trol, but the outside lines, such as the Beaver Line, the Atlantic service of the Canadian Pacific, and especially the Danish Line, created conditions so unfavorable to some of the lines within the conference, that the Cunard Line felt obliged to withdraw from its agreement with the other members of the conference. A most severe traffic war to secure the North American steerage business raged through the larger part of 1903-04.

The conference agreements of ocean carriers are unstable, partly because the profits to be derived temporarily by any individual line that may cut the rates, while others maintain them, are large. During times of exceptional prosperity, when there is business enough to employ the facilities of all the companies, there is little temptation to deviate from conference agreements; but when traffic becomes scarce and profits rapidly decline the temptation to secure a temporary advantage by obtaining traffic at cut rates becomes stronger than many vessel owners are able to withstand.

Another reason why agreements among ocean carriers are difficult to maintain is, that it is to the interests of shipbuilders to construct and place upon the market as great a tonnage as possible. There is a constant tendency toward oversupply of ocean shipping. During times of prosperity, when there is a demand for a large tonnage, shipbuilding expands rapidly and the activity of the builders continues beyond the period of prosperity, and thus tends to create an oversupply of shipping during periods when business is not abnormally active.

International rivalries and jealousies in the shipping world also work against the stability of agreements among ocean carriers. The shipping interests of each country are impelled by business and patriotic motives to develop the shipping of their country in preference to that belonging to the people of other nationalities. This spirit is

strengthened by the support given by many countries to the shipping interests of their own people. As the editor of Fairplay remarks, “the uncertainty of the foreign factor has been one of the chief obstacles in the way of combination among British shipowners." What is true of British shipowners is equally true of those of other countries.

The instability of the agreements among ocean carriers affords the shippers and the traveling public a safeguard against extortionate charges. If the conference lines attempt to enforce high rates, the competition of outside carriers will soon disrupt the agreement, even if the lines within the conference should refrain from cut

ting rates. With the exception of short periods of unusual business prosperity, the rates adopted by the conference must be fixed at a point low enough to cause rate cutting to yield but slight profits, or no gain, to the carrier that violates the rate agreement.

While agreements among ocean carriers are unstable in all parts of the world, they are less unstable in Europe than in the United States. In Europe, the vessels operated as lines are generally owned by the companies operating them; whereas in the United States the companies operating lines frequently own but a part of the ships they control, and charter or lease such other vessels as they require. European steamship companies have great property interests at stake, and are more disposed to adhere to conference agreements than are the American companies. Most of the European agreements were able to outlive the period of depression following the Boer War, whereas most of the American combinations went to pieces.

The older and more highly organized the ocean transportation service of a country becomes, the greater the stability of the service; accordingly, we may expect to

see the ocean transportation business performed by American companies gradually brought under a more perfect organization characterized by a higher degree of coöperation among rival interests. This greater coöperation in the ocean transportation services will be of advantage both to the carriers and the public.

REFERENCES FOR FURTHER READING

Highways of Commerce." Special Consular Reports, vol. xii, 1899, Washington, D. C. (This volume contains some information of value regarding the classification of ocean freight). There is practically no literature upon the subject of agreements and combinations among ocean carriers. The material upon which this chapter is based was gathered mainly from the files of such shipping journals as Fairplay and Lloyd's Gazette, published in London, and the Journal of Commerce, published in New York. The author desires to acknowledge his indebtedness to Dr. J. Russell Smith, of the University of Pennsylvania, from whose notes much of the information presented in this chapter was obtained.

CHAPTER XII

COOPERATION AND COMBINATION OF OCEAN AND RAIL

CARRIERS

THE Constant interchange of a large volume of traffic compels ocean and rail carriers to coöperate. The cheapening in cost of transportation during recent decades has enormously increased the tonnage of international commerce. The markets for even heavy commodities have become world-wide, and the organization of trade upon the basis of a world market renders more and more necessary a close coördination of the services of rail and water carriers.

Moreover, constant efforts to economize in the expenses of transportation are bringing about an increased unity in the organization of the service of public carriers. Indeed, in the more recently developed international transportation services, the tendency is distinctly toward a single management for the performance of the entire service of connecting the producers of one country with the consumers residing in another country. There are limits to the development of this tendency toward unifying the control of rail and water transportation, and it is not at all certain that both services shall everywhere come under a common management; but there is no doubt that the coördination of rail and water transportation will become increasingly close with the higher organization of the transportation business.

Whether the shipper conducts his business at the sea

board or at some remote interior point, he is now able to ship, on through bills of lading, by rail and water carriers, direct to the foreign destination. Facilities for such through shipments are now provided by most railroad companies. There are also freight forwarders and exporters and importers not connected with the railroad companies, and not necessarily connected with any line of steamships, who not only solicit freight from producers for shipment abroad, but also facilitate the importation of goods produced in foreign countries. For these services the freight forwarder charges the shippers or buyers a small commission. Oftentimes the freight forwarder operates a line of vessels which he may own or charter, and then his services consist of securing traffic from many interior and seaboard points for shipment abroad by his own line of vessels. The forwarder also has agents in foreign countries soliciting traffic to be brought by his vessels to the United States.

A company engaged in forwarding freight by its own line of vessels ordinarily assembles and distributes most of its traffic by one line of railroad, in return for which the railroad company may construct a pier to be used exclusively by vessels belonging to the freight forwarder's line; and the railroad company may also provide such other terminal facilities as the forwarder may require. Such an arrangement, however, does not preclude the forwarder from soliciting freight from any and all places on the lines of other railroads, nor from seeking traffic at the terminal port from vessels, barges, railroad companies, and individual shippers.

The efforts made by American railroad companies to increase the over-sea foreign commerce of the United States have had an important influence upon the organization of the transportation service. In order to secure foreign outlets for the products of the sections served