THE CANAL AND THE AMERICAS.
The likely effects of the Panama Canal on international commerce and the
development of the world's resources is so big a subject that one can do
little more than indicate the larger probabilities. The influence of the
canal on the British Empire must be left to another chapter. Here we
shall have to consider mainly the case of the United States, the country
which stands to gain far more than any other from this new link between
East and West.
The most obvious result of the new event, as it was the main object of
the canal's construction, must be the immensely quickened all-sea
communication between the eastern and western coasts of North America.
The motive for the building of the canal was military rather than
commercial. It was rendered necessary by painful experience during the
Spanish-American War of the effects of the 14,000-mile sea journey
between the two seaboards of the republic. But the commercial results
will not be the less important because they were not foremost in the
object and motive of the canal-builders. It is pretty clear that what we
may call the main developmental effect of the canal will be felt along
that Pacific coast of the Americas which has been so long shut out from
the great centres of industrial enterprise in the New World and the Old.
We are so accustomed to regard the United States as a fully developed
and fully equipped country that we forget how slowly her population and
industries advanced westward from the Atlantic coasts. Even now it
cannot be said that the railroad communications between the east and the
Pacific states beyond the great mountain-divide of the Rockies are fully
equal to the carriage of the produce which is or should be exchanged
between east and west. The transcontinental lines have scarcely yet
furnished a cheap and satisfactory connection between the Pacific coast
states and their largest and most natural markets. Hitherto the
railways have had to compete with only three alternative routes: (1) the
all-sea route round Cape Horn for sailers, and through Magellan Straits
for steamers; (2) the route _via_ Panama, with railroad transit over the
isthmus; (3) the route _via_ Tehuantepec, with railroad transit over
that isthmus from Puerto Mexico on the Gulf to Salina Cruz on the
Pacific. The new canal will be a much more formidable competitor. It is
highly important that the industries of the United States should have
the benefit of this healthy tug-of-war between railroad and canal, and
the government is perfectly justified in keeping that competition open,
even to the length of forbidding the use of the canal to ships owned,
controlled, or operated by railway companies.
There is no fear that the Panama Canal, even if it prospers exceedingly,
will ruin the transcontinental railroads. The report of the Isthmian
Canal Commission in 1901 made some interesting remarks on this subject,
and they are as pertinent to-day:--
The competition of the canal will affect, first, the volume
and rates of the through business of the Pacific railroads,
and secondly, the amount of their local traffic. At the
beginning of their existence these railways depended almost
entirely upon their through traffic; but their chief aim
throughout their history has been to increase the local
business, which is always more profitable than the through
traffic; and although the great stretch of country crossed
by them is still in the infancy of its industrial
development, the local traffic of some, if not all, of the
Pacific roads has already become of chief importance. A
vice-president of one of the railway systems states that
since 1893 "the increase in business of the transcontinental
lines has not come from the seaports, but from the
development of the intermediate country." The canal can
certainly in no wise check the growth of this local traffic,
and the evidence strongly supports the belief entertained by
many persons that the canal will assist largely in the
industrial expansion of the territory served by the Pacific
railways.
If this be true, the proximate effect of the isthmian canal
in compelling a reduction and readjustment of the rates on
the share of the transcontinental railway business that will
be subject to the competition of the new water route, will
be more than offset by the ultimate and not distant
expansion of the through and local traffic, that must
necessarily be handled by rail. It seems probable that the
increase in the population of the country, and the growth in
our home and foreign trade, will early demonstrate the need
of the transportation service of both the canal and the
railways.
The reduction of freight through the use of the canal is sure to give a
big stimulus to many leading industries of the Pacific states. One of
the most important is the lumber industry. California and Oregon are
very rich in forests of pine, spruce, cedar, and redwood, the last being
much in demand in Atlantic countries. A good deal of this timber is
exported to Europe and the eastern states, and it has all to be carried
in sailing ships round Cape Horn. It is calculated that the opening of
the Panama Canal will reduce the freight by 50 per cent., which means
that all this Pacific coast timber will be correspondingly increased in
value. The exports eastwards are sure to advance rapidly with the new
means of transport. Grain, wine, and fruit will benefit, and the
manufactured goods from the industrial states of the east will flow
through the same channel to the western states in an ever-increasing
volume.
Every staple industry of the United States will feel the new stimulus,
and England and Europe generally are certain to feel the pressure of
this new competitive power of the American republic. In cotton and iron
goods especially the exports from the eastern and southern states are
bound to forge ahead. Manufactured cotton goods exported from the
southern states have had to be carried by rail to the western ports, and
thence by steamer to China and Japan, or else eastward by the Suez
Canal, sometimes even _via_ England or Germany. We may imagine what a
boon the Panama Canal will be to this trade, and how conveniently it
will lie for the Gulf ports and all their raw and manufactured exports.
American iron and steel will also be immensely strengthened for
competition with those of England and Europe in the markets of China,
Japan, British Australasia, and along the coast of South America. We
need not describe in detail effects which are likely to be felt over the
entire range of American industry.
The United States appears, indeed, to be on the verge of tremendous
developments. In a paper read before the Royal Colonial Institute,[20]
that well-known physical geographer and economist, Dr. F. B. Vrooman,
gave us a hint of further American enterprises in civil engineering,
after the Panama Canal is opened:--
The isthmian canal is but a part of the greater American
waterways project. As soon as this is finished it is
possible that the United States will start in a large way
with the project of the artificial canalization of the
Mississippi with its 16,000 miles of already navigable
waters and a drainage basis of 1,280,000 square miles. The
cutting-through of an ocean-ship canal to the Great Lakes
will make seaport towns of the Canadian cities on the Lakes
Ontario, Erie, and Superior. The Saskatchewan and the Red
River can be canalized for 1,000 miles, and a short haul
from Winnipeg will open the whole Saskatchewan valley from
near the foot-hills of the Rocky Mountains--downstream, but
for this short portage--all the way to the Gulf of Mexico,
and thence to Panama and the Pacific ports. Every
transcontinental freight-rate in Canada and the United
States will be reduced, and perhaps some in the middle
interior. As this great southern movement starts up the
industries of the southern states will receive a new
impulse. The Gulf of Mexico and the Caribbean Sea will
spring into a new life, together with the West Indies and
Central America and the vast and fertile interior drained by
the Orinoco and the Amazon.
CENTRAL AND SOUTHERN AMERICA.
But there are no countries which will hear the call of the canal so
nearly and clearly as those of Central and Southern America. It is
astonishing how that forty-mile wide land barrier between the two
oceans has isolated all the western shore of the continent. The Panama
Canal Railroad has done very little to modify the situation. The Pacific
coast of America has looked westwards over its waste of waters, and has
scarcely been reached by the industrial and economic forces at work
behind it in the Old and New Worlds. Its trade has been carried on
mostly with Europe, and especially England, in sailing vessels that have
plodded round the distant Horn. An interesting example of this
geographical and commercial detachment of the west coast of Central and
South America is furnished by the port of Mazatlan in Western Mexico.
From this place there are considerable exports of logwood and mahogany.
But thirty times as much of this lumber has gone to Europe as to the
east of the American continent. On the opposite or eastern side of
Mexico is Tampico, where the returns of trade are just the reverse, the
United States being the largest customer for its exports. Despite the
old Spanish paved roads across the isthmus at Panama, by which the
silver and pearls of Peru and the Pacific were conveyed to Nombre de
Dios and Porto Bello, for shipment to Spain, despite the sixty years of
the little Panama Railway, the American continent even in its narrowest
parts has been something like an impenetrable screen between east and
west. Four centuries of continued agitation and effort to get the water
through show how seriously this physical divorce has been felt, and give
an earnest of the large results which are sure to follow the completion
of the task.
There have been other reasons for the backward development of western
South America. To begin with, the Spanish, not a progressive and
pioneering race, laid their hands on these countries four hundred years
ago, and have held them politically or racially ever since. This would
not in itself have kept out the Anglo-Saxon or the German. But these
countries have not yet been greatly needed as an outlet of the surplus
populations of Europe. Even the United States is very far from being
filled up, and Canada is likely to be giving away farms for many years
to come. The Teutonic race, to which above all others the trusteeship of
Western civilization is committed, has left these Spanish Americas,
with their revolutions coming almost as frequently and regularly as the
seasons, comparatively unvisited. As yet the North European emigration
to the southern continent has been mainly confined to Argentina and
Southern Brazil.
In one respect the isthmian breakwater has been profitable to these
states of the Pacific coast. It has sheltered them largely from the
negro element which has spread so widely over the West Indies and the
southern United States. But Japan and China are already there, and the
yellow will be laid on more and more thickly unless these countries are
brought quickly within the zone of Western ideas and enterprise. And
that process is likely to begin with the opening of the canal.
The backwardness of these regions is indeed almost unbelievable. Most
people think of them as producing mainly nitrates and revolutions. But
their possible resources and products are illimitable, and are only
awaiting the organized capital of the West to be made available for
human service. As yet these Latin republics are in their middle ages of
development. There are few railways, only one continuous
transcontinental line having been completed between Valparaiso, through
Mendoza, to Buenos Aires. Their internal communications are carried on
mainly by the pack mule, as they have been since the days of Pizarro and
Valdivia. Each country, of course, has a foreign trade, but the people
of the interior, the Indians or mixed breeds, live in isolated
communities which are self-sufficing, raise their own food and make
their own simple manufactures, knowing little or nothing of the products
of foreign countries.
The whole coast and its hinterland is engaged almost solely in what are
known as "extractive" industries--that is, in mining or agriculture. The
exports consist mainly of foodstuffs and raw materials, nitrate, ores of
copper, silver, and gold, grain, sugar, cotton, cocoa, coffee, wool,
hides, rubber, and woods. With these the people pay for their
manufactured goods, and these come mainly from Europe, and chiefly also
from the United Kingdom. The mineral wealth of the northern parts,
especially the Andean plateau, is still enormous, though vast quantities
have been extracted. For centuries the Andes furnished the civilized
world with most of the bullion used for its current coinage. Between
1630 and 1803 Peru alone sent out L250,000,000 worth of silver. Bolivia
has contributed L800,000,000 worth; the famous mines of Potosi alone
accounted for L600,000,000 worth of this metal. The nitrate works of
Chile are in the hands of Englishmen and Germans, and American and other
foreigners hold the sugar plantations of Peru. But, as I have said, the
range of production is enormous and only awaits the stimulus of imported
capital. To give one example of the variety of products, it is said that
the Aconcagua valley in Chile would alone furnish annually from its
vineyards 1,000,000 gallons of claret, if the grapes were not used to
produce a local drink named "chica." There is no sign of the exhaustion
of any of the natural products of these regions. Even the nitrate of
soda, that most valuable of fertilizers, though it is being shovelled
out at a great rate, covers about 220,000 acres, or about 400 miles from
north to south, and is sufficient to last for a very long time to come.
Nitrate, minerals, wheat, barley, wool, hides--these are the main
exports of the Pacific west, the returning imports being cotton goods,
machinery, steel rails, woollens, coal, and all sorts of miscellaneous
manufactures and supplies. But, as I said, the trade has been almost
wholly with Europe, England enjoying a very predominant position. The
United States have competed with Europe at great disadvantages. The
trade has been mostly carried on in sailing vessels. Now such craft, to
get from New York to South America, have been obliged to sail eastwards
almost as far as the Canaries in order to catch the trade winds and
weather Cape St. Roque on the coast of Brazil. The sailing vessel from
Europe, on the other hand, sails right past the Canaries, and can give
the American ship ten days' start in the journey to any part of South
America south or west of the most easterly point of Brazil. If the
reader will turn back to the chapter on the new distances he will see
how the little streak of blue water at Panama will alter all this. Take
one little fact to illustrate the change. Callao, on the coast of Peru,
is, before the opening of the canal, farther by steam from New York than
is the South Pole, but the Panama Canal will bring the city 1,000 miles
nearer to New York by steam than San Francisco will then be. The canal
will reduce the distance from New York to the Chilean nitrate port of
Iquique by 5,139 miles (nautical), to Valparaiso by 3,747, to Coronel
(farther south) by 3,296, to Valdivia (about 1,000 miles north of
Magellan's Straits, nearly at the farthest southern limit of the
commercially important part of western South America) by 2,900. Take
Iquique, an important North Chilean nitrate port. By Panama this place
is 4,004 miles from New York, but 6,578 from Liverpool. Their respective
distances _via_ Magellan were 9,143 and 9,510.
It looks, therefore, as though the United States, with its new
advantages, which begin when the first vessel is passed through the
Panama locks, would have a good chance of securing for the future the
main share of the South American trade. Its cotton, iron and steel
goods, electrical machinery, etc., will be able to compete on very
different terms with those of England and Germany. Cotton manufactures
have reached Chile and the other countries of Pacific South America by a
rather absurdly roundabout route. The raw cotton has been grown in the
southern parts of the United States, carried to Europe for manufacture,
and brought back to South America _via_ the Straits of Magellan. These
goods will, we may be sure, tend in future to go direct from the
American factories _via_ New York, Charleston, or New Orleans, without
trans-shipment, thus saving about 7,000 miles of transportation. A very
small part of the American trade with these countries has passed by the
Panama railroad. The rates charged by the steamers which have picked up
the goods for the west coast at Panama have been kept so high as to be
practically prohibitive. It has actually been cheaper to send goods from
the United States by way of England or Germany--that is, a journey of
14,000 miles--than by way of Panama, a journey of three or four
thousand. One of the surest results, then, of the Panama Canal opening
will be a rapid development of the Pacific coasts of America, especially
of South America, and a great expansion of trade between these countries
and the United States.
The effect of the canal on the Atlantic coasts and hinterland of South
America will naturally be less striking. There has never been much
interchange of trade between the two coasts of the southern continent,
for the simple reason that their products are not complementary but
mostly identical. Most of the trade of the eastern coast states is with
the countries of the North Atlantic. But some trade to the more
northerly and tropical parts of this coast is certain to flow through
the canal. Lumber from the Pacific coasts of North America is used in
Atlantic South America, and a part of this trade, which is likely to
grow in extent, will be passed through the canal. It should be noticed,
however, that the temperate reaches of the eastern coast of South
America farther to the south will be nearer the Pacific coasts of the
United States and Canada _via_ the Horn and the Straits of Magellan
owing to the big easterly projection of Brazil.
We must leave the probable effects of the Panama Canal on the British
possessions in America to another chapter. It has not been possible to
deal with prospective commercial developments in great detail. Only some
general idea could be given of the vast changes and developments in
progress. On the day on which I am writing the Washington correspondent
of _The Times_ summarizes the meaning and effect of the Panama Canal in
three rather formidable words. He says it "symbolizes commercial
Pan-Americanism." The canal is going to help America to keep its trade
more to itself. It represents in commerce and economics what the Monroe
doctrine represents in politics. It will immensely assist the United
States to become the chief industrial supplier of the great continent,
with the other states mainly as agricultural or mining annexes. One
incident in the furthering of this ambition was the attempt to conclude
a treaty of reciprocity with Canada, the effect of which, as Mr. Taft
admitted, would have been to make Canada such an "annexe" of the
republic. The Canadian people, however, realizing the ulterior political
and commercial effects of such a treaty, refused to ratify it. Canada,
in fact, belongs to another political and economic system. She gives
valuable trade-preference to the manufactures of the mother-country in
the Old World, and there is happily no reason to believe that she will
abandon the Imperial ideals for the objects of continental
Pan-Americanism. After all, the citizens of Canada and the United States
are mostly of the same stock, speaking the same language and cherishing
the same great traditions. The two branches of the Anglo-Saxon family
ought to be able, while each maintaining its own life and growth, to
remain happily side by side, sharing in the new prosperity which the
world owes to this latest achievement of the great republic.
FOOTNOTES:
[20] March 19, 1912.