THE FREE PORT AN AGENCY FOR THE DEVELOPMENT

OF AMERICAN COMMERCE

BY FREDERIC C. HOWE,

Commissioner of Immigration at the Port of New York.

AN OVERLOOKED ELEMENT IN INTERNATIONAL TRADE

In the discussion and legislation now going forward for the reëstablishment of the American merchant marine and the development of our carrying trade a very important, possibly the most important, of all elements has been neglected. And that is the necessity of cargoes, not only for incoming ships but for outgoing ones as well. In order to re-create our merchant marine and enter the field for the carrying trade of the world in competition with England and Germany, it is necessary that ships should be able to speedily and surely find cargoes. And neither the modification of the registration acts nor the acquisition of ships by the government will achieve the desired result unless provision is made for this primary condition as well. Incoming as well as outgoing cargoes are a sine qua non to the development of American trade and shipping.

The Opportunity. Several things coöperate at the present time for re-creation of our carrying trade. They are the European war, the opening of the Panama Canal, the amendments to the registry act and the new currency measure. Added to these is the substantial extension of the free list in the recently enacted tariff bill. The European war has closed the ports of Germany and Russia. It has dislocated the carrying trade of England, Belgium and the Mediterranean countries. The Panama Canal brings South America close to North America and also opens up the trade of the Orient to us. We now have the financial machinery for the transaction of a world business through the establishment of subsidiary banking branches, while our attitude of friendly neutrality to all of the nations involved in the present war lends a strong moral influence to the development of American trade.

The Present Carrying Trade of the World. It is the countries that have substantially free trade that do the carrying trade of the world. They are England, Germany (through her free ports),

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Belgium, Holland and Denmark. The great bulk of the carrying
trade is done by Great Britain, because she is a free trade country,
and a reference to the rise of British shipping in the years which
followed the repeal of the corn laws shows a tremendous and imme-
diate increase in her oversea trade following the establishment of
free trade. For fifty years she has been mistress of the seas for
the very simple reason that ships could come to her ports from all
over the world; they could there discharge their cargoes and find
other cargoes awaiting them without delay. Here there were no
obstacles, obstructions or tariff barriers to interfere with traffic.
All history is unanimous in its demonstration that carrying trade
will go hundreds of miles to escape tariff barriers. Protective
tariffs killed the Spanish trade; they destroyed the rich and pros-
perous cities of the Netherlands. They killed our own foreign
shipping; for commerce hates tariff barriers.
In recent years

Germany has begun to compete with Great Britain for the carry-
ing trade of the world. She has been able to do this through her free
ports, which have existed in Hamburg, Bremen and Lübeck, ever
since the Franco-Prussian war. These concessions were insisted on by
these old free cities when they entered the Empire. And by Imperial
law there exists in the harbor of these cities a large free harbor, into
which ships can come and go without the payment of customs
duties upon their cargoes. By this means a free counter is provided,
across which goods can be exchanged and trans-shipped to other
destinations. Or they can be placed in great storage warehouses,
where they can remain for an indefinite period until cargoes have
accumulated for other ports. If desired they can be shipped at
any time into the Empire on the payment of the customs duties.
These ports have grown with great rapidity. Here cargoes can
be broken and new ones made up. To these ports ships can
come from any place in the globe with the assurance that they
will quickly find outgoing cargoes to some other destination. The
free port has contributed greatly to the upbuilding of German
shipping.

THE PROPOSAL

America cannot hope to establish herself as a clearing house of the world until cargoes exist with which to fill ships' bottoms. For ships must be filled not only going but coming;

they must be able to change their destination and do a tramp trade. As it is now, we have cargoes of raw materials to European countries and some outgoing and incoming cargoes to South America and the Orient. But our protective tariff prevents the importation of European wares and compels a large part of the transAtlantic shipping to go empty one way.

How can this obstacle be overcome? Aside from a policy of free trade the only other alternative is the development of the free port idea along the lines of German experience. And the suggestion is that Congress should provide for a half dozen free ports as an experiment; three of which should be on the Atlantic seaboard, one on the Gulf, one at Panama, and one or two upon the Pacific Coast.

Quite obviously these free ports should recognize existing transportation and industrial conditions; they should be linked up with rail transportation. The leading Atlantic ports are New York, Boston, and Philadelphia. And New York and Boston have admirable natural advantages and harbor facilities for the planning of such ports. New Orleans is a natural port upon the Gulf of Mexico and may become a port of great prominence in connection with the Panama Canal traffic. Upon the Pacific coast San Francisco, Los Angeles and Seattle are all ports of importance, all of which either own or plan to own a comprehensive system of municipal docks. These would seem to be the natural harbors for the making of preliminary experiments. In addition, all of these cities are rail terminals and have a substantial industrial life which would be quickened by contact with the free port idea.

These ports might be opened in coöperation with various cities. Or it might be provided that any city with a certain amount of customs receipts that offered dockage for a free port would be entitled to enjoy this privilege. This would be an encouragement to cities to acquire and develop their own docks and harbors, which for the most part are in the control of private interests.

Into these ports ships could come from all over the world, from Europe, Africa, Asia, and South America. Here their cargoes could be placed in warehouses without the payment of customs dues; or cargoes could be broken and re-made. Goods which remained in the warehouses would be placed in bond, as is now done for importers.

In addition to the obvious advantages from the re-creation of our shipping, the diversion of trade to American ports would cheapen the cost of living. It would add other business, for periodic surpluses of goods would accumulate, which would find their way into the country, and would also place near at hand many materials needed in industry.

The free port would offer great opportunity for financial operations, now made possible by the recent currency act. It would stimulate international banking, and would tend to shift the financial center of the world to this country. And America, by the logic of events, has become the natural center for the world's financing, just as London became that center several centuries ago, when it shifted from the cities of the Netherlands. But the financial center will only move to this country when it becomes a clearing-house of goods as well as of money. For credit the world over is created by currently created wealth in transit or change, so that even our financial expansion is dependent upon the opening up of American ports to the clearance of the wealth of the world.

Now is the opportune moment for the development of this policy, while the ports of many nations are closed to trade. In addition, South America, the Pacific Islands, and the Orient have become more accessible to our ports through the Panama Canal than they have to the older ports of Europe. There is every reason why many of these countries should prefer to trade with us. But they can only do so when ships are in a position to earn the same return from our ports that they now earn from the ports of England, Germany and the other countries of Europe.

THE FREE PORT OF HAMBURG

Description. When Hamburg entered the German Empire in 1871 the city retained the right to remain a free port, which it had been in substance for centuries. The greater part of the port was set aside as a free port outside the customs union, as the whole city had been before. The Empire contributed 40,000,000 marks toward the construction of the free port, while the city contributed about 150,000,000 marks.

The free port consists of a large number of basins, many of them cut into the land, with quays jutting out into the river. Upon these quays are railroad tracks with cranes for the easy transfer of

freight into the near-by sheds. In the larger outside basins are many mooring posts which provide anchorage for vessels transshipping cargoes in the stream.

As a part of the free port many warehouses are operated by the port authorities. Goods are stored in these warehouses for reexport or for ultimate consignment into Germany or the other countries of Europe.

The free port is considered by the customs department as foreign territory. It is surrounded by a customs line guarded by customs officials. The line is designated by high iron palings upon the land side, while along the river is a floating palisade with an imaginary line across the river, guarded at either end by customs officials. At the land and water entrances of the free port are customs booths at which duty is paid on goods when they enter the Empire.

All of the Hamburg pilots are ex-officio customs inspectors. Under their guidance ships pass to their berths in the free port unmolested by customs officers. There are no declarations of dutiable goods to be made; no customs officials are taken aboard, with the delays attendant upon their presence. When a ship is cargoed ready for sea a customs inspector-pilot takes her from the free port to the mouth of the river. At no time is any other representative of the customs service aboard the boat. There is less hindrance to the free movement of the ship than in the free ports of England.

The free port contains such industries as are incident to the care and feeding of the employees; shipyards for repairs; and other industries relating to the building, outfitting and provisioning of ships. In addition there are certain rice-mills and oil-mills. About 15,000 workmen are employed in the free port, but at least 12,000 are employed in the shipyards.

German export produce is loaded to the outgoing ships by big river barges of from 600 to 800 tons' capacity, or by harbor lighters of about 60 tons. River barges are only permitted when they contain at least 50 tons of freight.

The cargoes of very many vessels are handled in mid-stream at the mooring-posts, nearly one-half the tonnage of the harbor being discharged in this way. By this means the capacity of the port is doubled.

Administration, Cost, Etc. The warehousing business of the