their prospective demonetization, and this outflow fortunately was still further increased by the demand for Mexicans for use in northern China, growing out of the then imminent war between Russia and Japan; but there still remained in the islands a very considerable sum in circulation. It was well understood that unless prevented there would be in due course a return inflow of Mexicans into the Philippines to meet the demands of trade. In order to prevent this the Commission, on January 14, 1904, by Act No. 1042, prohibited the importation into the islands of Mexican or other foreign currencies under heavy penalties, which effectually prevented further importations. Contemporaneously with the enactment of Act No. 1042 the Commission brought forward for public discussion a bill, which was subsequently enacted as Act No. 1045, by the terms of which provision was made for the continued purchase as bullion of Mexican dollars then in circulation in the islands, and which, after October 1, 1904, imposed a tax, which was to be increased each month up to January 1, 1905, upon all checks, drafts, notes, etc., drawn in the old currency, and upon bank deposits and transactions therein. The passage of this act was stoutly contested by the banks, money brokers, and exporters, who found it advantageous to deal in the old currency, but was favored by importers and all business men who were compelled to buy their commodities in the United States or foreign countries in gold and thereafter to sell them in the islands for the local currency. The wage-earner who, perhaps, was more vitally affected than any other class of the community, was unrepresented.

The interests opposing the passage of the act also insisted that Mexican and Spanish-Filipino currency should be redeemed in the new currency at par, but as this involved the entire loss of the seigniorage gained in the new coinage and would have completely exhausted the gold-standard fund and, besides, would have practically been of benefit only to the banks and money changers, who would have gathered it in for exchange, the Commission declined to consider this proposition favorably. There was also a strenuous effort made to induce the Commission to extend the time for the imposition of the tax referred to above, but this also was not considered favorably for the reason, among others, that, aside from the fact that ample time was given for making exchanges of the old currency for the new, it was obvious that the period of substitution of the new currency for the old would involve a general liquidation and readjustment of accounts between debtors and creditors which, with the temporary contraction of the currency caused by withdrawing the old currency from circulation, which would continue until the new pesos took its place, would necessarily have the effect to a considerable extent of paralyzing general business; and therefore it was thought that it was in every way in the public interest that the process of making the change should be as

speedy and sure as was reasonably practicable. The efforts thus made to establish a sound currency in the islands have, we are pleased to say, been crowned with success. There has been, month by month, a steady increase in the emission of the new currency and the retirement of the old, which, as fast as taken in, has been shipped to San Francisco for recoinage into the new pesos. The monetary depression incident to the change is passing away, and there are already unmistakeable indications of a general revival of business in all directions. On November 1, 1904, there had been a retirement and shipment for recoinage of 11,223,000 Spanish-Filipino pesos, and between July 1, 1903, and August 31, 1904, there has been a net commercial export of Mexican pesos by banks and commercial houses amounting to P8,041,747, and in their place there had been received in the islands down to the 1st day of November, 1904, P24,924,520 of the new currency, of which P15,964,043 was in actual circulation. Of the new currency thus issued P7,230,000 was in silver certificates, which have been found to be very well received by the people, who prefer to use them, as they are less bulky and are in every way a desirable substitute for the coins themselves which they represent. There is a very considerable demand for silver certificates of larger denominations than P10 which can not be met, as the Commission, under the act of Congress of March 2, 1903, is not authorized to issue certificates of larger denominations than P10. It is therefore again respectfully recommended that the act in question be so amended as to permit the issuance of silver certificates of the denominations of P20, P50, P100, P500, and P1,000.

The Commission desires to note the fact that after its policy as outlined in Act No. 1045 was understood to be fixed and irrevocable the banks and business community generally fell into line and cooperated in making the new system a success. The banks were espe

cially helpful in aiding in retiring the old currency and emitting the new. The Commission wishes also to make grateful acknowledgment of the aid which it has received at every stage in its work of currency reform from the Secretary of the Treasury of the United States, the Secretary of War, and the Chief of the Bureau of Insular Affairs of the War Department. The first named has given us invaluable assistance in directing and supervising the new coinage and in enabling us to realize a premium on our certificates of indebtedness by receiving them as security for deposits of Government money in national banks. We also acknowledge the assistance received from Prof. Jeremiah W. Jenks and Mr. Charles A. Conant, who have given us the benefit of their invaluable experience.

THE PHILIPPINE TARIFF.

The present Philippine tariff, Act No. 230 of the Commission, which was approved by the act of Congress of March 8, 1902, generally speaking, imposes specific instead of ad valorem duties upon imports. Such a system of taxation is open to the objection that it is in many instances unequal, but it has the advantage of being more economical of administration and of preventing frauds in classification or undervaluation as they exist in an ad valorem tariff. The enforcement of the provisions of the present tariff act has disclosed a number of defects and discriminations, which have been the subject of complaint by importers. They were so frequent as to induce the civil governor, on the 30th of November, 1903, by executive order, to appoint a committee composed of the acting collector of customs for the Philippine Islands, two of his deputies, and three prominent merchants of Manila to make report to the Commission as to needed changes in the law in such particulars as experience had shown it to be defective, inconsistent with itself, or oppressive in prohibiting useful importations. This committee went into the subject quite fully, took the testimony of many witnesses, and made an elaborate report recommending amendments in the existing schedules, mostly reductions, which they thought would relieve the law of its present objectionable features and at the same time would not injuriously affect the revenue derived therefrom. The Commission has carefully considered each and all of these suggested changes, and has made recommendations to you for such action as you may deem wise in the matter of submission to Congress.

While upon this subject we think it opportune to suggest that it would be advisable for Congress to give the Commission authority to make reductions in the present tariff schedules whenever in their opinion to do so will be in the public interest. Now it has no authority to make any change in the existing law, however slight. As the Commission enacted the original law, there does not seem to be any adequate reason why it should not at least be intrusted with authority to change it to the extent of making necessary and proper reductions. This becomes of considerable practical importance in view of the fact that the Commission has always felt that it was to the interest both of the islands and the United States that there should exist the most intimate trade relations between the two, which should be, so far as possible, unobstructed by tariff barrier. Having this in view, the Commission has thought it expedient to enact a comprehensive internal-revenue law, which has been recently put in force, and which, it is hoped, may ultimately enable it to raise sufficient revenue through that instrumentality to warrant very material reduction in existing tariff rates, at least upon goods coming from the

United States. With the revival of business generally in the islands we may hope for an increase in customs receipts as well as from our internal-revenue law, and we think that we should be in a position when the time arrives to make tariff reductions without the necessity for awaiting Congressional action.

THE DINGLEY TARIFF.

The taxation imposed by the Dingley tariff upon sugar and tobacco imported into the United States is very heavy, and is prohibitive so far as concerns the Philippine Islands. The civil governor in his last annual report to the Commission pointed out the languishing state of both these industries and explained that owing to the loss of their work animals by rinderpest and the damage done to their crops by locusts the people were much discouraged and were barely able to cultivate their estates. He also pointed out that their foreign market was exceedingly restricted and that prices were low. Although they have been able to restock their plantations with carabao to a considerable extent and thus make another crop, which up to this time is unusually good—and there is a prospect of their receiving slightly better prices than they did last year-still it can not be said that the outlook for these industries is at all encouraging. When the lack of capital and the amount of available labor is considered, it is certain that even under the most favorable conditions for many years to come it will be impossible for the islands to more than double their present output of sugar, and even if the whole of it were to be admitted into the United States it is obvious that it could not in any appreciable degree be injurious to any interests there. The same remark may truthfully be made of tobacco. Yet, while this is true, the admission of these products free of duty into the United States would be a great boon to the sugar planters and tobacco growers of these islands, as it would not only to the extent indicated increase the volume of production but would also increase the price received. Aside from being a measure of simple justice, nothing which Congress could do would have so tremendous a moral effect upon the people of the islands as to permit their sugar and tobacco to enter the United States without the imposition of any duty, or with the imposition at most of a low duty only. It is difficult for them to appreciate the soundness of the reasons which give this benefaction to Hawaii and to Porto Rico and refuse it to them.

REFUNDABLE EXPORT DUTIES.

We desire to call attention to the injustice effected upon the revenues of the islands by section 2 of the act of Congress approved March 8, 1902, which provides that the Philippine government shall refund all

export duties imposed upon articles exported from the islands into and consumed in the United States. Under the provisions of this section there has been collected in the Philippine Islands since its enactment down to the close of the fiscal year 1904 the sum of $1,060,460.20 United States currency, which is refundable. These refundable duties are principally upon hemp exportations to the United States, and are in effect a gift of that amount to the manufacturers of the United States who use hemp in their operations, and whether so intended or not it is manifestly a discrimination in favor of our manufacturers as against those of foreign countries. No good reason is perceived why this bounty to American manufacturers should be extracted from the treasury of the Philippine Islands, and it is respectfully submitted that the law authorizing it should be repealed.

MINING LAW.

The Commission again desires to call attention to the injurious effect of the provisions of section 33 of the act of Congress of July 1, 1902, which provides: "That no holder shall be entitled to hold in his, its, or their own name or in the name of any other person, corporation, or association more than one mineral claim on the same vein or lode." The chief of the mining bureau in his report for the year ending August 31, 1904, says:

This most unfortunate section will naturally operate against the development of any but the richest lodes, and in the Philippines, as in mining districts the world over, the bonanzas are few and the deposits of low-grade ores relatively large. In Lepanto and Bontoc, as well as in the Camarines, Masbate, and Mindanao, there are important deposits that should be worked upon a large scale, and which, under section 33, can never be worked at all. It is safe to say that under section 33 neither the famous Homestake nor the Alaska Treadwell mines would ever have been developed; and yet these are among the greatest gold producers known. The ore of the Homestake mines in South Dakota averages only $4 and that of the Alaska Treadwell only $2 to the ton, yet these mines, being able to handle immense bodies of ore, are among the best-paying and soundest mines in the world. The former requires 900 stamps, yielding a monthly output of $375,000 of gold, and the latter employs 540 stamps, paying $130,000 a month. The low-grade ore deposits in the Philippines are so extensive and valuable that section 33 tends to operate as an obstacle to the development of the greater part of our metalliferous resources.

There is no question as the soundness of the statements made by the chief of the mining bureau. In the province of Benguet alone there are undoubtedly large deposits of very low-grade ore which can only be worked to advantage by the construction of large reduction works, which of course call for the investment of capital on an extensive scale. No sane man would invest his money to the extent necessary to build such works with the certainty staring him in the face that after operating them for two or three years they could no longer be used and the principal of his investment would consequently be gone. No