important factor." MR. KERR continued: Mr. Chairman, I will not be able to get through to-night. As I am not accustomed to talking so long at any one time 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 I will continue. It is now 5 o'clock. ARBITRATOR DAY Mr. Kerr, you referred, as a part of your case, to an affidavit. Did you file it or did I overlook it? 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 really. 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 I qualified it by saying, "an affi- davit or statement," because I knew pretty well it was not an affidavit. It was a statement of some kind. ARBITRATOR WASHBURN Well, if you haven't it handy, 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 you would adjourn. ARBITRATOR WASHBURN We will then adjourn until 10 o'clock to-morrow morning. 4 6 Morning Session, October I3th, 1898, 10 A. M. The Meeting convened pursuant to adjournment. ARBITRATOR WASHBURN Mr. Kerr, I think at last evening adjournment you were looking for a statement that Mr. Day had asked for, a statement or affidavit. MR. KERR Mr. Chairman and Gentlemen of the Arbitration Board : When we closed last evening, I had been citing the correspondence that had passed between certain San Francisco merchants and the Executive of the Canadian Pacific Company, and in reading the letter of our Vice- President in connection with a statement received from Wellman, 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, Grocers, 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." 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 tariff 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? Now, I do not suppose it will occur to the Board 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 who are opposed to the Canadian Pacific Company maintaining their dif- ferential rates into San Francisco, 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 Vice-President to this communica- tion and also the further reply of these gentlemen to our Vice-President, under date of September I7th: (marked "Exhibit 5.") "San Francisco, Cal., Aug. 20, 1898. Sir William C. Van Home, President, Canadian Pacific Railway Company, Montreal, Canada. Dear Sir: At a meeting of duly authorized delegates from "the principal jobbing interests and Associations of this City, held on the i8th of this month, the following resolution was unanimously passed: 'Whereas, the present system of rate-making on Trans- continental shipments to San Francisco enforced by the Canadian Pacific Railway is, in our opinion, prejudicial to the business interests of San Francisco and the Pacific Coast generally, inasmuch 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 position, 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 Bureau Westbound Tariff No. 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. Van Home, and to request 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 kindly acknowledge receipt of this communication, and thereby oblige, Yours truly, (Signed) H. D. Loveland, For Wholesale Grocer Assn. of Cal. W. R. Wheeler, For Pacific Coast Hdw. & Metal Assn. Chas. R. Havens, For Wholesale Dry Goods Traf. Assn., S. F. L. Guggenheim, For Wholesale Drug Trade of California. A. G. Towne, For Wholesale Paper Trade of Pac. Coast. (Committee.) Brace Hayden, Chairman of General Meeting." "Montreal, 29th August, 1898. Brace Hayden, Esq., Chairman of General Meeting. Messrs. H. D. Loveland, Chairman Committee. W. R. Wheeler, L. Guggenheim, Chas. R. Havens, A. G. Towne, San Francisco, Cal. Dear Sirs: Referring to your letter of the 2oth 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 Francisco. 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- much 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 this 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. 49 I beg to say in reply that this 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 are injurious to general trade interests, and we shall be glad at all times to co-operate with you and others in endeavoring to secure something in the nature of stability. We take exception, however, to the statements made in your resolution. 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, and the instability of Trans-Continental freight rates, past and present, cannot in any manner be charged to this Company. The rates to and from San Francisco and other points in California were agreed upon by the several railways and tariffs were published in accordance with that agreement. The Canadian Pacific, which is an important factor in all Pacific 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 quote Trans-Continental rates to and from Cal- ifornia points on a basis of 10% lower than the all-rail lines. The Canadian Pacific has done this and nothing more; indeed, it has lost thousands of tons of traffic because its traffic officers were not permitted to disregard the published tariff and quote rates suffi- ciently low to meet the -improper and illegal concessions and re- ductions made by the other railways centering on San Francisco. Surely your Committee is aware that the other railways oc- cupying a position, so far as San Francisco traffic 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 ninety 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 way of the Canadian Pacific, because that the all-rail lines are disre- garding their tariffs and quoting differential rates. We know quite well that the unfortunate conditions to which you refer do exist, and we are in sympathy with your efforts to change them, but you will pardon me if I mention the fact that you are com- So mencing at the wrong end. The remedy should be applied right at home. If the merchants of San Francisco will notify the South- ern Pacific and all other rail lines they will decline to ship 'any goods over their lines at rates below the published tariff there will be no further difficulty. It will be rather a novel manner in which to deal with this vexed question, but I have no doubt that it will be effective. It has been the fashionable thing for many years with certain other railway companies to attempt to make the Canadian Pacific the scapegoat for the demoralization periodically resulting 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 searching inquiry before any Commission or Traffic Association these charges have been ex- ploded, and in no single instance has the Canadian Pacific been found to be the aggressor. Yours truly, (Signed) T. G. Shaughnessy, Vice-President." THE PACIFIC COAST HARDWARE AND METAL ASSOCIATION. San Francisco, Sept. 17, 1898. (Copy.) 'T. G. Shaughnessy, Esq., Vice-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, however, to the contrary, inasmuch as you deduct 10% from the American Line rates whatever they may be. If the American Lines reduce their tariff, you reduce yours correspondingly; if the American Lines advance their tariff, you advance yours cor- respondingly, maintaining in any event a differential via your line of 10% from the rates of the American Lines, thus forcing the latter to charge a rate of more than 11% in advance of your rates, or to meet your rates, thereby causing a rate war. We note that you state that the right is accorded you by unanimous consent (presumably of the American Lines) to quote Trans-Continental rates to and from California points on a basis 10% lower than the all-rail lines. Our information on this point fails to corroborate this statement. It so happens that five of the six gentlemen comprising this Committee were in attendance at the meeting of the Trans-Continental Freight Bureau, held in Milwaukee last May. We are informed, on what we consider un- questionable authority, that at that meeting a most earnest and vigorous protest was entered by certain representatives of the American Lines against the system of differential rates enforced by your road. We note that you apparently fail to correctly interpret the analogy referred to in our letter of August 2Oth, wherein we state that, 'other railways occupying a position, 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 Bu- reau Westbound No. i-C.' To our knowledge, there are but two Railway Lines, whose position, so far as San Francisco traffic is concerned, is analogous to that of your road viz.: The Northern Pacific and the Great Northern Railways, both of which, as you are aware, terminate on Puget Sound, and use the Steamships of the same Company used by your road for conveying Trans-Con- tinental freight to San Francisco. We reiterate that, to our knowledge, these railways have been, and are today, maintaining the freight rates to San Francisco as shown in Tariff No. i-C. In addition to the above lines there is another railway, viz., that of the Oregon Railroad & Navigation Co., whose position, so far as San Francisco traffic is concerned, is nearly analogous to that of your own line, the only difference being that the O. R. & N. Co.'s rails do not reach as far east, and trrey use their own steamers for landing freight in San Francisco. 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 52 right to differentials via their Sunset Route, which, as you are well aware, involves a much longer sea voyage, and is quite as in- direct a route to San Francisco as is your own. Concerning that part of your letter wherein you refer to one of our Committee, his reply to you, dated September 6th, 1898. fully covers and eliminates this as a subject matter of consider- ation. We are thankful for the suggestion as to the application of the remedy for existing conditions, and would ask if it would not perhaps be well for the merchants of San Francisco to apply same by withholding their patronage from any Trans-Continental railway line, American or Foreign, that insists upon a differential rate, thereby 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. Plainly 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 Pacific, and all other all-rail lines, why would it not be equally effective when ap- plied to the Canadian Pacific Railway? In our opinion, the Canadian Pacific Railway, and its con- nections, should be in equally 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 equal rates, get a fair share of San Francisco business, but at differential rates we doubt if it will be able to maintain its past volume of business to this city. 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, H. D. LOVELAND, For Wholesale Grocer Assn. of Cal. W. R. WHEELER, For Pac. Coast Hdw. & Metal Assn. C. R. HAVENS, For Wholesale Dry Goods Traf. Assn., S. R L. GUGGENHEIM, For Wholesale Drug Trade of Calif. A. G. TOWNE, For Wholesale Paper Trade of Pac. Coast. BRACE HAYDEN, CHAIRMAN of GENERAL MEETING." 53 In that connection it is quite proper that I should file the original letters (marked "Exhibit 4j") received by the Canadian Pacific Company, letters from representatives and large business houses in San Francisco, in Chicago, in Milwaukee and in St. Charles, Illinois, who all take the opposite view of the case to that of the gentlemen who put in this peti- tion (as representing the San Francisco trade) against our differentials. These letters that were read over to you last night, and are on the min- utes, all express in a strong way, and with no uncertain sound, the desire of the trade, a large portion of the trade that the Canadian Pacific position as it stands today, with its differentials in operation shall be continued and not disturbed. Gentlemen, in weighing one, we ask you to weigh the other side of the evidence. We desire to file: Trans-Continental Association Tariff No. 6, Westbound, effective March 6th, 1888 (marked "Exhibit 6"). Supplement No. i to Westbound Freight Tariff No. 6, effect- ive June 20th, 1888 (marked "Exhibit 7"). Supplement No. 8 to Westbound Tariff No. 18, effective Au- gust 20th, 1889 (marked "Exhibit 8"). Trans-Continental Association Tariff No. 36, Westbound, ef- fective July i8th, 1892 (marked "Exhibit 9"). We desire to file a "Report of Discussion on Question of Canadian Pa- cific Differentials, at Meeting of Trans-Continental Lines, held at Brown Palace Hotel, Denver, Colo., August 22nd, 1898," (marked "Exhibit 10") and with that a copy of the resolutions passed, along with which we have prepared a few notes, giving easy reference to the points in the proceed- ings to which we call particular attention. We thought this was advisable in order that you gentlemen might not have to labor through the whole thing if you did not want to. It may not be amiss, while we are right here, to say a few words with regard to a statement made at that meeting by the representative of the Union Pacific line, who said in his argument against the Canadian Pa- cific Company, that during the year 1891, when we were working under a subsidy (we are not afraid to call it a subsidy; it was one, just as the Panama Route space rental, so-called, is a subsidy) that during that year we had carried more than one-half the tonnage necessary, the business necessary to earn one-half, 50 per cent of the subsidy that the lines agreed to allow us. And, although it is not on record the statement was assented to by other gentlemen who knew better. We will file with vou the official statements of the Trans-Continental Association for the 54 year 1891 covering this point, showing exactly what the Association paid us and showing also the amount of business that we carried during the year; the understanding being that whatever we carried, the revenues derived from that business would be credited up to the lines who had to pay the money over. In other words it would be deducted from the total amount to be paid in cash. There is one report missing, I think for the month of January. No doubt Mr. Countiss, if you deem it necessary can supply that from the records of his office. But we have the record here on this statement from our own Audit office showing for the month of January and for each month what we earned, what we carried, the revenue we received and the amounts we received each month from the Trans-Continental Association. We therefore file with the Board the proceedings of the Denver meeting (previously marked "Ex- hibit 10"), and we file the Trans-Continental records along with our office abstract for the year 1891 (marked "Exhibit n"), when we worked under the subsidy from the Association instead of our differentials. The change from the differential to the subsidy as I stated yesterday was the offer and act voluntarily of the other members of the Association. We did not seek it. They came to us and made the offer and, as I said, after the usual business discussion on points of that kind with which you are all familiar, the offer was finally made and accepted and worked under, each party keeping perfect faith with each other the whole year. In case you may find it a handy means of reference on some points in connection with differentials that obtain by other lines cited yesterday and gone into with considerable elaboration, I desire to file freight Tariff No. 9 (marked "Exhibit 12"), by E. W. Beedle, known as "Beedle's Freight Tariff." It is a small vest pocket affair used for ready reference. It is used by a great many traffic officials and is considered reliable in its information. It is dated March nth, 1898. In connection with the point I endeavored to make yesterday of the frequent sailings of lake steamers from Buffalo and Lake Erie ports, steamers operating in connection with railroad companies, many of them I think most of them owned by railroad companies, forming what is known as the lake-and-rail lines, I desire to file a letter from R. H. Hebard, General Manager of the Minneapolis, St. Paul & Buffalo Steam- ship Company, Buffalo, dated September 8th, 1898, (marked "Exhibit 13") which gives with a good deal of detail the operation of the lake steamers and shows or rather bears out my statement of yesterday, that Buffalo during the season of navigation has pretty nearly a daily sailing, a daily boat service westward into Lakes Huron, Michigan and Superior. Before leaving the subject of differential lines and again referring to the point so often made by those who are opposed to us on this ques- tion, that whatever may be done in the east, in Trunk Line and Central 55 Traffic Association rates in regard to differentials, they are not recog- nized out in the west by anybody, I 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 point of the compass, 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. I 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. Now, 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, I think I stated yesterday every important town in Canada and many that are not important, carry the signs of American Railroads, their offices being scattered on the main streets of said cities and towns; they are there doing business with perfect free- dom; they are there under a welcome and no man dare or desires to make them afraid. They are there as I 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 "Burlington"; The Chicago & Northwestern; The Atchison, Topeka & Santa Fe; The Northern Pacific; the Great North- ern ; The Union Pacific ; and so on you can go to the end, it is simply a list of the eastern-middle states and many of the Western American lines. You will find them all there, not a word being said about preying or trespassing on Canadian traffic. In support of the statements I made concerning the value of the goods carried by American lines, from one point in Canada to another point in Canada, through the L^nited States, I desire to file a letter (marked "Exhibit 14") from the statistician of the Dominion Government, Mr. George Johnson, who treats on the subject, and also a copy of an open letter from Mr. Edward Farrar, addressed to the Honorable, the Chairman of the Committee on Inter- State Commerce, United States Senate, and dated "Toronto, March 3ist, 1897," 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 possibly 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. I will have this typed for you, gentlemen. I meant to have t done this morning, but other things intervened. It shows the man- 56 ner in which we arrive at the percentages and get at the value of goods carried, from those documents. ARBITRATOR WASHBURN It is a small matter. I do not think it is necessary to have it typed. Do you want that attached to the last document you filed? MR. KERR If you please. I intended to have it typed. I do not like to present you with a rough thing like that. I desire to file the proceedings of Trans-Continental Association, General Meeting, New York, March 16, 1896, General Meeting, Mil- waukee, April i, 1896; Rate Committee Meeting, Milwaukee, March 30, 1896 (marked "Exhibit 15"). We file this record (referring to "Ex- hibit 15"), in order that the Arbitrators may be possessed of all the facts in connection with the endeavor to re-form the Trans-Continental Asso- ciation, in 1896, and for the further purpose of showing the manner in which our friends on the other side of this case desired to dispose of our differentials. We had a grave difference of opinion, in fact we had a disagreement on the manner in which these differentials should be made. The question as late as 1896, was not that the Canadian Pacific Company should have no differential by its broken line, but the question hinged on the amount of differential. The principle was not touched on, it was only a question of degree. And after a good deal of discussion, you will note the resolutions here that seem to have disposed of our case by putting in a scale of differentials beginning at 10 per cent and scaling down to 8 per cent. The basis of differentials was fixed on the class rates, and when this company had agreed to take that scale our friends endeavored to put the class rates on the basis that gave us 8 per cent, and then they fixed the commodity rates to suit themselves, with the result, as you can see, that as the tonnage carried consists so largely of commodities I suppose the class rates do not represent more than 10 or 15 per cent that by this process we were put down on the basis of 8 per cent. When we came to assemble in Milwaukee and the plot developed, we very naturally entered our usual mild objection, which brought on further discussion, re-opened the question and finally we made a compromise. In the interest of peace and harmony the Can- adian Pacific agreed to take 9 per cent, but all the same we felt we were not being done justice to and we felt then as we feel now, that we should not have been asked to lower our percentage of differentials below 10 per cent. CHAIRMAN WASHBURN That compromise was accepted by the American Association? MR. KERR Yes sir; but it never went into effect for the reason that the Association was never formed owing to objections raised by the Receivers of the Union Pacific. The basis on which the Association was to have been formed fell through, namely; the arrangement for the 57 Panama route space rental, and it never went into effect. The Associa- tion was never formed and we naturally continued as we are to-day on our 10 per cent basis. I filed yesterday a list of so-called Pier rates enjoyed by the Sunset line of the Southern Pacific Railway Company differential rates. The list of commodities, as you have probably noticed, is very formidable. We have no means of knowing what it represents in tonnage, as carried by the Sunset Line. So far, they have not taken us into their confidence in that respect. Perhaps they will take you gentlemen into their con- fidence and tell you what tonnage is represented by the commodities they carry under these Pier rates which give them a differential and enable them to reach back into the interior of New York and Penn- sylvania. I think this very desirable information, because in the dis- cussion in the Denver meeting the New York Pier rates were said to be put in there to take tonnage as the overland lines did not care about it, low class, low quality, way down in the scale something that only clipper ships and Panama routes would seek for, but the list does not seem to bear that out in its entirety. I have a list of Trans-Continental tariffs here (marked "Exhibit 16") that it might be well to file in order that you may have any information you desire to take from them. Westbound Tariff No. 14, effective September ist, 1888. Westbound Tariff No. 18, effective January ist, 1889. Westbound Tariff No. 20, effective May 27th, 1889. Westbound Tariff No. 22, effective October ist, 1889. Westbound Tariff No. 26, effective June i8th, 1890. Westbound Tariff No. 30, effective January 1 5th, 1891. Westbound Tariff No. 34, effective September 2 ist, 1891. Westbound Tariff No. T i, effective April nth, 1893. Joint Westbound Tariff of Northern Lines, effective Oct. 2Oth, 1894. Westbound Tariff No. T 5, effective March 5th, 1895. Joint Tariff of the Northern Lines, effective February 22nd, 1896. Westbound Tariff No. T 10, effective February 22nd, 1896. Sunset Route Tariff No. C 13, effective November I7th, 1896. Westbound Tariff No. i A, effective June 24th, 1897. Joint Tariff of the Northern Lines, effective August i5th, 1897. Westbound Tariff No. i B, effective December i5th, 1897. Westbound Tariff No. i C, effective June 25th, 1898. Eastbound Tariff No. 7, effective March loth, 1888. Eastbound Tariff No. T 2, effective April nth, 1893. Eastbound Tariff No. T 7, effective June i7th, 1895. Eastbound Tariff No. 3 A, effective January loth, 1898. 58 Eastbound Tariff No. 3 B, effective July i6th, 1898. Canadian Pacific Railway Circular No. 10, effective Jan. 5th, 1892. ARBITRATOR WASHBURN Do these include all those? MR. KERR Yes sir. Now it occurs to me that the Board might de- 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 you the 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 only record we have. ARBITRATOR WASHBURN We think we do not need those. Mr. Kerr. If we want them, we can get them from Mr. Countiss: you need not leave your copies. MR. KERR Shall I give you the references and cite them? ARBITRATOR WASHBURN If you please, yes sir. MR. KERR Record of Proceedings, Trans-Continental Associa- tion, Nov. 5th, 1887, to Jan. 3ist, 1888. ARBITRATOR MIDGLEY That is when you began, or were al- lowed the differentials first? MR. KERR Yes sir; that is when we were invited to join the Trans- Continental Association. It was the period at which the Trans-Con- tinental Association was re-formed. It had been an Association before, but had gone to pieces, had dissolved for some reason or another and this was the period at which they re-organized their Association and invited us to come in. ARBITRATOR WASHBURN Can you give us that reference on a sheet by itself? MR. KERR Yes sir. ARBITRATOR WASHBURN Instead of our having to pick it out from the proceedings. MR. KERR Yes sir. The list of references (marked "Exhibit 17") was filed with the Board. MR. KERR The several points I have endeavored to make in pre- senting this case may be summarized as follows: First, I endeavored to treat of the general principle in connection with application of differential rates via broken rail-and-water routes. Second, I dwelt with the history of differentials allowed to the Can- adian Pacific since they were invited to join the Trans-Continental Asso- ciation organized in November, 1887. Third, I have explained the guarantee of an agreed amount during the year 1891 in lieu of differentials and the subsequent resumption of differentials. Last, the substitution of a percentage scale of differentials in place 59 of the fixed and rigid specific differential of so much per hundred weight. I have also endeavored to give you a record of the differentials in use by various other routes and lines, ocean-and-rail, lake-and-rail, Trans-Pacific, between points in the United States, between points in Canada, and from Japan and China to points in the United States and Canada, the intention being to show the wide extent and universality of the rule. I touched on the point yesterday that the guarantee of a fixed sum per month or per year, or for any period, to the Panama route, is in reality a differential under a more agreeable name. And I call your attention to remarks made at the Denver meeting, that after all, the Canadian Pacific differentials did not amount to so very much if they could only get the Panama route fixed. I called your attention to the disabilities of the Canadian Pacific under which they labored on account of the infrequent sailings of the Pacific Coast Steamship Com- pany between Vancouver and San Francisco. It is a great disadvantage as to time and risk compared with the Sunset Route and the all-rail lines. We are not claiming that the risk of the Canadian Pacific water line is any greater than the risk of the Sunset Line, but the risk is greater as against the all-rail lines and the time is much greater as compared with the Sunset and with the all-rail lines. Next, I have shown you that during the year 1891, when we changed from the differential to the subsidy, our differentials simply took on another phase and in accordance with our agreement in that connection we put our rates even with the rates of the other lines the all-rail lines, We got no business. It may be said, and was said yesterday, that naturally under those conditions we did not work for the business. That is true. Our agents did not specially work, but the agencies were all open; our men were still on the street; our men were gathering up business for other directions and if a carload for California fell in their way if they could get it at even rates, they gathered it in just as cheer- fully as they would a carload of any other freight for any other point. But with the even rates nothing was ever offered to us other than what I have shown you, which does not amount to very much, practically nothing. I do not know, gentlemen, that I can add very much more to the statements I have already made. I have taken up a very large amount of your time, and I fear may have exhausted in a measure your patience, but as we regard this matter as one of the utmost importance we felt it was necessary that we should endeavor to cover every possible point that we could think of, in order that the fullest statement of the case should be before you. I do not know that I have anything more to say other than to thank you for the patient and kind hearing you have given me. ARBITRATOR DAY I would like to ask you a question, Mr. Kerr. You touched on it in your summing up, but you did not go into it as fully 6o as I would like to have had you. You were speaking about the volume of traffic that came to you during' the period of time that you enjoyed the subsidy from the American lines, and you stated that at that time you maintained equal rates with the American lines. MR. KERR Yes sir. ARBITRATOR DAY And the total amount of traffic that you car- ried during the year was about $30,000.00 in revenue, or a little less. MR. KERR $28,000.00 odd. ARBITRATOR DAY What was the total amount of revenues that your line enjoyed from purely United States traffic between points east of the Missouri River and California, in the year 1897? MR. KERR That is a question that I cannot answer offhand, sir. but I will endeavor to get the information for you. ARBITRATOR DAY Can you tell me the total amount of inter- state traffic, I mean either in tonnage or revenue, of the Canadian Pacific road, that you received during the year 1897? The total amount of inter-state traffic, purely United States traffic? MR. KERR Not at this present moment, but I \vill give you the information. ARBITRATOR DAY Can you tell us whether the bulk of United States traffic that your line transports I mean inter-state, not imported or exported by either of your two great ports, but inter-state traffic be- tween the States whether the bulk of it is between California points and points east of the Missouri River, or \vhether the bulk of it is between points east of the Missouri River? MR. KERR Do I understand you to ask whether the bulk of it is, say from Chicago territory and westward-middle states, middle-west states, as against the Atlantic seaboard? ARBITRATOR DAY What I was endeavoring to get at was where you get the bulk of your purely inter-state traffic. MR. KERR We get the bulk of our inter-state traffic, generally, in the middle states, that is, say from Pittsburgh west; Pittsburgh, Chicago and Missouri River. ARBITRATOR DAY And where do you deliver it to, the bulk of it, east or west of the Missouri River? MR. KERR Oh, we deliver it out on the Coast. ARBITRATOR DAY The bulk of your traffic is California traffic, is that right? MR. KERR Oh no; not the bulk. Are you treating now of our whole business, both east and west, or business merely on our eastern lines? ARBITRATOR DAY I asked you the questions separately, in order to separate it, but you w^ere unable to answer the first question off- 6i hand; and then I asked you whether the bulk of your traffic was Cal- ifornia traffic, the bulk of your inter-state traffic. MR. KERR Oh no; not to the westward. ARBITRATOR DAY What percentage of your inter-state traffic is California traffic? MR. KERR That I cannot say, offhand. ARBITRATOR DAY What is your impression? MR. KERR As compared to what we carry to Puget Sound? ARBITRATOR DAY Yes; your entire United States traffic; what percentage of it is California? MR. KERR I would not like to give you an offhand answer. I would rather give you a correct answer, and if you will give me a memo- randum of those questions, I will give it to you before the session is over. ARBITRATOR DAY I haven't them written out; they just oc- curred to me. MR. KERR Well, the notes are here and as I shall have those, I will see that you are answered. ARBITRATOR DAY I want to see if I understand your contention respecting the differential. Is it a part of your claim that you I mean the Canadian Pacific line that you should make the Trans-Continental rates for the American lines? MR. KERR No; never. ARBITRATOR DAY That is not your contention? MR. KERR No sir. ARBITRATOR DAY Who should make them? MR. KERR The American lines should make the rates. ARBITRATOR DAY Then what is your precise contention? MR. KERR Then our contention is that we go in on those rates on the basis of our differential, whatever that may be. ARBITRATOR DAY They make the rates and then you insist that you shall have a differential below those rates? MR. KERR I do not know that we insist. * ARBITRATOR DAY By "insist" I mean that is your contention. I am not endeavoring to use any word that is at all offensive. By "in- sist," I mean that is your position? MR. KERR Yes sir. ARBITRATOR DAY That the American lines shall keep a certain percentage above you, or you a certain percentage below them? MR. KERR No; the principle is, that the American lines shall make the rates. They do so. We sit in council with them; we have done so ever since we have been outside of the Association. Every time a meet- ing is called, or nearly every time, we receive an invitation to attend; we always do so. They make the rates and we assent to them. We never object. Then we take our differentials, just as any other differential line 62 does, out of New York, where there are agreed differential rates as between all-rail and lake-and-rail lines. The all-rail lines make the rates and then there are these fixed differentials that the lake-and-rail lines charge below that, in precisely the same manner that we do. ARBITRATOR DAY If I understand you then, your contention is that you shall have a differential and the American lines fix the rate? MR. KERR Yes sir. ARBITRATOR DAY They fix it at what they regard reasonable: high or low? MR. KERR Yes sir; that is it. ARBITRATOR DAY Now, I will ask you another question, if you please: is it a part of your case that you shall be allowed a differential Under the rate on California traffic that is to be charged, by say, the Texas & Pacific? MR. KERR Yes sir, I should think so. What are the disabilities of the Texas & Pacific? If they are equal to ours, no. ARBITRATOR DAY But your contention is, as against the Texas & Pacific you are entitled to a differential on Atlantic Seaboard California traffic? MR. KERR No, 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. ARBITRATOR DAY Do you regard that your line is at a disad- vantage in respect to California traffic in its competition with the Texas & Pacific? MR. KERR I do not know that the Texas & Pacific ever enters into our calculations at all. ARBITRATOR DAY Do you regard that you are entitled to charge a lower rate on California traffic than is charged by the Northern Pacific on California traffic? MR. KERR 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 North- ern, that wherever they use the steamer line from Puget Sound to San Francisco, they shall have the differential, if they want it. But they are out of San Francisco business; they do not claim to be San Francisco lines; they do not work for San Francisco business. In other words, they have made a trade. They have differential rates over lake-and-rail lines up into Puget Sound, Portland, and points north of Portland, and they have agreed not to go into California. ARBITRATOR DAY Do you also have those rates? MR. KERR If we use lake-and-rail, yes sir. You understand we cannot use Canadian ships and our line the Canadian Pacific line, steamer line from Owen Sound to Fort William, are Canadian registered British bottoms. They cannot carry inter-state freight. 63 ARBITRATOR DAY And the converse of that is true; American ships cannot carry Canadian traffic? MR. KERR The converse of that is true; yes sir, except out on the British Columbia Coast, where there is an exception made and American ships are permitted to carry Canadian traffic. For instance, the North- ern Pacific steamer, "City of Kingston," an American registered, Ameri- can ownership, is permitted to carry Canadian goods from Seattle or Tacoma to Victoria. They take those goods out of Montreal; Toronto, London, in Ontario and Quebec, and carry them into Tacoma or Seattle and transfer them to American ships and they are landed in Victoria. The exception is made there, too. ARBITRATOR DAY That is an exception? MR. KERR Yes sir. ARBITRATOR DAY That is made by the governing council, I suppose? MR. KERR Something of that kind. ARBITRATOR DAY As a part of your case you have charged the American lines with violating the law and you referred to an affidavit, and you subsequently stated that the affidavit was this statement or this letter of this party. Was there anything else that would respond to an affidavit, anything more than was contained in that brief letter? MR. KERR You will remember, of course, that I explained to you exactly how the word affidavit came to be used. ARBITRATOR DAY Yes, you did. MR. KERR I did not use that knowingly or willingly. ARBITRATOR DAY I do not mean to make any play on that. MR. KERR It simply fell in the way explained. ARBITRATOR DAY We all understood it that way, that you re- lied on an affidavit, of making charges that the American line had vio- lated the law. MR. KERR That was the letter that Mr. Shaughnessy wrote. ARBITRATOR DAY Mr. Shaughnessy makes use of the state- ment in this letter that the American lines, or some of them, are violating the law have violated the law in the way of cuttinp- rates. Do you want to be understood as making that charge against all the American lines that do business out of San Francisco? MR. KERR No sir; I am making no charges at all. ARBITRATOR DAY Then will you specify why you introduced that? What is the purpose of the allegation? MR. KERR Simply as part and parcel of the record of this case. The point is this; these gentlemen of San Francisco make certain state- ments ; they make a statement that the American lines are maintaining agreed rates and that were it not for the Canadian Pacific differentials *he market in San Francisco would be steady and stable and thev would 6 4 know what they were about ; could put proper prices on their goods and be sure that their next door neighbor would not undersell them to- morrow by reason of getting lower rates, and that the Canadian Pacific differentials were rate disturbers. That is the reason why we put that full record in; to disprove, and along with it we filed the letters that we received on the other side from merchants of equal standing .with the gentlemen who signed the petition. It is all put in there intended to go together. We are making no charges; we are simply putting in such points as we think may be in support of our case. ARBITRATOR DAY The time that you devoted to that subject yesterday afternoon, without any doubt, impresses upon my mind and I think it must have done so upon the minds of the other Arbitrators, al- though I do not attempt to speak for them but it did upon my mind, that you made that a part of your case; charges of violation of the law T , that is to say that the American lines were soliciting and carrying traffic below their published tariffs. At that time I could not quite see that the allega- tion that the American lines were violating the law was germane to the matter we have to inquire into; but on subsequent reflection it came to my mind that there was an aspect in which it might be germane, and I 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 exculpate them, or in other words name the roads that are violating the law. That is all that I care to say. ARBITRATOR WASHBURN 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. STUBBS Mr. Chairman, it is now twenty minutes to 12 o'clock; undoubtedly the Board will want to adjourn at half-past 12 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 Board has a decided preference or objection to adjourning until 2 o'clock so that I can begin and have some hours without inter- ruption, I would prefer not to begin now, but I would like to have it understood that I am entirely in the hands of the Board in that respect and will begin if you like. ARBITRATOR MIDGLEY Well, we will consult your wishes, Mr. Stubbs. ARBITRATOR WASHBURN We will adjourn then until 2 Vclock this afternoon. Afternoon Session, October i3th, 1898, 2 P. M. The meeting convened pursuant to adjournment. ARBITRATOR WASHBURN Mr. Stubbs, are you ready to pro- ceed now? MR. STUBBS Mr. Chairman and Gentlemen of the Board: While I have been selected by the Committee appointed at the Denver meeting to represent the American lines in the presentation of their case and while all of the members are not present I think it fitting that I should state that they all have contributed in the preparation of our case. All desired very much to be here, but having done their part, they have thought that they might well leave the presentation of the case in the hands of myself and the members of the Committee that were resident in Chicago, or at least that they were so safe in it that they would not be justified in ignor- ing other important and pressing engagements 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. I 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 appeared before a Board of Arbitration or a Commission 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 Board. Naturally then, our case has been prepared 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, I 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, I 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 what the constitution of this Board 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 Board, 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 I 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, Topeka & Santa Fe Ry. Co. The Burlington & Missouri River R. R. Co. in Neb. The Chicago, Rock Island & Pacific Ry. Co. The Colorado Midland Railway Co. The Denver & Rio Grande R. R. Co. The Missouri, Kansas & Texas Ry. Co. The Missouri Pacific Ry. Co. The Northern Pacific Ry. Co. The Oregon Railroad & Navigation Co. The Oregon Short Line Railroad. The Rio Grande Western Ry. Co. The St. Louis & San Francisco Railroad Co. The Southern Pacific Company. The Texas & Pacific Railway Co. The Union Pacific Railroad Company. The Canadian Pacific Railway Company will hereafter be referred to as the Canadian .line; the other parties as the American 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 used to make through routes and through rates between San Francisco and their own points, are not parties to the dispute, being supposed not to be interested. The fact of their non-interest is largely a supposition, because it must be that, since the claim is for a differential under the rates of American lines under their through rates, and as the through rates embrace the charge for the transportation service of these connecting lines, necessarily, they are interested. That is to say, that if a differential operates so as to turn traffic from any of these (blue) lines 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- 67 Continental lines to leave largely, at the outset altogether, and even today, they leave largely to these lines, the question of determining what the through rates shall be. Heretofore, in all discussions and arrangements, contracts for the purpose of maintaining revenue have been entered into by these lines without much 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 common enough to justify me in saying that as a rule they are supposed not to be interested. The contention is in respect to freight rates and freight rates only. That is to say, between, in either direction, San Francisco on the one hand, and on the other hand places in the United States and Canada east of an imaginary line, which is also shown on the map here in red, but in 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 as 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 Francisco 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 Florida or in Maine or in the province of Quebec, 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 Francisco it is the subject of this controversy. I think it unnecessary for me to describe this line any further than it is delineated on the map, although I have described it, or written it out in my manuscript as it appears in the pro- ceedings of the Trans-Continental Association, and I will give it as written to the reporters so that the record may be straight. At a meeting of the chief traffic officers of the American lines and the Canadian line at Denver, Colo., on the 22nd of August, 1898, the following resolution was unanimously adopted. (I omit the proviso.) "Resolved, that the lines here represented will submit to arbi- tration, the question of whether the Canadian Pacific 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 question," just stated as freight to or from San Francisco and these points (pointing to map) "and if any differentials, what these differentials shall be. The Board of Arbitration to consist of three members; 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 of said Board of Arbi- tration shall be final, conclusive and binding upon all." 68 It is in pursuance of this resolution that we are here. It presents two questions for determination by the Board. First: Whether the Canadian line is or should be entitled to a differ- ential under the rates made by the American lines for the carriage of freight interchanged by San Francisco 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 against 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 respective rates, that differ- 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 are 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 are 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, between 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 adopt 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 not 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 common that the idea is abroad that it is part and parcel of the well settled, well considered policy of railroad lines. Differential rates may be of different kinds, orig- inating in various conditions and having different objects in view. For example, where several distributing centers of trade seek a common market of supply or consumption, the carriers, by agreement, sometimes fix different rates or establish a rule of difference to be observed in th^ rates to and from these different trade centers, respectively. An example of this kind of a differential is found in the rates from Chicago to Boston, Xew York, Philadelphia and Baltimore, respectively. The rates for New York being taken as the base, Baltimore and Philadelphia are made lower by an agreed difference and Boston is made higher by an agreed difference. Again, the rates from New York to Chicago, Cincinnati, St. Louis, and so forth, do, by agreement, bear a fixed relation to each other, the Chicago rate being the base, the respective rates to the other points being an agreed difference, lower or higher, as the case may be. As a rule, however, these differences in rates are governed in a greater or less degree by the difference in the cost of the respective service, as indicated by the length of haul; There is another kind of differential, designed to put competing supply markets upon an equality, so far as it is possible, with respect to a common consuming market, having the same object in view as those just described, but differing in this respect, that the difference in the rate is purely arbitrary, has no demonstrable relation to the relative cost or length of haul of the respective parties who agree upon the differential, though when the entire hauls, that of the associated parties and that of their respective connections are combined, the factor of cost is traceable. An example of this kind of differential is found in Texas. Galveston is the base point and the rates from all Mississippi River crossings into Texas bear a certain agreed relation to Galveston rates to what are called Texas common points. The numerous cities competing for that trade, New Orleans, St. Louis, Kansas City, Louisville, Cincinnati, Chicago, and so forth, necessitate this differential adjustment. It is competition of differ- ent markets and not competition of carriers which is the strongest force in creating the rate adjustment. To explain my reference to cost, this differential is agreed to by the Texas lines without consultation with and without any regard to their connections. For example, the differential as between New Orleans, Galveston and St. Louis is regulated, and rates for traffic from all these outside points (pointing to map) is agreed to by these Texas lines alone without consulting their connections. Measuring the differentials by the length of haul of the lines alone who agree to it, you cannot trace the factor of cost in their arrangement, but when you measure the total haul, the total cost, by taking into consideration the connections, why, there is that element to be traced. Another class of differentials exists called "Insurance differentials". These exist in places where the competition is in whole or in part between a carrier by water and a carrier by rail. An example of this is found in Texas where the rates from New York via water by way of Galveston or New Orleans are lower than the ordinary all-rail rates. The difference in such cases is in a measure arbitrary. The aim, however, is to approxi- mate the difference in rate to the cost of insuring, which cannot be done accurately, having some regard to the difference in the cost of transport- ation by water as compared with the cost by rail. yo Another example is found on the Pacific Coast between San Francisco and Portland, and between San Francisco and Los Angeles, Santa Bar- 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 unusual 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 New York and Texas are favored by the differential, they carry the bulk of the traffic. 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 Francisco 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 common notions that water lines always work at a disadvantage against the competing 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. Another example of this kind of differential 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 transportation by water is less per unit of service as a rule, the differ- ence in the cost of the service has something to do with creating the difference in rate and very much facilitates an agreement between the rival all-rail lines and the mixed rail-and-water lines as to what the differ- entials shall be. But another very weighty factor in this case is the fact that the lake-and-rail route is only a summer route. In winter it is frozen no thoroughfare. In reference to my statement that these lake- and-rail lines, the steamship part of them, are owned by the Trunk Lines, I think I find in the Canadian line's argument of this morning acknowl- edgment of that fact. The representative of the Canadian line says: "In connection with the point I endeavored to make yesterday of the frequent sailings of lake steamers from Buffalo and Lake Erie ports, steamers operating in connection with railroad companies, many of them I think most of them owned by railroad companies, forming what is known as the lake-and-rail lines." Under this head, in the Texas case, it should be explained that the differential originated at a time when a majority of the lines entering the state of Texas from the North, either extended to Galveston or were controlled by ownership or leased lines that ran from Galveston into Texas, so that, so far as the earnings of the carrier were concerned, this question of difference in the rates to be charged, for example, from St. Louis and Galveston, respectively, was not one of much moment. Of late years, however, lines have been extended southward into Texas, whose owners or managers have no interest in the lines leading north- ward from Galveston. The consequence is that the differential basis of rates so long in use has been for several years the subject of constant dispute, and as a matter of fact has not been faithfully observed. To a great extent the differentials have existed merely on paper. Another kind of differential is sometimes employed, although it is not regarded as a differential in the sense of the ordinary use of that term, namely: where a group of carriers concerned in a given business agree that one of those carriers may make certain rates between two given points as against a common competitor. An example of this is found in the case of the Trans-Continental lines, which permits the Morgan and Mallory Steamship lines and their connections west of New Orleans and Galveston, respectively, to make lower rates to San Francisco than the standard all-rail rates on certain selected commodities, peculiarly sus- ceptible to carriage by sea, in order to compete with the rates via the Panama and Cape Horn routes. This is the case instanced by our Can- adian friends, of the Sunset Route having a differential on San Francisco business. I call the attention of the Board to the fact that while it is stated that the Sunset Route, which means the Southern Pacific route for we claim that trade mark is not alone in the enjoyment of these lower rates. The Cromwell Line, in connection with the Texas & Pacific, and the Mallory line, in connection with any of the rail lines from Gal- veston, particularly the Atchison, Topeka & Santa Fe Ry., which controls a line from Galveston to San Francisco, operating over the Southern Pacific 383 miles, by contract which gives it, I think, an ad- vantage over what it would have if it owned the line enjoy that same differential, so-called. This is not a differential because the rail lines can, at their pleasure, make the same rates. Some of them do make the same rates. The reason why it is done is because of all this competition by the all-ocean, or the Panama route, from New York, to meet which, if rates were made through Chicago, would involve reduced rates for all this intermediate territory (pointing to map). These lines do not want to reduce these rates; they would lose money if they did. What they would gain here (pointing to map) against these competitors would not compensate for the loss here (pointing to map). Therefore, they consent *o the use of these commodity rates from the New York Piers of the 72 Mallory line, of the Cromwell line or of the Morgan line to San Francisco. ARBITRATOR DAY Mr. Stubbs, I do not know that I quite grasp that. Do I understand you to say that this is a concession to the part water lines in competition with the Panama and all-ocean routes, that these lines would carry all the traffic? MR. STUBBS Let me finish the paragraph. The difference in the rates is permitted, not for the purpose of benefiting the Gulf routes, but for the purpose of shifting the burden of meeting competition of a low- cost competitor on to those lines which are better able to bear, it, that is, can bear it with the least inconvenience and loss to themselves. Perhaps I might give you an illustration. It may be treated of later on, but it will fall in here very well. At the time the Columbian Line com- petition opened in 1893, all the railroad lines were forced out of the traffic, because the rates were so low that they could not compete with the rates made by the steamship line, except at a very large sacrifice on intermediate business which was only indirectly effected by competition from New York. But they threw the whole responsibility, the whole burden of meeting that competition, by carrying freight as low as 30 cents per 100 pounds from New York to San Francisco, on these Gulf lines, for they could do it; their intermediate business was not involved; it was involved, that is true, but it was so small compared with this volume of intermediate business (pointing to map), that they could afford to do it, and somebody had to take up the gauge of battle and conduct the traffic. Now, since that time, there has been no composition of the differ- ences with the Panama road. They stand in the market ready to take business that offers, at any rate that will take it. There are certain com- modities, which, not so much from their nature, not altogether from their nature but from their point of origin, that are peculiarly subject to this water competition. The bulk of the traffic for San Francisco comes from points west of Pittsburgh. These lines running west (point- ing to map) do not wish to carry lower rate's from Pittsburgh, or this intervening territory, than from New York over their own lines. If they put in these Pier rates from New York City, according to their policy, they would have to make these rates the maximum for all intermediate territory, and it would involve a loss which would not be compensated by the amount of traffic they would take. Therefore, they consent to this difference in rates. That is all there is to this story. There is yet another class of differentials which originated in the opening of circuitous routes for competition in carrying trade established on shorter and more direct routes. These, in the common language of the profession are termed "differentials in favor of weaker lines" lines which, upon the merits of their service, cannot successfully compete for the business, but claim a share of it, as the reward of virtue, the price of 73 maintaining reasonable rates. The differentials which are the subject of this controversy between the Canadian line and the American lines fall within this class. This class of differentials in great part, grew out of the formation of through lines between two points or territories by cir- cuitous routes. In many cases the through line is made up of carriers none of whose lines were projected or constructed with a view to en- gaging in the traffic laid open to competition by the formation of a through line by combination between the several individual carriers. For example, the Canadian Pacific road was not projected or built for the purpose of developing, fostering or sharing the carrying trade between San Francisco and the Eastern part of the United States. Nor, were any of the United States connections, running from the border down into New England and the middle and southern States projected or built with any such purpose in view. Nor, were its connections at Gretna and at Minneapolis built with any expectation of participating in said trade. Nor was the Pacific Coast Steamship Line between San Fran- cisco and British Columbia established with any such prospect or inten- tion. After they were built and the various connections made, then, and not until then, it was seen that there was a business opened if not opened, certainly more largely developed, more considerably fostered and sustained by other and more direct lines, which might be made more or less contributory to their lines if combined to make one through route. The route having been opened the newer and longer lines entered the field of competition against the older, shorter and more direct lines by cutting the latter's rates. When its cuts were met further cuts were made, which being met in turn the operation was repeated until the rates by all routes were see-sawed down to a level which not only made them unremunerative to any of the carriers forming in whole or in part any of the several competing lines, but sometimes the level was very much below cost. In a fight of this kind, paradoxical as it may seem, the stronger line always got the worst of it. The reason is apparent. The traffic was fixed to its route and any reduction from its rates in use pre- vious to and at the time the competing line using the circuitous route entered the field as a competitor was a loss; the greater the reduction the greater the loss. The weaker or longer line, on the other hand, not having any business at the outset had nothing to lose. Everything was gain to it which appeared to show an earning above the actual cost of handling the particular lot of freight. Quite a distinction between that and the average cost of handling all business. Such an unequal warfare could not long continue, and the common result was that the stronger line sought for terms and ultimately bought the weaker line off, either by paying it an agreed proportion of its earning under a pooling arrange- ment, previous to the enactment of the Inter-State Commerce Law, or by agreeing that its rates should be maintained at a certain rate of 74 difference higher than the rates of the longer lines. The latter has been the common practice only since the prohibition of pooling. Sometimes an agreement of this character has been reached between the opposing lines without first trying the arbitrament of war, the weaker line demand- ing a portion of the business or an adjustment of the rates that would enable it to carry some of the business and the stronger line or lines yielding, as a matter of expediency, without a fight. That was the case as between the Canadian line and the American lines. It is needless for us to represent to the Board 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 transportation facilities and instead of promoting, were really in restraint of trade. No carrier ever submitted willingly to that sort of an agreement. The submission has always been under protest and rarely, if ever, have such contracts been continuously performed in good faith. In support of these statements permit a reference to the findings of the Inter-State Commerce Commission, expressed in annual reports and otherwise, after inquiry, namely: (Third Annual Report Inter-State Commerce Commission.) "By traffic arrangement between American companies and Canadian companies differentials are allo\yed 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 disadvantage in the competition by reason of greater length of line or heavier grades or of other unfavorable circumstances, and that in con- sequence it is unable to obtain what it deems a fair share of busi- ness in open competition 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 competitors to be effected by giving the carriers thus unfavor- ablv circumstanced what are called 'differential rates'. The con- 75 ceding of a differential, however, is very likely not to be made willingly, but comes under the stress of compulsion at the end of a disastrous rate war. When once made there is constantly liability that under the feelings engendered by competition or from a conviction that it ought not to have been granted, it will be dissented from and an unprofitable rate offered by competitors instead." (Pages 22 and 23.) Further, "The differential lines are those which on account of longer lines and differences in facilities or owing to their through routes being partly by water, or from other disadvantages might not command, 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 proportion." (Page 210.) The history of this dispute may be briefly 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 Francisco, 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 City. 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 of the 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 equality 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 immediately for several reasons, one of which was the uncertainty of the effect which the Canadian line entering the field of competition would have and the dbubtfulness 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. Now let me digress for a moment. With respect to 1886 and 1887 I wish to criticise a remark 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. It never had differentials; it was not in it. The rates were too low, and 76 when there was a fight on it left the burden of the fight to the American lines. I read now from "Exhibit P"; it is the testimony in a report from a Committee, the Inter-State Commerce Committee of the United States Senate Report for 1888, by an order of May 2nd, that is the only date on it, May the 2nd, i "Sir William C. Van Home, President of the Canadian Pacific Railway was before the Senate Committee. The Chairman asked Mr. Van Home 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 United States and mostly at remunerative rates; does that still continue?' To which Sir William C. Van Home replied: 'We get considerable through passenger traffic, very little through freight traffic; it does not pay and we do not seek it.' " Added to this was the fact that the Inter-State Commerce law had just become effective 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 parts of the United 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-requisite 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 with the assurance that we would in some way, how we did not know, because of the Inter-State Commerce Law and the inhibi- tion of pooling, but that we would in some way, probably by differen- tial rates, compensate them, as the term goes, pay them for coming in and being good with the rest of us. My interview in Montreal was with Mr. George Olds, then General Traffic Manager, and General Manager Van Home, who was not at that time President, I believe. The principle of differential rates had never before been conceded in Trans-Continental territory. All the 77 American lines objected to it, but they were made to understand that the demand of the Canadian line was no more than what that line pro- posed enforcing, in so far as it could do so, in the event that the Ameri- can lines undertook to co-operate without its assistance. In other words, they were given to understand that if rates were advanced to any rea- sonable basis the Canadian line would use the tariff of the American lines simply as a maximum from which to cut and that these cuts, if met by the American lines, would result in forcing the whole scheme of rates down to the level of the minimum cost; that it would be a continuation of the battle from which they had just emerged for an indefinite time, if indeed there would ever be an end to it. If it had not been for the re- straining features of the Inter-State Commerce law, the exact measures of which they did not understand, and which, to most railroad operating officers were far more menacing than they are today, they would not have yielded to the demand of the Canadian line for a differential. The adjustment of rates would have been, as it always had been, on the basis of equal rates for all. Possibly a pool of earnings would have been made in which the Canadian line would have come in for a small share, but the pool would also have guaranteed a fair allotment of earnings to each and every other line as well as to the Canadian line, or they might have accepted the gauge of battle. It was argued, however, that the Canadian line was unknown to American shippers; that it was believed it would prove to be no thoroughfare during the winter months; that the fact that it was a foreign line and must carry goods under customs regula- tions, would be very prejudicial to it in the minds of shippers. These were the arguments that prevailed, because it was thought that at any reasonable difference in the rates, it would be impossible for the Canadian line to secure much traffic. Upon the organization of the Trans-Continental Association at this time, the rates to San Francisco by the American lines were higher than the rates made to San Francisco by the Canadian line, by these dif- ferences: From New York and common points, to San Francisco, first class, 30 cents, scaled down to 5 cents, the lowest class; the standard rates being, first class, $4.00, scaled down to $1.10 for fourteenth class. From Chicago and common points, to San Francisco, first class, 20 cents, scaled down to 5 cents, the lowest class; the standard rates being first class, $3.25, scaled down to 88 cents for fourteenth class. Later, from St. Paul and Minneapolis to San Francisco the difference, or differential, was, first class, 15 cents, scaled down to 5 cents, for the lowest class; the standard rates being $2.80, for first class, scaled down to 80 cents for fourteenth class. These rates prevailed until May, 1888, when the Canadian line de- manded that the differentials be increased to the scale of 40 cents for 78 first class, down to 10 cents for the lowest class from New York. The matter was eventually referred to the Chairman of the Association to negotiate with the Canadian line on this question, with the result that it was awarded a differential of 40 cents on first class, scaled down to J\ cents on the lowest class, on business to and from New York. This was the transaction in reference to which our Canadian friends read a reso- lution that was passed at that session of the Trans-Continental Associa- tion. This was the resolution as read by our Canadian friend, and I take it to be correct, I have not tested it. "RESOLVED, that it is the sense of our Committee that the differentials allowed the Canadian Pacific Railway Company should at all times be fixed upon such a basis as will secure to that Company a fair and reasonable share of the overland tonnage, and that if the present figures do not accomplish that result, they should be so modified as to bring it about. To this end the Chair- man is authorized to negotiate 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 under- standing that the same differentials shall apply to St. Paul and Minneapolis traffic via the Northern Pacific as may be awarded the Canadian Pacific Railway Company; it being understood that these differentials shall apply via the Ocean routes only." That resolution was passed, but it was in pursuance of a contract, a contract that was made under the fear of the total destruction of our traffic unless we made it. These latter differentials continued in force until the middle of 1889, when, upon the demand of several of the American lines, they were re- duced to the following scale: For St. Paul, from 15 cents first class, scaled down to 5 cents for lowest class; the standard rates being $3.50 first class, $1.00 lowest class. For Chicago, 17^ cents first class, scaled down to 5 cents for lowest class; the standard rates being $3.90 first class, $1.10 lowest class. For Detroit, 21 cents for first class, scaled down to 5 cents for lowest class; the standard rates being $3.95 first class, $1.15 for lowest class. For Pittsburgh, 22 cents for first class, scaled down to 5 cents for lowest class; the standard rates being $4.00 first class, $1.15 lowest class. For Atlantic Seaboard, 28 cents differential for first class, scaled down to 5 cents for lowest class, with a special differential of 7} cents for wool in grease; the standard rates being $4.20 first class, $1.20 lowest class. I have enumerated these differentials (and feel like apologizing to the Board for doing so), with but this object in view, to show that in no case was the Canadian Pacific line ever given a 10 per cent differential. 79 These last differentials prevailed until 1891, when in lieu of differential rates the American lines guaranteed the Canadian line $500,000.00, as gross earnings from San Francisco business for a year, the Canadian line to maintain an equality of rates with the American lines and the American lines to be credited by the Canadian line on their guaranty, with the amount of its gross earnings on all the San Francisco business it carried at equal rates, the balance or deficiency in the amount guar- anteed to be paid in cash by the American lines. Under this arrange- ment the American lines paid the Canadian line the sum of about $472,- ooo.oo for account of San Francisco business during the year 1891, that line having carried at equal rates business of the value of $28,000.00, in round numbers; business that sought its line without any effort at solici- tation, without any of the measures which all the American lines did and were compelled to adopt and actively employ, in order to get and keep their traffic. Here is what the gentleman representing the Cana- dian line said on that subject: (reading from transcript of Mr. Kerr's ar- gument see page 34 hereof). "ARBITRATOR WASHBURN Did you maintain agencies in San Francisco?" "MR. KERR Yes sir." His agent did not work freight business, he was a Passenger man; I defy the Canadian line to deny it. (commencing again to read from transcript of Mr. Kerr's argument): "ARBITRATOR WASHBURN During the entire year?" "MR. KERR Yes sir, we maintained agencies. We did not withdraw any agency." "ARBITRATOR WASHBURN You used the same effort to get business?" "MR. KERR I would not say that, naturally; but we did not refuse any business that 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 out, clean out of the business." "ARBITRATOR WASHBURN They did solicit the busi- ness during that time?" "MR. KERR Yes, in a line with their other business, a can- vassing 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 i^, he would want it. 'What is your rate?' 'Our rate is the same as all-rail/ 'Oh no, you cannot have it; we will give you the other, but we will not give you that.' " 8o MR. STUBBS (laying aside the transcript from which he had been reading) I submit, where would the Union Pacific that makes in con- nection with the Central Pacific the shortest and most direct line, that is the oldest line to San Francisco where would that company be today if their agencies were to carry out the program indicated for his agencies by Mr. Kerr in that testimony? Would it get any business that was competitive as between themselves and the "Santa Fe" or the Missouri Pacific or "Burlington" or "Rio Grande" or Rio Grande Western roads? In three months, notwithstanding all its natural advantages, more than 50 per cent of its business w r ould leave its rails; if it would get anything at all that possibly could go over another route. The Canadian line did not work for the business. 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 has never been any test of what it can do at equal rates, but in this connection I would ask, what does it matter? Under the submission in this case, what does 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 the business. Is there any other conclusion to be drawn than that this bargain with the Canadian line, this purchase of the neutrality of the Canadian line, shows the tremendous power of that company to destroy our business unless we bought it off? I have a statement (marked "Exhibit U") that was prepared by Mr. Countiss, which I will file with the Board: "Payments to the Canadian Pacific Railway Co. during the year 1891, as finally adjusted, based on each road's actual proportion of gross earnings from east and westbound California freight traffic, as pro- vided by Joint Agreement between roads in interest, effective January ist, 1891." This statement shows the amounts of the payments the amounts paid monthly, by each particular line beginning with January and ending. with December, 1891. The total earnings of the Burlington and Missouri River Railroad Company in Nebraska from all the Cal- ifornia business we cannot segregate the San Francisco business, the way the records were kept was $192,926.24, yet the "Burlington" con- tributed $5,678.00 in order to give the Canadian Pacific $500,000.00. The total earnings of the Chicago, Burlington & Quincy R. R., in connection with the Burlington and Missouri River R. R., were $97,082.00 and it contributed $2,879.00. The combined contribution of the "Burlington" lines was about $8,500.00 and their combined earnings was about $289,- ooo.oo. They submitted to that tax in order to give the Canadian line $500,000.00. ARBITRATOR DAY What did you say the Burlington & Missouri River R. R. was? MR. STUBBS The Burlington & Missouri River R. R. was $5,678.- oo and the Chicago, Burlington & Quincy R.R. was $2,879.00, they should 8i be read together, and the total earning of the Burlington & Missouri River R. R. was $192,900.00 and of the C. B. & Q. $97,000.00, making a total of about $290,000.00, and out of the gross earning of $290,000.00 from all California business, they submitted to a tax of something in the neighborhood of $8,500.00, in order to give the Canadian line $500,000.00. The Chicago, Kansas & Nebraska Railway Company's total earnings were $167,762.00 and the Chicago, Rock Island & Pacific $101,900.00 which made a total earning during the year from the California business all California business not San Francisco business, of about $269,- 700.00 and they contributed $8,000.00 towards giving the Canadian line $500,000.00 for being good. The Denver & Rio Grande Railway made a total earning of $180,000.00 and contributed $5,000.00 in order to give the Canadian line $500,000.00. The Rio Grande Western earnings were $228,500.00 in round figures, and it contributed $6,698.00 to feed and support the Canadian line. The Missouri Pacific Railway made a total earning of $109,300.00 and it contributed $3,261.00 in order that the Canadian Pacific might receive $500,000.00. The St. Louis & San Fran- cisco Road made a total earning of $86,700.00 and gave $2,591.00 to the Canadian line in order to swell its earnings to $500,000.00. The Great Northern Railway line, which I believe at that time was a connection of the Canadian Pacific, I am not sure, Mr. Kerr can correct me about that its western business went out of this territory via the Great North- ern Ry. through Gretna and up to Winnipeg. 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 threat, the fear of what the consequence would be if they did not buy the Canadian line's peace, its good will? In January, 1892, the differential scale in force in December, 1890, was restored. Those were the low, reduced differentials that were agreed to at the San Francisco meeting, I think, in May, 1889, and continued until November, 1892, when the dissolution of the Trans-Continental Association was forced by the withdrawal of several of its members. With the dissolution of the Trans-Continental Association, the differential with the Canadian line ended. Early in 1893 the Columbian Steamship line out of New York, in connection with the Panama Railroad Company and the North American Navigation company, operating a steamship line between Panama and San Francisco, began cutting rates, and initiated the most violent and longest war in rates that the Trans-Con- tinental traffic has ever been subjected to. That is the case I referred to by way of illustration a few moments ago. During this period the Canadian line was not much of a factor in the business between the 82 Atlantic Seaboard and San Francisco. During 1893, 1894 and 1895, the California lines organized and maintained a semblance of an organiza- tion, for the purpose of protecting that portion of their traffic which was not involved in the war of rates with the Panama line. That was the traffic west of Buffalo and Pittsburgh. This organization was called the Trans-Continental Freight Rate Committee. 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 Panama 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 the Trans-Continental Association. In order to accomplish this it was es- sential to make a contract with the Panama route; secondly, to come to some understanding with the Canadian line. The agreement failed of the necessary unanimous ratification for reasons which are not neces- sary to explain; 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 Panama route whereunder the Trans- Continental lines leased from the Steamship Company sufficient space in their steamers to accommodate a stipulated tonnage. The Canadian Pacific demanded, as the price of its co-operation in this agreement, a differential of 10 per cent, but finally consented to take 9 per cent. The representative of the Canadian line, in his statement yesterday or today, alluded to a difference that arose between the American lines and the Canadian line, as between the New York 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 much credit. As I have said, this agreement failed of final ratification, so that there has been no agreement, differential or otherwise, between the Canadian line and the American lines since 1892. ARBITRATOR WASHBURN Mr. Stubbs, I asked Mr. Kerr this morning, whether that concession of 9 per cent differential rate of 9 per cent was agreed to by the American lines and he said it was, but that the agreement was never put into effect. MR. STUBBS You understand. Mr. Chairman, how these things go; that we will get together and agree upon all details of a contract, but that at the last it must receive unanimous vote. ARBITRATOR WASHBURN I only mentioned that in connec- tion with your remark a short time ago, that the percentage differential was never allowed them. MR. STUBBS That is true. 83 ARBITRATOR WASHBURX Is it true that it was entered into? MR. STUBBS It never was consummated. ARBITRATOR WASHBURN But it was agreed to? MR. STUBBS Yes, it was agreed to, but Xo, I have never said it was. ARBITRATOR WASHBURX I understood you to say so. MR. STUBBS Xo sir. ARBITRATOR WASHBURX I understood Mr. Kerr to say this morning that it was conceded to him by the American lines and I under- stood you to say that the agreement was never consummated. MR. STUBBS The Chairman must be very well aware, I know, from his long experience in the business, that no agreement of that character becomes complete until the final vote upon the ratification of it. We never got the final ratification of all these details. The most that can be said is that, if the Union Pacific 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 T o one can say whether it was the 9 per cent differential that moved the Union Pacific not to vote for it or not. Xo one can say that if the Union 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 New York meeting had not occurred, or that the Milwaukee meeting had never occurred. As I have said, this meeting failed of final ratification, so that there has been no agreement, differential or otherwise, between the Canadian line and the American lines since 1892. I mean by that that since 1892 the Canadian line has never had a differential on San Francisco business. They have made a difference 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 1892, during which any one of the American 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 tariffs, by discounting the latter's rates to San Fran- cisco 10 per cent, thus arbitrarily increasing the difference between its rates and those of the American lines on the lower classes, which cover the bulk of the tonnage, almost 100 per cent as compared with the difference prevailing by agreement in 1892. That the apparent difference between the published rates of the Canadian line and the published rates of the American lines was not in practice maintained, has been for a long time manifest to every one concerned in the business. I, myself, have re- ceived complaints from Vice-President Shaughnessy, of the Canadian line, alleging that he knew, as a matter of fact, that the American lines 8 4 were not observing that differential, so-called by him. Rate cutting, open and secret, has been general and frequent and it is the judgment 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 rare demoralization in the Trans-Continental business. However, it had so much to do with it that the call for the August meeting at Denver, which adopted the agreement to arbitrate this question, 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 immediately decide upon a settled policy to be pursued uniformly 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 States 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 Pacific takes. The importance of this question merits the attention of the highest officers 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 by the other lines, meaning the American lines." Now 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, commonly 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 Inter-State Commerce Commission, an arbi- trary distribution of traffic. Here is what the Commission says on that subject: "The purpose of a differential is undoubtedly 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 85 a device for the distribution of traffic. At the basis of every inquiry into the reasonableness of a differential, therefore, lies the question whether the line claiming it is entitled to participate in the traffic involved." (Inter-State Commerce Commission Opinion "Cana- dian Pacific Passenger Differential," Page 8, Paragraph 2.) That reference is to the type-written copy that I had of that report and opinion, before I had received the printed copy. The Canadian line does 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 ground 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 communities 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 are objectionable to the shipper; that if these objection- able physical features are not in some way counter-balanced, it cannot 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 some portion of the American traffic in which the American lines have the natural advan- tage which the Canadian line claims it lacks. 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 the 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 that the Canadian line is but one of several lines engaged in the traffic which are in like manner entitled to an allotment; otherwise one line is protected by discriminating against 86 the rest. Apportionment by arbitrary means that does not provide like adjustment for each of the other lines engaged in the traffic, cannot be just and right. In any traffic, 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 traffic. If any arbitrary plan of allotment or distribution of the traffic be feasible, it cannot be right and just unless giving recognition to the natural rights of the American lines and protecting them therein. To proceed upon any other theory must sacrifice the natural right in the traffic 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 Board 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 question may be re-stated, in order to present in its clearest form the issue raised, in the following language : ist: 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 traffic 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 traffic. 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 disabilities, to counter-balance which it claims the right to an artificial advantage over the American lines in the shape of a differ- 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 by water 87 and partly by -ail, necessitating the transfer en route of goods from car to vessel and vice versa; That its steamer service on the Pacific Ocean is infrequent, causing delays as compared with daily service offered by the American all-rail lines; That it is the longest line between the Atlantic and Pacific Seaboards, as against the Sunset line in particular; 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 requirements and delays. This last point, according to my recollection, Mr. Kerr has not treated. I 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, must be established conclusively; that the physical features set forth as comparative disadvantages must be proven to be peculiar 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 physical 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 Canadian line is under no disadvantage compared with the American line or lines possessing substantially the same physical features and is not entitled to a differential under their rates. If it is not entitled to a differential against some of the American lines, it is not entitled to a differential against any of them, for this is the submission in this case: "Is the Cana- dian line entitled to a differential under the rates of the other lines?" Not 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 opposed to the claim of the Canadian lines. At the morning session, Arbitrator Day asked the Canadian line's representative the question: "Do you regard that you are entitled to charge a lower rate on California traffic than is charged by the Northern Pacific on California traffic," and his answer was, "No; if they use the water lines," and yet his submission is that he is entitled to a differential under the rates of all the other lines. Now, assuming, for the purpose of argument, that the conditions de- scribed do subsist with the Canadian line and for that reason that line 88 cannot secure rightfully the traffic which belongs to it, we submit, for the consideration of the Board, that there is, among the American lines on our side, a number of lines which are broken in the sense described; lines which are subject to the same delays incident to infrequent steamer service; lines which are as long and some of them longer than the Canadian line; lines which, when measured by these alleged 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, constitute substantial ground for a just claim to the artificial advantage of a differential as an offset 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 Francisco is a prior right; its title a higher title, than the right and title of the American lines afore- said. The Great 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 Vancouver. The distance from Seattle is 804 miles as against 833 miles from Vancouver. 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 Oregon Railroad & Navigation Co. and the Pacific Coast Steamship Company. It also connects with the Great 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 Union Pacific; at Salt Lake with the Rio Grande Western, which, in turn, connects with the Colorado Mid- land, and Denver & Rio Grande, and at Pueblo, Colorado Springs and Denver, they connect with all these systems. The distance from Portland to San Francisco is 653 miles against 833 from Vancouver. 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: 8 9 FROM MINNEAPOLIS: FIRST, The Great Northern R'y to Seattle and San Francisco. SECOND, The Northern Pacific R'y to Tacoma, Seattle and San Francisco. FROM OMAHA: There are three routes from Omaha: FIRST, The Union Pacific Railroad via Granger, the Oregon Short Line Railroad and Oregon Railroad & Navigation 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 & Navigation 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 Fe R'y to Denver, Col- orado Springs or Pueblo, where they connect with 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 Oregon Railroad and Nav- igation Company's steamships to San Francisco. THIRD, The Missouri Pacific Railway; the same way. 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 connect with identically the same roads. Therefore, with respect to all traffic moving via Minneapolis, to or from San Francisco, 90 these two lines, the Northern Pacific I might have said these three lines, the Great Northern, the Northern Pacific and the Canadian line arc upon an exact equality with respect to the service performed by their respective blue line connections. West of Minneapolis their respective physical characteristics compare as follows: The Canadian line's mixed service via Vancouver is Rail to Vancouver, 1802 miles. Steamship to San Francisco, 833 " The entire service Minneapolis via Vancouver to San Francisco being, 2635 miles. The Northern Pacific's service is Rail to Seattle, 1922 miles. Steamship to San Francisco, 804 " Total, 2726 miles. about 100 miles longer. Both lines have exactly the same connections at Minneapolis 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 Northern 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 Minneapolis and San Francisco, and the Northern 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 Northern, respectively, between the same points, as I have explained, save the im- material difference of 104 miles in the length of the Northern Pacific and the Great Northern road, making the Great Northern a very few miles shorter than the Canadian line I will give it to you, exactly; the North- ern Pacific line is 91 miles longer than the Canadian line. The Great Northern 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 Great Northern and the Northern Pacific. Consequently, if the Canadian line is entitled to any differential as against the two lines 91 named, it must be for its line east of Minneapolis. Having identically the same connections at Minneapolis as the Northern Pacific and Great Northern, there cannot be any difference as compared with those lines with respect to all this country, (indicating on map) For business from the Seaboard, from Portland, Me., from Boston, Mass., from New York City, from Buffalo, from Baltimore, from Wheeling, from Pittsburgh, it has identically the same routes that the Northern Pacific and the Great Northern must use to get that business. If, then, for any part of this business, New England, for example, it chooses to use its routes via Sudbury and Montreal, through Ogdensburg, N. Y., or through Port- land, Me., is it entitled to a differential because it elects to use those routes as against the very same connections of the Northern Pacific and the Great Northern, which are equally 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 using that line east of Minneapolis, does it not create the disability? And, if it creates the disability can it come to the Northern Pacific and Great Northern and ask them to com- pensate it for a disability of its own creation by a money advantage? 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 Omaha and St. Paul and Minneapolis, as the Board well knows, is not material, while the character of the service east of Omaha and east of Minneapolis 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, respectively, 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 mixed rail-and-water line, via Portland, formed by the Union Pacific, Oregon Short Line and Oregon Railroad & Navigation 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, Total, 2476 As I have already explained, the service from Minneapolis via Van- couver, by the Canadian line, is 2,635 miles. The difference is 159 miles. Both lines are broken and are in the same manner subject to infrequent steamer service, while the difference in distances, 159 miles, ought not, as the Board well knows, to make any material difference in the time required for movement of the traffic between shipping point and destina- 92 tion. 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 Portland, formed by the "Burlington," Rio Grande, Oregon Short Line and Oregon Railroad & Navigation Company's roads (indicating on map) these lines are the B. & M. to Denver Oregon Short Line to Portland will differ from that just made between the Canadian line and the Union Pacific line only in the respective distances between Omaha and Portland, the "Burlington" line being 367, and the "Rock Island" line 321 miles longer than the Union 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 I have already pointed them out which lines serve the same blue line territory with facilities which are, for the most part, equal to those offered by the Minneapolis and Omaha lines, respectively, as before de- scribed, compare with the Canadian line about as the Union Pacific's Portland line does. The difference is in the mileage to Portland. This comparison shows the Kansas City lines via Portland, respectively, to be longer than the Canadian lines from Minneapolis as follows: The Union Pacific line total 2703 miles, by 68 miles The Atchison, Topeka & Santa Feline. " 2813 " by 178 The Missouri Pacific line " 2818 " -by 183 " From Portland the steamer sailings are, perhaps, more frequent than from Vancouver 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 Vancouver and Seattle as stated by the representative of the Canadian line in his argument. These comparisons are just and applicable to all the traffic which may, or can, move via Minneapolis, via Omaha, via Kansas City, to or from San Francisco, and the whole blue line territory shown on this map. Minneapolis, Omaha and Kansas City, as the members of this board well know, are common base points for San Francisco rates common gate- ways through which the San Francisco trade with this blue line territory moves upon an equality as to rate. Very much the largest share of the subject traffic passes through these gateways. The Canadian line uses its Minneapolis connections for all of its traffic with this entire blue line ter- ritory (indicating on map) except the Atlantic Seaboard; hence, with that exception, the Canadian line and the several American lines, so far as contrasted, are on a parity in respect to that part 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. Y., but the American lines mentioned use the Minneapolis, Kansas City and Omaha gateways for that traffic also. That is, they use these gateways for New England and Middle States traffic as well as for this western traffic. The Minneapolis connections of the Canadian line, which are identical with the connections of the Great Northern and the North- ern Pacific, are open to the Canadian line for Atlantic Seaboard traffic upon the same terms as they are open to and used by the Great Northern and the Northern Pacific and we make the point 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 Great Northern and Northern Pacific use via Minneapolis that if it thereby incuij or subjects itself to any disadvantages or disabilities as compared to the American lines, those disadvantages are of its own creation and it cannot thereon build a just or reasonable claim that they should be counter-balanced by an artificial advantage in rates. We will proceed with the contrast, however. From New England and Middle States territories, the Northern Pacific, Minneapolis-Seattle route is longer than the Canadian line's Vancouver route from all points save Philadelphia and Baltimore and in these cases the difference in distance is not material. It 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 Great Northern, Minneapolis- Seattle route is longer than, or is practically the same length as the Cana- dian line's Vancouver route, except from Philadelphia and Baltimore, but these differences would be overcome if the Canadian line would use the same connections, they being equally open to it east of Minneapolis, as are used by the Great Northern. The distance is practically the same, possibly a little shorter, about thirteen miles, I think I stated, but as I said in the case of the Northern Pacific this distance would be overcome if the Canadian line would use the same connections east of Minneapolis that the Great Northern uses. The broken routes via Omaha and Port- land, Ore., compare with the Canadian line's Vancouver route, as fol- lows: The Union Pacific-Oregon Short Line's Portland route is prac- tically of the same length as the Canadian line's Vancouver route from Portland, Me., Boston and New York City and is only 260 miles shorter from Philadelphia, but these differences would be reduced to insignifi- cance were the Canadian line to use its Minneapolis route. The "Bur- lington," Rio Grande-Oregon Short Line, Portland route is longer from all New England and Middle States cities, except Baltimore, where the difference is not material, and the conditions would be reversed by the Canadian line's use of its Minneapolis route. The "Rock Island's" Rio Grande-Oregon Short Line, Portland route compares the same prac- 94 tically as the ''Burlington." The Missouri Pacific's Rio Grande-Oregon Short Line, Portland route compares practically the same as the "Rock Island's" route, and so does the "Santa Fe's" Rio Grande-Oregon Short Line, Portland route. In the foregoing we have contrasted with the Canadian line eight of the American lines. There are no disparities in respect to their facilities, physical or other, on the eastern end, say east of the Missouri River line; they are practically equal. On the western end, the ex- tremes of difference are found to be American lines via Seattle against the Canadian line via Vancouver. The American lines' rail haul is longer by 91 miles. Their Ocean haul is shorter by 27 miles. The American lines via Portland against the Canadian line via Vancouver; the Ameri- can lines' rail haul is longer by 208 miles, Ocean haul is shorter, by 180 miles. Equate the Ocean haul with the rail haul by adding 15 per cent to the Ocean 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 Vancouver, (27 geographical miles) and the American line is longer by 60 miles. The American lines via Portland against the Canadian line via Vancouver and the American line is longer by one mile. With perhaps the single particular of not being required to move their traffic through a foreign country, the characteristics of these lines are practically 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 reason of having to transport the freight through 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 proceedings 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 differential. With respect to that disadvantage, if it is one, it will be sufficient to say at this time that these American lines which I have described to you, when working with the Grand Trunk or the Michigan Central Railroad east of Chicago, as they all do to a greater or less extent, encounter the same disadvantage. ARBITRATOR DAY Or the Wabash. MR. STUBBS Or the Wabash. These American mixed rail-and- water lines do not exist merely on paper. They are open and in daily use for both freight and passengers. They are effectively worked against the all-rail lines for San Francisco trade with Oregon, Washington, 95 i Idaho, Utah and Montana. Some of them are preferentially worked for San Francisco's trade with St. Paul and Minneapolis and points further east the Great Northern works them. It matters not whether they have been worked more or less effectively for the subject traffic. The fact that the Canadian line has continuously, since 1893, been working openly 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 upon an equality 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 possesses a right to a share, defined or undefined, of San Francisco's trade, then these lines possess the same right to an equivalent 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 equal to those charged by the all-rail lines. If the Canadian line by the use of the 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 differential, then these American lines are entitled to use a differential. If these American lines possessing the same right, whatever its origin, whatever its scope, to share the traffic that the Canadian line possesses, presenting substan- tially the same physical features as those presented by the Canadian line, suffering the same natural disadvantages, if they be such, when com- pared 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 disadvantages and not only voluntarily forego, but protest against its use, by themselves or any other line sim- ilarly circumstanced, is not that fact, for it is a fact, very strong testi- mony against the asserted right of the Canadian line to share the traffic; against its being an equitable right, one that is equally just to all con- cerned under the circumstances of the particular case? If any one of them were standing any one of these American lines that I have de- scribed, were standing alone against the Canadian line in competition for this trade, this question would never have reached the stage of arbi- tration. It would never have been raised. The Canadian line would never have demanded a differential. Blot out from the map, remove from the earth's surface this single line of railroad, (indicating on map) the Central Pacific between Ogden and Sacramento, the pioneer road would any of these eight American lines entertain the proposition which is involved in the Canadian line's contention for a moment? Does the existence of the Central Pacific Road and its operation as a part of a through all-rail line (in which some of the integral parts of the through lines via Portland, which are part water and part rail, are interested), alter 9 6 the rights, the equitable rights of the Portland mixed lines as against the Canadian line or against any other competitor? We contend that it does not that as a matter of right, of equitable right, as well as a matter of law under Justice Brewer's decision in the case of the Chicago Northwestern, plaintiff in error against John Osborn, and the same plaintiff in error against A. J. Junod, (S. C. 52 Fed. Rep. 912), a through line is a line, is a unit, regardless of whether part of it may be used in forming another through line even if it be a rival through line. The reasonableness of this proposition is manifest. Any other view would deprive certain individual carriers, not only from participation in, but also of an opportunity to compete for a given traffic. To illustrate: If the Oregon Short Line (indicating on map) running from Huntington to Granger and to Salt Lake, were deprived of a connection for the pur- pose of making a through line to San Francisco, via Portland, with the Union Pacific at Granger, or with the Rio Grande Western at Salt Lake City, because those roads respectively had physical connection with the Central Pacific at Ogden, the Oregon Short Line would be deprived of all opportunity to compete for a share of the San Francisco traffic. Like- wise, if the Rio Grande Western were denied, for through line purposes a connection with the Central Pacific at Ogden, on account of the latter's former connection with the Union Pacific in a through line which was ample to accommodate all the traffic, the Rio Grande Western, the Den- ver and Rio Grande and the Colorado Midland roads, would all be thrown out of competition for the California trade. The same reasoning would apply to the Canadian line's connections through Minneapolis and through Ogdensburg. Therefore, it seems conclusive to us that all of these eight American lines, part water and part rail, are distinct and sep- arate lines just as the Canadian line is a distinct and separate line. For example, take the connection through Ogdensburg. The New York Central controls the Rome, Watertown & Ogdensburg Railroad, the traffic moves up out of New York over the New York Central or West Shore and up over the Rome, Watertown & Ogdensburg. If the Oregon Short Line is not entitled to make connection with the Union Pacific and Rio Grande Western, certainly the Rome, Watertown & Ogdensburg and the New York Central and West Shore are not entitled to form a connection with the Canadian Pacific. Therefore, as I stated before, it seems conclusive to us that all of these eight American lines, part water and part rail, are distinct and separate lines, just as the Canadian line is a distinct and separate line. They are as much so now as they would be if the Central Pacific Railroad did not exist. Their relative rights and privileges as against the Canadian line are no more abridged by the ex- istence of the Central Pacific Road than are their duties as common carriers abridged by that fact. We repeat that the issue presented, to this Board is between the 97 Canadian line on the one hand, and the American lines as a unit, on the other. If the claim of the Canadian line fails against one of the Ameri- can lines, it fails against all of them. If the right of the Canadian line to a differential is not established as against the Northern Pacific, this Board will not award it a differential against the Northern Pacific, because it may be of the opinion that its claim is not unreasonable as against the all- rail line of the Central and Union Pacific. To do so would be to add to the disabilities of the Northern Pacific, what is taken from the disabilities of the Canadian line. Will this Board work an injustice to the Northern Pacific in order to satisfy a claim of the Canadian line against the Union and Central Pacific all-rail line, no matter how reasonable such claim may be? In May, 1888, the right of the Northern Pacific to make by its mixed rail and water line between Minneapolis and St. Paul and San Francisco 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 Association in San Francisco, but it long ago fell into disuse. The Northern Pacific found it would not work, for immediately upon the suggestion of the proposi- tion the Oregon Railway & Navigation Co. came in and wanted the same advantage. Since then the Great Northern has been completed. Give the Northern Pacific a differential and can you withhold it from the Great Northern? Give it to the Great Northern and Northern Pacific and how can you withhold it from the Oregon Short Line and Union Pacific? If you give it to them how can you withhold it from the Kansas City lines? The Great Northern, Northern Pacific, Oregon Railroad & Navigation Co. in connection with the Union Pacific, which means the Union Pacific, the "Burlington," the "Rock Island," the Missouri Pacific, the Atchison, Topeka & Santa Fe, 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 Francisco community, 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 Mail Company previous to the opening of the overland route; accustomed to put a large share on the sailing vessels, a small share on the Panama route and a still smaller share on the overland roads simply to avail themselves of differences in rates? Touch this question. Introduce differential rates with any 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 operate exactly as a cut rate. Let the rate be cut on the Great Northern and it goes down to the Gulf of California. Let it be cut on the Northwestern and it goes down to the Gulf of Mexico. Let it be cut on 9 8 the New York Central and it goes down to Florida. You cannot stop it. An attempt to introduce differentials among the American lines will result in no difference at all in rates. All rail lines and the mixed rail-and-water lines will all be upon exactly the same footing. It may not be amiss here, although I shall get to it later, to call the attention of the Board to the fact that there is a very small volume oi traffic to be distributed over the various lines that can serve San Fran- cisco. There is not a single line leading out of San Francisco take the Central Pacific, take the Atchison, Topeka & Santa Fe, take the Oregon & California in connection with the Great Northern, or the Oregon Rail- road & Navigation Co., or the Northern 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 capacity 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 upon these roads here (indicating on map) at Chicago and at St. Louis. At certain seasons of the year when the capacity 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 they not just as easily get the full all-rail rates as they can their lower differen- tial rates? That is a question to be seriously considered when you talk about customs of other lines as precedents. In reference to the equality of rates as between the Northern Pacific and the Canadian line, produced by vote in 1888, the Canadian Pacific concurring, that is to say, the Northern 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 equality at that time. If equality of rate for San Francisco's trade with Minneapolis and St. Paul was just and reasonable then, as between the Northern Pacific 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 North- ern Pacific line on a rate equality for San Francisco-Minneapolis trade, would not the same conditions demand that the same equality of rate should subsist between these two lines for all San Francisco business moving via Minneapolis? If there is any disadvantage as between those two lines west of Minneapolis, I have demonstrated conclusively that the disadvantage is the Northern 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 Northern Pacific's eastern connections at Minneapolis for this trade, are identical. Then, if the Canadian Pacific concedes that as for business between San 99 I-rancisco and Minneapolis equality of rate is proper as between it and the Northern Pacific, how can it say that equality of rate is not proper between the Northern Pacific and the Canadian Pacific with respect to all this business passing through Minneapolis from Atlantic Seaboard, Middle, Southern, Western or Southwestern states? I think I have dwelt enough upon the question of its own disability east of Minneapolis. The mere purpose in itself of turning the traffic from the domestic to a foreign carrier does not give any title to a differential. On the most radical theory favorable to such title, the differential can be allowed as a matter of right and title, only when the disability is real, not optional. If the contention of the Canadian line is not established against the Northern Pacific's broken line, how can it be established against the Great Northern's broken line? As I have explained, they have identi- cally the same connections. The Great Northern line is a little shorter than the Northern Pacific, but not more than 13 miles shorter than the Canadian Pacific. It connects at Seattle with the very same steamers that the Canadian Pacific uses. Its line is broken; subject to infrequent steamer service, with consequent delays that are alleged to spring from that, in same manner and degree. If not established against either of the mixed rail-and-water lines via Minneapolis and Seattle, how can it be established against the mixed lines via Omaha and Kansas City, respect- ively, via Portland, via the lines that we have described? We now pass from the American part water and part rail lines via Seattle and Portland, which work through Minneapolis, Omaha and Kansas City gateways, to the consideration of other American part water and part rail lines, whose ocean service is performed on the Atlantic side and which work via Mexican Gulf Ports. Their San Francisco 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 open 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. If there is a difference, it is of degree only and in degree the advantage is with the Canadian line as compared with them. They are the SOUTHERN PACIFIC "SUNSET" LINE: Morgan Steamship Line, New York to Algiers (New Orleans) 1800 miles. Thence via rail to San Francisco 2489 " Total.. . 4280 " IOO TEXAS & PACIFIC GULF LINE: Cromwell Steamship Line, New York to New Orleans. 1800 miles. Thence via rail to San Francisco 2 455 Total 4255 "SANTA FE" GULF LINE: Mallory Steamship Line, New 7 York to Galveston 2300 miles. Thence via rail to San Francisco. . 2666 '" Total 4966 They all do San Francisco business too at equal rates. They com- pare with the Canadian Pacific's line from New York in this wise: The "Sunset" line is longer by 240 miles. The Texas & Pacific Gulf line is longer by 206 The Santa Fe Gulf line is longer by 917 From the territory north, northwest and east of New York City, the difference 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 New York and transfer it to steamer. From the territory west, southwest and south of New York City, the differences are the same as from New York City, as the traffic moves via New York City, to reach any of the lines contrasted. Some of these Gulf lines have been engaged in the San Francisco trade for a period 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. No one is more familiar with it than Arbitrator Midgley. It 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-water lines cannot successfully compete at equal rates with all-rail lines, or tliat an artificial advantage in the shape of a differential or other device, is essential to participation in a common traffic by the rail-and-water lines as against all-rail lines. The success of the "Sunset" line, and the fact that our Canadian friends TOT : ^ :* V:: >j l ---: :;< have been accustomed to cite it as a line against which, in particular, the Canadian line needed a differential, suggests the pertinency of a brief his- torical statement. The "Sunset" line was opened for San Francisco traffic in 1883. At that time its officers believed that it could not successfully compete at equal rates with the older and well advertised all-rail lines. Accord- ingly, they undertook to carry a lower scale of rates. There was an im- mediate and earnest protest by the all-rail lines. Within five months, less than five months, the ''Sunset" line was obliged to adopt the all-rail schedule for California business and has since continuously maintained it, except at certain times when the violence of the all-sea competition temporarily drove the all-rail lines out of the business rather than involve their intermediate traffic. To maintain itself, it improved the service. I am stating nothing now but what all those which are competitors with the ''Sunset" line know. They have learned it by experience. It brought ship and car together, so that the/ transfer was as expeditious and as harmless to freight as the all-rail lines' transfer from car to car. It built large and fast steamships that reduced the sailing time between New York and New Orleans nearly one-half. It reduced grades, straightened its tracks, in one case shortening its line fifteen miles by bridging the Pecos River at enormous cost. It increased the speed of its trains and reduced the average time of crossing the Continent. It abolished over- charges which had been the rule. It promptly adjusted claims for loss and damage, previous delays in which had been a standing grievance with the California shipper. It earned the everlasting gratitude of the Cali- fornia shipper, and has since been fortunate in holding a fair share of its patronage, notwithstanding that during certain seasons climatic condi- tions are unfavorable, and that the all-rail lines now beat it by several days in the matter of time, the Canadian representative to the contrary notwithstanding, and are now and for several years have been equally prompt and efficient in their service in all respects. There was no such thing as an overcharge waiting six months before it was adjusted, or a loss and damage claim that was not paid promptly. Its Managers, the Managers of the "Sunset" line, seriously doubt if the line would have done nearly so well had it been allowed and continued to use a differential. They would have been apt to have folded their hands and trusted to a reduced rate to get the business. The other Gulf lines, those of the Texas & Pacific, and the Atchison, Topeka & Santa Fe, respectively, have not been operated with the vigor that has characterized the management of the "Sunset" line. As a con- sequence, their respective participation in the subject traffic has been in- considerable by comparison with the "Sunset's", and also by comparison with the more direct all-rail lines. Yet, equality as to rate has been the rule as between these several Gulf lines and as between them and the 102 all-rail lines. They did not exact or ask a differential because they did not get what they supposed to be a fair share of the traffic. Lest it be suggested from any source, to the minds of the Board, that the reason for the disparities between the other Gulf lines and the "Sun- set," in the volume of traffic handled by each, respectively, may be the result of restrictions placed upon the Texas & Pacific by the Southern Pacific west of El Paso, and west of Mojave in the case of the Atchison. Topeka & Santa Fe, we submit that these lines have been continuously operated under contracts with the Southern Pacific that gave the same rights west of El Paso and west of Mojave, respectively, in respect to rates and the movement of traffic, as have hleen a.ccorded the connections of the Southern Pacific, which, with it, form the "Sunset" line. Under these con- tracts they have had the right, so far as the Southern Pacific's consent or interference was concerned, to meet, at will, the rates charged by any other through line, including the Canadian line, competing for the same traffic, and the Southern Pacific was pbliged to share that rate on a pro- rata per mile basis of division. If the Southern Pacific did not, they had to go and take their chances before a Board of Arbitration as to who was right. That was the contract between both the Texas & Pacific and the Atchison, Topeka & Santa Fe. Notwithstanding, as we have said, they have elected to maintain equality of rates with the "Sunset" line, and with the all-rail lines. There must be some reason for this. Could there be adduced stronger testimony against the contention of the Canadian line that the physical characteristics pleaded by it furnish just grounds for its claim to a differential against any American line than this fact that these lines, carrying little or no business, comparatively speaking, and having these routes that I have described, still maintain equality of rates? Does it not illustrate what I have said would be the inevitable result if we introduced differentials into this business? All these Gulf lines present the same physical characteristics (some of them in an exaggerated degree), as are set forth as peculiar to the Canadian line. Undoubtedly they have equal rights with the Canadian line to have a share or a part of the traffic set apart for their exclusive enjoyment. By contrast the equities would be with the Texas & Pacific and "Santa Fe," rather than with the Canadian line, and we claim the same thing for the "Sunset" line. Having the same kind of a line, the same opportunities and the same necessities to obtain by fair means a reasonable share of traffic, a differential in their favor would operate to increase their respective takings in like manner and to the same extent that a differential in its favor would operate to increase the volume of traffic taken by the Canadian line. Having rights, equal to the right of the Canadian line, if the latter is, under all circumstances entitled to a differential, they are equally entitled to a differential. Why is it that the Canadian line has not yet demonstrated the fact that 103 it can make anything like the time in delivering to the east that the ''Sunset Route" makes? We ask whether the Canadian line has ever tried to make time equaling that of the "Sunset." Has it built large and fast steamships of latest models to reduce the time of the sea-service? Has it scheduled its trains with special regard to San Francisco service? Has it improved the method of transferring from ship to car, so as to do it in the minimum time, or has it continued to use slow and antiquated vessels which serve many intermediate ports with much consequent loss of time, instead of running through direct from Vancouver to San Francisco, or perfecting its arrangement to use a rail connection? Has it scheduled its trains first with regard to San Francisco business, or has it given trie preference to its way-traffic, and to its Oriental trade? It was opened more than ten years ago and has since been continuously operated. Has it improved its service? In that regard, has it done anything like what the American lines have done, and which was equally possible to it? Rather, has it not depended wholly upon lower rates to secure traffic? Its rail-and-water line is shorter than the "Sunset-Gulf" line by more than 200 miles. The ocean part of its line is less than half as long as the ocean part of the "Sunset-Gulf" line. Why, then, in the name of all that is creditable in railroad management, has it not demonstrated that it can excel the "Sunset-Gulf" line in despatch? Is it not reasonable to require 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 command a share of the San Francisco traffic against the all-rail lines at equal rates, is it not unreasonable to assume that the Canadian line cannot do likewise? If the Canadian line will not first try the means employed by the "Sunset" line, what measure of justness and fairness to the American lines, or to the "Sunset" line, in particular, or to the public, which is deeply inter- ested in securing efficient and adequate service, would there be in com- pensating the Canadian line for its remissness? Was not the Inter-State Commerce Commission right in saying, in the Passenger Differential case (page 9, paragraph 3) : "If the Canadian Pacific fairly can and fairly ought to make substantially the same time as is made by the American lines, then the fact that it does elect, at the present to use more time, ought not to weigh in its favor." Who will deny the soundness of this reasoning? Apply it to the relative conditions affecting the ability of the Canadian line and the "Sun- set" line, respectively, to perform equally good service, to make equally 1O4 good time by employment upon the part of both of the same skill and energy. Then, if the Board please, what weight should be given to the Canadian line's plea in this respect as against the "Sunset" line or any of the American lines? Should the shareholders of the Southern Pacific, or other roads in the "Sunset" line, after having taxed themselves heavily to faring the "Sunset" service to the maximum of efficiency, on that ac- count be subjected to another tax, an assessment which requires them to surrender a portion of their business to the Canadian line? The Inter- State Commission justly says: "A differential is but a device to partition traffic." To suffer the Canadian line to use a differential against the ''Sunset," is to turn traffic from 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 Pacific 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 Government 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 Commerce, shows that the value of the various aids received by the Canadian line from the Dominion Government 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. Van Home acknowl- edges that for some of their land they received $3.50 per acre, and a statement that I saw (and which I 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 to is in Report No. 847, 5ist 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 per cent. Manifestly, our poor Canadian friends ought to be further assisted; but ought they not to put their petition upon more substantial and creditable grounds? ARBITRATOR DAY You stated a moment ago that there was an annual dividend of three per cent guaranteed. By whom was it guaran- teed? MR. STUBBS It was guaranteed by the Government. I was under the impression it was a subsidy by the Government, but I find that the testimony of Sir Wm. C. Van Home is to the effect that the money was deposited by the Company with the Government to provide for that divi- dend, but I did not go deep enough into it to be certain as to that. I did not think it was Very important. There have been filed with you the proceedings of the Trans-Con- tinental Association, and of the Denver Meeting and various other docti- 105 ments, and if you examine those, you will find, as I have previously stated, that among the reasons urged why the Canadian line should have this differential, is the fact that they transported their goods through a foreign country under customs regulations. If the gentleman of the Canadian Pacific who presented its case here alluded to that, I did not hear it, but anticipating it, and knowing that the Board will find it in the record, 1 am persuaded to answer that point. In respect to the annoyances and delays arising from customs regU' lations incident to moving domestic traffic through a foreign country and alleged by the Canadian line as prejudicial to it, we submit that they 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 Revised Statutes of the United States, confers the privilege of transporta- tion through adjacent foreign territory of the products and manufactures of the United States from one port or place in the United States, to an- other port or place in the United States, under such rules as the Secretary of the Treasury may prescribe. This is the way it is done: When mer- chandise is offered for transportation from San Francisco to other places in the United States, via Canadian Pacific Railway, delivery is made to the Pacific Coast Steamship Company. A shipper's part manifest ("Ex- hibit H") is presented at the Custom House by the shipper, or his agent, and duly sworn to. From this is made the special coastwise manifest ("Exhibit I"), and Shipper's manifest ("Exhibit J"). Certified copies of these are forwarded to Vancouver and to the port of re-entry into the United States. These three forms of manifest are the only customs papers required, and they are made out by the brokers employed by the Cana- dian Pacific Railway without charge to the shippers. When the steamer arrives in Vancouver, the merchandise is transferred to the cars under supervision of a United States Inspector, who fastens the cars with United States Government locks and seals. This Inspector, detailed from the district of Puget Sound, is paid $3.50 per day, the United States being re-imbursed by the Canadian Pacific Railway. At the frontier (Morris- town, N. Y., or Portal, No. Dak.), the manifest accompanying the car is compared with that in the hands of the Inspector, and with the con- tents of the car, and if found to agree, the fastenings are removed, and the cars are thereafter free of customs control. No fees are paid. The brokers charges or salary, and the per diem of the Inspector are the onl\ expenses, and these the shipper has nothing to do with. In the move- ment, westbound, similar papers are prepared and presented at Morris- town, N. Y., and Portal, No. Dak., the cars proceeding under lock and seal to Vancouver, where the lading upon steamer is supervised by the Inspector stationed there. We contend that the deterrent effect of the necessary custom regula- tions upon the otherwise natural movement of traffic is immaterial. The io6 American lines suffer 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 Buffalo and points farther east or west under like customs regulations, in keen competition with the "Lake Shore" and "Pennsylvania" 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 10 o'clock A. M., October 14, 1898. Morning Session, October 14, 1898, 10 A. M. The meeting convened pursuant to adjournment. ARBITRATOR WASHBURN Mr. Stubbs, will you proceed with your argument? MR. STUBBS Mr. Chairman, and Gentlemen, Members of the Board: 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. In answer to a question by Arbitrator Day, at the morning session yesterday, the Canadian Pacific representative answered, "No, 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 are 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. But they are out of San Fran- cisco business; they do not claim to be San Francisco lines; they do not work for San Francisco business. In other words, they have made a trade." TO; He who affirms must prove. There is no trade; there never has been a trade between the Northern Pacific and the Great Northern on the one side, and the other San Francisco lines on the other side. They do work for San Francisco business. The Northern Pacific is in the trade and I may say daily takes business to and from San Francisco, using, however, for the most part, its all-rail line. The Great Northern takes business for San Francisco in connection with its ocean line from Seattle. It matters not how much they take, they are in it. But, assuming that all that is said by the Canadian line is true, how does it bear on this case further than to accentuate the position of the American lines, 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 differential, because of consequences, 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 differential had not been used in favor of the so-called weaker Cal- ifornia lines, let me repeat that I am talking to experts in the transporta- tion business. Put a differential of 10 per cent on the Canadian line; put it upon the Great Northern line; put it upon the Northern Pacific line, and I assert that you cannot refrain from putting it upon the Oregon Railroad & Navigation Co. and Oregon Short Line. The Kansas City gateway, the Omaha gateway and the Minneapolis gateway must be upon an equality with respect to this business. No one would stand it. No line would stand any disparity between those gateways, and, especially 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 "Burlington," the "Rio Grande," the Missouri Pacific and the "Rock Island" connections, to enter this territory with, a 10 per cent differential and what would be left for the line, the direct all-rail line via Ogden? Where would the "Santa Fe" be? Where would the Texas & Pacific be? Where would this much vaunted "Sunset Route" be? Is it not apparent to every practical man that there would be no differential; that there could be no differential; that dead level of equality of rates would necessarily 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 reasonable 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 stepped in and said "Stop!" We would come out at the same hole we w r ent in at just as in the case of the great fight be- io8 tween the "Atchison" and the other lines in 1886 dead level of equality of rates. Reverting again to the comparison between the "Sunset Route" and the Canadian line: the "Sunset Route" competes in this New England territory, the great manufacturing center for cotton piece goods, do- mestics, boots and shoes, nails and many other commodities with which you are all familiar. It competes with the all-rail lines on a dead level equality of rates. The Canadian line takes up goods at Boston, or at any of these New England points or any of the interior New York points, in cars; transports them without breaking bulk to Vancouver, transfers them from car to ship and delivers them at San Francisco. The "Sunset" line and all the Gulf lines take these goods from Boston, as a rule, and put them aboard of the steamers of the Metropolitan Steamship Company; they are delivered by that company on their pier, in New York City; they are then lightered to the Mallory Steamship pier or to the Morgan Steamship pier, reloaded into the vessels of the Gulf lines, transported to New Orleans or to Galveston, then transferred from vessel to car, and carried to San Francisco. 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. I cannot see what the cutting of rates, or the maintenance of rates, between these lines currently, has to do with this proceeding. But it was deemed to be necessary by the Canadian people to refer to the "Sunset" line invidiously, I think, in order to account for the share of the traffic which it takes, which has nothing whatever to do with this controversy according to our construc- tion of the submission. The advocate of the Canadian line says: "Now, in connection with accumulating 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 ship- 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 Brother Kerr forgot that on eastbound business his steamer line is the initial line. I have at hand a ready illustration of evasion of classification upon the part of the Canadian line, but I do not think it is fitting to introduce it "here. He proceeds: 109 ''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 & Navigation Co. must use the Southern Pacific tracks. Being in this position, they are enabled to influence business in various ways to the Sunset line, in which they have been very successful." (Thank him for that) ''Merchants are naturally chary of unnecessarily antagonizing 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, 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 proves that their circumstances are so entirely different from the Canadian Pacific that they are npt entitled to differential rates as against all-rail lines." I am not going to take the time of the Board in disputing such propo- 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 tremendous leverage by reason of having hedged California in. By lease and by ownership the Southern Pacific controls about 3,000 miles of railroad in the State of California. Not 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 Pacific Company. In nearly every case in constructing these roads they crossed virgin soil tenanted only by the coyote and jack rabbit; they opened those valleys; they discounted the future by many years; they 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. Now, again, returning to the question of the advantage to be derived by these Gulf lines, the "Sunset" line in particular, by under-classifica- tion of freight. From October, 1889, to January first, 1892, there was an inspection service at San Francisco 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 paid by the Association, they acted in complete subordination and under the entire, sole direction of the officers of the Association. From April first, 1893, to April 3Oth, 1897, under the Trans-Continental Freight Rate Commit- tee, this system of inspection was employed for all the lines except the Canadian Pacific, Northern Pacific and Great Northern. From June first, ^897, to date, the Trans-Continental Freight Bureau has directed and no controlled inspection for all the lines except the Canadian Pacific. De- cember 1 5th, 1897, less than a year ago, the Canadian Pacific was brought into the inspection. I do not think that has anything to do with this case, notwithstanding. Resuming the argument where it was left yesterday, we ask what answer can be made to our showing in behalf of the American broken lines? Is it that they have alternative all-rail lines? There must be some answer to that question. Is it that they have alternative all-rail lines, that they elect to use them and thereby some of them are enabled to carry a share of the traffic with which they ought to be satisfied? To that supposititious question, our answer has been fore-shadowed in part. It is that these American part water and part rail lines are through lines, de facto and de jure, open to the public use for transportation of freight between San Francisco and places on and east of the Missouri River line, as the Canadian line is open to such use; that they present physical characteristics differing so little from those presented by the Canadian line that they are equally available with that line; that their respective capacities to do that business are equal to those of the Canadian line; that the obligations of their respective Managers to secure all the business tributary to them or that can be made so at remunerative rates under reasonable conditions, are quite as binding as the similar obligations of the Managers of the Canadian line; that their respective obligations to connections and to their competitors are neither greater nor less than the obligations of the Canadian line to its connections and to its com- petitors ; that their respective rights to share the San Francisco carrying trade are equal to and as sacred and inviolable as the right of the Cana- dian line; that each of these lines is a unit for this comparison with the Canadian line as in like manner and degree the Canadian line is a unit for comparison with the American lines; that they cannot be divided into their integral parts, their several constituent roads, without destroying the line, just as the Canadian line can- not be divided into its integral parts, its several constituent roads without its destruction as a line. To say, that because the Union Pacific road is a part of an all-rail line between New York and San Francisco, or between Chicago and San Francisco, that it cannot also be part of an independent part water and part rail line, New York or Chicago to San Francisco, is equivalent to saying, that because the New York Central or the "West Shore" is part of an all-rail line, New York to San Francisco, 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 & Northwestern, 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. I J 1 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 \\Jiich carries a more or less considerable share of that business, that fact ca mot be fairly used against the right of the mixed water and rail line as a unit to participate 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 completely cut off from any participation in the business. For example: Between Chicago and Atlantic Coast cities, the Baltimore & Ohio Railroad is a recognized standard all-rail line over which the standard rates prevail. It 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 Francisco traffic? Cer- tainly not the Canadian Pacific. If 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. All of its alleged disabilities which were dwelt upon by our adver- sary arise from its use of this broken line. Why does it not use the all-rail line? In that case these troubles would disappear in a moment. If it elects to use a mixed water-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 money 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 any consideration in the way 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 advantage, 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 Vancouver instead of the rail line from Sumas, because there is an advantage in it. 112 Now, on the other hand, if the Northern Pacific elects to use the all-rail line from Portland against the ocean line trom Seattle, or from Portland, the same choice being open to the Canadian line, does it by so doing give the Canadian line just grounds for demanding a differential against it or for saying that it ought to be satisfied with what it gets because it uses an all-rail line? Again: The Canadian line works for the North Pacific Coast business; the business of Seattle, Tacoma and of Portland with all this blue line territory (indicating on map), upon a strict equality of rates with the Great Northern, the Northern Pacific, the Oregon Railroad & Navigation Company, and the Oregon Short Line. Permit some repetition as we wish this point to be understood : From and to each point in all of this blue line territory east of the Missouri River line, the Canadian Pacific, the Great Northern line and the North- ern Pacific line, the Omaha lines and the Kansas City lines, respectively, via Granger and Pocatello, and via Ogden and Pocatello, work Portland business upon a strict equality of rates. This recognizes and establishes equality of rates as a principle between these interested lines for the rail service east of Portland. Now, then, as we have shown that the identical roads and facilities between Portland and San Francisco are alike open upon equal terms to all the roads terminating on the North Pacific Coast; to the Great Northern, the Northern Pacific, the Oregon Railroad & Navigation 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 not manifest that they are upon the same equality with respect to San Francisco business, as subsists between them in respect 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 between them in respect to San Francisco 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 Northern 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 Francisco 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 Northern Pacific connection for Portland business, and does work upon an equality of rate with all the North 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 Francisco business? I 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 should 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 (772 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 fully 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. From New York City its line is longer than the Great Northern and Northern Pacific by 163 miles and 46 miles, respectively. From Philadelphia its line is 229 miles longer than the Northern Pacific line and 346 miles longer than the Great Northern's line, but this difference would be greatly reduced by the use of its line via Minneapolis. From Baltimore its line is 385 miles longer than the Northern Pacific's line and 482 miles longer than the Great Northern's line. These differences where they show against the Canadian line, would almost disappear if it would use its Minneapolis and "Soo" line route, using the identical connections for the business that the Great Northern and Northern Pacific are obliged to use. Its percentage of the entire haul ranges from 70 per cent to 63 per cent, while the Great Northern ranges from 48 to 45 per cent and the Northern Pacific from 50 to 47 per cent. Two factors of more or less relative advantage to the parties to this contention, or parties interested in the differential question are revealed by these comparisons: FIRST: the percentage of the entire haul performed by the interested parties. SECOND: 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 matter 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: From Portland, Me., the Canadian line has the shortest line against the Northern Pacific, and besides, would receive, upon a pro-rata per mile basis of divisions, 37 per cent more of the through rate than the Northern Pacific, with which to satisfy its connections. Taking 100 cents as the rate unit, it would have, in this case, 27 cents more than the Northern Pacific would have with wthich to pay arbitraries or to persuade connections to give it the preference as against the Northern Pacific. Take, as another illustration, Baltimore. These are extremes that I give you. The Northern 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 New 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 Northern Pacific would receive; or, to state it in another form, out of the through rate of 100 cents, Baltimore to San Francisco, the Canadian line would receive 13 cents more than the Northern Pacific, and would be by that much better able to satisfy its connections. If, on the eastern side, the Canadian line can go down H5 into Tennessee and Arkansas, seeking business for which it has to pay, out of the short-line through rate to San Francisco, the published rates of connecting railroads for the haul of over 1,000 miles to Minneapolis, why can it not use the thousand miles of railroad necessary to connect it with San Francisco on the western side, no matter what the arbitrary is of the Northern Pacific? What becomes of its objection to using the Northern Pacific road from Seattle to Portland, because it cannot afford to? If the Canadian line elects not to do so, but for any reason chooses the steamship connection, in preference to the railroad connection, does it not thereby create whatever disability, if any, is attached to that choice? Is it under such circumstances entitled to a rate advantage over the Northern Pacific, the Great Northern, and others? It takes business from Tullahoma, and from Obion, Tenn., and from Helena, Ark., takes it through up over this line; (indicating on map) pulls it away from the Kansas City, more direct route. We think these illustrations prove conclusively that the Canadian Pacific has, and can work an all-rail line to and from San Francisco, quite as advantageously as the Great Northern or Northern Pacific; that it has the same alternative in the use of an all-rail line as any of the mixed all-rail and rail-and-water lines possess 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. From Boston, the Canadian line is longer than the Texas & Pacific line by 339 miles and shorter than the "Sunset" line by 21 miles (all- rail lines I am speaking of now). From New York the Canadian line is longer than the Texas & Pacific line by 446 miles and longer than the "Sunset" line by 45 miles. ARBITRATOR DAY Are you speaking of all-rail, now? MR. STUBBS All-rail lines altogether, now. From Philadelphia, the Canadian line is longer than the Texas & Pacific line by 673 miles and 247 miles longer than the "Sunset" line. From Baltimore 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 -New York, from Philadelphia and from Baltimore, in the distances via the Canadian line and the Texas & Pacific n6 line would, as I have heretofore explained with respect to the comparison with the Great Northern and Northern Pacific, be very much reduced if the Canadian line would use its Minneapolis route; use precisely the same line the Great Northern does, and which in part is used by the Texas & Pacific. The Texas & Pacific 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. R. to New Orleans. The highest percentage of haul is: for the Canadian line, 70 per cent, the Texas & 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 *tfie "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. Take another example to illustrate the extreme in which difference in distance is disregarded 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 is via Chicago, Omaha, and the Union and Central Pacific. Adopting the Grand Trunk route from 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 3511 " " 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" 44io miles " Boston, via Northern Pacific 43^7 " " 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 911 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 between all lines, whether all-rail or mixed rail-and-water, has 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- 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 equality 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 equality of rates as the only reasonable and just rule under all the circumstances, to govern the relations of their respective rates for San Francisco traffic with this eastern territory, regardless of the charac- teristics of their respective lines, whether all-rail or mixed rail-and-water, whether equal in length or widely differing, whether rich in local traffic or poor, 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, by 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 we have developed, promoted and sustained (and which we must without its assist- ance, continue to promote and sustain), as it can do upon equal 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 United States it should be content to operate upon 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 it had made out a case but not this case. It has been urged in support of the contention of the Canadian line that it is customary among rail carriers to accord differentials to so-called weaker lines, meaning carriers partly by water and partly by rail. For the purpose of reference and illustration we beg to file with the Board a statement of all the freight differentials now in effect through- put 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". But, in order to make up any deficiency in that respect I also beg leave to file Central Freight Association Cir- cular, dated Chicago, November 26, 1897, publishing rates to and from west bank Lake Michigan, which are not shown in Secretary Moseley's statement. The latter is marked "Exhibit K-2". I also desire to file with the Board a statement of the existing freight differentials in the territory of the Joint Traffic Association, as shown by its records furnished by Mr. George R. Blanchard, Commissioner. It is scheduled as "Exhibit K-3". In respect to these customs the Canadian Pacific representative says: "Later, I propose to show the great number in extant and the universal custom, law and rule, prevailing throughout 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. I will go into the detail of this matter later on." He did go into the detail of it. Now, under the common law, the common law of England which has spread throughout that Empire over all its Provinces and Colonies and because of its wisdom has been adopted by almost every State in this American Union, custom is limited. Customs are territorial. Custom must 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 of 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 and have never been used by the American lines between themselves for San Francisco business, with the single exception of the Northern Pacific to Minneapolis, which was dropped very suddenly, although the respec- tive physical characteristics of these lines differ widely, presenting every feature of relative advantage and disadvantage that enters into the alleged reasons for the use of differentials in other territories. They are not used in the Southeastern Mississippi territory on business to and from Ohio and Mississippi River crossings, from Cincinnati to New Orleans, where the opportunities for mixed rail-and-water lines are frequent. They are not used for San Francisco traffic with Montana, Utah and Colorado, as between the all-rail lines and the mixed water-and-rail lines. There is much valuable business in Montana, Colorado and Utah, com- peted for by these direct Central Pacific, Union Pacific, Denver & Rio Grande lines and by the Oregon Railroad & Navigation Co. and Oregon Short Line, and for Montana by the Great Northern and the Northern Pacific, as well as the Oregon Railroad & Navigation Co. and Oregon Short Line, but we all work on a dead level equality of rates. In the I2O use of differentials, as in the classification of freight, in the relation of the rate charged 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 Official 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-Commissioners, Boards of Managers, Boards 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 the carriers interested, that their use should be recognized and adopted as of right, not expediency 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 question 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 expediency, that it or they may participate in the traffic, its existence always depends upon agreement between the interested parties. In the case at bar, the essential factor of consent, agreement, is absent. The American lines deny the right of the Cana- dian line to participate in San Francisco business unless it can do so upon equality of rate with them. They refuse to concede the Canadian line a differential as a matter of expediency, and are here to try the ques- tion of the Canadian line's right to share the traffic if a differential is necessary to enable it to do so. We are not here to try the question whether it is expedient to give 'the Canadian line a differential in order that it may share in the traffic. That is not the question submitted for 121 determination by this Board. Therefore, we submit that the absence of consent, or agreement, nullifies the customs of other lines 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 Boston and Providence, via rail-and-ocean, are used, alike, by seven different lines to New 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 New York City by 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 Gulf 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 Utah points, via Atlantic and Gulf ports, apply by all the several lines, whether through New 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 New York to Colorado, and also a part of the mixed rail-and-water lines via New Orleans and via Galveston from New York to Colorado; the latter taking a differential against the former. The Chicago, Rock Island & Pacific, and the Aitchi- son, Topeka & Santa Fe, respectively, participate in both the all-rail lines, via Chicago, and the mixed water-and-rail lines via New Orleans and via Galveston, from New York to Colorado and Utah, the latter being so-called differential lines. Again, the lake-and-rail differential rates to North Pacific Coast Terminals apply through Lake Huron 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 Superior. That is to say, they apply, alike, over all 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 has rail connections making through 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 Oregon Short Line, the Union Pacific, over the Ogden, Central Pacific and what is called the "Shasta Route" to Portland; the "Burlington" and the "Rio Grande", 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 Gladstone, or in connection with the all-rail lines from Chicago and Milwaukee all have the same rate; there is no inequality. In some 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 Seaboard, and of the lake-and-rail differ- entials between North Pacific Coast points, and the territory east and south of the lake ports, etc., but it is not true of the differentials between western points and Atlantic Seaboard territory and the South-eastern territory, in which cases the carriers relieve the shipper of the marine risk and give him lower than the standard all-rail rates. Customs that differ in these important 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 Great Northern line's contention or position 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, ast- bound, only; that is, inward to the United States, that is conducted by the Pacific Mail Steamship Company via the Port of San Francisco, the Occidental & Oriental Steamship Company via the Port of San Fran- cisco, the Great Northern Steamship Company, or rather the Nippon Yusen Kaisha Company the English of which is the Japan Mail Steam- ship Company in connection with the Great Northern, the Northern Pacific Steamship Company, in connection with the Northern Pacific and the Canadian line's Steamers through the Port of Vancouver. 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 Good Hope, a\nd have never been able to take half the tonnage that goes into the United States and Canada; even with the multiplication of lines of late years, we have not succeeded in diverting all this tonnage to the Pacific I2 3 ports. Necessarily, the handling of these rates must be left with the agencies at Hong Kong and Yokohama and Nagasaki and other ports there. All we have to do, that is so far as the roads which I am con- nected with are concerned, is to accept what rates are brought to us, to honor their bills of lading. This contract that is referre'd to is a contract between the steamship lines, except that the Central Pacific and Union Pacific and its connections, the Atchison, Topeka & Santa Fe, etc., are obliged to accept any rate that is found necessary to take that business. They are not parties to it. They are not signatory parties to the contract. Speaking for the lines via San Francisco, I never was consulted as to whether that contract should be made or not. I received a copy of the contract after it had been made. It originated exactly as most differen- tials are originated by the laying" on of a line which had to be advertised, which had no business, but which was not particularly weak in any other respect, as compared with the older lines. That line said: "Give me some of this business or I will knock down your rates." The effect of that kind of competition was to bring the silk rates from $8.00 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 Steamship Company 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 stronger 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 responsible 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- wards put on a line of steamers, or to state it more correctly, afterwards hired 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 Northern 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 keep the business and 124 wanted to get reasonable rates out of it. Later, as I hav^ said, when the Japan Mail Steamship Company laid on its steamer line, it followed in the footsteps of the Canadian Pacific and the Northern Pacific, began to cut rates. Meantime the Northern Pacific, having 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, Northern 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 effective, it was necessary to bring the Japan Mail Steam- ship 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. STUBBS 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. Van Buren was 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 traffic, 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 Francisco 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 Commission, I did not know where else to get it. In "Exhibit K" will be found a statement that the rates between San Francisco and points on and east of the Missouri River via Canadian Pacific Railway and Pacific Coast Steamship Co. are 10 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 Francisco rates. The American lines have not conceded the Canadian Pacific a 10 per cent differential, nor any differentials whatsoever since 1892. They have not a differential to-day. They may make a difference in rates, but it is not a differential. 125 A differential requires an agreement, consent. As we have already stated the Inter-state Commerce Commission has repeatedly charac- terized the purpose 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 depends upon an agreement between interested carriers. It follows then that an agree- ment between two or more carriers that one or more of them shall use differentials against the others in competing for a given traffic, 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 questionable practice in this respect of other lines in other territories can create a rule, an equitable rule to be followed by 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 must 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 Commerce law. Nor is it open to question that such pools are devices pure 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 commerce between the States, public opinion seems to have crystallized against them. A pool of freights would be far less obnoxious to the shipping 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 freight money after he has paid it, free to use the line he prefers to ship his goods over, without the constraint imposed by an unfavorable differ- ence in rates. If the pooling 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? For 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 are 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 sihall 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 Pacific 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 cannot 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 Pacific representative and stand before this Board on that. Has he given you one example of ineffable cheek on the part 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 competitors? The case is analogous to the case which I have lately illustrated to the 127 North Pacific Coast. Think of it. In this case he comes in and says, we alone want a differential against the American lines on San Francisco business because differentials are made to all these lake ports in connec- tion with all the lake lines to the North Pacific Coast. He admits enjoy- ing the same rate that every other line works on in that territory; he admits that they work upon an equality of rates to the North Pacific Coast by all-rail; he admits that they work upon an equality of rates to the North Pacific Coast by lake-and-rail. THIRD, getting back to the question of custom, the nature of the differential is not uniform as between different territories. Uniformity is essential as well as age to make a custom valid as a precedent. In some respects it is in whole or in part compensatory for the marine risk to which the shipper is subjected. In other cases, it is independent of or super-added to the assumption of this risk by the carrier. FOURTH, there is a reasonable assumption that the differential is repugnant to the spirit of our laws and obnoxious to public sentiment. Returning to the doubtful lawfulness of pools which, if judicially determined, might include differentials because the latter, like the former, are essentially a device for the distribution of traffic between competing carriers, we do not wish to be understood as acknowledging that the legislation which forbids pools in which there is reason to fear differ- entials may be included, if the issue is made and the question judicially determined, is founded on right principles, nor that public sentiment behind that legislation grew from dispassionate and reasonable inquiry into the nature of and effect upon the public interest of lawful pools. On the contrary, we believe that pools between railroads which could be enforced by law, would be no less beneficial to and productive of the public interest, than they would be to the carriers; but we must take conditions as we find them. The point is, pools being forbidden by law, if differentials are essentially devices to accomplish the same end, and are objectionable to the shipping public, can it be said that any line is entitled to a differential? If the question submitted to this Board were, "Is the Canadian line entitled to a pool of freight with the American lines?" is there any doubt that the Board would promptly answer in the negative, if on no other ground, upon 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 undisputed upon other grounds, would not the fact that it is in its essence a device to distribute traffic between competing carriers inject a fatal flaw? The American lines protest against the use of differentials as a means of removing or equalizing, as the common phrase is, relative transport- ation disabilities, on the ground that equalization, merely, is not their real purpose. Their real object is to divert traffic from its natural to an 128 unnatural channel. To accomplish this end, there is, and must always be, a surplus of benefit or advantage over and above the level of equality of service, to win the shipper from his accustomed and otherwise preferred line. They are, therefore, designed to give the so-called weaker lines a substantial though 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 apparent from the occasion of their use. The line which demands a differential from its competitors, by that demand confesses that its route is one that the 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 traffic, 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. Between 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 129 territories, we all know that they are not maintained, except, perhaps, during a period when the pressure of tonnage upon all lines is equal to or above their capacity. When tonnage is slack, when the boys are on the streets hustling for business, to get something to fill their cars, away goes the differential. Those are the conditions that exist between Chi- cago and New York 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 New York for the purpose of maintaining rates. Mr. George R. Blanchard, who, by reason of his long incumbency of the Chairmanship of the Central Traffic Association, and the Joint Traffic Association, respectively, within whose territories the differential is in most common use, together with his great ability, qualifies 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 away from the first lines, or too little." I confidentially submit that expression from Mr. 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 Francisco than to other California and Pacific Coast common 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, Stocktqn 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 imma- terial difference in cost as compared with San Francisco's cost in using the same routes. When the rail lines were opened, connecting Portland, Seattle and Tacoma, and Los Angeles and San Diego, directly with eastern cities, the same principle of equality 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 ination that we regard as unjust to the common points and as a disturber of several commercial conditions. Moreover, this discrimination is not invited by the merchants of San Francisco. We object to the use of a differential by the Canadian line, because it has no right to preference over any of the American lines, no superior right, no higher title to either a fixed and determined share of the San Francisco 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 equit- able and satisfactory proportion, 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 equality, 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 of rate equality? In order to recognize the claim of the Canadian line in this case, we must admit that the Dominion Government of Canada has created a superior being in respect to the domestic commerce of the United States, than the beings created by the United States Government, and the several State Governments; 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 question submitted as from the beginning, because: FIRST, this is the first time that the question of the right or title to a differential of one line against others 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 dispassionate and whose decision would be given without fear of loss or hope of gain, after a patient hear- ing of both sides; the first time that the question has been submitted 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 protested against it, and submitted to it only under the con- straint of fear that the value of their San Francisco business and 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 of hope of gain, if the differential was granted, and the fear of almost incalculable loss were it denied, was: "Is it expedient to give to the Canadian 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. Under the second head, we submit that the American lines consented to the freight differentials enjoyed by the Canadian line previous to 1893, at the same time under same conditions, and for similar reasons, that they consented to the passenger differentials so lately investigated and pronounced against by the Inter-state Commerce Commission. Here is what the Commission says under that head: "The first Trans-Continental Association was formed in 1886." (In that respect they have made a mistake. It was a re-organization in 1888, following the freight war with the Atchison people.) ''Although the evidence is not very clear, we are inclined to think that the Canadian Pacific was from the first a member of that Association." (It was; from the first it was a member of the re-organized Association.) "Mr. Eustis, who was at that time General Passenger Agent of the Chicago, Burling- ton & Quincy Railroad, and who in that capacity participated in the discussions which led to the formation of that Association, was of the opinion that the Canadian Pacific only came into it upon condition that it should be allowed the differential which it then had upon Pacific Coast business. The parties who represented the Canadian Pacific in these negotiations were not before us, but we are inclined to think that the recollection of Mr. Eustis is substantially correct." "The Canadian line was insisting that it was entitled to this differ- ential. It had apparently for two years actually enjoyed it." (That is a mistake, as I showed you yesterday.) "It may be doubted whether it could have obtained by that route and at that time any considerable part of the business without it, and it is hardly probable that it would consent to become a member of an Association with power to fix its rates, every other member of which would be opposed to a differential unless it was understood either expressly or tacitly that it should continue to enjoy one. This, however, was against the earnest protest of the American lines, which had always insisted that the differential was unjust and only consented to it as a matter of expediency." The speaker conducted the preliminary negotiations with the Cana- dian Pacific Railway Company, visiting Montreal for that purpose, and he avers and Mr. George Olds, the General Traffic Manager at that time will not deny, that from the very start, the Canadian line demanded either a guarantee of earnings, or its equivalent, and upon that condition and that only, sent its representative to the meeting of the Trans-Con- tinental Association. The conclusions of the Inter-state Commerce Com- mission in this respect are undeniably correct, as will further appear from the records of the Trans-Continental Association. We quote from pro- ceedings of Trans-Continental Association at Chicago, in July, 1889, only seven months after the agreement granting to the Canadian line its first differential and while the whole matter was fresh in the minds of every one connected with it. At this meeting Mr. Stubbs stated his views, and no one will deny that they fairly represented the views of all the American lines, in the following language; I do not think there is any one will deny that Mr. Stubbs on that occasion was the spokesman for the American lines: "I am not unwilling to place my views on record, regarding the position that lines, associated together as we are, should occupy in respect to this business, and my views are founded on the prac- tice that we have pursued in the past, and that is, that each line should take and be satisfied with only what it can fairly secure upon an absolute equality of rate. The reasons for withdrawing from what had been the rule in the Trans-Continental Association, were peculiar when we gave or agreed to give the Canadian Pacific differential rates. Not only since the reorganization of this Asso- ciation, but previous, our Association had been made up of lines that presented varied characteristics in respect to their taking power. There were lines in the Association that labored under, with respect to some business, greater disadvantages than the Canadian Pacific labored under, Lines who felt themselves en- titled to a differential rate, and yet the opinion of the Association was decidedly against it, and we had, up to the time that the Canadian Pacific was invited to join the Association, set our faces against it. There is no need of my recapitulating the circum- stances under which the. Trans-Continental Association was reor- ganized. Every one here understands just as well as I do the conditions then existing that moved us, and influenced us, to offer the Canadian Pacific a differential rate. The conditions have changed, very materially. I believe they ought to take their posi- tion in this Association just as the other lines do, be content with what they can take on an equality rate. In respect to certain territory they have a better line than some others. Their line has been thoroughly advertised. Prejudice against that line, owing to the idea that it was a bad winter line, has all been dissipated. The prejudice that some of us worked against it very materially, because it was a foreign line, has all been removed, if it ever existed. It has demonstrated its ability to take freight between the Pacific coast and Atlantic seaboard in time equal to the best time made by any of the other lines. They have demonstrated that they have as good a winter line as any other line. They are 133 as free from the casualties that interrupt and impede transporta- tion of any kind of freight, that great prejudice in the minds of shippers, as any of the rest of us. They have some advantages that the rest of us cannot enjoy." (Trans-Continental Association Proceedings, Chicago, July 23rd, 1889, pages 96 and 97.) And again, from the Proceedings of the Trans-Continental Associa- tion, March i8th, 1890; Mr. C. S. Mellen, then representing the Union Pacific Railway, now President of the Northern Pacific Railway Com- pany, speaking of the Canadian Pacific differentials, says: "I believe they are only a necessity, so long as a line shows itself weak and as a bar to demoralization. It is a stand and deliver policy and we deliver the differentials to prevent worse trouble." The fact that on former occasions the American lines submitted to what was believed by them to be an unjust and unreasonable demand upon the part of the Canadian line should have no weight with this Board in determining its present title or right to the advantage it has forced the American lines to give it in the past. As well might it be claimed that a man who, through weakness of judgment, fear of bodily harm, or of damage to his name or fortune, once having yielded to the unjust demands of another person or a superior power, has thereby established a precedent which, regardless of his personal or property rights, can be pleaded before a Court as a reason why he should continue to submit to the exaction. We repeat that the American lines have heretofore yielded to the demands of the Canadian line under protest and through fear that unless they did so their property and their business would be destroyed. They have never admitted the Canadian line's title or right to what it claimed or what has been surrendered to it. They have not only denied it, but have sought, and were seeking at the time the reference of the question to this Board was proposed and accepted, through the law- making power, the administrators of the law, through Congress, the Treasury Department and the Inter-state Commerce Commission, to restrain the Canadian line from all interference with the business which is the subject of this controversy. Therefore, we claim that the question submitted, the one we are discussing is an original question and should come before this Board de novo; that the Canadian line has the affirmative of the question and should be required to show its title to the claim for a differential regardless of the past; that it should be re- quired to establish to the satisfaction of this Board that its right to engage in this business is paramount to the right of the American lines, or, in view of the unsubstantial nature of its showing in respect to its 134 disability, as compared with conditions subsisting with the American lines, if such a paramount right is not inherent with the Canadian line, upon what ground can it establish its claim to an artificial advantage over the American lines? While we contend that constraint was the dominant factor influencing the American lines to make the original concession to the Canadian line, there were subordinate considerations which assisted in determining their choice between the expedient of a differential to that line and the alternative of unrestrained, unregulated competition, the effects of which were so much feared. These consider- ations were: FIRST, that the Canadian line was unknown to American shippers. It had not been advertised. SECOND, it was believed that its location through the extreme northern part of the continent would make it no thoroughfare through the winter, and THIRD, that its being a foreign line, having to carry domestic traffic under customs regulations, would prejudice it very much in the minds of American shippers. FOURTH, its own road, or roads under its control, did not pene- trate the United States at any point. FIFTH, it had no physical connection with American roads at Sumas, hence could not make an all-rail line. All traffic from the northwest and the States south of the Great Lakes and west of the Allegheny Mountains seeking its line, had to move via Winnipeg. The statement of Mr. Stubbs at the Trans-Continental Association meeting held at Chicago, July, 1889, made in the presence, and as we have said, while the recollection of the representatives of all parties was vivid and accurate, for only seven months had elapsed since the arrange- ment with the Canadian line had become effective, proves that the first, second and third of the considerations cited, were those which in point of secondary influence induced the American lines to experiment with the differentials rather than encounter a disastrous rate war. Speaking to the proposition to reduce the differentials then in use by the Canadian Line, Mr. Stubbs said and here I repeat in part what I have just quoted, but I do it to .accentuate this point: "Every one here understands just as well as I do the con- ditions then" (seven months previous) "existing that moved us, and influenced us, to offer the Canadian Pacific a differential rate. The conditions have changed, very materially. I believe they ought to take their position in this Association just as the other lines do, be content with what they can take on an equality rate. In respect to certain territory (New England) they have a better line than some others. Their line has been thoroughly 135 advertised. Prejudice against that line, owing to the idea that it was a bad winter line, has all been dissipated. The prejudice that some of us worked against it very materially, because it was a foreign line, has all been removed, if it ever existed." The value of the statement quoted as testimony in this connec- tion, consists not alone in the time it was made, but in the circum- stance that it was made during a discussion of the Canadian line's differential among ourselves; in the closet, before representatives of both sides, who were as familiar as the speaker was with all the facts and circumstances involved in the discussion and could not be deceived by mis-statement men who were experts in transportation and had for a long time dealt with each other; men who not only understood the spoken word, but could also discern the unspoken thought behind it. Since that time the Canadian line has obtained control of the Minne- apolis, St. Paul & Sault Ste. Marie Railway, has extended it from Min- neapolis to a junction with the Canadian Pacific Railway at Portal, and built a branch down from Pasqua, to meet it, thus shortening its route from Minneapolis to San Francisco by about 150 miles. The effect of this has been to reverse the relative length of the lines between Minne- apolis and San Francisco of the Canadian line, via Vancouver, and the Northern Pacific, via Seattle. Then the Canadian line was the longer by about 91 miles. The acquisition or control of the Sault Ste. Marie line bettered its relations to the traffic between San Francisco and all the Northwestern States, and the States south of the Great 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 upon an equality with the Northern Pacific in respect 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 Mission Junction, B. C, to Sumas, made a traffic agreement with the Seattle & Interna- tional Ry., thus practically making physical connection with the rails of the Northern Pacific over which and its connections, it can reach all Washington, Oregon and California by rail. Then it could reach Puget Sound points, Portland and San Francisco by water only, from Vancouver. 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 relieves the shipper of all trouble arising therefrom. It has proven to be a good winter line, having never been obstructed by snow, while in 1889 the lines via Ogden the short line were closed for weeks by a snow blockade in the Sierra Nevadas. In 1897 the "Sunset" line was stopped for several weeks by yellow fever. 136 In 1898 it is partially 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 circumstance 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 differentials 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? 137 The Canadian Pacific was not created for the purpose of doing San Francisco business. It is the creature of a foreign state. Its sovereign could confer upon it no title, right or privilege, within the borders of the United States, or with respect to the domestic commerce 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 communi- cation between the different parts of the Dominion, 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 political and mili- tary enterprise, its construction was and its operation is not amicable toward the United States Government. In war it is as powerful an engine of offense or defense as in peace it is a potential agent in develop- ing and promoting the commercial and industrial resources of the Nation. In war it is a menace to the American Nation; in peace its primary object is to develop the resources of Canada and to promote British 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 United States. It does not employ, to any considerable extent, American labor. No considerable part of its line is taxable in the United States. Did the Canadian line make, build, extend or sup- port the trade of San Francisco and thus acquire a right to possess and enjoy it? It has had no part in creating San Francisco's trade. It in no sense contributes to it; does not promote nor sustain it. On the contrary, the purpose and effect of its operation and construction was and has been to divert from and diminish the trade of San Francisco. One 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 Francisco, a very considerable amount of Oriental trade that formerly passed outward and inward through the Golden Gate. 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 opened no new territory to the San Fran- 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 38 are creatures of the United 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 people of this American Union 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 people. 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 United States. Again, the American lines have, for the most part, created a trade for San Francisco. They have developed, promoted and sustained it. The duty of sustaining it, of further promoting and increasing it, also falls upon and will forever remain with the American lines without aid or comfort from our Canadian friends. In a broad sense, carriers, and especially railroads, may be classed among the most productive industries, because they are among the most efficient agents of productive and manufacturing industries. On the American continent they have superseded the pioneer, have pushed beyond the borders of civilization out into the wilderness and the desert; they have been followed, not preceded, by the husbandman. Farm houses, villages, towns and cities with their varied manufacturing indus- tries, have sprung up in their tracks. This is peculiarly true of the terri- tory, the supplying of which has made San Francisco the metropolis of the Pacific Coast. Her chief trade is in distributing 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 I have named. The product of the field, of the forest and of the mines, which she ships to the east in exchange for this merchandise, are for the most part the products of the States and Territories named. It is this merchandise and these products, the trans- portation of which is the subject of this controversy. The opening of this consuming and producing traffic 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 productive valleys of California that furnish over 75 per cent of the trade of San Francisco? Who climbed the Sierra Nevadas and the Rocky Mountains, revealing to the world their treasures of wealth of field, forest and mine? It was the builders of the American Railroads. The trade of San Francisco is of their creation. Without their agency in 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 an d the early 5o's, into an inconsequential seaport town whose chief trade with the eastern states consisted in distributing supplies to the cattle ranches and carrying their products hides, wool and tallow, to New York, for which an occasional sailing vessel around Cape Horn would amply suffice. Permit us to illustrate by 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 through line, the population of the State of California was 560,000. In 1890, it was 1,280,130. STATE OF CALIFORNIA. In 1870. In 1890. Population 560,000 1,280,130 Valuation of Property $638,000,000 $2,533,000,000 Imports $15,900,000 $48,750,000 Exports $13,365,000 $35,960,000 Manufactures $66,500,000 $213,400,000 Number of Farms 23,724 52,894 Value of Farm Products.. $49,856,000 $87,033,000 Railroad Mileage (miles) . . 925 4,328 What was the principal agent in this remarkable improvement? The. answer is found in the fact that in 1870 the railroad mileage in Cali- fornia was 925 miles. In 1890 it was 4,328, and this increased railroad mileage was almost wholly constructed and has been operated by the American lines who are parties to this controversy. The Canadian line in no sense and in no degree contributed to it. Is it apparent from this showing that the Canadian line has any equitable ground for claiming that its right to the smallest part of San Francisco's trade is paramount to the rights of the American lines to do, and enjoy, the whole of San Francisco's business with other points in the United States? Is its competition desirable and helpful; promo- tive of trade? Is its presence in the San Francisco markets welcome to the San Francisco merchant? We aver that it does not introduce any necessary element of helpful competition which promises a freer and fuller exchange of commodities between San Francisco and its eastern markets of supply and consumption. A single glance at the map will 140 prove that San Francisco is served by a sufficient number of inde- pendent American lines, not only to handle all her freight, but to do so if it were increased many times over its present volume. I refer to these lines out via Portland, Seattle and Tacoma; out via San Diego, not touching the Central Pacific; besides the Central Pacific and Southern Pacific lines and added to these, the Pacific Mail Steamship Company, the original line, in connection with the Panama route, and the vessels of Cape Horn. The history of the operation of these lines proves beyond question the impossibility of any combination without the competition of the Canadian line which would not be possible with it. The public interest is fully protected in this respect by the natural, uncontrollable, competi- tion of the American lines, so that the Canadian line cannot find any substantial foundation for its claim of right to share in this traffic in the assertion that its services are necessary or desired by San Francisco merchants either to move the traffic or maintain helpful competition. Moreover, the volume of the traffic is not so great as to tax the capacity of any of the American lines to move it safely and expeditiously, while there are six of the American lines, all-rail and mixed water-and-rail, over which it can move to and from the State of California, under as favorable conditions, approximately, as it can move over the Canadian line, and we contend that it is not equally just and right to all con- cerned to require these American lines, or any one of them, under such circumstances, to surrender, through the device of a differential or any other expedient, any portion of this trade which may otherwise seek their line. We are talking about right, now. On the contrary, to require all or any of these American lines to surrender, under cir- cumstances such as have been described, any portion of their traffic, to the Canadian line, is to declare that their right is subordinate; that the right of the Canadian line is paramount in respect to said traffic. Such a requirement is essentially inequitable, unequal, partial and unfair. In support of our averments that the Canadian line does not con- tribute to the up-building of San Francisco trade, but, rather, that its purpose and effect has been to divert and diminish that trade, and that its competition is not promotive of San Francisco's trade interest, we beg leave to file with the Board certified copies of the following docu- ments : ("Exhibit A") Report to Chamber of Commerce of San Fran- cisco of Committee on Withdrawal of Bonding Privilege of Cana- dian Pacific Railway, March, 1898. I am not going to take your time by reading all this, just a few para- graphs. "The Canadian Pacific Railroad diverts from our city a very large part of the constantly growing trade with China, Japan and Australia, which but a few years ago came to our port." Then they give some examples. "In fact, this road is engaged in building up Vancouver with trade which formerly came to us, and we are helping them." That shows how the Americans look at this thing. "We allow only American vessels to carry cargoes between Atlantic and Pacific ports, or, in fact, between any of our domestic ports, but a foreign railroad is allowed to compete for this busi- ness, and is more favored by us than our own lines, as we are obliged to comply with our laws, while we do not put this restraint on the foreigner." Is that Jingoism? It is the Chamber of Commerce of San Francisco. "Our sense of justice demands that a foreign road should not be treated with more favor or consideration than a domestic road." And then they go on and pass resolutions, going to an extent that we do not desire, asking that the bonding privilege be canceled, and that they be forbidden or prevented by that enactment of law from doing any of this business. We take no such position with them. We are not shaking the "bloody s'hirt" and saying "you shall not come into this country." We are simply contending that you must come in on an equality with us; that "you do not possess a better right nor a superior title to one pound of this freight than we possess. You are welcome; we are glad and willing to work with you, if you will come in on an equality of rates." Anticipating that it may be said, as was intimated in reference to another Exhibit, which I shall now put in, that this was procured by rail- road efforts, I wish to say, in the first place, that no railroad man in San Francisco or from anywhere, that I know anything about, had any- thing to do with that. The inspiration of that, so far as my knowledge goes, was from Captain W. L. Merry, at the time Secretary of the Cham- ber of Commerce; the man who, for years, has been the agent of Nica- ragua Canal, and has felt himself obliged to antagonize the railroads because he thought they were inimical to that interest. He is now our Minister to the Central American Republic of Nicaragua. 1 4 2 (''Exhibit B") Letter of San Francisco Chamber of Com merce, by its President, addressed to the Boston Chamber of Commerce under date of 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 present to you, originated in organized bodies of business men, which, in respect to all the commercial interests of their cities, are the mouth- piece of the people. To accentuate this I call your attention to "Exhibit B," which I 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 Commerce's influence in favor of that program. This is a letter dated August 29th; it is a copy, but certified. "Boston Chamber of Commerce, Gentlemen: A short time ago Mr. Osborne Howes of your Chamber gave a very interesting and instructive address to us on trade relations and reciprocity with Canada, and in the course of his remarks he spoke of the Fishing question, Klondike Mining laws, Boundary, Fishing and Navigation of the Great Lakes, Beh- ring Sea Sealing matters, Alaskan boundaries, &c., &c., but the question of transportation in bond by the Canadian Railroads was not commented on. A resolution was adopted by the meeting expressing the hope that the most friendly relations might exist between the two countries and that the Commission would make a satisfactory 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 New 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 Inter-state Commission Report for 1892, 143 wherein the Commission say that 'No such advantage exists or can be given to the people of this country on the Pacific Coast as is afforded the people of our Western and Northwestern States/ Why should this advantage be given when we do not get a com- pensating benefit? It is the policy of the Canadian Pacific Rail- road to build up Vancouver and Canada and divert the trade which would otherwise come to and through America. It is also the policy of this railroad to demand a differential to San Francisco. 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 quote rates 10 per cent below those of the American lines without regard to the fairness and so obliges the American lines to collect n per cent more than the Canadian Pacific. It does not base its rates on the cost of trans- portation, but says whatever rates the American lines make, we will cut them 10 per cent. There is not justice or reason in this. We trust this bonding privilege 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 opposition to a treaty that might otherwise be beneficial." That is "Exhibit B." ("Exhibit C") "Petition of Manufacturers, and Producers As- sociation of California Terms of Re-entry of Goods into the United States." I will not read them, preferring not to take your time. These are all addressed to Congress, or to our representatives in Congress. ARBITRATOR WASHBURN You understand we are here to listen to anything you desire to say. MR. STUBBS I did not want to take your time, but thought that you preferred to go over these in your chambers. ARBITRATOR DAY If you do not wish to read them you may just briefly state what they are. MR. STUBBS 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 which shall take away from and deprive the Canadian Pacific Railway, and all other railways or trans- portation lines of any sort or nature, of any and all right to 144 transport goods, or passengers from any one part of the United States to any other, or further terms of re-entering into the United States than those which exist and are applicable to passengers and goods coming into the United States from a foreign country." ARBITRATOR WASHBURN That is from whom? MR. STUBBS The Manufacturers and Producers Association of California, with the seal of the Association, signed by James W. Kerr, President. You see this goes further than we do. We do not wish to exclude them from this country. I file next, as "Exhibit D," two resolutions of the Chamber of Com- merce, Sacramento, ''Protection of American Commerce," under date of March 18, 1898. You will observe these are all addressed to the Congress of the United States. "Exhibit D" is as follows: "Resolved, by the Sacramento Chamber of Commerce that our Representatives in Congress be urgently requested to favor such legislation as will protect American Commerce and give to American labor and capital, ample protection against this unfair foreign competition." (Signed by its President and by "Cole- man, Secretary.") I file a resolution of Chamber of Commerce of Los Angeles, "Protec- tion of American Commerce," as "Exhibit E." "The Los Angeles Chamber of Commerce, March 2nd, 1890."- (before we ever thought of this arbitration.) "Whereas, it has been represented to this Chamber that the Canadian Pacific Railway by reason of the aid received from the Government of Canada, and by its exemption from the provisions of the Inter-state Commerce law of the United States, has great advantage over the American Railroads, and Whereas, it is understood that the Canadian Pacific Railway is using the advantages so enjoyed by it, in aid of the Commerce and interests of Canada, and against those of the United States, and especially of the Pacific Coast States, therefore be it, Resolved, that our Senators and Representatives in Congress be and they are hereby respectfully requested to enact such legis- lation as will deprive the Canadian Pacific Railway, and all other foreign railways of any privileges tJhat give them an undue advan- tage over the railroads of the United States. 145 Resolved, that a copy of these resolutions be transmitted to our Senators and Representatives in Congress." (Signed by "Wig- gins, Secretary," with the seal of the Chamber under date of August 26th.) Mr. McCloskey, the Assistant Secretary of the Pacific Coast Hard- ware and Metal Association, forwarded to our Traffic Manager a copy of the resolutions adopted at a meeting of the various jobbing lines of San Francisco, an original copy of which was sent to Sir Wm. C. Van Home, President of the Canadian Pacific Road, and a duplicate forwarded to Mr. Robt. Kerr, Traffic Manager of the same System. I do not know whether that is the same that Mr. Kerr referred to or not. I will file it with the Board as "Exhibit F." I file these documents not representing the desire of the American lines that the Canadian line shall be completely shut out from our trade. We do not believe in that, because the Board must have seen from the presentation that we have so far made, that all we are contending for is equality; that we have met the Canadian Pacific upon its own ground and disputed its alleged claims of disability; that we are not allowed, for considerations of law, or the general policy affecting this whole ter- ritory, which is more binding on us than law, I must say, because it affects directly our own interest to partition this traffic among our- selves. We cannot say to the Northern Pacific, "You shall have so much of this business," nor to the Texas & Pacific, "You are entitled to this much," nor to the Oregon Short Line, "You shall have this percentage." We cannot do that. There is nothing left for us but equality of rates. That is the traditional policy, and it is an outgrowth of a careful study of the situation by the experts that are employed to manage these roads from the Presidents down to the Traffic Managers and General Freight Agents, and therefore it must be taken as conclusive that business con- siderations, the financial considerations, entering into the general policy of this traffic, are very weighty. It leaves the Northern Pacific and the Great Northern to say we will do all we can at equal rates with you and take that, not and be satisfied, but with the consciousness that we have done the best we can. I might as well here touch on something that has occurred to me several times. It must be manifest to this Board that if the Canadian line is entitled to a differential on San Francisco, these lines (indicating on map) are entitled to a differential on Vancouver. We have not asked ; t. Mr. Kerr says: "The question of Canadian roads being permitted to partici- pate in American traffic has been a subject brought under fre- quent discussion and in some quarters strong efforts have been 10 146 made, through the press and by various other means, to preju dice the rights and privileges "rights and privileges" of Cana- dian roads in that respect, the motive being to work up public opinion to a point that will enable our opponents to procure legis- lative action against us, in order that the Canadian roads be re- moved from the field as competitors in American traffic." What if it is true? Is it not the inalienable right of every American citizen or of every Englishman to agitate a question that concerns his personal or property rights; to seek for protection whether to his per- son or to his property; to reform laws that operate adversely to his interest? If we had done what is claimed, have we done anything differ- ent than every Englishman that felt himself suffering from abuses since the time the charter was wrested from King John has done? Is it not, as I have stated, our inalienable right? This question has already become a public question. That is evidenced by the exhibits I have submitted and partially read. I may say that it has become a national question because it is treated of in the Annual Reports of the Inter-state Com- merce Commission and in the Passenger Differential case was made the subject of an inquiry by the Inter-state Commerce Commission, in the City of Chicago. It will continue to be a public question and a national question just as long as the Cross of St. George flies above the Cana- dian line, guaranteeing to it the support and protection of the greatest and most aggressive commercial power on earth; just as long as Old Glory waves in beauty over the American lines, symbolizing liberty and equality to every one beneath its folds; just so long as this alien comes into this country and demands that in respect to domestic commerce it shall have an advantage, not equal rights, but that it shall have an advan- tage over domestic carriers. In that demand it assails the very genius of our institutions. It is an insult to our flag which not only symbolizes but guarantees liberty and equality to all. Is that jingoism? Talk of business interest or commercial instinct commercial instinct is British instinct. The American public is just waking up to the significance of the attitude of our adversaries. Exacting as it may be to the American railroads, unreasonable as it may seem to us at times to be in dealing with us, there is no doubt that the body politic means to be just, and when it becomes a matter of public knowledge that American lines in respect to domestic business are at the mercy of foreign lines, you may as well attempt to smother free speech or to muzzle the press as to pre- vent its becoming a political issue that will spread all over this country and overwhelm even New England with a tide of patriotism that will coerce Congress to legislate to protect the American lines; to secure to them, at least, equality of privilege with the Canadian lines, and that, if it pleases this Honorable Board, is all we demand and all we ask. 147 Now, having treated of the alleged disabilities that the Canadian line works under, as contrasted with the American lines, and, as we be- lieve, disposed of them, found them to be insufficient, is it not manifest that behind or beneath all the reasons advanced by the Canadian line in support of its contention, and which we have reviewed, there lies, uncon- fessed, a reason which predominates, a reason which, though not publicly avowed, underlies the original demand of the Canadian line, and has since provided its only support? We aver that there is such a reason, that it subsists in our adversary's unavowed but conscious power to injure us without fear of retaliation; in its ability, without any material damaging consequence to itself, to make the subject business valueless to the American lines, and with it the business of all Pacific Coast Ter- minals, and the business of other intermediate dependent points, and we solemnly aver that this power to work harm to the Amer- ican lines, constitutes the sole ground upon which rests the Cana- dian line's claim of right to share in San Francisco's carrying trade; the only ground upon which its claim for differentials is founded. If proof of this averment is required, further than that which is found in the universal belief of all practical railroad men, not only with respect to the claim of the Canadian line, but of all similar claims by other car- riers, alien or citizen, let this test be applied: Build at Vancouver, the Pacific Coast terminus of the Canadian line, a city of the population, wealth and enterprise of San Francisco, supported by a territory as large and productive as the State of California. Give the American lines as large a target to fire at as San Francisco now presents to the Canadian line. Would not the latter's demand for a differential be instantly with- drawn? And, if so, why? Because its power to inflict injury without suffering a like injury at the hands of American lines would not exist. Enlarge this test. Reverse the industrial conditions in Canadian terri- tory west of Lake Superior served by the Canadian line, and the indus- trial conditions in United States territory served by the American Trans- Continental lines west of this river the Missouri River line. Put San Francisco as it is, in the place of Vancouver as it is, California in the place of British Columbia and Vancouver as it is, reverse them. Place the cities, towns, farms and other industries now located in the United States territory west of the Missouri River, in Canadian territory west of Winnipeg. Relegate the United States territory referred to to the conditions prevailing thirty-five years ago in all respects save existing railroads. Would either party be before this Board? Would not the governing council have adopted such regulations as to effectually prevent American lines from interfering with the Canadian line's traffic, by the use of an advantage, whether it be differential rates or other device? If not, is it dou'btful whether the Canadian line would not then be found in the same attitude of resistance to the demand of the American lines 148 for a differential, which we now occupy with respect to its demand: Would it not cry out in protest against our demands that they were not only unjust but barbarous because they rested upon no other foundation than that of our power to destroy their business and the purpose to destroy it unless the demands were yielded to? Is it possible, in this civilized age to build up and establish a right, an equitable right, upon the doctrine that the power to destroy gives the right to take over and hold? There may be no statute in the code of man's making which will pre- vent the Canadian line from presenting to the American lines the alter- native to yield the advantage it asks, or suffer the loss which its purpose to take it will impose upon them; but we believe it to be against the spirit of the laws of society, which take no account of a person's power to work mischief in measuring that person's rights, but are designed to protect the weak against the strong. That power may be taken account of and may continue to dominate the considerations when the question of expediency is submitted for determination, but it can have no place here or in the consideration of this Board of the question submitted. Will the High Court of Arbitration appointed to determine the respective rights of the British Government and the Venezuelan Government in respect to certain territory, the ownership of which is in dispute, be influ- enced in reaching a determination of the questions submitted by the fact that Great Britain could take the land she claims or destroy the Venezuelan Government, or inflict greater loss upon the Venezuelan Government than the disputed land is worth? It may be true, and we believe it to be true, as the Inter-state Com- merce Commission says in the Canadian Pacific Passenger Differential case, that: "If the Canadian Pacific used its power to inflict injury as a means of obtaining the allowance of a differential, that is precisely what in a greater or less degree every road which obtains a dif- ferential or an advantage in the shape of a differential does." It is likewise true that powerful nations at times go to war with weaker nations, or threaten to do so, in order to gain advantage, and the issue of that war is not doubtful; but when they refer the question as one of right to the arbitration of a disinterested tribunal, as in the Anglo-Venezuelan case, the relative power of the contestants, the mani- fest result of war, are put out of sight; and if the claim of one party is found to have no other foundation than its power to destroy or injure the other party, the conclusions of the arbitrators are inevitably in favor of the party subject to said injury. Take away from this case what we all know and what the American 149 lines fear, the power of the Canadian line to destroy this commerce with- out anything like a similar injury or equal injury being inflicted upon it, I appeal to every member of this Board if we would be here, if you would ever hear of this differential case or would have ever heard of it? So in this case we submit that if the Board finds that, but for its power to injure the subject business of the American lines, the Canadian line would not have preferred its original demand for a differential, much less have persisted in it; that, as no equitable right can subsist alone in such power, we are entitled to the decision in this case. If it please the Honorable Board, this question when reduced to its last analysis, stripped of its cloak of technical phraseology and exposed to the understanding of the non-professional mind, the naked question submitted to your determination is: Has the Canadian line such right to an arbitrary allotment of San Francisco traffic, that the American lines shall be required to adjust rates so as to force American citizens to use the facilities of that foreign line for domestic transportation? That is the naked question. The question is not whether the American lines shall make more money or have a more comfortable time by yielding the demand of this stranger to our soil and our laws. The submission to your Honorable Board is one of title and right. It is not one of expediency. The right asserted, either subsists, or it does not subsist. There is no middle ground. The Canadian line affirms this right. As I have stated once before today, "he who affirms must prove." We contend, that it must not only establish its title and right to an undefined share of the San Francisco traffic, but, necessarily, that its title or right is an exclusive title, a sole right, because it is asserted against all the American lines. It must establish its right to be dealt with preferen- tially, to have us deal with it as we may not deal with each other. It must provide this Board with a reason upon the record of which your Honors may stand before the world in justification of your decision, that we, who are to the manor born, citizens of this Nation, shall give way to an alien, a stranger within our gates. What reason, founded in equality of privilege which everywhere is co-existent with equality of right, has been advanced by our adversary? Whence comes the asserted title and right? What will be the answer of this Honorable Board to that question? If it please the Board, I have in passing referred to and submitted several Exhibits: "A", "B", "C", rt D", "E" and "F". I wish now to offer "Exhibit G": "Exhibit G:" Comparison of distances via Vancouver, Seattle, Portland, New Orleans and Galveston, respectively. Those are compiled from the "Travelers Official Guide," my authority for the distances I have used. "Exhibit H," I have already filed. "Exhibit I," the same; "Ex- hibit J," the same. "Exhibit K," "K-2" and "K-3," are the lists of Differentials. "Exhibit K:" Freight Differentials in the United States, prepared by Secretary of the Inter-state Commerce Commission, Sep- tember, 1898. "Exhibit K-2:" Circular Central Freight Assn., Chicago, show- ing rates to and from west bank of Lake Michigan ports, November, 1897. "Exhibit K-3:" Freight Differentials between Joint Traffic and Trunk Line territories and San Francisco. "Exhibit L:" Report and Opinion 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 N:" Comparison of Distances of the all-rail lines of Canadian Pacific, Great Northern and Northern Pacific. "Exhibit O:" 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, 5ist Congress, First 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 Fe Ry. Co., and others, for a suspension of the fourth section, decided February 24th, 1898. "Exhibit S:" Article in the New York Sun of July 16, 1898, entitled "War in Passenger Rates." "Exhibit T:" Report 1530, 5ist Congress, ist Session, on relations with Canada. Testimony. taken by the Select Committee on Relations with Canada, United States Senate. "Exhibit U:" Showing, payments that were made to the Cana- dian Pacific Railway Company during the year 1891, that I read from yesterday. 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 you care for this map as an exhibit? ARBITRATOR WASHBURN Yes. MR. STUBBS As many of these exhibits that I have are original documents, and belong in my records, after you are through with them, I suppose they can be returned to me; they are my own exhibits. ARBITRATOR WASHBURN Yes." ARBITRATOR MIDGLEY Mr. Stubbs, might I ask you a ques- tion, please? MR. STUBBS Yes. ARBITRATOR MIDGLEY I think there has not probably been any statistics kept by the Trans-Continental Bureau for several years? MR. STUBBS No sir. ARBITRATOR MIDGLEY 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. STUBBS I would not, for the reason that it has nothing to dc with the case. ARBITRATOR MIDGLEY My object in making the inquiry, was, you have complained of the past injury done you by reason of this com- petition with the Canadian Pacific, and so, taking their traffic, which we will call for at the same time, we would ascertain the percentage of the total they have carried. MR. STUBBS I beg the Honorable 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. We 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 to the Canadian Pacific, through fear, or constraint fear that there would be incalculable injury done to us. I have made no statement that the Canadian Pacific has damaged us in the past few years. ARBITRATOR MIDGLEY In looking over the proceedings, after I was appointed, and called for the record in fact took 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. STUBBS That probably would come under the second ques- tion submitted to the Board, possibly. If it please the Board, you will notice I have not touched the second question, for the reason that the submission to this Board is the question of title and right. I do not believe, and cannot be made to believe, that this Board or any Board will decide that the Canadian Pacific, or any other line, has a title or right to a differential 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 second question, then I shall be very glad to do every- thing that I can in the way of giving information. 152 ARBITRATOR MIDGLEY At the close of Mr. Kerr's remarks for the Canadian Pacific, one of the Arbitrators asked him for certain information in the way of statistics, which he said he did not have now, but would procure them. I simply wanted to comment on the differ- ence in position. MR. STUBBS I have noticed what Arbitrator Day did at that time. Arbitrator Day, I suppose, knows what he is about. ARBITRATOR DAY Mr. 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 the total volume of Inter-state traffic which they carried. That is easily obtainable from the Treasury records of the United States Government, 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. I 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. ARBITRATOR 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 differentials 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 differential, 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 WASHBURN Mr. Stubbs, I understand you have finished? MR. STUBBS Yes sir, I have closed. ARBITRATOR WASHBURN Will there be any other speakers in behalf of the American lines? MR. STUBBS I do not know of any. ARBITRATOR WASHBURN Then the Board is ready to hear the Canadian Pacific in its closing argument. MR. STUBBS- Here is an exhibit I intended to put in. You may 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 differentials, is presented here in form that is more ready for your examination, than if you were to go and search through those books. If you had rather have them I will file it with you. ARBITRATOR WASHBURN I would like to have them. MR. STUBBS I file this as "Exhibit V." 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 oratory, I 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 quietly 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. ARBITRATOR WASHBURN We will adjourn until 10 o'clock to-morrow morning. At 4:15 P. M. an adjournment was taken until October I5th, at 10 o'clock A. M. Morning Session, October 15, 1898, 10 A. M. The meeting convened pursuant to adjournment. ARBITRATOR WASHBURN Sincewe 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 infer, to possibly make some 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. STUBBS Mr. Chairman, I do not know that we have any 154 objections. I think we are prepared to stand on our case as it is made, at the same time I think it pertinent that this statement be made: This matter was agreed to on August 23rd. At that time, as I once before stated to the Board, we hoped to be able to get it out of the way; to make the submission, expecting the question to be decided before October loth. On that account the meeting at Denver, which was attended by representatives of all the Trans-Continental lines, inclusive of the Canadian line, adjourned to meet at New York on October loth, for a consideration of the general situation, with the end in view of im- proving it, if that were possible. Some Committees were appointed for the purpose of leading up to the work that might come before that meeting in New York. These facts will be revealed to you if you will refer to the proceedings of the Denver meeting, which I understand have been filed. We all went about preparing our case immediately upon the adjournment of that meeting I am speaking now for the American lines, and in that respect speaking for myself more perhaps than for any other member of the Committee laying aside much of our current work in order to prepare for this hearing. The Canadian line had the same opportunity, and I presume that the same spirit inspired them that inspired us in the matter. Later on, in correspondence with Mr. Morton, who was the mouth-piece of the Chicago resident members of the Committee, it developed that some understanding was desirable as to how the submission should be made. Just how that came up, I do not know, but I was advised that the Canadian line asked our people here whether this submission was to be made by traffic men or by coun- sel. We expressed a willingness to leave the presentation to the traffic men, and I have -been informed by Mr. Morton that he had the under- standing with Mr. Shaughnessy, that this presentation was to be made by the traffic men. That is, so far, supported by telegraphic correspond- ence passing between Mr. Kerr and myself. I received a message from Mr. Kerr asking me if our case was to be presented by counsel or by traffic men, and, if so, by whom. I replied that the Committee had not yet met, but that I understood that the case was to be presented on our side by traffic men; as to who would present it, I did not know; we had not reached any conclusion as to that. I received an answer from Mr. Kerr to this effect, that that was all right, except that if we afterwards decided upon presentation by counsel, he wished to notify me that the Canadian line would ask fur a postponement of the hearing, in order to coach their counsel. I responded to that by saying that I should see that he was properly notified, and immediately alter 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 by traffic men. Upon my arrival here, I asked Mr. Morton if the notification had been sent, upon which he informed me, as I have said, that it had, upon receipt of my despatch, and that there was an agreement that the arguments were to be made by traffic men on both sides, and I believe he stated that he notified the Canadian people that I was to represent the American lines. Now, it has been intimated to me that the Canadian people 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 degree. The presentation of the case that has been made by the American lines, is my work, wholly unassisted by any lawyer or any counsel by way of advice, reference or suggestion. The only assistance I have received has been on the part of the traffic men who are members of the Committee. 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 Board knows is very pressing; and I have purposely avoided anything that would in any way delay the case. Now, 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 I 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 Vice-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. Shaughnessy 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 hoped that we would present this speedily and that I should be able to get home; that is to leave for San Francisco tonight. That, I now see is not possible. Now, with that statement of the case, I propose to leave the matter entirely in the hands of the Board, and shall be satisfied. I do not intend to make any reservations, but leave our case in that respect entirely in the hands of the Board. ARBITRATOR DAY Mr. Stubbs, I understand you say that you do not object. MR. STUBBS Yes sir; I say I am not going to object. ARBITRATOR 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 officer; in the same way, of course, he is also our chief operating officer. He 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 Vice-President, so that in asking that he should appear here before you, 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, I take it as not wrong or amiss that the Canadian Company should be heard through their Vice-President. MR. STUBBS Why has he not been here from the beginning? It has developed by this statement you were not going to call him in ; you had no intention of bringing him in, in the first place. ARBITRATOR 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 members 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 will be until Monday morning at n o'clock, at which time Mr. Shaughnessy says he can be present. Now, Mr. Kerr, are you ready to proceed? 157 MR. STUBBS Now, Mr. Chairman, yesterday I filed as an exhibit with the Board a copy of a Decision of the Inter-state Commerce Com- mission in the Passenger Differential case. I had it in my mind at the time, but it escaped, to file the Record of the hearing in that case. I wish now to file it as a part of the submission yesterday. (Filed as "Exhibit Y.") I also omitted to file a document which I had with me, but somehow it got 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 to the commercial interest of the City of San Francisco. In support of that statement I beg leave to file as an exhibit a "Compilation of the Imports and Exports, Port of San Francisco." (Filed as "Exhibit W.") It is signed by Edward A. Stevenson, who is our Custom House Attorney in San Francisco, but it is taken from "Commerce and Navigation of the United States," an official document issued by the United States Treasury Department. 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 Board to this showing "Com- merce between San Francisco and British Columbia for the years 1880, 1886, 1888, 1890 and 1897 the years being the fiscal year ending June 30 in 1880 the exports to British Columbia by San Francisco 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 Francisco as between 1870 and 1897 increased three times. ARBITRATOR WASHBURN Those are practically the figures you gave us yesterday as I remember. MR. STUBBS No, 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. MR. STUBBS 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 Board thinks it is entitled to, a copy of the Evening Post of October 13, 1898. (1'iled 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 Grand Trunk from connection with American lines in the matter of through business. Those were conditions to which the Grand Trunk could not consent. That is submitted in reply 158 to the assertion upon the part of the other side that the participation in purely domestic Canadian business by the American lines was welcome to the Canadian line. It is a matter of public knowledge that this brief statement found in the despatch which I have referred to, refers to the fact that because the Grand 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. ARBITRATOR WASHBURN Mr. Kerr, are you ready to proceed now? MR. KERR Mr. Chairman and Gentlemen of the Board: Before proceeding to the main case, I 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 Puget 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 producing power of those valleys is increasing every year, they are producing more and more, and they have more to sell. What more natural than that they should supply their products to the towns and cities of the coast in British Columbia? And what more natural than that the exports, the sales of products from San Francisco, should decrease? Surely, there is nothing in that very natural course to influence you, or to bear on this subject in hand, nor to create in your minds any prejudice whatever. Concerning the filing of this newspaper as a matter of record official 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 good, and they are a mighty power for evil; but we all know that they are not always accurate in their statements of facts. The very nature of things, the rush and turmoil of this busy life, this busy period, this end of the I9th century, precludes the possibility of men, who are devoted to the gathering of news, the hurry and scurry, to do more than gather the points here and there. They get the skeleton, and they build on the body; and, in that building, they are very, very frequently, out of line, and do not get their proportions right. Now, even in my wildest moments, I do not think 1 would ever dream of riling a newspaper as evidence before a Board of intelligent, experienced men, such as I am standing before, to take it such a report, as being correct; and if it is correct, what does it mean? It has nothing to do with this subject that is before you. The whole question under discussion is the passenger mat- ter. It is a question of restoration of passenger rates, with the hope of increasing passenger revenues. There have been various points of dis- pute, as you all know, as between the Canadian Pacific and the Grand Trunk. Does anybody mean to say that there are not also many points of dispute as between the American lines, one with the other? Has the Southern Pacific Company no disputes with their neighbors of any kind? Now, why should a newspaper report bearing on passenger difficulties, that may or may not exist, as between the Grand Trunk and the Canadian Pacific, the Grand Trunk, and any other Company, Canadian or Ameri- can, the Canadian Pacific and any other company, Canadian or Ameri- can, on purely passenger 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 purely 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. No fox ever eluded his pursuers, 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 thumping and pounding 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. We 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 may have to iterate and reiterate, on the same points, double and come back. The representative of the American lines in the opening of his case on Thursday afternoon, makes use of this statement: "This contention is in respect to freight rates, and freight rates only," meaning that the i6o subject before this Board is one pertaining exclusively to freight 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 Commerce Commission, it is an opinion that they gave in connection with the Passenger Differen- tial case. He has not only done this, but he has filed with your Board, the opinion of the Commission in connection with the case. Now, it is not at all clear to me what bearing a passenger question which stands alone, by itself, can have on this freight question, that stands alone by itself. We all know that precedents, customs, rules and regulations, per- taining to the handling of passenger business are very different from customs, rules and regulations pertaining to the handling: of freight business. Sometimes general principles can be applied to both, but what may be done or said in a passenger matter, cannot possiblv have any connection with what you do and how you act in a purely freight matter, therefore, I have not the least fear that all these passenger records, that our opponent has filed with you, will have anv influence on vour minds whatever in dealing with this subject. Mr. Stubbs makes argument that the so-called Pier rates in effect by the "Sunset," "Mallory" and "Atchison" lines, and "Cromwell" and Texas & Pacific lines, cannot be regarded as differential rates for the reason that the all-rail lines may make the same rates if they wish. The published rates as shown in Trans-Continental Freight Bureau Tariffs are made up by conference and agreement in fact but not in theory. That may seem paradoxical. It is so. They are supposed to be that is these tariffs these agreed published Freight Bureau tariffs are 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. Now, if the all- rail lines decided to adopt and put into effect, from New York, the Chicago rates, being lower than published rates from New York, and the lower rates as I have already explained from Chicago are the rates that are put in effect from the New 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 the great champion on that subject. He is the warrior that is always put into the arena when a battle is to be fought, on that or any other subject, and as all of you know he is a very vigorous warrior. Now, is it con- sistent to come before this Board, having the enjoyment of lower rates than the all-rail lines out of New York and the surrounding immediate coast territory? I think he has explained to you that the all-rail lines, owing to their greater interests up in the middle and middle West States, cannot always afford to reduce their rates, openly, 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 have 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 & Pacific line; they were taken by force, and now are growing to be a custom to them, according to Mr. Stubbs' interpretation of the word. He is great on telling us what words mean. It is not quite conforming to the rule as being beyond the time whence the memory of man runneth not. We remember when it began and we know it exists. And now they sit here with these differential rates, and they say it is right they should have them. I think Mr. Stubbs also gave us a lesson on what the word "right" means. On the records of the Trans-Continental Freight Bureau, it would appear as if the other lines now had consented to these differences of rates as made from the New York pier on the one hand, and by the all-rail lines from New York proper on the other, and by the aid of these differential rates, these ocean-and-rail lines are enabled to reach up into territory they should not invade. Still, the Canadian Pacific Company, in one place of Mr. Stubbs' statement is compared to Barons 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 Pacific was not projected or built for the purpose of developing, fostering or sharing in the carrying trade between San Francisco and the eastern parts of the United 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 country, by building, by absorption, by purchase, and the various other methods we recognize of building up great systems? A little road may be started down here and has been started in Illinois or any other State in the Union, that may not 'be more than fifty or one hundred miles long when first projected, but after the lapse of years what do we find? A link in a great system of railroads which may reach clean across this Continent. Now, what point is there in it, in stating that it was not con- templated by the builders and projectors of the Canadian Pacific road at 11 162 the start, at the beginning, that we should reach out for San Francisto traffic? I feel as if it is wrong for me to take up your time in explaining a point that is as well known, and better known to you than it is to me, that railroad companies seek for traffic and revenue from and between all points that they deem may be to their advantage to do so. I am not seized of the facts, but I very much doubt that when this "Sunset" line was built, as between San Francisco and New Orleans, that the original projectors had any idea that it would reach away up to New York and through the whole northern tier of States in the Union, Northern and Eastern. These things all come by a process of evolution. The world was not made in a day; we are told it took six. In this connection, he very mistakenly calls up the "Soo Line" as one of the examples. Now, the "Soo Line," so far as its western extension to the junction of the Canadian Pacific line at Portal, No. Dak., was built expressly for the purpose of seeking for the trade and traffic of the Pacific Coast, Middle-West, Middle and Eastern States. The Pacific Coast Steamship Company was not built and operated expressly for the purpose of carrying Trans-Continental freight in connection with the Canadian Pacific road. They are an old company, antedating the Canadian Pacific by many years, as I believe. When that line was put in operation they had not the faintest idea that they were going to participate in Trans- Continental San Francisco traffic; but on the completion of the Canadian Pacific line to the Pacific Coast very naturally they sought an alliance whereby they could increase the field from which they would draw rev- enue and traffic. It was of mutual interest that such an alliance should be made. It was made and today the line is in operation, and has been for a good num'ber of years. It is not necessary for projectors to have in mind all the possibilities that may come from the inception of construc- tion of a line at the beginning. In connection with the question as to the special arrangements we had with the Association lines in 1891, turning on the point of my state- ment that we carried so little business practically nothing the ques- tion was asked if we still maintained our agencies, to which I replied, "Yes, we still maintained our agencies in their entirety." Mr. Stubbs makes the statement that the San Francisco office of the Canadian line was simply a ticket office. I do not believe Mr. Stubbs made that state- ment deliberately in order to deceive the Board. He was simply mis- taken. We do now, and have always, maintained a freight and passenger office in San Francisco, and the title of our representative there is that of "District Freight and Passenger Agent." The agency was inaugurated, I think late in '86 or early in '87. The same representative is there today as was appointed then ; he is there for the purpose of taking care of both our freight and passenger interests. No agencies were closed during the year of 1891. In that connection the representative of the American lines cites as an example an imaginary case in connection with the Union Pacific and Central Pacific, and says that if they had pursued the same policy, or did pursue the same policy in connection with the canvassing and work- ing for freight to and from competitive points, that their business would leave them, 50 per cent or more, inside of a year. That is my under- standing of his statement and what he meant. Now, no one can dispute that statement as it stands alone and by itself, but it was made with the purpose of carrying you away from the point. The Union Pacific and Central Pacific under like circumstances, conditioned as we were, under the same agreement with the other lines as we were, would, I take it, have done exactly what we did, and carry out their agreement with the other fellow honestly and truly, and their business would have left them their tonnage; and, as in the case of the Canadian Pacific, it would have taken them a long time after that agreement was through with, to recover and get back to the status of tonnage that they enjoyed before they entered upon that agreement. The representative of the American lines has laid particular stress on the fact that the different lines, members of the Association, should contribute to the Canadian Pacific subsidy, paid out certain sums, which, from the figures, you will notice, shows that they amounted only to about 2^ per cent of their gross earnings, many of the lines being only 300 or 400 miles long, away off in the center of the country there, little bits of links in a long chain that traverses this great country from the Atlantic to the Pacific. This, our opponent considers a very heavy tax and unprofitable investment. He does not tell you that the Canadian Pacific Company, while a member of the Association, in paying its share of the Pacific Mail space rental (so-called) subsidy, in fact, a dif- ferential under another name, does not say that we were suffering any hardship in paying for something for which we gained very little direct benefit. Strange, how sometimes a fellow on the other side always for- gets the good points against him, and in pleading for your sympathy in connection with the great sufferings of these small lines, away out in the middle of this great country, the middle links, in contributing to the subsidy of the Canadian Pacific road, he does not say anything about how they are suffering under present, conditions. Their sufferings, under those conditions back in 1891, were not a drop in the bucket, as com- pared to the suffering they are now undergoing by reason of disturbance in rates and reductions in revenues to and from points with which the Canadian Pacific Company has nothing on earth to do. It cannot reach, cannot get near, and still they will tell you, and do tell you, that the Canadian Pacific differential is the great our greatest disturbing element "164 in the rate situation of the whole Trans-Continental business. They say this to you gentlemen, who know as much about the situation as they do and it sounds to me I was going to say, ridiculous, but I will only say, funny, why they should do it. ARBITRATOR DAY You spoke of the Panama subsidy. What was the amount of that? MR. KERR My recollection of the Panama subsidy is that it was $65,000 a month, and before it terminated it was $75,000 a month, amounting in the year, I guess to something over $800,000, perhaps $900,000; the records of the Association of course will tell you if you care to investigate them. ARBITRATOR DAY Did that continue more than one year, or is it the year you particularly mention? MR. KERR Oh yes, the Panama space rental arrangement subsidy expired in 1892; when the Association dissolved, I think they went too. ARBITRATOR DAY You were speaking about your contribution to that. What was the amount of it? MR. KERR Our contribution to that in 1891 was nearly $12,000 $11,700 odd 2^ per cent on the amount of earnings that year. The other fellows, these little links out here, paid us 2.\ per cent. We also paid 2^ per cent. ARBITRATOR WASHBURN What roads contributed to that, Mr. Kerr? MR. KERR All the roads in the Association. ARBITRATOR WASHBURN All the roads of the Trans-Con- tinental Association? MR. KERR Yes sir. ARBITRATOR WASHBURN None of the roads east of the Mis- souri River line contributed, only the roads west of that? MR. KERR Only the Trans-Continental roads; yes sir. ARBITRATOR MIDGLEY Those east of the river never con- tributed. MR. KERR At our first entrance into the Association in 1887, for a certain period, we, along with some others, did not contribute, but eventually we came in and took our share with the rest and carried it on until the arrangement expired; whatever the agreement was we all carried it out. It may not be amiss, while on the subject of the subsidy to the Canadian Pacific road for the year 1891 to reiterate the fact, first, that W* 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 renew it to renew the arrangement for another year, perhaps with some modification as to sum and so on, but others of the lines I think some of those that had the least interest too, in the arrangement, objected, 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 Pacific and the American lines as to the Canadian Company'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 Board, 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- pany 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 w r as an agreement. There was an agreement at the beginning the agreement being the outcome of proper, honest business negotiations. Negotiations of that kind you are all familiar with. It would be pre- sumptuous in me to enlarge upon the point. There was no idea in the mind of the Canadian Pacific as to shot-gun policy, or ruthless destruc- tion of revenue. At the inception, the question 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 and 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 adopted 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, I do not think there is any record of protest with this Company against the adoption of the 10 per cent differential plan, until about one year ago, when, at a meeting in Chicago, something was said of rather an indefinite character on the question of our differentials. Again, in March and April of this year, the question was raised at a meeting. Again, in May, the question was raised, evidently a concerted plan to make a record. They had got to act and they built up there a structure on which they could remove our differentials and destroy us so far as the California traffic was concerned. I think it will be remembered that the representative of the American lines insinuated that the failure of the Union Pacific to finally agree to the proposed formation of the Trans-Continental Association, in 1896, 1 66 was due to the question of differentials with the Canadian Pacific Company; differentials of 9 per cent, the compromise differential of 9 per cent. Mr. Stubbs is too clever to make that statement out straight, because he knows that it is not so. He knows, I know, and I think prob- ably nearly every gentleman in this room knows, with all reasonable degree of certainty, without really being behind the scenes and having the records in our hands, the reason why the Union Pacific Receivers failed to confirm the action of their traffic representative in agreeing to the formation of that Association. The reasons were, stated briefly and in general, that they were advised that they were taking some risk under their personal bonds in assuming to join in the payment of the Panama route proposed subsidy, and as they were not prepared to take that risk, consequently they failed to confirm the action of their chief traffic officer in the New York and Milwaukee meetings. As has already been stated and explained at some length, a meeting was called in Denver, Colo., to be convened August 22nd, last, for the purpose, as was explained in the call, of considering the question of Canadian Pacific differentials in connection with them, as being an ele- ment going towards the disturbance of the rate market. Now, it says. "Westbound rate conditions have become so demoralized ARBITRATOR DAY What says that, the call for the meeting? MR. KERR No sir; Mr. Stubbs' presentation of his case. ARBITRATOR DAY I thought you said that that was in the call for the meeting? MR. KERR Sir? ARBITRATOR DAY I thought you said it was in the call for the Denver meeting. MR. KERR Yes, I take it as really a rehearsal of the call. This is a copy of the call sent to the Canadian Pacific Road. ARBITRATOR MIDGLEY Who sent that? MR. KERR Mr. Stubbs. "Westbound rate conditions have become so demoralized by attempts to meet Canadian Pacific differentials that I think the domestic Trans-Continental lines should immediately decide upon a settled policy to be pursued uniformly 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 States 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 Pacific takes. The importance of this question merits the attention of the highest officers of lines engaged in California traffic with the east. Will you attend a i6 7 meeting at Denver on Monday 22nd inst., for the purpose of dis- cussing and disposing of this question?" I wish to amend the record when I stated that this is a copy of the call sent to the Canadian Pacific Company. I did so because it is so stated here in Mr. Stubbs' evidence. But 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 Cana- 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? After the discussion had fairly gotten under way, pro and con, as to the situation, the representative and chief traffic officer of the Union 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 New York to San Francisco can be cut through causes entirely foreign to the Canadian Pacific differential. This was a fact patent to us all. We all knew it, and the following resolution was adopted: "RESOLVED, that a Committee of five of the Trans-Con- tinental lines be appointed to confer with a Committee or such organization as they have, of the Central Freight Association and the Trunk Lines for the purpose of arranging, if possible, to stop present demoralization in Trans-Continental California and North Pacific Coast freight rates. If said Committee reports satisfactory arrangements, it then to be understood that all lines here repre- sented are pledged to restore rates from all territories on such day as Secretary Countiss may fix." Now, 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 propor- 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 Freight, in the Western and in the Trunk Lines' territory, is caused by the Cana- dian Pacific Trans-Continental differential on California business? 1 68 Surely, no man would say so who knows anything about the situation. Furthermore, 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 Pacific Coast. It carries all along 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 Francisco cause all of these lines down here to shrink their rates? Surely, you will never believe it. The representative of the American lines claims that the American lines are united; that they are welded together 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 Union Pacific by their accredited representative, the chief traffic 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 opinions 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, why 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 was 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. 169 ARBITRATOR WASHBURN In its entirety or in part, Mr. Kerr? MR. KERR To the extent, with possibly some exceptions, that the California lines do not work up into Puget Sound, north of Portland; they do not work actively; they do not care for the business, so long as the Northern lines will not work actively for California business. Pre- cisely on the same basis, you might say, for the same principle will apply, 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 dammed up and stemmed the flow of traffic to and from California by the Canadian Pacific road. Consequently, the two northern lines maintain, in the same way, the full, published all-rail tariff by their ocean-and-rail routes, and they get no business. On 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. I beg permission to quote from the proceedings of the Trans-Continental Association, "General Meetings New York and Mil- waukee, 1896." These are the meetings when it was proposed to form this Association and failed. On page 17 you have a copy of this filed with you the resolution reads : "RESOLVED, 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 publish tariffs 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 North Pacific Coast points, from Portland to Vancouver Vancouver excepted to reach California (it being expressly understood that the Canadian Pacific Railway Company is excepted from this provision), hereby agree not to publish tariffs or to solicit business between Califor- nia points and points in the eastern Trans-Continental territory, but, on the contrary, to withdraw from participation in such 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 effect to the agreement em- braced in this resolution." MR. STUBBS Was that resolution adopted? MR. KERR That resolution was adopted at that meeting. It says: 'After full discussion, the following was offered and adopted." MR. STUBBS I just wanted to get it fully before the Board. That was at the Milwaukee meeting, as I understand? MR. KERR That was the Milwaukee meeting. Now, 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 traffic, all-rail, out and into San Francisco, via the "Shasta Line" of the Southern Pacific Company, from Portland to San Francisco. Possibly there may be, also, an arrangement whereby the Great Northern line may work certain lines of traffic, through Spokane, over their con- nections, the Oregon Railroad & Navigation Co. to Portland, thence to San Francisco. 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 cannot 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 oiit of what is a very low and practically non-paying through 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 connecting 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 question, and endeavors to create the impression on the Board that that all-rail line from 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 suffer 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 miles haul on the one end and 1000 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 get up in the usual way, just as the others do. ARBITRATOR DAY Up to St. Paul? MR. KERR Yes, to Chicago and St. Paul. ARBITRATOR DAY I was wondering whether you carried that business by way of Detroit? MR. KERR Oh, no. Therefore, we must look at this question from a practical standpoint and stop theorizing. We could not possibly afford to carry the business by the all-rail line, under even very favorable offers 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 No, I did not say you had it at the start. I said quite to the contrary. MR. KERR Well, when the rails were connected through from Sumas. MR. STUBBS Yes. MR. KERR We could not have it; of course, if the rails were not there we could not have it. I meant when the rails were connected. Now, the information that he has gathered on that head is wrong. We have not had an all-rail line into Portland; not for freight business. We have no passengers. The Northern Pacific would not take our business into Portland. The very best that the Northern Pacific would ever do with us was to let us, for a period, into Tacoma, 42 miles from Seattle and two or three years ago they cut that off, 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 offer, and today we cannot move business south of Seattle on the North- ern Pacific road, and we never have been able to move business south of Tacoma on the Northern 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? 172 MR. KERR They will not have another competitor in territory that they can hold to themselves. ARBITRATOR DAY Did you offer to do it? You heard Mr. Stnbbs' statement yesterday. MR. KERR We have never discussed the propriety of working San Francisco business, but the Northern Pacific would never allow us to work into Portland ; it never would allow us to use their line. They will not today. They would not take a car of San Francisco 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 local to themselves. MR. STUBBS Well, now, is not that new matter Mr. Kerr? MR. KERR No sir. MR. STUBBS I have not said anything about that business. MR. KERR It is in connection with this whole question. MR. STUBBS I make the distinct assertion that you never have approached the Northern Pacific Company to form an all-rail through line to San Francisco, equitably, with an offer to abandon your differen- tials. I have not discussed Portland business or your relations with the Northern 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 Northern Pacific Railway Company. They acquired the control of that road some months ago I have forgotten how many, but it was some months ago in the beginning of the year, I think. Previous to that the Seattle & International Ry. was an independent 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 put our cars into Seattle today over that road. In connection with the statement that the Northern Pacific and Great Northern by their ocean-and-rail lines, do not demand a differential, but that they actually operate those lines on a parity of rates equality oi rates with the all-rail routes Trans-Continental roads. I explained the reason why the Great Northern and Northern 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 from a statement of "Expenses of Inspection of Westbound Trans-Continental shipments reaching San Francisco via Pacific Coast Steamship Company and Oregon Railroad & Navigation Company Steamers;" that is, handed to this steamer line by the Canadian Pacific, the Great Northern and the Northern Pacific and the Oregon Railroad & Navigation Coni- pany^-theirs is a railway up to their Ocean Division. I might add that it was agreed that we would submit to the general system of inspection that obtains in California in order to check classification and weights and to charge up and all that sort of thing that you are familiar with. We and these other lines named agreed to go in under this inspection and share on a certain basis in the expenses in connection with the inspection the salaries and so on. I quote the following percentages of business carried: 1898 Can.Pac.Ry. Gt.Nor.Ry. Nor.Pac.Ry. O.R.&N.Co. January .9274 .0307 .0419 February .9924 .0007 .0065 .0004 March .9814 .0185 .0001 April .9906 .0009 .0085 May .9498 .0502 June .9848 .0007 .0145 July .9846 .0002 .0152 Now, 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? Because they do not want to be in it; it is not to their interest to be in it. The Union Pacific will not work San Francisco 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 business 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 off. In the case of the Northern Pacific and Great Northern, they are bought off. In the case of the Union 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 you finished on that point? MR. KERR Yes sir. ARBITRATOR WASHBURN 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, October 15, 1898, 2:30 P. M. The meeting convened pursuant to adjournment. ARBITRATOR WASHBURN Mr. Kerr will resume his argument. MR. KERR Mr. Chairman and Gentlemen: When we adjourned I had disposed of the case and given you the reasons why the Cana- dian Pacific stood alone on the question of differentials into San Fran- cisco, and now with your permission I 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. Stubbs says that the Atlantic Seaboard traffic 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 Fort 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 thej do not exist and he 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 Superior. That is my understanding of his meaning in the manner in which he puts the case and I want to say right here that I think he knows better than that. We do not claim to have 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 connections. 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 reasons that I have already specified. I will not take up your time to recount them. The next point I desire to touch upon is that of equality in rates. As baldly stated without explanation and without regard to circumstances surrounding particular cases, it looks fair and it is fair when not applied practically as between broken rail-and-water lines and direct all-rail lines and of equality 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 both lake-and-rail and by all-rail lines; sections that are filled full with differential lines; differential lines because they suffer under these disabilities that I have described over and over again. Now, carried to a logical conclusion what is the effect of equality 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 the effect of largely de- stroying the weaker rail-and-water 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? Gentlemen, I 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 perfect equality of rates does not mean just what I have said, if carried to its logical conclusion. Now, taking that to be correct, what 'becomes of the Canadian Pacific line in connection with San Francisco traffic? If we are forced to adopt equal rates with the strong direct lines? It goes without saying, that we must abandon the business, or, rather, that the business will abandon us. That will fit the case of our friend here. He would like to see a com- petitor removed. He does not care whether that competitor is a Cana- dian road or an American road. He would remove that competitor, if he had the power to do so, with the utmost cheerfulness, but that does not suit the rest of us; it does not suit the public; it does not suit the people of the United States to have any line removed from the field as a com- petitor for business for traffic. Now, the argument has been freely advanced and dwelt upon, that the differentials of the Canadian Pacific road are a disturbing element and that they cause a general demoralization of rates. Applying the general principle of that, and weighing the lake-and-rail routes as against the all- rail routes, down in this section I mean the lake section, from the At- lantic Seaboard to Chicago, if you like if the differential of the Cana- dian Pacific line on the San Francisco business, is a general disturber of rates, then the lake-and-rail differentials of the lake lines here, must also be a general disturber of rates, but do we not often find that during the season of closed navigation on these lakes, when no steamers are operating, do we not find that there is often a greater demoralization in rates during the winter season when the lake-and-rail differential lines are not in operation? It is .not because of the differential rates. As Mr. Stubbs has said, differential rates mean agreed rates, and when rates are agreed to they should be maintained. The statement has been made that agreed 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. And this principle is advanced as an argument, has 176 been on many occasions, why the differential rates of the Canadian Pa- cific should be done away with, because they were a temptation too great a temptation to the representatives of the other lines to maintain their tariffs. Those gentlemen can withstand anything except tempta- tion, and I do not think it is a good argument, not if these strong lines in- tend that those 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, with 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. The trouble is, they do not receive those orders, and the representative of the strong line falls under the temptation. He uses the differential rate and that is the destruction of the whole revenue on the traffic. That 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 re- ferred 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 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 Portland business as well as to San Francisco business? I 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 Northern Pacific con- nection for Portland business, and does work upon an equality of rate with all the North 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 Francisco business?'' I just mention this in order to set the record right, that the question of Portland business is in the record and consequently 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 well covered, but the point is this: The agreement was made in Hong Kong as Mr. Stubbs correctly states, by the representa- tives of the steamship lines, but in making that agreement, being 7,000 or 8,000 miles away, those representatives were empowered to act in joint traffic matters for the railway companies that operated in connec- tion with the steamship lines. So that, in maKing the agreement covering overland business through from China and Japan ports to points in the United States or Canada, they were acting for the Southern Pacific Com- pany, the Northern Pacific Company, the Great Northern and the Cana- dian Pacific Company, just the same as if the chief traffic officers of those companies were over there and made the agreement. So there is no question on that head of those men making an agreement simply for the steamship company; they also made it for the railroad company. A great deal of stress has been laid on the alleged fact that the dif- ferential arrangements as originally made and continued with the Cana- dian Pacific were the outcome of fear on the part of the strong American lines; fear that we would adopt a "shot-gun policy" unless they delivered up their goods. Now, gentlemen, I hold that the very fact of your being there at the head of that table and Mr. Stubbs and myself presenting our respective cases to you, refutes that argument. We never adopted a policy of force. We did adopt as everybody adopts the proper and reason- able policy of negotiations, business negotiations. In agreeing to this arbitration, what is our position? We have everything to lose and the other man has everything to gain if we do not substantiate the facts on our side and obtain your favorable verdict. If we were pursuing a "shot-gun policy" would we have come to an arbitration? Would we have ever consented to an arbitration? Would we not have said: "No, we will not arbitrate; we will fight. We insist on taking our differentials and you can do what you like about it." We did not say that. But we were so strong, we felt so strong in the righteousness of our cause, in the merits of our case, that when the suggestion of arbitration was made we said: "Yes, we have a good case and we are very confident we will win.'" We were taking all the risk. They were not taking any. We are in the position today that we have been in for ten years with differentials. We could probably keep on in that position indefinitely if we were to pursue this policy of force, this robber baron policy like Mr. Stubbs has referred to. We did not do it. We are here with all the risk on our side and none on theirs to present what we believe to be a righteous and just cause. There is no "shot-gun policy" in that. Then again, after we had agreed to this arbitration the door was open for us to with- 12 1 78 lraw. The Union Pacific, one of the chief and leading Trans-Continen- tal California lines by their chief traffic officer in meeting assembled at Denver, voted "aye" to this resolution to arbitrate, that we would all arbitrate. That vote was reversed by his President and the Union Pacific retired. The door was made wide open for us to withdraw then. We had agreed to arbitrate with all those gentlemen. That is the "unit" Mr. Stubbs tells us about which immediately became a dis-unit disunited very quick. We did not do it and yet we are accused of pursuing a policy of force. Mr. Stubbs presents for your consideration the remarks made by various gentlemen at various times in various meetings of the Trans- Continental Association, touching on the question of the Canadian Pacific differentials, wherein they all give expression to their dissatisfaction. That is only a nagging, harrying, policy. They kept that up for ten years in and out; wanted to make a record. We all know about the records. We have all been railroading for a good many years and we all know about records and how they are made. No importance can be attached to that. We know that loose statements are often made at these meetings That does not carry any weight. The representative of the American lines has read and filed with the Board a number of communications from various Boards of Trade in California. Usually reports of such important bodies as Boards of Trade are the outcome of their wisdom in general meeting assembled. Sometimes they are reliable, sometimes they are not. We all know how Boards of Trade can be assembled at times and under certain conditions and we know how resolutions can be put through those bodies. Now in regard to this particular report drawn up by Captain Merry, I do not know whether this is the same gentleman or not, and if it is, I do not know whether he went into that matter honestly or not, but I have a very distinct recollection that years ago, at the inception of this line there were some very long communications voluminous correspondence as between a gentleman named Merry, living in San Francisco, and our President, seeking a connection with the road, wanting to be a representative in some character. He did not get what he wanted and I presume he has not been very friendly to this railroad since. He may not be the same gentleman, but I have an impression he is. If I am right in my surmise, it is not difficult for a man to work up resolutions of that kind through a Board of Trade or any other body if he sets about it. And now, gentlemen, we come to that point where yesterday we were given such a delightful display of fire-works oratorical fire-works, with all the fixings thrown in. Mr. Stubbs made a grand speech, but it was not business. He is good enough to say that I have made out a case, but that I have not made out this case. Now it seems to me that all these national prejudices should never 179 abide in the mind of a business man. It seems to me that no proper thinking man will bring up such questions, or touch any man upon his nationality in a gross manner. The flag of England, according to Mr. Stubbs, is the emblem of trade, and that only. The flag of England is the emblem of open trade. The flag of England is the emblem of liberty, just as much as the flag that floats over our heads today, and they two, together, with their silken folds entwined, represent the liberty of the world, and as they pass with the drum beat, going around the world, the oppressor must cease to oppress and the haughty nations must bow their heads. I give place to no man in admiration of that flag I mean the American flag. Why should I? I followed it through many bloody fields ; I carried it on many, and why should I give place, although I am said to be a stranger within your gates, an alien, a foreign intruder. That is the point I gathered from the remarks of Mr. Stubbs, for I am part and parcel of the Canadian Pacific Company, a company that owns a very, very large mileage in the United States, a company that spends millions in trade with the United States; a company that employs many Americans, not only in the United States but in Canada, in all grades of the service. There sits (indicating Mr. Bosworth) as true an American citizen as any man in this room, who occupies a very important position, one of the most important in the service of the Canadian Pacific. Is he an alien? I have spent more than half my life among you; yet, I am a stranger within your gates. The alleged prejudice in the minds of railroad officers, agents, and others, against the claim of the Canadian Pacific for a differential, if it exists, is the result of clamor in the public press and of misrepre- sentation by selfish rivals. Nothing is or was more popular, or a surer way to unthinking public favor than to raise an outcry against a foreign road ; but such practices are narrow and unwise and in no way creditable to the otherwise liberal ideas of the American people, a large section of whom do not consider broad trade questions within the narrow limits of International boundary lines, but consider that the door should be kept wide open for all, in order that American trade may expand and grow, in like manner to the open-door policy pursued by your Cana- dian friends, who invite competition, freely admit and encourage Ameri- can lines to participate in their domestic traffic, throwing no restrictions around American roads in their efforts to compete for business between points in the Dominion. Agencies of leading American lines are estab- lished in the larger Canadian cities which strive hard with the Canadian Pacific Railway for the transportation of traffic between strictly Cana- dian points. For example, between Quebec and Ontario on the one hand, and the Northwest on the other. Those interchanges cannot be carried on without the co-operation of American lines, such as those west o-f Chicago and St. Paul. In reply it is asserted that no differential is claimed i8o by American lines doing a Canadian business, therefore the Canadian Pacific Railway should be glad to share in American traffic on even terms. But 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 engaging in the business claim and apply differentials, and the universality of the rule not only 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. Mr. Chairman and Gentlemen, I feel that I have trespassed upon your patience very largely, and I 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. I thank you. ARBITRATOR DAY Mr. 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 I would like to know : I would like to know how you carry your 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? MR. KERR We bring it to Prescott by the rail line, New York Central and Rome & Watertown roads. ARBITRATOR DAY To Ogdensburg? MR. KERR Yes. ARBITRATOR DAY Is there a ferry there? MR. KERR Yes. ARBITRATOR DAY And you ferry the cars right over to your road? MR. KERR Yes. MR. STUBBS 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. I do not know how you are going to determine those questions, unless 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 American 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 must prove it. If you are going to consider that matter, we demand that you shall take testimony on that point. 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 Railroad & Navigation Company did not participate in San Francisco traffic; did not insist upon the use of their rail-and-ocean line on a differential basis was that there was a trade. ARBITRATOR WASHBURN I understand now, what you mean. I understand what you refer to. MR. STUBBS I answered that by saying there was no trade. Not- withstanding that fact, the Canadian Pacific or Canadian line, today reiterates the statement that there is a trade. He has no foundation whatsoever for it, except the fact that they carry but little business. He introduces evidence in the shape of ARBITRATOR WASHBURN He said he thought he knew. MR. STUBBS He said that he knew. That is an opinion. That is not evidence. The point I wish to make is this, that he must prove his statement; that it cannot stand; is entitled to no consideration by this Board, in the face of our denial. For, when we deny, we speak the truth in regard to the matter. We demand that he shall be put to the test on that point, or that the statement shall be thrown out. The Board should request or demand that witnesses who ought to know all about this thing, shall come before it and testify, under oath, if you please, to the fact as to whether there is any such trade or not. I wish further to make the point, that you may search the statement of the American lines through; you may analyze every phrase, 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, placed 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 of themselves as "citi- zens," they are referring to the artificial person of the Canadian Pacific road, the Canadian Pacific Railway Company, and the artificial person in law, just as when they refer to themselves as "citizens," they refer to the corporations 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 point his argu- ment, by saying that the Traffic Manager of that road is an American citizen, that he, himself has fought under the "stars and stripes." There 182 is no one who will honor him more as an ex-soldier of the United States, whichever side he fought on in the Civil War, than the representatives, the individual officers of the American lines. All honor to the soldiers of our country, whether they be in the employ of an alien or whether they be in the employ 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. We are 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 Mr. Shaughnessy has said what he has to say, you will have an opportunity to reply to him as in the first instance. MR. STUBBS I do not understand, I wanted to understand it, that is why I spoke this morning. ARBITRATOR MIDGLEY Oh, certainly; if they bring in any one else you should certainly have an opportunity to be heard again. MR. 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? MR. KERR Mr. Chairman, just one word more. If the Board desires any fuller information than they have with regard to the New York and Milwaukee meetings held in March and April, 1896, Mr. 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. ARBITRATOR WASHBURN 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 May 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? MR. KERR Oh, I imagine so. MR. STUBBS I did not know but you knew something about what Mr. Shaughnessy might have to say and whether it was going to throw the thing wide open again for discussion. MR. BOSWORTH Oh, no; I think he will not occupy more than an hour. MR. STUBBS You know bringing in reserves is a little danger- ous; I may want to come in with some reinforcements. ARBITRATOR WASHBURN The American lines will be given any reasonable time that they may require. MR. STUBBS Any one of the American lines that we choose to bring forward to represent us, barring counsel any one of the Ameri- can lines to represent us? ARBITRATOR WASHBURX Yes sir. Then we will stand ad- journed until Monday morning at 1 1 o'clock. Morning Session, October 17, 1898, n A. M. The meeting convened pursuant to adjournment. ARBITRATOR WASHBURN Gentlemen, on Saturday we ad- journed until this hour, to give Vice-President Shaughnessy, of the Cana- dian Pacific, an opportunity to appear before the Board, and make an argument, and if he is now prepared to speak, we will listen to him. MR. SHAUGHNESSY 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 companies 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 ringer ends. I was surprised to learn by telegraph Friday evening, that the American lines, represented by Mr. Stubbs, 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 and 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 that I would be given oppor- tunity to speak, for which I thank you. I decided that I would come here today to make such answer as the circumstances of the case might de- 1 84 mand. I had no intention then, nor have I any intention now, of introduc- ing any new issues here, or saying anything that may tend to prolong your session. I merely desire in as few words as possible to answer the par- ticular remarks of Mr. Stubbs, with reference to the Canadian Pacific, its history, its destiny, its conduct, and so forth. I had no opportunity, until I saw the stenographers' notes yesterday, to ascertain just what Mr. Stubbs had said, and, indeed, in the limited time I had after I re- ceived the notes, I could give his remarks but little more than a cursory examination. I must, before I proceed, express my regret and my surprise, that Mr. Stubbs, with all his tact and his policy, and his experience, should have thought proper, when a business question of this kind was before the Board of Arbitration for discussion, to display what I must be pardoned for calling exceedingly bad taste for making the attack an unwarranted, unreasonable attack upon the other party 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. But, I 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. I may say, further with reference to these appeals that they are not un- usual; that the same gentlemen whose sentiments Mr. Stubbs voiced here the other day have for years past, 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 United States, but entirely without avail. The sections of the country of the United 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 pronounced. The Canadian Pacific Railway Company, organized under the laws of Canada has about 7,000 miles of railway in Canada. Its paramount duty and its prime purpose, as Mr. Stubbs stated in his remarks, are the development of the resources of Canada, the expansion of Canada's trade, and the Canadian Pacific has endeavored and is endeavoring to perform that duty faithfully, and in pursuing 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 miles of railway in the United States, so that even in this country, Mr. Chairman, no gentleman is warranted in calling the Canadian Pacific an alien institution. It is true that the Canadian Pacific received sub- sidies from the Canadian Government 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 been quite impossible for the Canadian Pacific to have built its line from ocean to ocean, and the vast areas of land belonging to the Dominion Government, which are now producing food for the people of the world, would have remained un- productive. But the policy of the Canadian Government in this respect, does not differ materially in dealing with the pioneer portions of the west. In this respect the United States was quite as liberal, and I think I may safely assert that the figures will show that the lines represented here today received far more liberal aid from this Government than the Canadian Pacific received from the Dominion Government. Mr. Stubbs has mentioned another matter. Mr. Chairman, I am going into these matters only in answer to Mr. Stubbs. I do not con- sider them essential arguments in dealing with this subject I 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 of road in 1897, 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 11,000 as against 18,000 miles of railroad, and the population of the State being somewhat less than 4,000,- ooo; so that the Railways of Ohio 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, I refer now more directly to some of the territory traversed by the lines represented here; the railroads in Texas, Arizona, New Mexico and California with a population nearly equal 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, Mr. Chairman, I am not mentioning this matter for the purpose of impressing on the people of the United States that their rail- ways are being overpaid; on the contrary, I do not believe that they are being overpaid, but that we are seriously underpaid. At the same time I desire to impress on you the fact that there are subsidies and subsidies, i86 and of a necessity subsidies are not always paid in the nature of a lump sum. Then when they refer to this alien corporation that is preying 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 Northern Pacific Railway Company owns 250 miles of railway in the Province of Manitoba; that they not only re- ceived from the Provincial Government and the British 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 Great Northern have received in addition to that, large grants of land from the Government of British Columbia. For what purpose have those lines been utilized? For 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. Neither party has any ground for com- plaint upon that score. There is another difficulty about which the United States lines complain. They say the Canadian Pacific is in the jurisdiction of the Canadian Government; it is not amenable to our Inter-state Commerce Act; it is not required as the United States lines are, to obey the re- quirements of that Inter-state Commerce 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 with their lines at home that the Canadian Pacific would not think of doing abroad in a foreign country. I feel confident that if upon this point the opinion of 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 been guilty of infraction of that Act. Indeed, I might tell you, and I think 1 could tell you without danger of contradiction that today every line represented here, except the Canadian Pacific line has violated the Inter-state Com- merce Act; and that the Inter-state Commerce Commission would state to you that the Canadian Pacific has obeyed its requirements more closely than any other line on the continent. However, gentlemen, as I 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. I prefer in a very few words to outline the position of the Canadian Pacific from the practical standpoint, and for that purpose and in view of what I 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 you obliterate the international boundary line. Imagine 187 that there was no boundary line there and consider that all these railway companies are railway companies of a common nationality, all within the same country. Upon no other ground can the question be properly discussed. There are the Atchison, Topeka & Santa Fe, the Southern Pacific and Union Pacific and other lines running along through the United States, direct all-rail lines, with their connections to San Fran- cisco and other points of California. There is the Canadian Pacific line running to the north, with its Trans-Continental line and its connections, giving it access to all of the New England 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 Vancouver. It 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 business between Vancouver and San Francisco it uses an American Steamship line. This does not belong to the Canadian Pacific; it is not, as stated in the Inter Ocean of this morning, subsidized by the Canadian Pacific line or any other line. It is purely a steamship line engaged in commercial trade between San Francisco and points in Canada and on the Coast. The Inter-state Commerce Commission in their opinion or report or ruling upon the passenger rate war recently, made the point that the Canadian Pacific, because of its long, circuitous route, should not be a participant, should not be a competitor for passenger business between New York and other points on the Atlantic Coast and San Francisco; and, while I do not consider their opinion entirely sound upon that point, it has some merit, because there can be no doubt that a passenger, re- quired to travel a long additional distance, several hundred miles, to use a broken route, part rail and part water, will hesitate about going that way, unless he is offered some extraordinary inducements. But 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 question of route. If he can send his carload of nails, or his carload of merchandise, by a direct, all-rail route, from a point in the east to San Francisco, and from San Francisco to a point in the east, with the same saving of time, without trans-shipment, at exactly the same rate he is required to pay if he sends it by the circuitous route with the delay and all the danger? of trans-shipment incident thereto dangers of damage, and so forth, it is natural, indeed, it is a foregone conclusion, that his goods will go by the all-rail route and the less direct route or broken rail-and-water route will, of necessity, be forced out of the business. In order to compensate 1 88 tor the disadvantages of the broken route, it has been the practice for the broken route to offer to the shipper a lower rate than the all-rail continuous route; and the giving of these lower rates, unless there are some regulations, or some understanding, is sure to lead to demoraliza- tion. For the purpose of equalizing, as far as possible, the conditions, and to prevent the inferior road from quoting a rate that may be unduly low, and to keep the regulation of rates within some reasonable limit and prevent demoralization, it has been the practice for years and years, on this continent, to grant 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 Vancouver, thence a steamship line from Vancouver to San Francisco, and it is quoting a differential rate. It has been for some years past, by agreement with its competitors, the all- rail lines, and we maintain that agreement is in force today. We maintain that the dissolution of the Trans-Continental Association has had no effect whatever upon 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. Now, the gentlemen representing the all-rail lines recently con- ceived the idea that with this differential, the Canadian Pacific had pos- session of an undue advantage over the all-rail lines. A meeting was called in Denver for the purpose of discussing that subject, and the parties, unable to agree, decided to refer the question to arbitration. I am sure that our traffic officials Mr. Bosworth and Mr. Kerr have given you all the necessary evidence to show that at even rates the Canadian Pacific would be forced out of the business, and that the freight business between San Francisco and all eastern points would be practically in the control of one single railway company. They have given you illustrations to show that, under like circumstances, it is the common practice, indeed the universal practice, in the United States to permit the rail-and-water car- rier to quote differential 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 explained that the Canadian Pacific with no access 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 Fran- cisco lines, and that therefore the Canadian Pacific is, with reference to San Francisco, in a position radically different from either the Northern Pacific or the Great Northern. It is not my intention to recapitulate or enlarge 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 buncombe. We are prepared to compete with the i8 9 American lines for inter-state or inter-provincial traffic in exactly the same manner as they compete with each other, the establishment and regula- tions of rates to be determined by exactly the same measures, the same practices that they use when dealing with each other in the several sec- tions of the country. We do not ask that our foreign position, our Cana- dian position, give us any advantage; but we beg you that it shall not prejudice us in dealing with this subject. We see no earthly reason why it should under the circumstances. By the laws of the country, and by common consent, we are exercising in the United States, transit privileges 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 to deal with us, without reference to the question of nationality. Now, gentlemen, I have nothing more to say. With this I am pre- pared to submit to you the case of the Canadian Pacific. If, in your deliberations, and in view of the testimony 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 Arbitrators to decrease it. I can see no possible grounds, 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 you decide that it shall be abrogated, that the Canadian Pacific shall practically with- draw from San Francisco and California business, and that it shall entirely avoid that territory, because it can secure no business on even terms with these Trans-Continental lines, and it will be making that sacrifice; you will 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 differ- ential 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? MR. SHAUGHNESSY $65,000,000.00. ARBITRATOR DAY That is represented in shares:' MR. SHAUGHNESSY In shares. ARBITRATOR DAY At the par value of $100? MR. SHAUGHNESSY 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 Missouri River 190 from Boston I mean Inter-state traffic now solely how does the traffic from Boston reach your rails? MR. KERR It goes up and connects with us at Newport, Vt., all- rail, over the Boston & Maine. ARBITRATOR DAY Do you have any water connection with your rails on the Atlantic Seaboard? MR. KERR There are from New York, in connection with the Canadian Pacific Dispatch. That does not operate Trans-Continental, but operates up into this section of the country, Chicago and St. Paul. ARBITRATOR DAY I thank you. ARBITRATOR WASHBURN The Board is ready to listen to any reply that the representative of the American lines desires to make to the remarks of Mr. Shaughnessy. MR. STUBBS Mr. Chairman, and Gentlemen of the Board: I do not know that I have much to add ; indeed, I am somewhat embarrassed by the turn the discussion has taken. I really do not know how far my right extends to reply to Mr. Shaughnessy. If I err, you will have to call me to order. FIRST, the Vice-President of the Canadian Pacific says, 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 $35,000,000.00 in cash MR. SHAUGHNESSY $25,000,000.00. MR. STUBBS $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 $10,000,000.00. You will find that all explained fully in the published documents which I filed with you. They received $35,000,000.00 in cash from the Canadian Government, 18,000,000 acres of land and 714 miles of railroad. That is acknowledged. None of the American lines received a dollar of cash subsidy from the United States Government. The Government loaned them money, and issued bonds and paid the interest, but those lines have got to repay. Tne Union Pacific has already, in its settlement with the Government, 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 Union Pacific, knows that the Government is pressing and will press for the refundment or re-payment of the full amount ad- IQI ' i i vanced, principal and interest. Their land subsidy I am not able to tell you how much it was, in gross; it was every odd section within twenty miles of the road. What that aggregated, I do not know; much of it has been forfeited. Now, the representative of the Canadian line this morning says, that the Northern Pacific and the Great Northern, referring to both of them, have extended up into the Province of Manitoba, built into that portion of the Canadian territory, for the purpose of sharing in Canadian com- merce; that commerce which is purely domestic to Canada. No one denies that, but can he demonstrate to this Board that they entered that territory asking an advantage over the Canadian line? I endeavored to impress it upon the minds of the Board, 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 petitions 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 I think Seattle and Tacoma did the same thing), I explained to the Board that 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 the Canadian line in this territory, if it came here upon equal terms with us. Further on, the Honorable Vice-President of the Canadian line says: ''We are prepared to compete exactly as they compete with each other," meaning the American lines. That is all we want him to do. Now, competition does not consist alone in competition of rates. There is such a thing as competition in service; competition in facility, which every railroad man and every shipper understands. The Canadian line has not competed, never has, and is not now competing in service. This I illus- trated to the Board, by contrast with the "Sunset" line, that it was evi- dent that it had sat down on its differentials, and depended w r holly upon its differentials, in order to get business with San Francisco, instead of doing what the "Sunset" line had done. Now, the Vice-President of the Canadian Pacific says, that they have no line from Vancouver running into San Francisco or into the United States territory, but that there is an American Steamship line there with which they are compelled 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 Francisco? Then its question of disabilities would disappear. If American lines put in their money to build a railroad, put up that investment, thereby creating an advantage over the Canadian line who has the same field open to it, who will say that they must necessarily compensate it by giving an advantage in rate? IQ2 Why should not the Canadian line be less like the Chinaman who comes into this country, bringing nothing with him, and sending every dollar that he gets out of the country; even comes under a contract that his bones must be taken back to the Celestial Kingdom? That is what the Canadian line does with respect to San Francisco business. It can build railroads into the United States territory exactly as the Great Northern, or acquire railroads exactly as the Great Northern and the Northern Pacific acquired roads in Manitoba; do it, exactly as the American lines have done it. By using the same means, the same methods, the same skill, the same energy, they can duplicate the lines of the American roads. There is no question about that. I think it is preposterous for any line having this field and this opportunity open to it to come into the United States and say, "Because we elect to use an inferior route because of the money that it brings into our pockets, the profit we make by so doing, and do use a steamer line from Vancouver to San Francisco, that the American lines shall pay us something in addition by giving us (as its own representative said) a money advantage." What we are contend- ing against is the claim of the Canadian Pacific line, an alien for it is an alien for an advantage over domestic lines with respect to domestic business. They are not entitled to the advantage. The Vice-President of the Canadian Pacific road refers to a fact that 1 fully expected the General 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 upon 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 United States to another point in the United States, through a foreign country without t*ie payment of duties upon re-entry into the United States. That law was passed by Congress for what purpose? Was it passed in order to give the Canadian line an advantage over the American lines? No sirs. It was to put them upon an equality, 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 proposed 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 3006 of the Statutes of the United States, was given not for the purpose of benefiting a foreign corporation. It was given for the purpose of benefiting the domestic shipper. It was reciprocal. It gave to the Canadian people by the operation of their laws the right to ship Canadian commerce through the United States back into Canada and it gave the American shipper the right to ship American freight through Canada back into the United States. It was because it gave a short line. It goes away back to 1864. The Act was passed for the purpose of legalizing the ruling of the Treasury Department. When the Suspension Bridge was built a shorter route could be made to the Peninsula of Michigan and the Great Northwest through Canada than could be made by any of these lines (indicating on map) and the privilege was given for the benefit of our own people. Now then, when the Inter- state Commerce law was passed dealing still with this question of equality when the Inter-state Commerce law was passed Section 6, I think it is, provides that tariffs shall be published certain tariffs, shall be published and posted and that all through tariffs shall be filed with the Inter-state Commerce Commission. 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 Commerce Commission, to suspend the bonding privilege in any case where a Canadian corporation or a foreign corporation failed to comply 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. Now, it is intimated that it seemed necessary to bring the chief operating 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 of the Board of Arbitrators. That section of our argument was introduced by the fact that the Canadian line had opened the ques- 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 that 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 poor man. I then appealed to this Board 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 mental in the principles of both governments. Every American citizen has that right, and every Englishman will assail Parliament if Parliament passes a law which is inimical to, or fails to enforce a law which is pro- tective of that person's rights which affects his property. If we have done what we were charged with, we only exercised the inalienable right of American citizens, I stated, further, that this thing had become a public question; not that we had made it so; that it had become a na- tional question. I said this was evidenced by the fact that the Inter-state Commerce Commission had treated of this question in its several Annual Reports to which I have referred the Honorable Board. I said that the Inter-state Commerce Commission had investigated this question with respect to passenger business, and had made a report and rendered an opinion upon it in which notwithstanding what the Honorable Yice-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 United States. I have not raised the question here as to whether the Canadian line obeyed those law r s. That is apart from this question so far as this differential case is concerned. I do not care whether they are quoting a reduction of TO per cent or 25 per cent or 50 per cent below our rates. It has nothing to do with this case, but it is a public question. It is a national question and I stated to this Board that it would continue to be so, so long as the British 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? No, 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 British Government, you take away its very life and spirit. Brother Kerr referred to the open door policy of England; calls this evidence, in- tends to be understood that we should extend an advantage to the Cana- dian Pacific in order that we may be in harmony with the open door policy of Great Britain. There was a little speck of war in the horizon a little while ago. What was it about? It was because Russia had gained a railway franchise in China instead of Great Britain. What did Great Britain care especially about that railway franchise, per se? Nothing, but it was because if that railway franchise was given to Russia and not given to an Englishman, the territory or provinces served by that railroad would be closed to British trade, and so jealous is Great Britain of her British 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 by saying that it is not business. Take the extension of British 195 trade away from the policy of the British Government, and her fleet, which is built for no other purpose than to maintain that trade, and which is now equal to the combined navies of the world, will disappear inside of ten years. Take business principles, as shaping and governing gov- ernmental policy, away from Great Britain and the British Empire per- ishes from the face of the earth. Take business principles away from the governmental policy of the United States, and where will this agitation end, or how far will this agitation go with respect to whether we shall retain the Philippines or Cuba or Porto Rico? Is not the business senti- ment of this country crying out to the Government and forcing the Gov- ernment to a policy of retention of the Islands in the Pacific Ocean as well as those in the Caribbean Sea? How can you rob it this question of its public aspect? Business principles? Great Britain was against slavery, fundamentally; was active in its destruction all over the world, until the Civil War in America broke out, and then Great Britain sym- pathized with and aided the South. Why? Because the American people controlled the commerce of the oceans at that time. She saw her chance and, against her settled principles, she equipped the Shenandoah and the Alabama, and allowed them to sail forth, fully equipped and armed, to prey upon American commerce, 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 Trans-Continental lines meaning the lines west of this Missouri River line take upon 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 traffic is diverted from the New York Central, or from the Pennsylvania or the Baltimore & Ohio from all these direct lines. Nearly all the important railroads in the United 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 traffic upon equal terms with us. The question, sim- mered down, is, "Shall the American lines adopt a policy which will force a part of this traffic 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 United 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 occupy the same relative posi- tion to this traffic, 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 I have said, is deeply IQ6 interested in having, not only adequate but efficient service, and I do not believe that it is possible to convince a business man, an intelligent man, who thinks upon this subject, that there is any justification, whatever, in giving the Canadian Pacific a money advantage over the American lines because it elects to use this steamship line, (pointing to map) when it can get franchises and can build down into San Francisco, as readily as any of the American lines, and if the American lines have built these roads at great expense to themselves, they ought not to be asked to pay the Cana- dian Pacific, by forcing a portion of the traffic on that line for using an inferior route. It seems to me to be an "A, B, C" proposition. The Vice-President of the Canadian Pacific, referred to and dwelt upon the fact that he, or his representative, had shown that the Canadian line was only asking for what was recognized as a settled principle over the United States, both with respect to domestic traffic and with respect to international traffic. Now, I think I have shown this Board, clearly, First: 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. Take the differentials by lake-and-rail to North Pacific Coast points that were dwelt upon 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 gave 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 differential. Now, the Canadian line adheres to its allegation of physical dis- ability by reason of being 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-bear 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 place, the ocean haul from Vancouver to San Francisco, is eight hundred and some odd miles I have forgotten eight hundred and fifty or sixty miles. It is 1800 miles from New York to New Or- leans, more than double. Compare the line, New York to San Fran- cisco via the "Sunset," New York to San Francisco via the Canadian line and Pacific Coast Steamship Company, and it is 200 miles longer this way. (pointing on map to "Sunset" line). There is a comparison. 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 That is a fine argument, isn't it? If the "Sunset" line can build steamships, improve transfer service, run trains 2400 or 2500 miles from New Orleans to San Francisco, and take a fair share of the business; so much of the business that the Canadian line and no other line would be willing to give 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, and while I am not an operating man, if I were on the Canadian line, I could do it. All I should ask would be that my backers should put up the money, as they did in the case of the "Sunset" line. But, in- stead of putting up its money to make its line effective as a competitor with the "Sunset" line, the Canadian line comes in and says: "Give us a money advantage;" that would be a tax on the "Sunset" line after it has improved its service in that way. Or it says, "Oh, the owners of the 'Sunset' line have hedged California in with railroads and by reason of its local influences there is able to control the business." Very well. Let the Canadian line come down into California and build about 3500 miles of road; develop virgin territory; open it up to the outside world; invest money for which it has to look thirty-five to fifty years beyond in expectation of a return. Do not let it come and say: "Because you 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." Now, one word more and I will close. I insist, in the name of the American lines, that back of this whole demand of the Canadian line, behind it and underneath it, there is nothing that gives it any force in the mind of the Vice-President of the Canadian line, any more than it does in my mind, or any more than it does in the mind of this Board, than the unconfessed but existing consciousness that if you do not give them this 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 equality up here in Oregon with the American lines? It is the more amazing to me since I got some information from Mr. Kerr's state- ment of his relations with the Northern Pacific road. He says he cannot work in over the Northern Pacific to Portland. I know he does business to Portland, for I was present at the hearing of the Inter-state Commerce Commission 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 Northern 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 traffic arrangement with the Seattle & Interna- tional Ry. Now, there must be some subsisting arrangement. I do not 198 know but it may be that this line has a traffic arrangement with respect to Vancouver; an understanding that if the Great Northern and Northern Pacific will keep out of Victoria and Vancouver it will keep out of Tacoma and Seattle. I do not know that that is the case, but that is the only reason that I can think of. As I have said before, if you will just reverse conditions, and that is the test, I do not care what is said; what argument is made beyond that. Picture in your minds San Francisco with the State of California back of it up here (indicating on map) at Vancouver; Vancouver 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 Pacific be here asking for a differential in order to get into Vancouver, any more than we are asking a differential to get into Van- couver today? Why are they here? Because here (pointing on map to San Francisco) is a great volume of business that they did not create, nor contribute towards its creation. They do not support 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, (pointing to map) then they will not be like the Chinaman, they will build up 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, "You 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 tliat 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 underlying reason in this case and that this is not a question 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 differential demands so as to stop the demor- alization of rates. Analyze the statement of the other side and 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 expediency. 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 prove 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 of the question, the whole range of the argument that the American lines submitted seems to us to be germane. I am obliged to the Board for this attention. ARBITRATOR WASHBURN Mr. Shaughnessy, if you desire to make any further remarks on this subject confining yourself to Mr. Stubbs' argument, you may do so. MR. SHAUGHNESSY I shall say but a very few words because there was 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 points that I 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 practically 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 Mr. 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 Pacific, and no one knows better than Mr. Stubbs that that is not its policy 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 Pacific but frequently with some of the gentlemen connected with the Southern lines I will not except the Southern Pacific 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 question, 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 United States; deal with it in exactly the same way as if the Canadian Pacific was an American line and not a Canadian line. I say the 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. Now, one further point. Mr. Stubbs refers to the Northern Pacific and says that they have built lines up into the Winnipeg country com- peting for strictly Canadian domestic traffic and he says that the North- ern Pacific by competing with the Canadian Pacific does so on exactly the same footing. MR. STUBBS No, I did not say that was the case. I asked you the question. 20O MR. SHAUGHNESSY I beg your pardon, I will answer the ques tion; they do. The Northern Pacific Company makes exactly the same rate from Toronto or Montreal as the Canadian Pacific makes, both hav- ing all-rail lines to Winnipeg, but on business, rail to Owen Sound and by water to Port Arthur, thence via rail to Winnipeg, if the Canadian Pacific uses its rail-and-lake route, it makes a lower rate and the Northern Pacific consents to it and the Canadian Pacific reciprocates by giving to the Northern Pacific the right, if it takes business by its lake-and-rail route from any point in Canada to Duluth it reciprocates by permitting them to make a lower rate. Now, if the conditions were the same; if we had this all-rail line, to which Mr. Stubbs referred, to San Francisco, 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 differential 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 standpoint we consider it just as the other roads of a sim- ilar character are considered throughout the United States. I know of nothing else that I care to say there is one matter, but I think it was probably an error on the part 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 I intended to say was, that the Canadian line had the same right and priv- ileges with reference to traffic in bond that United States roads have in Canada with reference to bonding. That is our case. ARBITRATOR WASHBURN The hearing is closed, and the Board, after giving the matter proper and conscientious consideration, will render its decision. We stand adjourned. At 12:45 P- M. the Board adjourned, 2OI DECISION OF BOARD OF ARBITRATION. The following is a copy of the decision rendered by the Board: Chicago, October 19, i J. C. Stubbs, Esq., Representing the United States Lines. T. G. Shaughnessy, Esq., Vice President, Canadian Pacific Railway Co. GENTLEMEN: The undersigned who were appointed Arbitrators under the following resolution adopted at a meeting of interested lines which convened at Brown Palace Hotel, Denver, Colorado, August 22nd, 1898, viz.: "RESOLVED, That provided the Canadian Pacific Railway will join with the United 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 other 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 United States lines for the carriage of the freight in question, 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 of said Board of Arbitration shall be final, conclusive and binding upon all." after hearing the evidence and arguments of the interested parties and having duly considered the same, 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 United States lines for the car- riage of the freight in question. Signed: Edw. S. Washburn W. A. Day I do not concur in the above conclusion; Signed: J. W. Midgley. 3 YL'K UNIVERSITY OF CALIFORNIA LIBRARY