CHAPTER VII

THE CANAL AND THE FOREIGN TRADE OF THE UNITED STATES

The United States Government undertook the construction of the Panama Canal because the work proved to be too great a task for the Panama Canal Company, the corporation that began the enterprise. It is obvious that the people of the United States, in doing this, must have been influenced by the desire to accomplish three results: The connection of the two seaboards of the United States by a more direct and more economical route for the intercoastal trade of the country, the reduction in the cost of reaching foreign markets with goods of American production, and the removal of the barrier which prevented the Atlantic and Pacific squadrons of the American navy from coöperating effectively in defending the country.

The purposes of the United States, however, were by no means entirely selfish. The Panama Canal, like the Suez waterway, was constructed not for the sole use and benefit of one country, but that it might be of service to all nations. The

ships of all flags and countries, in accordance with the policy to which the United States has consistently adhered for more than a half century, are to use the Panama highway under like terms, each nation being free to take full advantage of the new "gateway to the Pacific" in carrying on its commerce not only with the United States but with other countries. In constructing the canal and opening it to the commerce of all nations "on terms of entire equality," the United States voluntarily undertook to act as trustee of all nations in order that the world might thereby secure a benefit that could not otherwise have been obtained. To be of service to mankind is a nation's highest reward.

The truth of this assertion of altruism on the part of the United States in the construction of the Panama Canal is not invalidated by a frank admission that the people of the United States expect to derive large benefit from the canal— a larger benefit, indeed, than is to be secured by any other country. Because of its location, its resources, its assured economic development, and, most of all, because of its use of the Panama route in carrying on its intercoastal trade, the United States will secure greater assistance from the canal than any other single country can hope to obtain; although Canada and Europe, as will be pointed out in a later chapter, will profit

largely from the economies resulting from the use of the canal.

Commerce with foreign nations is subject to the control of forces different from those that have to be reckoned with in carrying on trade within the country; and, in this discussion of the relation of the Panama Canal to the development of the foreign commerce of the United States, it will be a help to clear thinking, and possibly to the avoidance of overstatement, to keep in mind certain controlling principles concerning industry and trade.

First among the facts to be kept in mind is, that international trade, as regards most commodities, is subject to worldwide competition. Except for the limited number of commodities, of which the particular country in question may possess a monopoly, success in securing foreign trade depends upon certain well known factors, chief among which are efficiency in production, economical means of transportation by land and by sea, skillful methods of merchandising, foreign investments and adequate international banking facilities. These essential factors of success in foreign trade have often been overlooked or neglected in discussions of the service which the Panama Canal will be to the foreign commerce of the United States.

Trade begins with production. A large activ

ity in foreign commerce is impossible without diversification and efficiency in industry; moreover, this efficiency must obtain not only in the enterprises and establishments of individual producers, it must characterize the organization and conduct of the industries of the country as a whole. To meet international competition successfully, there must be brought about, for the country as a whole, such territorial division of labor and industry as will enable each section to engage in those activities for which it is best equipped as regards climate, resources, and labor supply. It is only when the productive energies of the entire country are so organized that all the various resources are intelligently utilized, and only when labor and capital are applied where they will produce the best results, that the national output can be of maximum volume and can be secured at minimum cost of production.

A second factor of controlling influence is transportation. The effective organization of production and the economical shipment of goods to the seaboard and to markets beyond the sea require the services of systematically developed, adequate, and economical means of transportation by land and by sea. The country as a whole needs to be supplied with railroads and with such inland waterways as can, at reasonable expense, be so improved as to increase the facilities and

reduce the cost of transportation. There is need, moreover, for a merchant marine under the national flag of tonnage and efficiency commensurate with the volume of the country's maritime commerce. To depend mainly upon foreign shipping for the transportation of exports and imports is to limit a country's foreign commerce at all times and to subject that commerce to temporary destruction during a period of war with or among strong commercial nations.

It should be the policy of the Government to bring about the coördinated development of railroads and waterways; and, while protecting the public against abuses, to assist the carriers in providing the country as a whole with a system of transportation that will permit the general development of all natural resources, and assist in the production of all commodities that can be profitably produced or, manufactured for consumption at home or for exchange in other countries. It should also be the policy of the Government to establish conditions favorable to the construction and profitable operation of an adequate deep-sea fleet.

It is but recently that the people of the United States have come fully to appreciate the fact that success in foreign trade can only follow the attainment of economy and efficiency in production. Indeed, it was hardly to be expected that special