Economic aspects of the Great Lakes-St. Lawrence ship channel

Foreword

In this analysis of the economic aspects of the Great Lakes-St. Lawrence Ship Channel, the authors have endeavored to present conservatively the more important local and national advantages to be gained from opening the Great Lakes to ocean traffic.

Prior to making this investigation, they, like many others, had formed an immature judgment that ocean vessels on this route could not compete with existing routes serving the Northwest. A study of the factors affecting the costs and advantages of the various available routes and methods of transportation has served to dispel the impressions derived largely from reports submitted many years ago when the conditions and costs of transportation, as well as the needs of the vast territory served by the Great Lakes, were very different from what they are at the present time.

The authors desire to give credit for valuable information regarding various phases of the proposition, contained in public utterances and in special papers by Herbert Hoover, Julius H. Barnes, William C. Redfield, George F. Roberts, Senator Irvine L. Lenroot, Senator Chas. E. Townsend, Congressman A. P. Nelson, and many others whose names appear in this report and in the record of hearings before the International Joint Commission.

January 3, 1921.

TABLE k.- -wr~

Chapter.

I. Scope of the investigation

II. Relation of transportation to the economic life of the nation. . 12^

III. The transportation shortage 16^

IV. The remedy for the defects in our transportation system 31 ^

V. The handicap of inadequate terminal facilities 35 "^

Vk .Character of water transportation needed for the commerce

: of the Northwest 54

> VII. I Cost of transportation between upper lake ports and Liverpool. 65 VIII. The areas commercially tributary to the Great Lakes-St,

Lawrence waterway 81

IX. Production of the tributary area 113

X. Brief history of improvements for navigation on the Great Lakes 1 50

XL Benefits from navigation improvements on the Great Lakes. . . 157,— . • XII. Comparison of navigation facilities on the Great Lakes with

those of ocean ports 162

XIII. Character of navigation to be provided on the St. Lawrence River 166

XIV. Comparison of the St. Lawrence with other ocean routes 173

XV. Navigation conditions on the St. Lawrence route 177

XVI. Depths required for the accommodation of vessels engaged in

maritime trade 195

XVII. Types and sizes of vessels which carry the world's commerce . . . 205 XVIII. Study of vessels passing through the Panama Canal between

«' XIX. Will ocean vessels seek inland ports? 234

-* XX. The problem of return loads 237

. XXI. The commerce of the Great Lakes 242

XXII. Volume of commerce affected by the Great Lakes-St. Law-

rence waterway 248

XXIII. The grain movement 253

XXIV. Other commodity movements 268

~XXV. Shipbuilding on the Great Lakes 282

JXXVI. Water Power 284

XXVII. Conclusions 287

Chapter I SCOPE OF THE INVESTIGATION

Study of the engineering features of the proposed improvement is in progress by engineers representing the United States and Canada. Much information relative to the physical conditions is already available as a result of previous surveys, but a new investigation of the commercial and economic features is necessary in view of the magnitude of the agricultural, mineral and industrial development in the areas to be served by the waterway and the marked changes in transportation costs and conditions during recent years.

The law and the official reference. — The river and harbor act approved March 2, 1919, contains the following item :

Sec. 9. That tire International Joint Commission created by the treaty between the United States and Great Britain relating to boundary waters between the United States and Canada, signed at Washington January 11, 1909, under the provisions of article 9 of said treaty, is requested to investigate what further improvement of the Saint Lawrence River between Montreal and Lake Ontario is necessary to make the same navigable for ocean-going vessels, together with the estimated cost thereof, and report to the Government of the Dominion of Canada and to the Congress of the United States, with its recommendations for cooperation by the United States with the Dominion of Canada in the improvement of said river.

To formulate definite conclusions upon the questions specified in the law necessarily involves extensive study and investigation of the physical, commercial, transportation, industrial, and other economic conditions affecting or affected by the proposed improvement. In the letter of reference from the Secretary of State, the matters requiring investigation are definitely stated, as follows :

Department of State, Washington, D. C, January 21, 1920.

International Joint Commission, Washington, D. C.

Gentlemen.— I have the honor to inform you that the Governments of the United States of America and of the Dominion of Canada, under the provision of article 9 of the treaty of the 11th of January, 1909, between the Governments of the United States and Great Britain, herewith refer certain questions, as set forth below, "involving the beneficial use of the waters of the St. Lawrence River, between Montreal and Lake Ontario, in the interests of both countries, and in general the rights, obligations, or interests of either in relation to the other, or to the inhabitants of the other along their common frontier."

It is desired that the said questions be made the basis of an investigation to be carried out by the International Joint Commission, to the end that the said commission may submit a report to the two countries covering the subject matter of this reference, together with such conclusions and recommendations as may be considered pertinent in the premises.

Question /.—What further improvement in the St. Lawrence River, between Montreal and Lake Ontario, is necessary to make the same navigable for deep draft vessels of either the lake or ocean going type?. What draft of water is recommended and what is the estimated cost?

In answering this question the commission is requested to consider:

(a) Navigation interests alone, whether by the construction of locks and dams in the river; by side canals with the necessary locks; or by a combination of the two.

(b) The combination of navigation and power interests to obtain the greatest beneficial use of the waters of the river.

Question //.—Which of the schemes submitted by the Government or other engineers is preferred, and why?

Question III. — Under what general method of procedure and in what general order shall the various physical and administrative features of the improvement be carried out?

Question IV. — Upon what basis shall the capital cost of the completed improvement be apportioned to each country?

Question V. — Upon what basis shall the costs of operation and maintenance be apportioned to each country ?

Question VI. — What method of control is recommended for the operation of the improved waterway to secure its most beneficial use?

Question VII. — Will regulating Lake Ontario increase the low-water flow in the St. Lawrence ship channel below Montreal? And if so, to what extent and at what additional cost?

Question VIII. — To what extent will the improvement develop the resources, commerce, and industry of each country?

Question IX. — What traffic, both incoming and outgoing, in kind and quantity, is likely to be carried upon the proposed route both at its inception and in the future, consideration to be given not only to present conditions but to probable changes therein resulting from the development of industrial activities due to availability of large quantities of hydraulic power?

Pending the receipt of plans, estimates, and other engineering data necessary for the final consideration of this reference, the commission is requested to hold such public hearings as may be considered necessary or advisable in order to obtain all information bearing directly or indirectly on the physical, commercial, and economic feasibility of the project as a whole.

To facilitate the preparation of the desired report each Government will, from its official engineering personnel, appoint an engineer with full authority to confer with a similar officer of the other Government for the purpose : First, of acquiring, each in his own country, such data as may be found necessary to supplement the existing engineering data and surveys ; and, second, of preparing complete outline plans for and estimates of the cost of the proposed improvement, including the value of all property, easements, damages, and rights connected therewith. These plans and estimates are to be submitted to the commission as soon as practicable, but not later than one year from the date of appointment, and the commission is requested to forward to the two Governments its final report, with recommendation not later than three months thereafter. A copy of the instructions furnished these engineers is attached hereto. I am, gentlemen,

Your obedient servant,

Robert Lansing.

Instructions to the engineers. — The instructions to the engineers were as follows :

You are hereby designated to take charge of the survey of the St. Lawrence River, Montreal to Lake Ontario, for the purpose of preparing plans and estimates for its further improvement to make the same navigable for deep-draft vessels of either the lake or ocean-going type, and to obtain the greatest beneficial use from these waters.

The surveys, plans, and estimates are to be submitted to the International Joint Commission within twelve months, and are to assist the commission in answering the questions of a reference to the matter under the provisions of article 9 of the treaty of the 11th of January, 1909, between the United States and Great Britain. (A copy of the letter of reference is inclosed for your information.)

It is desired to expedite the completion of the duty confided to you by utilizing all available surveys and other reliable information, whether derived from public or from private sources. That a proper basis of procedure may be agreed upon in the first instance and the field work and the preparation of plans and estimates promptly and efficiently carried on thereafter, you are requested to confer fully and freely with (name of individual to be inserted), who has been designated to take charge of corresponding duties on behalf of the (name of country to be inserted), to arrange for the division of the field work, and for cooperation in the preparation of the desired plans and estimates. While it is clear that the field work necessary to complete existing information may properly and advantageously be divided, cooperation and unity in the preparation of plans and estimates seem preferable.

It will be noted that the reference to the joint commission contemplates four different general schemes or methods of improvements, as follows :

(a) By means of locks and navigation dams in the river.

(b) By means of locks and side canals.

(c) By a combination of the two preceding methods.

(d) By means of locks and power dame.

The plans and estimates should definitely cover these four general schemes or methods of improvement, but other variations of them may be considered, and, if deemed desirable, also presented to the commission.

The channels to be considered are to be of 25 and 30 feet depth at low water, and the plans and estimates should be prepared correspondingly. A choice between them will, under the terms of the reference, be made by the commission.

As detailed plans can not be prepared within the time limit of one year fixed for this work, it is desired that merely outline plans and lumpsum estimates, based upon experience from similar work, such as the enlargement of the Welland Canal and the power development at Niagara Falls, should be submitted.

The general schemes should be furnished to the commission showing: First, the best for navigation alone; and, second, for the most efficient utilization of the waters of the St. Lawrence for navigation and power, together with the approximate costs thereof.

As the handling and disposal of ice is a fundamental difficulty on the St. Lawrence River, the arrangements regarded as being necessary for this purpose should be discussed as well as those recommended for ice disposal during the construction period and thereafter.

Regulation of the levels of Lake Ontario so as to equalize the discharge of the St. Lawrence may be desirable in the interest of navigation, of ice disposal, and of power development. If the plans include any provisions for such regulation, an explanation should be furnished to make clear just what is proposed.

Finally, you are requested to keep the International Joint Commission fully advised of your progress and to maintain close and sympathetic touch with it so as to insure complete coordination.

The engineers appointed to conduct the surveys are Col. W. P. Wooten, Corps of Engineers, for the United States, and Mr. W. A. Bowden, for the Dominion of Canada. Upon the submission of the report of these officers the Commission will be in possession of complete and reliable data regarding the physical features of the improvement, concerning which much information is already available as a result of previous surveys, both by the United States and by the Dominion of Canada.

New investigation of commerce and transportation essential. — The questions relating to commerce and transportation, however, require a new and independent study, in the light of the conditions now existing affecting the foreign and domestic commerce of the country. So rapid has been the industrial and commercial expansion of the United States, and so pronounced have been the changes in transportation and terminal conditions and costs during recent years, that the studies made and conclusions reached twenty years or more ago, respecting the merits of a deep waterway connecting the Great Lakes with the seaboard, are inapplicable to the problems now confronting our great Northwest. In view of the above, extended discussion of the engineering features of the improvement will be omitted from this report, and only such brief reference included as appears necessary to a clear understanding of the facilities available and required for the use of commerce and navigation.

The problem which the International Joint Commission is now asked to solve is one of the most important projects of waterway improvement ever proposed in the interests of the public. At the many hearings held by the Commission throughout the country, a vast amount of information has been submitted, setting forth the advantages to be derived from a deep waterway connecting the Great Lakes with the Atlantic seaboard. As affecting the advisability of undertaking the improvement, the information for each locality must be coordinated into the general study, and the missing elements must be supplied from reliable sources, in order that the final results may give a clear picture of the problem, portraying the advantages in their true proportions. An attempt has been made in this report to coordinate the information presented at the hearings, and to present as fully as space will permit the vital facts affecting the advisability of the United States undertaking the proposed improvement in cooperation with the Dominion of Canada.

Chapter II RELATION OF TRANSPORTATION TO THE ECONOMIC LIFE OF THE NATION

The future of America will be determined by the efforts made to extend her commercial relations with other countries. Economical transportation between areas of production and foreign markets is one of the requisites of successful foreign trade, and improvements increasing the economy of overseas business are national in character and contribute directly to the welfare of every citizen of the land. The surplus producing areas of the United States are in the heart of the continent at distances of 800 to 1,500 miles from the seaboard. The cost of transportation by rail has now reached the point where a thousand-mile haul across the country, with attendant expense of transfers, completely wipes out the margin of profit on many commodities entering largely into our foreign commercial relations, and serves to limit the markets for many others. The provision of economical transportation for our surplus production is a national duty.

In order to clearly appreciate the importance of efficient and economical transportation in shaping the destiny of the nation, we must first realize that the progress of industry and commerce has now reached the era in its development when nations can no longer live alone. The developments in the physical means of transportation during the last century have so extended the limits of commercial intercourse that the interchange of products around the world is now as freely accomplished as was the local trade of a limited territory when this country was founded. The wonderful recent development of manufacturing throughout the world rests upon transportation. Our factories no longer fabricate only the raw materials produced at their doors, but they locate where some one great essential is available, drawing the remaining essentials from all quarters of the globe and distributing the finished products to every land. Raw products are frequently imported many thousand miles from distant lands, and the finished manufactures returned for consumption to the very countries where the raw material originated. Crude rubber from Brazil and long staple cotton from Egypt find their way to our factories, where they are manufactured into tires, and thence during 1919 were exported to 88 different countries or provinces throughout the world. The same situation applies to many other manufactured articles.

While adequate transportation of our domestic commerce is of vital importance to the people, it is of the utmost importance that efficient and economical transportation be available from source to destination for products entering into our foreign trade. No nation ever became great that did not seek foreign intercourse. The Phoenicians became great through seeking trade in the Mediterranean Sea ; the Portuguese by exploring the coast of Africa; Venice by opening up trade routes to the East; Spain by her discoveries made in the quest of commerce ; and Great Britain by her indefatigable zeal in extending her trade to the four corners of the world. The future of America will be determined by the efforts made to extend her commercial relations with other countries. Economical transportation between the areas of production and manufacture and the foreign markets is one of the requisites of successful foreign trade, and the greater the efficiency attained the greater will be our ability to meet competition in the markets of the world. Any improvement that will contribute to the economy of overseas business is national in character. The benefits in such cases are never confined to geographical limits of the improvement. Both directly and indirectly they contribute to the welfare of every citizen of the land.

During the last few years the world has been begging for our products and was willing to pay any price to obtain them. During this period the economic laws governing trade between nations were cast aside. No price was too great to pay for the supplies urgently demanded for the successful prosecution of war, nor for the food required to meet the necessities of lands where production had been brought to a standstill. During this period our manufacturers were enabled to extend their trade into many new fields, and a large business was developed in South America and elsewhere for manufactured articles which were formerly obtained almost exclusively from Great Britain and Germany. In return, we purchased large quantities of raw materials from these lands, and through this helpful intercourse have developed a trade of vast proportions which we must exercise every rightful means to retain. It is needless to say that we shall meet keen competition in this endeavor. Having in mind the fact that our labor, while the most efficient in the world, is more costly than the labor of many of our competitors, and accepting as fundamental to our institutions the just and generous treatment of those who contribute their daily efforts to our industry, it behooves us to seek such other means as are attainable to place our goods in foreign markets as cheaply as our competitors. We have it within our power by suitable tariff legislation to prevent the dumping of foreign manufactures upon our shores at prices with which our factories can not compete, but care must be taken lest we impose additional costs upon materials required for use in American industries. The real problem confronting us is the maintenance and extension of our export business. Many things can be done to help accomplish this purpose, but the most important in its bearing upon our ability to meet competition is economical transportation.

The sixteen States which are united in the movement for a deep waterway connecting the Great Lakes with the ocean produce 75 per cent of the wheat, 65 per cent of the corn, 100 per cent of the flax, 85 per cent of the iron, 39 per cent of the copper, 74 per cent of the zinc, and 46 per cent of the lead produced in the entire country. The shores of these lakes are lined with industries producing in great volume a multitude of manufactured articles entering prominently into our foreign trade. This great and productive territory is situated in the heart of the continent at distances of 800 to 1,500 miles from the seaboard, and in order that its commerce can be placed upon the vessel by which it is taken to foreign ports, it must first proceed to tidewater by routes which have grown to be excessively costly and unreliable. Herein lies a handicap to successful foreign business that is shared by few, if any other, nations of the globe, and it can not be too strongly impressed upon those responsible for our national policies that this condition must be alleviated or the foreign trade of the United States will be permanently impaired. The cost of transportation by rail has now reached the point where a thousand-mile haul across the country, with the attendant expense of transfers and delays at the terminals, completely wipes out the margin of profit on many commodities entering largely into our foreign commercial relations, and it serves to' limit the markets for many others. Consider England, with her short hauls to seaboard from important manufacturing districts, and consider Argentina and Australia with their short distances to ship side from surplus grain producing areas.

Our competitors in foreign trade are already alive to the necessity of reducing costs in order to supplant us in the markets which we have so recently gained. It will be only a short time when this competition will once again be upon the same basis of keen rivalry that existed prior to the war. Our duty is to meet this competition by every means which American skill can devise. Superior quality of goods, improved machinery, quantity production, cheap power and economical transportation are some of the means which must be employed. Of these means the latter two will be greatly advanced by the opening of the Great Lakes to ocean vessels and by the incidental development of the vast waterpower of the St. Lawrence. Thus will be provided a transportation route suitable in character and capacity for the economical shipment of the raw' and manufactured products of the great Northwest, and fof the importation of the products of other lands direct to this important consuming area. On the banks of this waterway new industries will be established where all the raw materials of manufacture can be assembled at lowest cost, and where a neverfailing source of power will turn the wheels. Since the dawn of our country's history, no greater opportunity has been presented for the establishment of industry under such favorable conditions with respect to economical production and distribution. In the following quotation from a recent speech, Presidentelect Harding set forth succinctly and truly the importance of commercial progress to the life of the nation :

Here is a vast continent, so favored by God and so blessed by His infinite bounty that the discoverer, a Spaniard, stood only at the gateway and marveled, without ever dreaming of the reality. Ours are millions of broad acres, eager to respond to man's cultivating touch; we have an empire in millions more which are awaiting reclamation ; we have not half revealed the mines nor measured our waterpower. We are unmatched in genius and unexcelled in industry. We are progressive in education, we are free in religion and mean to stay free, and mean ever to be free in press and speech. We have more than the beginning of an adequate transport system. We are awakened to the possibilities of inland waterways and tardily alert to the imperative need of a merchant marine to widen commerce, world influence, and national safety. . . .

We have ships now; we have the commercial foundations; our future lies in policies and practices. We must buy as well as sell, to be sure, but we need the expanding trade policy, its efficient agents in salesmen and credits, and the simple, practical understanding that commerce is the life-blood of material existence, that the barterers of commerce are the ambassadors of developing civilization, that the paths of trade are the avenues of exchanging ideas in art and education, and no nation in the world ever has been or ever will be eminent in influence until it establishes its eminence in commerce.

Chapter III THE TRANSPORTATION SHORTAGE

The railroad facilities are inadequate to meet the transportation requirements of the country during periods of business activity. There is a shortage of about 700,000 freight cars, and the rail mileage in the eastern district where the congestion has been the greatest shows a continual decrease since 1915. There has been an almost complete cessation of the construction of classification * yards, freight houses and stations, and all terminal facilities other than those required to repair and maintain the motive power and equipment. The inability of the railroads to handle the traffic expeditiously has resulted in enormous losses and has discouraged production.

Inadequacy of railroads to meet the requirements of commerce.

— It has been estimated that the lack of adequate transportation facilities in the United States results in a daily loss of $100,- 000,000. While this figure seems large, careful reflection of the far-reaching effects of inadequate transportation upon the prices of commodities will show that it is within reason. Inadequate transportation has resulted not only in a direct loss to the producer and manufacturer on practically all business, but it has likewise resulted in an increase of cost to the consumer on all purchases, and this affects every article required for the daily sustenance of our population. Every embargo by the Government on the shipment of given commodities in given localities has resulted in an increase in price of that commodity, and has enabled those in control of the supply to exact usurious charges from the public. The failure of the car supply has resulted in the creation of a hazard on all business. This hazard is assumed by the wholesaler or middleman and is added to the price of the goods. The inability to provide an even flow of commodities at all times results in the creation of monopolistic conditions in local trade which have to be paid for by the consumer. The increase in the cost of living in this country was due as much to the failure of transportation as to increase in cost of production. A glance at the statistics .will show that the railroad facilities of the United States are hopelessly deficient, and that the cost of supplying equipment to care for the peak loads during crop moving periods will be greater than can be met from any sources now available.

In 1916 a committee of experts, after an elaborate investigation, reported that, if traffic should continue to increase during the succeeding ten years at the same rate as it had during the preceding twenty, the railroads would be obliged to spend $1,500,- 000,000 a year, or $15,000,000,000 in all, to enable them to keep up with it. (Testimony of Alfred P. Thorn, General Counsel Association of American Railway Executives, before the Newlands Committee.) At the instance of a group of New York bankers, another investigation was recently made by a committee of eminent engineers, who reported that at present prices it would take at least $18,000,000,000 to put the railroads into condition to handle the traffic of the country with reasonable promptness and efficiency. In October, 1914, the late James J. Hill made the following statement : "To imagine the amount needed can be secured when there is such a poverty of capital as there will be for ten, twenty, possibly more years to come, is absurd.''

The normal growth of traffic in the United States is susceptible of reasonably accurate determination, and a comparison of the number of freight cars constructed each year with the normal yearly increase of traffic will show the increase or decrease in carrying capacity. The failure of the railroad facilities to meet the expanding requirements of traffic is clearly shown by the deficiency in the construction of new cars, as well as by the almost complete cessation of construction of new lines and extensions of old lines. Since 1916 there has been an unprecedented volume of traffic accompanied by acute car shortages, but the roads have purchased but little new equipment and the situation is daily becoming more serious. The railroads are unable to handle the normal traffic, and no adequate preparation is being made to meet the greater demands which the normal growth of traffic will entail. The records show that the ton miles of freight carried increased from 186,463,109,510 in 1905 to 301,398,752,108 in 1913, which was the year of heaviest freight traffic in the tenyear period between 1905 and 1915. During this period of ten years the number of freight cars increased from 1,731,409 to 2,356,338, an increase of 36 per cent, indicating that the increase in the number of freight cars was only 59 per cent of the increase in traffic. Between 1915 and 1918 the freight traffic increased 45 per cent, while the number of freight cars in service increased only 1.6 per cent.

The comparisons indicated' by the above figures, however, are somewhat modified by the increase in freight-car capacity. The normal traffic for each year from 1904 to 1926, and the actual traffic between 1904 and 1918 are shown by the following table :