MANUAL OF SHIP SUBSIDIES
An Historical Summary of the Systems of All Nations
EDWIN M. BACON, A.M.
PREFACE I INTRODUCTORY II GREAT BRITAIN III FRANCE IV GERMANY V HOLLAND-BELGIUM VI AUSTRIA-HUNGARY VII ITALY VIII SPAIN-PORTUGAL IX DENMARK-NORWAY-SWEDEN X RUSSIA XI JAPAN-CHINA XII SOUTH AMERICA XIII THE UNITED STATES XIV SUMMARY INDEX
The intent of this little book is to furnish in compact form the history of the development of the ship subsidies systems of the maritime nations of the world, and an outline of the present laws or regulations of those nations. It is a manual of facts and not of opinions. The author's aim has been to present impartially the facts as they appear, without color or prejudice, with a view to providing a practical manual of information and ready reference. He has gathered the material from documentary sources as far as practicable, and from recognized authorities, American and foreign, on the general history of the rise and progress of the mercantile marine of the world as well as on the special topic of ship subsidies. These sources and authorities are named in the footnotes, and volume and page given so that reference can easily be made to them for details impossible to give in the contracted space to which this manual is necessarily confined.
BOSTON, MASS. September 1, 1911.
The term subsidy, defined in the dictionaries as a Government grant in aid of a commercial enterprise, is given different shadings of meaning in different countries. In all, however, except Great Britain, it is broadly accepted as equivalent to a bounty, or a premium, open or concealed, directly or indirectly paid by Government to individuals or companies for the encouragement or fostering of the trade or commerce of the nation granting it.
Ship subsidies are in various forms: premiums on construction of vessels; navigation bounties; trade bounties; fishing bounties; postal subsidies for the carriage of ocean mails; naval subventions; Government loans on low rates of interest.
In Great Britain they comprise postal subsidies and naval subventions, ostensibly payments for oversea and colonial mail service exclusively, or compensation for such construction of merchant ships under the Admiralty regulations as will make them at once available for service as armed cruisers and transports. They are assumed to be not bounties in excess of the actual value of the service performed, with the real though concealed object of fostering the development of British overseas navigation. Still, notwithstanding this assumption, such has been their practical effect.
Their original objects when first applied to steamship service, as defined by a Parliamentary committee in 1853, were—"to afford us rapid, frequent, and punctual communications with distant ports which feed the main arteries of British commerce, and with the most important of our foreign possessions; to foster maritime enterprise; and to encourage the production of a superior class of vessels, which would promote the convenience and wealth of the country in time of peace, and assist in defending its shores against hostile aggression." To foster British commerce they have undeniably been employed to meet and check foreign competition on the seas, as the record shows.
In the United States they have taken the form of postal subsidies openly granted for the two-fold purpose of the transportation of the ocean mails in American-built and American-owned ships, and the encouragement of American shipbuilding and ship-using.
England has never granted general ship-construction or navigation bounties except in the reigns of Elizabeth and James I. Under Elizabeth Parliament offered a bounty of five shillings per ton to every ship above one hundred tons burden; and under James I that law was revived, with the bounty applying only to vessels of two hundred tons or over.[A]
A policy of Government favoritism to shipping, however, began far back in the dim ninth century with Alfred the Great. Under the inspiration of this Saxon of many virtues, his people increased the number of English merchant vessels and laid the foundation for the creation and maintenance of a royal navy.[B] The Saxon Athelstan, Alfred's grandson, whose attention to commerce was also marked, first made it a way to honor, one of his laws enacting that a merchant or mariner successfully accomplishing three voyages on the high seas with a ship and a cargo of his own should be advanced to the dignity of a thane (baron).[C]
The first navigation law was enacted in the year 1381, fifth of Richard II. This act, introduced "to awaken industry and increase the wealth of the inhabitants and extend their influence,"[D] ordained that "none of the King's liege people should from henceforth ship any merchandise in going out or coming within the realm of England but only in the ships of the King's liegeance, on penalty of forfeiture of vessel and cargo."[E]
This act of Richard II was the forerunner of the code of Cromwell, which came to be called the "Great Maritime Charter of England," and the fundamental principles of which held up to the second quarter of the nineteenth century.
Under Charles I was enacted (1646) the first restrictive act with relation to the commerce of the colonies, which ordained "That none in any of the ports of the plantations of Virginia, Bermuda, Barbados, and other places of America, shall suffer any ship or vessel to lade any goods of the growth of the plantations and carry them to foreign ports except in English bottoms," under forfeiture of certain exemptions from customs.[F] It was followed up four years later (1650) under the Commonwealth, by an act prohibiting "all foreign vessels whatever from lading with the plantations of America without having obtained a license."[G]
Cromwell's code, of which the act of 1381 was the germ, was established the next year, 1651. Its primary object was to check the maritime supremacy of Holland, then attaining dominance of the sea; and to strike a decisive blow at her naval power. The ultimate aim was to secure to England the whole carrying trade of the world, Europe only excepted.[H] These were its chief provisions: that no goods or commodities whatever of the growth, production, or manufacture of Asia, Africa, or America should be imported either into England or Ireland, or any of the plantations, except in English-built ships, owned by English subjects, navigated by English masters, and of which three-fourths of the crew were Englishmen; or in such ships as were the real property of the people of the country or place in which the goods were produced, or from which they could only be, or most usually were, exported.[I] This last clause was the blow direct to Holland, for the Dutch had little native products to export, and their ships were mainly employed in carrying the produce of other countries to all foreign markets. It was answered with war, the fierce naval war of 1652-1654, in which was exhibited that famous spectacle of the at first victorious Dutch admiral, Van Tromp, sweeping the English Channel with a broom at his masthead.
With the final defeat of the Dutch after hard fighting on both sides, their virtual submission to the English Navigation Act, and their admission of the English "sovereignty of the seas,"[J] by their consent to "strike their flag to the shipping of the Commonwealth," England, in her turn, became the chief sea power of the world.[K] During the ten years of peace that followed, however, the Dutch despite the English Navigation Act, succeeded in increasing their shipping, and regained much of the carrying trade if not their lost leadership.[L]
Cromwell's act was confirmed by Charles II in 1660, and made the basis of the code which then her statesmen exalted as "The Great Maritime Charter of England."
Early in Charles II's reign also (in 1662) indirect bounties were offered for the encouragement of the building of larger and more efficient ships for service in time of war. These were grants of one-tenth of the customs dues on the cargo, for two years, to every vessel having two and one-half or three decks, and carrying thirty guns.[M] Thirty years later (1694), in William and Mary's reign, the time was extended to three years. Under William and Mary the granting of bounties on naval stores was begun, and this system was continued till George III's time.[M] With William and Mary's reign also began the giving of indirect bounties to fishermen for the catching and curing of fish. After the middle of the eighteenth century vessels engaged in the fisheries were regularly subsidized, with the object of training sailors for the merchant marine and the royal navy.[M]
While the fundamental rules of the "Maritime Charter" of 1660 remained practically unimpaired, although in the succeeding years hundreds of regulating statutes were passed, breaks were made in the restrictive barriers of the code during the first third of the nineteenth century by the adoption of the principle of maritime reciprocity.[N] In 1815 (July 3) a convention establishing a "reciprocal liberty of commerce," between the "territories of Great Britain in Europe and those of the United States," was signed in London.[O] In 1824-1826 reciprocity treaties were entered into with various continental powers. In 1827 (August 6) the treaty of 1815 with the United States was renewed. In 1830 a treaty for regulating the commercial intercourse between the British colonial possessions and the United States was executed.[P] Under these conventions, repeatedly interrupted by British Orders in Council and by Presidents' proclamations,[Q] the trading intercourse between both countries was regulated till the abrogation of the code of 1660.
In 1844 an indirect move against the code was made, with the appointment of a committee of the House of Commons to inquire into the working of the reciprocal treaties and the condition of the mercantile marine of the country.[R]
At this period the competition of the United States in the overseas carrying trade of the world was hard pressing England. The Americans were building the best wooden ships, superior in model and seaworthiness, the fastest sailers. They were leading in shipbuilding. Much of the British shipping trade was carried on in American-built vessels. The splendid American clipper ships were almost monopolizing the carrying trade between Great Britain and the United States. Most of the shipping of the world was yet in wooden bottoms. Iron ships were in service, but iron-shipbuilding was in its infancy.
The Parliamentary inquiry of 1844 was followed up in 1847 with a move openly against the ancient code. Its principles as they then stood, essentially as in 1660, despite the multitude of regulating statutes, are thus enumerated:
1. Certain named articles of European produce could only be imported into the United Kingdom for consumption in British ships, or in ships of the country of which the goods were the produce, or of the country from which they were usually imported.
2. No produce of Asia, Africa, or America could be imported for consumption into the United Kingdom from Europe in any ships; and such produce could only be imported from any other place in British ships, or in ships of the country of which the goods were the produce and from which they were usually imported.
3. No goods could be carried coastwise from one part of the United Kingdom to another in any but British ships.
4. No goods could be exported from the United Kingdom to any of the British possessions in Asia, Africa, or America (with some exceptions with regard to India) in any but British ships.
5. No goods could be carried from any one British possession in Asia, Africa, or America, to another, nor from one part of such possession to another part of the same, in any but British ships.
6. No goods could be imported into any British possession in Asia, Africa, or America in any but British ships, or in ships of the country of which the goods were the produce; provided, also, that such ships brought the goods from that country.
7. No foreign ships were allowed to trade with any of the British possessions unless they had been especially authorized to do so by an Order in Council.
8. Powers were given to the Queen in Council which enabled her to impose differential duties on the ships of any foreign country which did the same with reference to British ships; and also to place restrictions on importations from any foreign countries which placed restrictions on British importations with such countries.
Finally, in 1849, with the adoption of the commercial policy founded on freedom of trade, came the repeal of the restrictive code, excepting only the rule as to the British coasting trade; and in 1854 the restrictions on that trade were removed, throwing it also open to the participation of all nations.
Meanwhile the British ocean-mail subsidy system for steamship service, instituted with the satisfactory application of steam to ocean navigation, in the late eighteen-thirties, had become established: the first contract for open ocean service, made in 1837, being for the carriage of the Peninsular mails to Spain and Portugal. Although successful ventures in transatlantic steam navigation had begun nearly a score of years earlier, the practicability of the employment of steam in this service was not fully tested to the satisfaction of the British Admiralty till 1838.
In this, as in so many other innovations, Americans led the way. The first steamer to cross the Atlantic was an American-built and American-manned craft. This pioneer was the Savannah, built in New York and bought for service between Savannah and Liverpool. She was a full-rigged sailing-vessel, of 300 tons, with auxiliary steam power furnished by an engine built in New Jersey. Her paddles were removable, so fashioned that they could be folded fan-like when the ship was under sail only.[S] She made the initial voyage, from Savannah to Liverpool, in the Summer of 1819, and accomplished it in twenty-seven days,[T] eighty hours of the time under steam. Afterwards she made a trip to St. Petersburg, partly steaming and partly sailing, with calls at ports along the way. Her gallant performance attracted wide attention, but upon her return to America she finally brought up at New York, where her machinery was removed and sold.
An English-built full-fledged steamer made the next venture, but not until a decade after the Savannah's feat. This was the Curacoa, 350 tons, and one hundred horsepower, built for Hollanders, and sent out from England in 1829. The third was by a Canada-built ship—the Royal William, 500 or more tons, and eighty horsepower, with English-built engines, launched at Three Rivers. She crossed from Quebec to Gravesend in 1833. The next were the convincing tests that settled for the Admiralty the question of transatlantic mail service by steamship instead of sailing packet. These were the voyages out and back of the Sirius and the Great Western in 1838.
The Sirius had been in service between London and Cork. The Great Western was new, and was the first steamship to be specially constructed for the trade between England and the United States. Both were much larger than their three predecessors in steam transatlantic ventures, and better equipped. The Sirius started out with ninety-four passengers, on the fourth of April, 1838, and reached New York on the twenty-first, a passage of seventeen days. The Great Western, also with a full complement of passengers, left three days after the Sirius, sailing from Bristol, and swung into New York harbor on the twenty-third, making her passage in two days' less time than her rival. Both were hailed in New York with "immense acclamation." They sailed on their homeward voyage in May, six days apart, and made the return passage respectively in sixteen and fourteen days. The Great Western on her second homeward voyage beat all records, making the run in twelve days and fourteen hours, and "bringing with her the advices of the fastest American sailing-ships which had started from New York long before her."[U] This clinched the matter. The Admiralty now invited tenders for the transatlantic mail service, by steam, between Liverpool, Halifax, and New York.
The first call for tenders was made in October, 1838. The St. George's Packet Company, owners of the Sirius, and the Great Western Steamship Company, owners of the Great Western, put in bids, the former offering a monthly service between Cork, Halifax, and New York for a yearly subsidy of sixty-five thousand pounds; the latter, a monthly service between Bristol, Halifax, and New York for forty-five thousand pounds a year.
Neither offer was accepted for the reason, as was stated, that a semimonthly service was desired.[V] Instead, private arrangements were made with Samuel Cunard and associates for a carriage between Liverpool, Halifax, Quebec, and Boston, twice a month, for a term of seven years, the subsidy to be sixty thousand pounds annually, less four thousand pounds for making only one voyage a month in the winter season.[W] The contract required Mr. Cunard and his associates to furnish five ocean steamships and two river steamers, the latter on the St. Lawrence.[V] There were also definite restrictions as to turning their steamers over to the Government for use in time of war. All were to be inspected by Admiralty officers, and were to carry officers of the navy to care for the mails.[X] The service was started with the Britannia, the first of the four to be finished, sailing from Liverpool for Boston on July 4, 1840. Thus was begun the career of the celebrated Cunard Line. In 1841 the subsidy was increased to eighty thousand pounds, and the number of steamers to five; and in 1846, a further increase brought the subsidy to eighty-five thousand pounds.[Y]
The Admiralty's favoritism toward the Cunard associates aroused a protest from the unsuccessful bidders for the subsidy, and at length the Great Western Company, whose bid had been the lowest, caused a Parliamentary inquiry to be made into the transaction. They complained that a monopoly had been granted "to their injury and to that of other owners of steamships engaged in the trade, and who were desirous of entering it"; and they asked the inquiry on the broad grounds "that the public were taxed for a service from which one company alone derived the advantage, and which could be equally well done and at less expense if mails were sent out by all steamers engaged in the trade, each receiving a certain amount percentage on the letters they carried."[Z] Although the fact was brought out in the testimony that the Great Western Company had offered to perform the service on practically the same basis as the Cunard associates, and that afterwards the Great Western had proposed to do it at half the subsidy to the Cunarders, the investigating committee sustained the Admiralty's action.[AA]
The Great Western Company overcame the advantage of the Cunarders in the latter's high mail subsidy by increased enterprise and superior management; and prospered. In 1843 they launched the Great Britain, the largest and finest steamship up to that period built for overseas service.[AB] She was, moreover, distinguished as the first liner to be built of iron instead of wood, and to be propelled by the screw instead of the paddle-wheel. In the latter innovation, however, she was not the pioneer. Again the Americans were first in the application of the auxiliary screw to ocean navigation,[AC] as they had been first in despatching a steamer across the Atlantic.
The initial transatlantic subsidy to the Cunard Company was followed up in 1840 and 1841 with contracts for steam mail-carriage to the West Indies and South American ports.[AD] The first (1840) went to the Royal Mail Steam Packet Company, for the West Indian service, the mail subsidy fixed at two hundred and forty thousand pounds a year;[AE] the second (1841), to the Pacific Steam Navigation Company. The latter enterprise was promoted by an American,[AF] after he had failed to obtain support in his own country[AG] for a project to establish an American steamship line to ports along the west coast of South America, a field in which American sailing ships had long been preeminent.[AH]
Up to 1847 the British lines monopolized the transatlantic service. Then the situation became enlivened by the advent of competing American steamships subsidized by the United States Government, with high-paying mail contracts. The first of these was the New York, Havre, and Bremen line starting in 1847; the next, the celebrated Collins Line between New York and Liverpool, underway in 1850. The competing vessels were American-built, wooden side-wheelers; those of the Collins Line superior in equipment and in passenger accommodations, and faster sailers, than the British craft.[AI] To meet this competition the Cunard Company increased their fleet while the Admiralty increased the subsidy. Four new steamers were first added, in 1848, to run directly between Liverpool and New York, and the postal subsidy was raised to one hundred and forty-five thousand pounds a year for forty-four voyages—three thousand nine hundred and twenty-five pounds a voyage.[AJ] The competition began sharply with the regular running of the Collins liners, in 1850. Meanwhile during this year and the next additional contracts were given the Cunard Company for carrying the mails between Halifax, New York, and Bermuda, on the North American side, in small steamers, fitted with space for mounting an 18-pounder pivot-gun, subsidy ten thousand six hundred pounds a year; and for a monthly mail conveyance between Bermuda and St. Thomas, subsidy four thousand one hundred pounds a year.[AK] These services united the West Indies with the United States and Canada.[AK]
In 1851 John Inman entered the trade with his "Inman Line" of transatlantic screw steamers, which were to carry general cargo and emigrant passengers, then a steadily increasing business, and to be independent in all respects of either the Admiralty or the Post-Office.[AL] The unsubsidized line prospered. The next year (1852) the Cunard Company increased their liners' horsepower, and the Admiralty again increased their subsidy. The contract, now made to run for ten years, provided a subsidy of one hundred and seventy-three thousand three hundred and forty pounds per fifty-two round trips a year. The Americans were pressing them closer. Now freight rates were cut, and the British premier is quoted as advising the Cunard Company to run without freight if necessary to "beat off the American line."[AM] The increasing subsidies occasioned a Parliamentary investigation. The committee, evidently impressed by the gravity of the American competition, reported that "the cost of the North American service was not excessive," but they advised that all contracts thereafter "be let at public bidding."[AN] This recommendation was not heeded. In 1857, upon the plea that the Americans were about to build larger and more powerful liners, the Cunard Company asked a five years' extension of the contract of 1852. The extension was promptly granted. At the same time they were awarded an additional subsidy of three thousand pounds for a monthly mail service between New York and Nassau in the Bahamas.[AO] The next year (1858) after suffering crushing disasters in the loss of two of their steamers, and the withdrawal of their subsidy, the Collins Company failed, and their line was abandoned.[AP] So this competition ended.
Meanwhile complaints of the Admiralty's partiality in the allotment of the contracts had been renewed more vigorously, with wider criticism of grants for mail carriage largely in excess of the postage received; and in 1859-60 another Parliamentary investigation was made. The ultimate result of this inquiry was a radical change in the system. The management of the ocean mail-service was taken from the Admiralty and placed wholly in the hands of the Post-Office Department; and at the expiration of the Cunard Company's extended contract, the service was thrown open to public competition, as the Parliamentary committee of 1846 had advised.
Bids were now received from the Cunard, the Inman, the North German Lloyd, and other lines. The Inman Company had previously offered to perform the service, and had done so for sea-postage only.[AQ] Contracts were finally concluded with the three named. The contract with the Inman Line was for a fortnightly Halifax service, for seven hundred and fifty pounds the round trip, nineteen thousand five hundred pounds a year, and a weekly New York service for sea-postage. That with the Cunard Line was for a weekly service to New York at a fixed subsidy of eighty thousand pounds. That with the North German Lloyd was for a weekly service, at the sea-postage. These contracts were to run for a year only. The Cunard's subsidy, although considerably less than half the amount that the company had received the previous ten years, showed a loss to the Government, at sea-postage rates, of forty-four thousand one hundred and ninety-six pounds, since the amount actually earned at sea-postage rates was twenty-eight thousand six hundred and eighty-six pounds.[AR]
When advertisements for tenders were next issued, it was found that the Cunard and Inman companies had formed a "community of interests," with an agreement not to underbid each other. They asked a ten years' contract on the basis of fifty thousand pounds fixed subsidy for a weekly service. Instead, they were awarded seven years' contracts: the Cunard for a semi-weekly service, seventy thousand pounds subsidy; the Inman, for a weekly service, thirty-five thousand pounds subsidy.[AR] At the same time contracts were made with the North German Lloyd and the Hamburg-American lines for a weekly service for the sea-postage.
The Cunard and Inman grants were sharply criticised, and a Parliamentary committee was appointed to investigate them. The committee's report sustained the critics. It observed that "the payments to be made when compared with those made by the American Post Office for the homeward mails are widely different, inasmuch as the American Post Office has hitherto paid only for actual services rendered at about half the rate of the British Post Office when paying by the quantity of letters carried." The committee recommended that these contracts be disapproved, and that the system of fixed subsidies be abolished. "Under all circumstances," they concluded, "we are of the opinion that, considering the already large and continually increasing means of communication with the United States, there is no longer any necessity for fixed subsidies for a term of years in the case of this service."[AS] This recommendation, however, was not accepted, and the contracts were duly ratified.
The report of this Parliamentary committee is significant in the evidence it indirectly affords, confirming the declaration of 1853,[AT]—that the postal subsidies were not as assumed, payments solely for services rendered, but in fact were concealed bounties.
In 1871-72, when a renewed effort was made to establish an American line of American-built ships,[AU] the British subsidies were again increased. Then, also, was instituted by the Admiralty the naval subvention system—the payment of annual retainers to certain classes of merchant steamers, the largest and swiftest, in readiness for quick conversion into auxiliary naval ships in case of war, and to preclude their becoming available for the service of any power inimical to British interests.
At the expiration of the Cunard and Inman seven years' contracts the postmaster-general applied the principle of payment according to weight throughout for the carriage of the North American mails. But preference was given to British ships, these receiving higher rates per pound than the foreign. In 1887 an arrangement was entered into by which the Cunard and Oceanic lines were to carry all mails except specially directed letters, and the pay was reduced.[AV] This method of payment continued till 1903.
Then another sharp change was made in the subsidy system to meet another, and most threatening American move. In 1902 was formed by certain American steamship men, through the assistance of J. Pierpont Morgan, the "International Mercantile Marine Company," in popular parlance, the "Morgan Steamship Merger," a "combine" of a large proportion of the transatlantic steam lines.[AW] Upon this, in response to a popular clamor, subsidy, and in a large dose, was openly granted to sustain British supremacy in overseas steam-shipping. To keep the Cunard Line out of the American merger, and hold it absolutely under British control and British capitalization, and, furthermore, to aid the company immediately to build ships capable of equalling if not surpassing the highest type of ocean liners that had to that time been produced (the highest type then being German-built steamers operating under the German flag), the Cunard Company were resubsidized with a special fixed subsidy of three-quarters of a million dollars a year, instead of the Admiralty subvention of about seventy-five thousand dollars, and in addition to their regular mail pay, the subsidy to run for a period of twenty years after the completion of the second of two high-grade, high-speed ocean "greyhounds" called for for the Atlantic trade. The Government were to lend the money for the construction of the two new ships at the rate of 2-3/4 per cent per annum, the company to repay the loan by annual payments extending over twenty years. The company on their part pledged themselves, until the expiry of the agreement, to remain a purely British undertaking, the management, the stock of the corporation, and their ships, to be in the hands of or held by British subjects only. They were to hold the whole of their fleet, including the two new vessels, and all others to be built, at the disposal of the Government, the latter being at liberty to charter or purchase any or all at agreed rates. They were not to raise freights unduly nor to give any preferential rates to foreigners.[AX] The subsidy is equivalent to about twenty thousand dollars for an outward voyage of three thousand miles.
* * * * *
Of the British colonies, Canada grants mail and steamship subsidies, and fisheries bounties. In 1909-10 the Dominion's expenditures in mail and steamship subsidies amounted to a total equivalent to $1,736,372. The amount appropriated for 1910-11 increased to $2,054,200; while the estimates for 1911-12 reached a total of $2,006,206. In these estimates the larger items were: for service between Canada and Great Britain; Australia by the Pacific; Canadian Atlantic ports and Australia and New Zealand; South Africa; Mexico by the Atlantic, and by the Pacific; West Indies and South America; China and Japan; Canada and France.[AY] The home Government pays the same amount as Canada toward maintaining the China and Japan, and British West Indies services.[AZ] The fisheries bounties amounted to one hundred and sixty thousand dollars in 1909.[BA]
* * * * *
The grand total of subsidies and subventions paid by Great Britain and all her colonies in 1911 approximate ten million dollars annually. The subsidies and mail pay of the Imperial Government amounted, in round numbers, to four million dollars, of which, in 1910, the Cunard Company received seven hundred and twenty-nine thousand dollars.[BB] Besides the Admiralty subventions, retainer bounties are paid to merchant seamen and fishermen of the Royal Naval Reserve.
Since the establishment of steam in regular ocean navigation, and the substitution of iron for wooden ships, England has maintained her leadership among the maritime nations. The total tonnage of the United Kingdom and her colonies, steam and sailing ships, in 1910-11, stood at 19,012,294 tons.[BC] nearly four fold that of any other nation.
[Footnote A: Royal Meeker, "History of Ship Subsidies."]
[Footnote B: John E. Green, "Short History of the English People."]
[Footnote C: W.H. Lindsay, "History of Merchant Shipping."]
[Footnote D: Lindsay.]
[Footnote E: David A. Wells, "Our Merchant Marine," p. 96.]
[Footnote F: John Lewis Ricardo, "The Anatomy of the Navigation Laws," p. 111.]
[Footnote G: Lindsay, vol. III.]
[Footnote H: Lindsay, "Our Navigation Laws"; also his History.]
[Footnote I: Ricardo; also Lindsay in other words.]
[Footnote J: Meaning the waters between Great Britain and the continent.]
[Footnote K: Green, p. 593.]
[Footnote L: Ricardo, p. 26.]
[Footnote M: Meeker.]
[Footnote N: W.W. Bates, "American Marine," pp. 57-59.]
[Footnote O: John Macgregor, "Commercial Tariffs."]
[Footnote P: Lindsay, vol. III, p. 65.]
[Footnote Q: Macgregor.]
[Footnote R: Lindsay, vol. III, p. 69; also pp. 53-54 and 107.]
[Footnote S: Rear-Admiral George H. Preble, "Chronological History of Steam Navigation."]
[Footnote T: Preble. Lindsay says thirty-seven.]
[Footnote U: Preble, p. 137; also Bates, p. 185.]
[Footnote V: Meeker.]
[Footnote W: Parliamentary papers 1839, vol. XLVI, no. 566, as to the private contract.]
[Footnote X: Lindsay, vol. IV.]
[Footnote Y: Meeker; also Parl. papers 1849, vol. XII, no. 571.]
[Footnote Z: Lindsay, vol. X; also Parl. papers, report H. of C., Aug., 1840.]
[Footnote AA: Report of Select Com. (1846) Parl. papers, vol. XV, no. 565, p. 3.]
[Footnote AB: Lindsay, vol. IV.]
[Footnote AC: The Princeton, sloop-of-war fitted with the Ericsson screw, launched the same year.]
[Footnote AD: Lindsay, vol. IV, p. 198, note.]
[Footnote AE: John R. Spears, "The Story of the American Merchant Marine," pp. 254-255.]
[Footnote AF: William Wheelwright, of Newburyport, Massachusetts, sometime American consul at Guayaquil.]
[Footnote AG: Winthrop L. Marvin, "The American Merchant Marine," p. 231; also Preble; and Lindsay, vol. IV, pp. 316-330.]
[Footnote AH: Marvin, p. 231.]
[Footnote AI: See p. 76, post.]
[Footnote AJ: Meeker.]
[Footnote AK: Lindsay, vol. IV, p. 198, note.]
[Footnote AL: Wells, p. 148.]
[Footnote AM: Bates, p. 87; also p. 130.]
[Footnote AN: Meeker.]
[Footnote AO: Meeker.]
[Footnote AP: See p. 77, post.]
[Footnote AQ: Meeker.]
[Footnote AR: Meeker.]
[Footnote AS: Parl. papers, 1867-68, 1868-69.]
[Footnote AT: See p. 20, ante.]
[Footnote AU: The American Steamship Co. of Phila., with 4 iron steamers built on the Delaware—the Pennsylvania, Ohio, Indiana, and Illinois.]
[Footnote AV: Meeker.]
[Footnote AW: Ultimately embracing the American, Red Star, White Star, Atlantic Transport, and Dominion Lines.]
[Footnote AX: For details of this contract see report of (U.S.) commissioner of navigation for 1903, pp. 48-52, and 224-268. The two steamships called for were the Lusitania, 31,550 gross tons, launched June 7, 1906; and the Mauretania, 31,937 gross tons, launched Sept. 19, 1906, both quadruple screw turbines, about 70,000 horsepower; the largest, fastest, and completest steamers afloat till the production in 1911 of the Olympic, 45,324 gross tons, of the International Mercantile Marine Co.'s White Star Line.]
[Footnote AY: U.S. consul, Charlottetown, P.E.I. in daily Con. Repts. (Jan. 20) 1911, no. 16.]
[Footnote AZ: Consul General Small, Halifax, in Con. Repts. (Dec.) 1905, no. 303.]
[Footnote BA: The American Year Book, 1911.]
[Footnote BB: American Year Book, 1911.]
[Footnote BC: Lloyd's Register, 1910-11.]
France has been rightly termed the bounty-giving nation par excellence.[BD] She first adopted a policy of State protection of native shipping in the middle of the sixteenth century with the enactment (1560) of an exclusive Navigation Act, forbidding her subjects to freight foreign vessels in any port of the realm, and prohibiting foreign ships from carrying any kind of merchandise from French ports.[BE] This was followed up in the next century with the institution of the direct bounty system to foster French-built ships.[BD]
In the reign of Louis XIV, Colbert, Louis's celebrated finance minister, perfected (about 1661) an elaborate system of navigation laws, evidently copied from the rigorous English code. This was directed primarily against the commerce of Holland and England, with the ultimate object of upbuilding the home merchant marine and the laying of a broad basis for a national navy.[BF] These acts included decrees giving French ships the monopoly of trade to and from the colonies of France; imposing tonnage duties on foreign shipping; awarding direct premiums on French-built ships. England retaliated immediately. Holland remonstrated first, then made reprisals. For a time under Colbert's energetic administration of the finances and the marine, "prosperity grew apace. At the end of twelve years everything was flourishing."[BG] Then came the six years' war (1672-1678) with France and England combined against Holland, and at its end the French merchant marine lay sorely crippled.[BG]
Still the fundamental principles of the stringent navigation laws long remained. A decree in 1681, and subsequent ordinances, defined what should constitute a French vessel; and corporal punishment was ordained against a captain for a second offence in navigating a vessel of alien ownership under the French flag.[BH] By later decrees, no alien was permitted to command a French vessel. An ordinance of 1727 further restricted alien command by shutting out even French subjects who had married aliens.[BH] It was required that every French vessel should be manned by a crew two-thirds of whom were French subjects.[BH] The system of regulations restricting the trade of the French colonies to French ships, and to the home market held till well into the nineteenth century.
During the Revolution a decree (May, 1791) prohibited acquisition of all vessels of foreign build. In 1793 (Sept.) it was ordained that no foreign commodities, productions, or merchandise should be imported into France, or into any of her colonies or possessions, except directly in French ships, or in ships belonging to the inhabitants of the countries in which the articles imported were produced, or from the ordinary ports of sale or exportation. All officers and three-fourths of the crew were required to be natives of the country of which the foreign vessel bore the flag, under penalty of confiscation of vessel and cargo, and a fine enforcible under pain of imprisonment. A tonnage tax was levied on foreign ships alone.
Despite this elaborate code designed for its benefit the domestic mercantile marine almost entirely disappeared during the wars of the Republic and the Empire; and after the Restoration its revival was so slow that for some time foreign ships were absolutely necessary for the supply of the French market.[BH] Still the underlying principles of the code were retained by the Restoration Government, modified in a few particulars. The modifications included the removal of the prohibition on indirect commerce—- the carrying trade between France and other countries:—yet advantage even in this commerce was held for the French flag through "flag surtaxes," added to the ordinary customs duties levied upon the merchandise imported into France in foreign bottoms, and by the tonnage charges.[BI] A law of March, 1822, renewed the prohibition against the importation of foreign-built ships.[BI]
Early under Napoleon III movements toward the adoption of an economic policy similar to that then established in England were begun, and shortly a succession of radical changes in the maritime code were instituted.[BJ] In 1860 a commercial treaty with England was entered into. In 1861 freedom of access of foreign shipping to the French West Indies was permitted, subject to the payment of special duties varying according to the ports whence the goods were brought, or to which they were imported. Then at length, in 1866, numerous restrictions of the old code were swept away.[BJ] This law of 1866 (May) admitted duty-free all materials, raw or manufactured, including boilers and parts of engines necessary for the construction, rigging, and outfitting of iron or wooden ships; abolished a premium, or bounty, granted by a law of 1841 (May) on all steam engines manufactured in France intended for international navigation; admitted to registration foreign-built and fully equipped ships upon the payment of two francs a ton; abolished all tonnage duties on foreign ships, except such as had been or might be levied for the improvement of certain commercial harbors; abolished the flag surtaxes; opened colonial navigation to foreign ships. The monopoly of the coasting trade alone was retained for French ships.[BK]
Complaints against these new regulations were promptly raised by shipbuilders and ship-outfitters,[BK] and in 1870 a Parliamentary inquiry into their grievances was made. It appeared that shipbuilders, though enabled to import free such materials as they needed, were handicapped by numerous and extensive formalities; while the outfitters were embarrassed by special burdens which the law laid upon them, and which their British competitors did not have to bear.[BL] In 1872 laws were passed which reversed much of the act of 1866. A tax of from thirty to fifty francs a ton measurement was re-imposed on all foreign ships purchased for registration in France, together with a duty on marine engines; again a tonnage duty, of from fifty centimes to one franc, was imposed on ships of any flag coming from a foreign country or from the French colonies; and the provisions freeing materials for ship construction, and admitting foreign-built ships to French registration upon payment of the two-franc tax per ton, were repealed.[BM] In 1873 an extra-parliamentary commission took up the general question of the state of the commercial marine,[BN] and the outcome of this inquiry was the establishment of the system of direct bounties. This system was applied for the first time in the Merchant Marine Act passed in January, 1881.
The act of 1881 granted both construction and navigation premiums, and was limited to ten years. The construction bounties, as was declared, were given "as compensation for the increased cost which the customs tariff imposed on shipbuilders" in consequence of the repeal of the law granting free import of materials by construction; the navigation bounties, "for the purpose of compensating the mercantile navy for the service it renders the country in the recruitment of the military navy." The construction bounties, on gross tonnage, were as follows: for wooden ships of less than 200 tons, ten francs a ton; of more than 200 tons, twenty francs; for composite ships, that is, ships with iron or steel beams and wooden sides, forty francs a ton; for iron or steel ships, sixty francs; for engines placed on steamers, and for boilers and other auxiliary apparatus, twelve francs per 100 kilograms; for renewing boilers, eight francs per 100 kilograms of new material used; for any modification of a ship increasing its tonnage, the above rates on the net increase of tonnage.[BO] The navigation bounties were confined to ships engaged in the foreign trade, and were to be reduced annually during the ten years' term of the law.[BP] They were thus fixed: for French-built ships, one franc and fifty centimes a registered ton for every thousand sea miles sailed the first year, the rate to diminish each succeeding year of the term seven francs and fifty centimes on wooden ships, and five centimes on iron and steel ships; for foreign-built ships owned by Frenchmen admitted to registry, one-half the above rates; for French-built steamers constructed according to plans of the Navy Department, an increase of fifteen per cent above the ordinary rate.[BQ]
The first effect of this law was to stimulate the organization of a number of new steamship companies, and to occasion activity in various ship-yards, foreign (English) as well as home, in building steamships for their service.[BR] Most of the domestic-built iron and steam tonnage produced during the law's ten years' term was of steamers.[BS] The tonnage of steamships increased from 278,000 tons in 1880 to 500,000 tons in 1890. Of this increase more than three-fifths were represented by vessels bought in other countries.[BT] The results of the navigation bounties are shown in official statistics covering the years 1882-1890. During this period iron or steel French-built ships earning these bounties increased from 159,714 tons to 190,831 tons, gross tonnage; while wooden or composite tonnage decreased from 150,233 tons to 57,068 gross. Foreign-built iron or steel tonnage earning the bounties increased from 43,787 tons to 91,170 tons, gross; and wooden or composite tonnage increased from 1,220 tons to 9,799 tons, gross.[BS] In 1891 the law which had then reached its limit of ten years was extended for two years. Doubting its renewal shipowners had sometime before ceased to increase their fleets.[BS]
These results were variously pronounced unsatisfactory, and a revised or a new law was called for, with more and higher bounties. Owners of wooden sailing-ships were especially clamorous for larger benefits. They argued that sailing-ships being much slower than steamers should therefore receive higher mileage subsidies in order to compete on equal terms with steamships.[BU]
A new law was enacted in 1893 (January 30). This act cut off bounties to foreign-built ships, and granted increased construction premiums. The construction subsidies were again declared to be given as "compensation for the charges imposed on shipbuilders by the customs tariff"; the navigation bounties, "by way of compensation for the burden imposed on the merchant marine as an instrument for recruiting the military marine." The construction subsidies were not to be definitely earned till the ships were registered as French; and by ships built in France for foreign mercantile fleets, not till they had been delivered. The navigation bounties were accorded to French-built ships, of more than 80 tons for sailing-ships, and 100 tons gross for steamers, engaged in making long voyages and in international coasting; and were limited to ten years. They were based on gross tonnage per thousand sailed miles. To merchant steamships built in accordance with plans approved by the Navy Department, the rate of fifteen per cent above the regular navigation bounty provided in the law of 1881, was increased to twenty-five per cent. All ships receiving the navigation bounty were subject to impressment in case of war.[BV]
The effect of this law appears to have been a division of the interests of shipowners and shipbuilders. The shipowners found the builders constantly increasing their prices until a point was reached where they were accused of absorbing both premiums for construction and navigation, by calculating the amount of bounty which proposed construction would demand, and adding that amount to their cost price.[BW] The increase of the bounty on sailing-ships was made in the expectation that it would check their falling off, which had been rapid since the development of steamship building; merchant sailing-ships were regarded as the best school for seamen, all of whom in French commerce, up to the age of forty-five, are subject at any time to draft into the national navy. It did this and more. There resulted the "strange phenomenon," as Professor Viallates puts it, "of a steady increase in the sailing-fleet, while the number of steam-ships remained stationary."[BX]
Thus, like its predecessor, unsatisfactory, the law of 1893 was succeeded by another act further enlarging the bounty system. This law was promulgated in 1902 (April 7). It provided three classes of bounty: construction and navigation as before, and "commission compensation" or "shipping premiums." The construction bounty remained as in previous law. The navigation bounty, now introduced as awarded "as a general compensation for the charges imposed on the merchant navy, and for the excessive cost of vessels built in France," was increased.[BY] It was payable to all French-built sea-going ships, steam and sailing, of over 100 tons gross, and less than fifteen years old, and was limited to twelve years. To stimulate speed development, only ships showing a trial speed of at least twelve knots with half load were to receive the full navigation bounty; to those making less than twelve knots the bounty was diminished by five per cent; to those making less than eleven, by ten per cent. The shipping bounty was declared to be granted "as compensation for the charges imposed on the mercantile marine" by making merchant vessels practically schools for seamen. It was a "chartered allowance" made to foreign-built iron or steel steamers manned under the French flag for long voyages or for international coastwise trade, of more than 100 gross tons, belonging to French private persons or joint-stock or other companies, the latter having on their boards a majority of French citizens, and the chairman and managers being French. This allowance was reckoned on the gross tonnage, and per day while the steamer was in actual commission (three hundred days the maximum number in any one year).[BX] The rate varied according to the tonnage. Up to 2000 tons gross, it was fixed at five centimes per ton; from 2000 to 3000 tons, at four centimes; 3000 to 4000, three centimes; above 4000, two centimes; over 7000, the same grant as 7000. The creation of this "chartered allowance," as Professor Viallates explains, was to prevent the navigation bounty from becoming to the same extent as under the previous law merely another form of bounty upon shipbuilding. It could so become, he points out, only to the extent of which it exceeded the owner's bounty.[BZ]
Not all of the shipping and navigation bounties were to go to shipowners. Five per cent was to be retained for sailors' insurance "with a view to reducing the deductions imposed on them for the purpose of that insurance"; and six per cent to be reserved for distribution for the benefit of marines, as follows: "two-thirds to the provident fund, with a view to diminishing the deductions on mariners' pay and to increasing the funds for assisting the victims of shipwreck and other accidents, or their families; one-third to the invalids' fund, with a view to granting subventions to the chambers of commerce or public institutions for the creation and support of sailors' homes in French ports, intended to assist the nautical population, or of any other institutions likely to be of use to them, especially schools for seamen." The requirement in the old law of 1793 as to the composition of the crews of French merchant ships was modified, reducing the proportion of sailors who must be Frenchmen.
French-built ships were privileged to chose between the shipping and the navigation bounties. To obtain the shipping bounty for the maximum of three hundred days steamers must make during the year a minimum of thirty-five thousand miles if engaged in the overseas trade, or twenty-five thousand if in "cabotage international."[CA] Shipowners agreeing to maintain on routes not served by the subsidized main steamers a regular line, performing a fixed minimum of journeys per year, with vessels of a certain age and tonnage, were permitted to claim, in lieu of the regular bounties, a fixed subsidy during the term of their agreement, equal to the average of the bounties to which the vessels in commission would be entitled for the whole of the journeys performed. The new tonnage to be admitted to the benefit of the law was limited to three hundred thousand gross tons of steamers and one hundred thousand gross tons of sailing-ships; of which new tonnage freight-built ships could form two-fifths. The appropriation for the payment of the bounties was also limited, to guard against a too heavy burden upon the national treasury. This was fixed at two hundred million francs: one hundred and fifty million for the shipping and navigation bounties and fifty million for the construction bounties.[CB]
Unforeseen results of an unsatisfactory nature followed the application of this law. Professor Viallates effectively states them in the fewest words:
"To be sure of profiting by the advantages of the law the ship-owners hastened to order vessels and to place them on the stocks. Their haste increased when it was seen that there existed a considerable discrepancy between the allowed tonnage and the money appropriated. The appropriation of one hundred and fifty million francs, opened to assure the payment of the navigation bounties and the compensation for outfit, was much too little. The rush was such, as soon as this formidable mistake was discovered, that, less than nine months after its promulgation, from December 20, 1902, the useful effect of the law was completely exhausted."!
Thereupon resort was had to another Extra-Parliamentary commission to frame another system. The result was a law of 1906 (April), which separated the shipbuilder from the shipowner. The provisions for the construction bounty were redrawn with the object, as Professor Viallates explains,[CC] "not only to equalize the customs duties affecting the materials employed, but also to give the builders a compensation sufficient to enable them to concede to the French shipowners the same prices as foreign builders." The rates were thus fixed on gross measurement: for iron and steel steamships, one hundred and forty-five francs per ton; for sailing-ships, ninety-five francs per ton: these bounties to decrease annually to four francs and fifty centimes for steamships and three francs ninety centimes for sailing-ships during the first ten years of the law's application, thereafter to stand at one hundred francs and sixty-five francs, respectively; for engines and auxiliary apparatus, twenty-seven francs fifty centimes per hundred kilograms. The navigation bounty to owners of French or foreign-built ships under the French flag, was calculated per day of actual running: for steamships, four centimes per ton gross up to 3000 tons; three centimes more up to 6000; two more to 6000 and above; for sailing-ships, three centimes per ton up to 500 tons, two more up to 1000, and one more to 1000 and above. This bounty to continue for the first twelve years of the law. The provisions for fostering speed development in steamships excluded from compensation those making on trial, half laden, less than nine knots, in place of ten in the previous law; reduced the rate to fifteen per cent of the bounty for those showing more than nine and less than ten knots; and increased this rate by ten per cent for those making at least fourteen knots, by twenty-five per cent for fifteen knots, and thirty per cent for sixteen knots. The extra bounty equal to twenty-five per cent of the regular navigation bounty to steamships constructed on plans approved by the Navy Department, and the provision making all merchant ships subject to requisition by the Government in case of war, were retained as in previous laws.[CD] This is the law at present in force.
The total cost of the French bounty system in the twenty-four years from its establishment with the law of 1881 to 1904, when the law of 1902 had practically run out, was in round numbers upward of three hundred and eighty-one million francs. Professor Viallates shows that the new law of 1906 would absorb during the first seven years of its application, upward of eighty-four million francs.[CE]
These construction and navigation bounties are exclusive of the subventions to steamships for carrying the mails. The establishment of the French postal ocean steamship subsidy system dates back to 1857, when a contract was made with the Union Maritime Company for a service to New York, Mexico, and the West Indies. The assertion is made by Professor Meeker that the French postal subventions paid "ostensibly for the furtherance of the mails," are "both greater in amount and more influential upon shipbuilding, navigation, and commerce than are the general premiums upon shipbuilding and navigation."[CF] Says Viallates:
"The system is calculated to secure regular and rapid postal communication with certain countries beyond seas, and at the same time to constitute an auxiliary fleet capable of being utilized by the navy in times of war. The existence of fixed lines with constant service is also a means of favoring the expansion of the national commerce. The State obtains, moreover, in exchange for the subsidy, direct advantages; the free carriage of the mails and the funds of the public treasury; transport of officials at a reduced price, and of arms and stores destined for the service of the State."
"The greater part of the concealed subventions undoubtedly goes to the shipbuilders, for all mail contract steamers must be built in French yards and of French materials. These first costs are estimated to be from twenty-five to fifty per cent greater in France than in England."[CG]
There is no competition in the letting of the French mail contracts. They go to four steamship concerns. For many years more than one half of the total steam tonnage of France has been owned by these four subsidized lines: the Compagnie Generale Transatlantique, the Compagnie des Messageries Maritimes, the Chargeurs Reunis, and the Compagnie Fraissant.[CG]
The great ship-yards have developed a capacity for building steamships of the largest class. The tonnage since 1881, when it had fallen to 914,000 tons, had increased only to 1,052,193 tons in 1900. By 1910-11, it had reached 1,882,280 tons.[CH] The total mail subsidies average, in round numbers, five million dollars a year, while the construction and navigation bounties amount to three and a half million dollars additional.
Practically every French vessel floating the French flag and engaged in foreign trade either receives or has received subsidies, or bounties, from the Government.[CI]
[Footnote BD: Meeker.]
[Footnote BE: Lindsay, vol. III.]
[Footnote BF: Rear-Admiral Alfred T. Mahan, "The Influence of Sea Power upon History," pp. 105-107.]
[Footnote BG: Mahan, p. 73.]
[Footnote BH: Lindsay, vol. III.]
[Footnote BI: Prof. Achille Viallates, "How France Protects Her Merchant Marine," in North American Review, vol. 184, 1907.]
[Footnote BJ: Lindsay, vol. III.]
[Footnote BK: Lindsay, vol. III, also Viallates.]
[Footnote BL: Viallates.]
[Footnote BM: Lindsay, vol. III, pp. 457-458.]
[Footnote BN: Viallates.]
[Footnote BO: Meeker. Also Wells, pp. 163-164, note.]
[Footnote BP: Wells, pp. 163-164, note.]
[Footnote BQ: Meeker. Also Wells.]
[Footnote BR: Wells, p. 164.]
[Footnote BS: Meeker.]
[Footnote BT: Viallates.]
[Footnote BU: Meeker.]
[Footnote BV: For this law see Meeker.]
[Footnote BW: U.S. Consul Robert Skinner, Marseilles; Con. Repts., xol. XVIII (1900), p. 36.]
[Footnote BX: Viallates.]
[Footnote BY: Meeker.]
[Footnote BZ: North American Review, vol. CLXXXIV, 1907.]
[Footnote CA: Embracing voyages within the limits of the ports of the Mediterranean, North Africa, and Europe below the Arctic circle—Meeker.]
[Footnote CB: Meeker and Viallates, summaries of this law.]
[Footnote CC: North American Review, vol. CLXXXIV, 1907.]
[Footnote CD: For this law see Senate Doc. no. 488, 59th Cong., 1st sess.]
[Footnote CE: North American Review, vol. CLXXXIV, 1907.]
[Footnote CF: Meeker.]
[Footnote CG: Meeker.]
[Footnote CH: Lloyd's Register, 1910-11.]
[Footnote CI: Senate Rept., no. 10, 59th, Cong., 1st sess.]
Germany was a close follower of France in the adoption of the direct ship bounty system. Only two months after the promulgation of the initial French law of 1881, Bismarck brought the question before the Reichstag, with an exhibit of this act. In an elaborate memorial (April 6, 1881) he reviewed the general subject of State bounties and subsidies to shipping in various maritime countries, and closed with this pointed declaration: "It is deserving of serious consideration whether, under the circumstances as given, German shipping and German commerce can hope" for further prosperous developments as against the competition of other nations aided by public funds and assistance.[CJ]
At this time the German marine was represented by a substantial fleet of merchant steamships, but all were foreign-built, mostly from British ship-yards. The Government was paying only a postal subsidy of about forty-seven thousand dollars—a sum in proportion to the weight of the parcels forwarded—in the overseas trade to the participating German steam lines. A first step had been taken indirectly in favor of domestic shipbuilding six years earlier (1879), when Bismarck, in introducing the general protective system, exempted this industry, and free entry was permitted to German ship-yards of materials used in the construction and equipment of merchant as well as of war-ships, which then were only on the domestic stocks.[CK] Bismarck's proposal of 1881, to meet French subsidies with German subsidies, was avowedly with the single object of promoting with State aid a German mercantile marine.
The project was brought before the Reichstag early in 1884 and warmly discussed. Earnest protests were raised against it by shipping merchants of the chief German seaports;[CL] while earnest support came from other merchants and varied interests. The initial proposal was for the establishment of a subsidized mail service by German steamships. It contemplated an annual subsidy of four million marks, with fifteen years' contracts, for such service between Germany and Australia and East Asia. The measure was defeated in the Reichstag that year. Brought forward the next year (1885), and in a new form, it was finally enacted in April and went into effect the following July.
This law increased the annual subsidy from four million marks as first proposed to four million four hundred thousand marks, of which one million seven hundred thousand was offered for the East Asian line, to China and Japan; two million three hundred thousand for the Australian line, and four hundred thousand for a branch line connecting Trieste with the Australian line at Alexandria. The contracts in accordance with it all went to the North German Lloyd Company, of Bremen. The convention between the Government and this company required that the new vessels to be furnished must be built in German yards and of German material. The coal supply was, as far as practicable, to be of German product. The chancellor was empowered to take over all the company's steamers for the mobilization of the navy, at their full value, or on hire at proper compensation. The sale or loan of a steamer to a foreign power could be made only by permission of the chancellor. The number of voyages to be made on each line yearly, and the rate of speed, were set down in careful detail. Failure to observe the table of voyages, without sufficient reason, subjected the company to heavy penalties. All persons employed in connection with the mail service were, if practicable, to be German subjects. All officers in the service of the empire, relief crews, weapons, ammunition, equipments, or supplies for the imperial navy, were to be carried at twenty per cent under the regular tariff.[CM]
Subsequent laws made additions to the free list of raw and manufactured shipbuilding material; and preferential rates on the State railroads were arranged for the transportation of steel, iron, timber, from the interior, where these are found at an average distance of some four hundred miles from the coast, to the ship-yards.[CN] Speedily large and superior steamships were designed and turned out from the enlarged ship-yards, the first ocean flyer being the Auguste Victoria for the Hamburg-American Line. In 1890 a subsidy of ninety thousand marks annually was granted for an East African line on a ten-years' contract. Within less than six years the establishment of a fortnightly Asiatic service was agitated; and in 1896 a bill granting a yearly subsidy of one million four hundred thousand marks therefor, was brought before the Reichstag. If this were forthcoming the North German Lloyd agreed, besides furnishing the fortnightly service, to increase the speed of their steamers, to send ships direct to Japan, and to meet all requirements of the Admiralty with respect to ships and crews.[CO]
Now the advocates of further subsidies maintained that the policy instituted with the law of 1885 had proved its effectiveness. The indirect advantages from the subventions were claimed to be quite as great as the direct. While before 1885 all large ships for German companies had been ordered in England, now all large ships for the German transatlantic lines were built in Germany.[CO] This condition, the increasing activity in domestic shipbuilding, and the steady growth of the empire's commercial marine, were presented as conclusive evidence of the law's effect. Germany was now pressing into sharp rivalry with England, and turning out larger and speedier steamships.[CP] The increased subsidy for the China service was especially urged upon these grounds: the importance of placing the German mail service in the East on a par with the services of England and France, the benefits to commerce, and the aid of the national defence.[CQ]
The measure met opposition at the session in which it was first introduced; but at the next session (1898), after amendment, it became law. By this act the subsidy was fixed at one million and a half marks a year for the extension of the East Asiatic service to China direct, and for making the whole service fortnightly; and the contract was extended for another fifteen years. It was conditioned that if foreign competing lines should increase the speed of their ships the North German Lloyd must do likewise, and without additional subsidy, unless the foreign companies should receive extra payments.[CR]
The total annual subventions for the Asiatic and Australian service had now reached five million five hundred and ninety thousand marks ($1,330,420). After January, 1899, under a contract between the North German Lloyd and the Hamburg-American Line then made, a part of this subsidy went to the latter. In 1901 the subvention to the East African line was increased to one million three hundred and fifty thousand marks. Thus Germany's grand total of annual payments in postal subventions had reached six million nine hundred and forty thousand marks.
Besides these postal subventions and the free entry to materials used in ship-construction and equipment, and the preferential railway rates on long hauls of the heavy domestic materials, barely covering the cost of handling and transportation,[CS] the Government bestows a special form of indirect bounty upon the subsidized steamship lines in the shape of largely reduced through freight rates. These include substantial reductions on merchandise exported from inland Germany to East Africa and the Levant. Thus the combined land and sea through rates are brought considerably below those in force on goods sent to German ports for direct importation.[CT]
Under these and other favoring conditions the German merchant marine has advanced in total tonnage from an insignificant place in 1880 to the third in rank among the maritime nations in 1911. Between 1885 and 1900, a period of only fifteen years, its growth was tenfold.[CU] In 1890 the gross tonnage stood at 928,911 tons: in 1900 it had reached a total of 2,159,919 tons. Steamers and sailing-ships were nearly equal in tonnage. German-built steamships had won the speed record in ocean liners. Thereafter the output of steamships became much the larger, and in 1906 the Government was taking measures to revive the sailing-ship trade, because of its value as a training-school for seamen for the navy.[CV] In 1910-11 the total tonnage was recorded at 4,333,186 tons.[CW]
The other influences contributing to this extraordinary growth are variously stated according to the observer's point of view. The United States consul at Hamburg sees them in the "rapid transformation of the country from a non-producing nation into one of the foremost industrial powers of Europe, a large available supply of excellent and cheap labor, and the geographical situation of the empire."[CX] The historian of Modern Germany sees them in German business methods:
"The astonishing success of the German shipbuilding industry is due partly to its excellent management and organization; partly to the application of science and experience to industry; * * * partly to the harmonious co-ordination and co-operation of the various economic factors which in more individualistic countries, such as Great Britain, are not co-ordinated, and often serve rather to obstruct and to retard progress by unnecessary friction than to provide it by harmonious action."[CY]
[Footnote CJ: For this Memorial see U.S. Con. Rept., no. 112, Jan., 1890, pp. 108-118.]
[Footnote CK: J. Ellis Barker, "Modern Germany," 3rd edition, 1909.]
[Footnote CL: Wells, p. 166.]
[Footnote CM: U.S. Con. Rept., no. 61, 1886, pp. 285-287.]
[Footnote CN: Barker, 3rd ed.]
[Footnote CO: Meeker.]
[Footnote CP: U.S. Con. Repts., 1889, no. 101, p. 544.]
[Footnote CQ: Meeker. Also German report on the operation of the law of 1885, in report of (U.S.) commissioner of navigation for 1898.]
[Footnote CR: Meeker. Also German report on the operating of the law of 1885, in report of commission of navigation for 1898.]
[Footnote CS: Barker, 3rd ed.]
[Footnote CT: Meeker.]
[Footnote CU: Barker, 3rd ed.]
[Footnote CV: U.S. Con. Rept, no. 13, July, 1906, pp. 87-89.]
[Footnote CW: Lloyd's Register, 1910-11.]
[Footnote CX: U.S. Consul General Robert P. Skinner, Hamburg, in Daily Con. Repts., April 8, 1911, no. 82.]
[Footnote CY: Barker, Modern Germany, p. 490.]
The home Government of the Netherlands gives neither construction nor navigation bounties. Only subventions to steamship lines for carrying the mails are granted. The single purpose of these subventions is declared to be to secure the prompt and effective furtherance of the mails at reasonable cost.[CZ] The contracts are not publicly let, but go to the several steamship lines plying to foreign ports and to the Dutch colonies. The amounts fixed by contract are at a given rate per voyage. The cost of the subventions to the Dutch East Indian lines is divided equally between the home and colonial Governments. Independently of the home Government the Dutch East Indian Government grants general mileage subventions for the maintenance of lines making regular communication with the various ports of the East Indies.[CZ] Holland's gross tonnage in 1910 had reached the respectable total of 1,015,193 tons,[DA] ranking her eighth among the maritime nations.
* * * * *
Belgium had a subsidy system for shipbuilding before 1852. At present neither bounties to domestic shipping nor postal subventions are paid by the Government. Subsidies, or premiums, however, are given to certain foreign steamship lines to encourage the commerce of Antwerp. These include an annual payment of eighty thousand francs ($15,440), and the refunding of lighterage and pilotage dues, to the North German Lloyd on their East Asiatic and Australian lines; and fifteen hundred francs ($289.50) to the German-Australian line for each call to and from Australia, the maximum subvention limited to thirty-nine thousand francs ($7527). A Danish steamship concern is also exempted from lighterage and harbor dues and granted other facilities, but receives no money premiums.[DB] Belgium tonnage in 1910 comprised only 165 steam and sailing ships for a total of 299,638 tons.[DC]
[Footnote CZ: Meeker.]
[Footnote DA: Lloyd's Register, 1910-11.]
[Footnote DB: Meeker.]
[Footnote DC: Lloyd's Register, 1910-11.]
The Imperial Government of Austria-Hungary spurred by the action of Germany, instituted a direct subsidy system, also modelled after that of France, in 1893, when the Austrian merchant marine was languishing.[DD]
A postal subsidy had long been in operation, the subsidies being all awarded to a single steamship company—the Austrian Lloyd, earlier the Austro-Hungarian Lloyd. They were practically mileage and speed bounties,[DE] increasing with the extension of service. Ten-years' contracts were at first made with this company. The contracts, executed in 1888, particularly guarded domestic interests. In the purchase of materials it was required that preference be given to Austro-Hungarian industries. The coal used must be bought from Austro-Hungarian subjects in the proportion of two tons from Austria and one ton from Hungary, provided that "the price is not greater than foreign coal, and that the steam-producing power of the native coal is equal to at least eighty-four per cent of that of foreign coal." In the building and repairing of their ships, or parts of ships, and engines, the company must also favor home interests. Ships, engines, or boilers could be ordered abroad only with the consent of the foreign office when shown that the work cannot be made in Austria within proper time, or that the want can be supplied by a foreign country on more favorable terms.[DF]
By a law of July, 1891, the rates for mail-contract steamships were fixed as follows: for fast lines, making above ten knots, a maximum rate of seventy kreutzers per nautical mile; for slower lines, fifty kreutzers a mile. The total amount of mileage bounty payable each year was limited to two million nine hundred and ten thousand florins. But in addition to this bounty the Government agreed to pay the Suez Canal tolls. To encourage the Austrian Lloyd to build larger and swifter vessels the Government further agreed to advance the company one million and a half florins. This was to be furnished in three equal payments yearly (1891, 1892, 1893), and was to be repaid in five equal payments of three hundred thousand florins each, beginning in January, 1902. The company's ships were to be exempted from consular fees, "the same as vessels of the imperial navy"; and were to be at the disposal of the naval and military departments in case of war. All the officials of the company were to be Austrian subjects, "naval officers either active or retired to be given the preference"; and there was to be an administrative committee of eight members, the president appointed by the Emperor and two other members by the ministry of commerce, the intention of this provision being to give the Government control over the company's affairs.[DG]
The general subsidy law of 1893 (November 28) was the outcome of the deliberations of a special Parliamentary committee appointed that year; and its declared object, as set forth in this committee's report, was "to put a stop to the decline of our merchant fleet, to allow it to cope with foreign competition, and to secure for the inhabitants of our coast needed employment and profits in maritime pursuits."[DG] Three years before (1890), with the same object in view, a preliminary step had been taken in the exemption of all iron and steel steam and sailing ships from trading and income taxes while engaged in ocean voyages.[DG]
The law provided two classes of subsidies—a trade bounty and a navigation bounty. They were to go to all steamers and sailing-ships engaged in the deepseas trade or long-coasting trade, and not receiving mail subventions. At this time a large percentage of the Austrian steam tonnage was receiving the postal subsidies, and most of this tonnage was owned by the Austrian Lloyd Company.[DG] The trade bounty was for ships making long voyages; the navigation bounty for those engaged in coastwise voyaging. Ships entitled to the trade bounty were required to be owned at least two-thirds by Austrian subjects, to be not over fifteen years old, and registered A1 or A2. The rates were thus fixed: for the first year after launching, iron or steel steamers, six florins ($2.44) per ton, iron or steel sailing-ships, four florins and fifty kreutzers; wooden or composite (part iron) sailing-ships, three florins. After the first year the rate was to be reduced five per cent annually till the end of the fifteenth year. As an inducement to employ home work and to utilize home materials, the bounty was to be increased by ten per cent for iron or steel sailing-ships built in the Austrian ship-yards, and by twenty-five per cent if at least one-half of the materials used in the construction were of Austrian origin. If more than one year had elapsed since the launching of a ship otherwise entitled to a bounty, a deduction of fifteen per cent was to be made for each year that had passed. The navigation bounty was fixed at five kreutzers per net ton of capacity for every hundred nautical miles sailed. The exemption from the production and income taxes, granted in 1890, was extended for a term of five years from January 1, 1894. The law was to be in force for ten years.
As the end of the term of this law was approaching ship-owners began agitating for its renewal with an increase in the subsidy. Since its enactment the production of steam tonnage had been accelerated, and the decline of sail tonnage had been checked; but no marked change in the merchant marine generally had been manifest.[DH] Of the bounties paid the Austrian Lloyd had received a large share in behalf of their ships which were not directly under contract for the mail service. The remainder went to the various companies controlling the coast and river trade. The ten to twenty-five per cent addition to the trade bounty for ships built in domestic yards and from domestic materials, finally went for the most part to a single large building concern at Trieste. While most of the Austrian tonnage was yet of foreign build, mostly constructed in British yards, the increase in the proportion of domestic build was considerable after 1893. The greater part of the materials used was Austrian product. Consequently allied industries increased with this increased output of home ships.[DI]
At length in 1907 (February 23) a new law was enacted increasing the navigation and construction bounties. For the navigation subsidies, to go to shipowners according to the tonnage of the ships and the number of miles run, allotments were thus made: for the first year, $852,600; for 1908, $893,200; 1909, $954,100; 1910, $1,015,000; 1911, $1,075,000; and for the five years remaining of the term, of the law—which ends December 31, 1916—$1,136,800 a year. The construction subsidies were raised as follows: for ships launched after July 1, 1907: steamers built of iron and steel $8.12 per gross ton, sailing-ships of iron and steel, $2.84; for marine engines, boilers, pipes, and auxiliary apparatus, $1.62 per 220.46 pounds. To entitle a ship to these bounties fifty per cent of the materials used in its construction must be home product.[DJ]
This year (1907) also the annual postal subventions to the Austrian Lloyd were increased $1,486,586, for a further period of fifteen years. This contract called for an increase of speed to the Levant and the Orient. The Suez Canal tolls were to be paid by the Government as before.
* * * * *
The Kingdom of Hungary grants bounties to Hungarian ships, or ships owned in greater part by Hungarian subjects, independently of the Imperial Government. Her first general bounty law was also enacted in 1893 and was limited to ten years. The subsidies granted were of two classes—premium on purchase, and a mileage bounty. The purchase subsidy was based on net tonnage and was payable for a term of fifteen years from the date of the ship's launching, reduced each succeeding year by seven per cent; the mileage subsidy, for the same term, was in proportion to the length of the voyages made "in the interest of national commerce whether to or from Hungarian ports." The premiums on purchase were thus fixed for the first year: for vessels employed in long-distance coasting trade—sailing-ships, six krone (each 20 cents); steamers, nine krone per ton; employed in deep-sea trade,—sailing-ships, nine krone; steamers, twelve krone per ton. Iron or steel ships rated first class were entitled to these bounties. The mileage subsidy was fixed at five hellers per ton, per hundred nautical miles run. It was offered only for voyages "to places where no company in receipt of State subsidies is obliged to maintain regular communications;" and it was not to be given for "petty coasting trade."[DK]
This law was succeeded by an act of 1895 granting construction bounties, with the intent of fostering domestic shipping and the use of domestic material. The rates were proportioned according to the amount of foreign or domestic material used, construction with domestic product receiving the highest bounty. These rates were: for iron or steel hulls, thirty to sixty krone per ton; for wooden ships, ten to twenty-five krone per ton; for engines and auxiliary machinery, ten to fifteen krone per ton of materials used; for boilers and pipes, six to ten krone per ton of material. The total amount to be paid out yearly was limited to the modest figure of two hundred thousand krone ($40,600).[DL]
The law of 1895 in reality was not effective, for ships of the Hungarian merchant marine continued to be built in foreign parts—mainly in British yards;[DK] and while the carrying capacity had considerably increased, the tonnage had continued to decline.[DK] By 1904 the situation had become so unsatisfactory that, as the American consul at Budapest wrote, the passing of a new navigation-development law by Hungary's Parliament had, it was believed, become a pressing necessity.[DM]
* * * * *
In 1909 the Austrian Government guaranteed a maximum sum of one million crowns (approximating $200,000) annually to the Austro-American Shipping Company for their service between Trieste and Brazil and Argentine ports. Should the service tend successfully to promote home industries and agriculture, this subsidy was to be increased, the amount of increase to depend upon the amount of cargo carried in excess of a certain minimum. The contract was to run for fifteen years from January 1, 1910. The service, beginning with sailings three times a month, was to become weekly on January 1, 1911.[DN]
The total Austria-Hungary tonnage in 1910-11 was recorded at 779,029 tons.[DO]
[Footnote DD: Meeker.]
[Footnote DE: U.S. Con. Rept., Jan., 1890, no. 112, p. 95-96.]
[Footnote DF: U.S. Con. Repts., vol. XXXII, 1890, no. 112, pp. 23-24.]
[Footnote DG: Meeker.]
[Footnote DH: U.S. Con. Rept., no. 282, March, 1904, pp. 645-646.]
[Footnote DI: Meeker.]
[Footnote DJ: U.S. Con. Rept., no. 320, July, 1907, p. 180.]
[Footnote DK: Meeker.]
[Footnote DL: Meeker. Also Parl. papers, Com., 1909, no. 4, p. 8.]
[Footnote DM: U.S. Con. Rept., no. 283, April, 1904, p. 304.]
[Footnote DN: U.S. Con. Rept., no. 352, Jan., 1910, p. 45.]
[Footnote DO: Lloyd's Register, 1910-11.]
Early after its establishment in 1861 the Kingdom of Italy adopted a subsidy system with the object of reviving and upbuilding the then languishing Italian merchant marine. This policy was instituted in 1866 with the grant of premiums on the construction of wooden ships. At the same time materials used in the construction, repair, or enlargement of ships were made duty-free.[DP]
For a while under these conditions, before iron ships had come much into use, the merchant marine prospered. Then it again began to languish; and in 1881 the promulgation of the French general bounty law was made the special occasion for considering the adoption of a similar measure.[DQ] The draft of a bill modelled after that law was promptly introduced in the Chamber of Deputies, in February. But with its consideration such perplexities arose that at length the whole subject was referred to a commission of inquiry, to investigate and report a more satisfactory one. The result of this inquiry was a bill which became law December 6, 1885, to continue in force for ten years.
This law provided for general construction subsidies, on the following scale: for steamers and sailing-ships built of iron or steel, sixty lire ($11.58) per gross ton; for steam or sailing ships built of wood, fifteen lire; for galleggianti (floating material: the term signifying merchant ships navigating the Italian seaboard, rivers, and lakes, but not provided with certificates of nationality), of iron or steel, thirty lire; for construction and repairs of marine engines, ten lire per quintal; for marine boilers, six lire per hundred kilograms of weight. These bounties were to be increased from 10 to 20 per cent (according to the degree of speed and other desirable qualities shown) for steamers built on plans approved by the Government engineers as to be convertible into cruisers, showing a speed of not less than fourteen knots an hour, and with sufficient coal-carrying space to steam four thousand miles at ten knots. The law was applicable to ships bought abroad as well as those of domestic build. But it forbade the sale or charter to a foreigner of any steamer upon which the bounty had been paid, except by Government permission. The laws of 1866 granting premiums and free entry to shipbuilding materials were suspended during the ten years' term of this act.[DR]
In 1888, a new tariff of the previous year (July, 1887) having increased the customs duties on shipbuilding materials, additional bounties on construction and repair were granted by a royal decree to offset these disadvantages to the shipbuilders. A provision was added for the payment of fifty lire per gross ton for construction of war-ships, and eight and a half-lire per horsepower for engines, nine and a half lire per quintal for boilers, and eleven lire per quintal for other apparatus, to be used in war-ships. Navigation bounties were also added to Italian ships as follows: 0.65 lire per gross ton for every thousand sea miles run beyond the Suez Canal or the Strait of Gibraltar to or from ports outside of Europe; the same for ships sailing between one continent with its adjacent islands and another continent with its adjacent islands, outside the Mediterranean. Sailing-ships of above fifteen years of age were ineligible to these bounties; so also were mail-route steamers.[DS]
In 1896, after the expiration of this law, a new law was enacted (July 23) closely modelled upon it. The construction subsidies were the same, except that war-ships built for foreign countries were debarred from receiving bounties. The navigation subsidy per gross ton for every thousand sea miles sailed beyond the Suez Canal and the Strait of Gibraltar was increased to 0.80 lire, the rate to be diminished by ten centimes for steamers and fifteen centimes for sailing-ships every three years. An important addition was the reenactment of the customs rebates on shipbuilding materials. This law was also to be in force ten years.[DS]
In 1900 (November 16) a royal decree was issued modifying the law of 1896 in several particulars. No bounty was hereafter to be allowed to vessels built in Italian yards for foreigners. The customs drawbacks were abrogated, and in place of them was granted a bounty of five lire per quintal of metal used in repairs. A bounty of fifty-five lire per gross ton was offered for iron or steel steamers showing a speed of above fifteen knots; fifty lire, for steamers speeding twelve to fifteen knots; forty-five lire, for steamers or sailing-ships with speed below twelve knots; and thirteen lire per net ton for modern hulls. The navigation subsidies per gross ton per thousand miles, were thus fixed: for steamers, forty centimes up to the fifteenth year after construction; for sailing-ships, twenty centimes up to the twenty-first year after construction. The yearly distances run for which the bounties were to be paid were limited to thirty-two thousand miles for a steamer below twelve knots; forty thousand for one of twelve to fifteen knots; fifty thousand above fifteen knots, and ten thousand for a sailing-ship. All Italian ships were eligible to this bounty; foreign ships were debarred. The maximum expenditure for all the bounties was limited to ten million lire ($2,000,000) a year.
In 1910 (May) a new subsidy bill was enacted providing for the continuance of the arrangement under the measure of 1900, with a few immaterial modifications.[DT] Early in 1911 the Government was reported to have in readiness ten bills looking to the support of domestic shipping and shipbuilding. Eight of these had relation to the increase of subsidy on the Italian mail and cargo service of the Mediterranean. Other routes subsidized included lines to Central America, Chile, Canada. Domestic shipbuilding was to be aided to the extent of twelve hundred and forty thousand dollars.[DU]
Italy's mail subvention system dates from 1877, when the Italian steamship companies by a convention (July 15) consolidated with the Government.[DV] All the lines receiving the mail subsidy came to be owned by a single powerful corporation, the Italian General Navigation Company. While the rates paid per mile are not so high as those paid by several other countries, the requirements as to size of vessels, speed, and amount of service to be rendered, are less exacting. Accordingly these subventions are in fact, as Professor Meeker recognizes them, "partly in the nature of concealed bounties." In 1879 the Government spent in these subventions a total equalling $1,593,214. By 1889 the total had only slightly increased, the amount that year being $1,849,392. In 1908 the total was $2,328,917. The mail steamships are required to carry government civil and military employees at half price.
Previous to 1896 the Italian General Navigation Company owned more than half of the Italian steam tonnage, and most of the large steamships.[DW] After 1896 the sail tonnage steadily increased. In 1905 it was recorded that "the Italian flag now flies over some of the best modern transatlantic liners in the port of New York; the Mediterranean is full of Italian ships; and the Lloyd Italiano has five new ten-thousand-ton steamers nearly ready for service in South America."[DX] Between 1890 and 1910 the Italian gross tonnage increased from 809,598 tons to 1,320,653 tons.[DY]
[Footnote DP: Meeker.]
[Footnote DQ: Bismarck's Memorial to the German Reichstag, April, 1881.]
[Footnote DR: U.S. Con. Rept., Jan., 1890, no. 112, pp. 61-62. Also Meeker.]
[Footnote DS: Meeker.]
[Footnote DT: U.S. Consul J. K. Wood, Venice, in Daily Con. Repts., no. 30, Aug 9, 1910.]
[Footnote DU: U.S. Consul T. St. J. Gaffney, Dresden, Germany, in Daily Con. Repts., no. 83, April 10, 1911.]
[Footnote DV: Meeker.]
[Footnote DW: Meeker.]
[Footnote DX: U.S. Senate Rept., no. 10, 59th Cong., 1st sess.]
[Footnote DY: Lloyd's Register, 1910-11.]
Spain instituted a ship-construction bounty system in 1880, when her merchant marine was languishing, and in 1886 a comprehensive system of mail subventions, contracting for the whole ocean service with a single steamship company, La Compania Transatlantica Espanola.
Previous to 1886, for a quarter of a century and more, postal subventions had been given to private commercial houses, or individuals, providing steam communication with the Spanish colonies and foreign ports; but much of the service during that period had been performed by this company through cessions from the holders of the contracts. Before the adoption of the private contract system, the service to the colonies had been performed by the first regular steamship line between the Peninsula and the Antilles (in 1850), established at the State's expense. The ships of this line were all under the command of officers of the navy, and performed various services for the Government besides carrying the mails and despatches.
Under the contract of 1886 (ratified by the Cortes in 1887) the company were to furnish all the mail steam communication between the Peninsula and the colonies and possessions, and foreign ports, for a total maximum subvention of 8,445,222 pesetas ($1,689,044) annually. The subsidy was calculated on the number of nautical miles run. The total sum was distributed among the budgets for the Peninsula and the several colonies.[DZ] In 1909 the subvention was redistributed over the various lines, the total amounting in round numbers to $1,665,600. The contract went as a whole also to the Spanish Transatlantic Company, to run for twenty years. A particular requirement was that the company must favor Spanish trade in every possible way.[EA]
The first construction subsidy law, that of 1880 (June 25), granted a bounty of forty francs ($7.72) per measured ton of 2.83 cubic metres on all ships built in Spain. All tariff duties paid on imported materials for building, careening, or repairing ships or their machinery, were to be refunded by the Government.[EB]
During the decade between 1880 and 1890 the Spanish marine slowly increased. Further to foster it, in 1895 a more general subsidy law was enacted. This act granted a construction subsidy of forty pesetas ($7.72) per gross ton for wooden ships; seventy-five pesetas ($14.48), for iron and steel steamers; and fifty-five pesetas ($10.62), for ships of mixed construction and for sailing-ships of iron and steel.[EC]
The year following the passage of this law was marked by rapid expansion in the national marine. Then came a more rapid decline. This was due, it is assumed, to increased taxes, and business depression occasioned by the colonial wars, involving enlarged Government expenditures and the cutting off of much colonial trade.[EC] During the war with the United States (1898) Spain lost eighteen large steamers of 31,316 tons. After that war, with the development of her national resources, the Spanish marine again began rapidly to grow.[EC]
In 1909 (law of June 14) the system was extended with the addition of general navigation bounties calling for an annual expenditure of 2,750,000 pesetas ($530,750). For ships making monthly sailings to various named points, among them Brazil, Uruguay, and the Argentines, and semi-weekly sailings to Algeria, bounties were provided ranging from seven to seventeen cents per ton gross for every thousand miles run, to continue for a period of ten years. Spanish ships manned by Spanish crews and ranked by maritime agencies as first class were made eligible to them. All ships receiving these bounties must admit naval cadets and perform certain services for the Government. To shipbuilders, as off-set to the duties on imported materials which they must pay, bounties for port materials as well as for ships were granted by this law. The construction subsidies were increased to $13.84 per gross ton for wooden ships not possessing their own motor power, and $17.30 self-propelling; $20.76 for iron or steel ships without motor, $27.68 for ships for freight only, $29.41, freight and passengers; and $32 passengers only. Ten per cent of the bounties for passenger ships was to be added for each knot made above fourteen per hour. The sale of a ship to a foreigner within two years after the ship's construction was made invalid unless about a third of the bounty received be repaid. Ships built abroad for Spanish citizens were to be relieved of certain duties "provided it appears that it was absolutely necessary that they be built abroad."[ED]