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A third source of complaint of disproportionate rates arises from the competition between ports. Assume, for instance, port A to be 51 miles, port B 72 miles, and port C a greater distance from D, one of the great seats of manufacture and commerce. The merchants and shipowners at C and B desire to compete with A, and they induce the railway company to carry from all three at the same rates. The result is that the rates are lower for the throughout distance than to and from some of the intermediate places. The grounds of grievance would be removed by the railway company ceasing to carry from C and B at the same rates as from A. But the importation of foreign goods would continue; the only difference being that they would be carried through one port instead of two or more. And here a curious fact may be noted. If, in the case supposed, the railways between A and D, B and D, and C and D belonged to separate companies, in all probability no complaint would be made of the rates from A, B, and C to D being the same. On the contrary, competition being always desired by the public, it would be considered in that case advantageous and in the interest of the public. But because the lines between B and D and C and D belong to the same company as that between A and D complaints are made on account of the rates being equal. What is hailed in the one case as a benefit is decried in the other as mischievous and unjust.

Many of the rates from Hull are affected by inland water competition, or by those charged from Liverpool. On the other hand, the rates from Hull govern those from Grimsby , Harwich, West Hartlepool, Newcastle, Sunderland and Shields. In fact, a large portion of the anomalies in railway rates arise from the competition between ports. Although improvements in detail as to such rates, no doubt, are possible, the interests of some ports would be seriously affected by any change in the principle on which railway rates are fixed.

The chief explanation of differential rates have been mentioned; another cause less important is in operation. In carriage by road, cost may be roughly measured by distance, though even as to the expenses of cartage that is subject to exceptions. But this test--admitted to be practically useless as regards freight by sea--does not hold good of railway transport. Of the various kinds of outlay on the part of a railway company, a large portion remains fixed, whether the distance run by a train is ten miles or one hundred. Such, for example, are the cost of terminal accommodation, and the services of loading and unloading, and clerical work. Such, too, speaking broadly, are the interest on cost of construction, repairs of bridges and earthworks, the permanent staff of employ?s, and of signalling. Another kind of expenditure increases directly with the mileage run; for example, the provision of, and wear and tear of locomotives, rolling stock and permanent way, and liability for loss of or damage to goods in transit. Certain kinds of expenditure increase with the distance run, but not in the same ratio. Obviously wages, cost of locomotive power, and cost of haulage generally are not four times as much in the case of a train which has run a hundred miles as in one which has run twenty-five. With the progress of railways, with improved economy in the use of machinery, and in other ways, this tendency--recognised to some extent by the Legislature in the rates for short distance traffic--in expenditure not to increase in the same proportion as mileage distance, becomes an important element. The result of all this is to make mileage less a criterion of cost, and tends to place large towns at a greater distance at an advantage as compared with intermediate towns, and to give rise to differential rates. It is also obvious that from many intermediate towns the quantities forwarded are not so large and regular as from terminal towns, and that from the former there is not a constant traffic to and fro.

The urgent demands of traders and producers have created differential rates; the interests of the public and consumers have maintained them; interests, it may be added, which have been little heard in any of the inquiries which have taken place, but which, if any change were meditated, would probably be found to have more at stake than the railway companies. They would ask,--Why should such special rates be withdrawn? They would be losers by the change. The railway companies also would be losers. So too would the public interested, especially as regards perishable goods, in the more rapid and regular conveyance of merchandise than is possible by water. Who would be the gainer? Not, certainly, the home producer, who would find foreign goods brought direct to London by sea; not the consumer, who wishes cheap goods rapidly conveyed, and to whom it is immaterial how they reach him. The fact is that differential rates have arisen in no small degree out of the same causes as have necessitated a classification of goods. Goods of small intrinsic value will not be conveyed at all unless at low rates; only on special terms can such goods produced at a great distance be brought to market.

Sometimes it is urged as an objection to differential rates, that by reason of them companies sustain, on long distance traffic, a loss which is made up by charges on short distance traffic. Repeated, as if it were an axiom, this statement is generally erroneous; though producing, no doubt, a lower percentage of profits than the latter, the former yields some profit, unless where undue competition operates.

To carry traffic at a rate yielding a small profit, is better for a railway company than to have its permanent way for many hours unused, and its plant not fully employed. It may be expedient to accept traffic producing only a small percentage of profit, if it can be got on no better terms; such traffic will at least help to defray the fixed charges, which must be incurred whether it is carried or not. But is a company bound to do all its business on such terms, or would it be desirable that it should do so? Can the senders of other traffic paying only reasonable rates, yielding the company what would otherwise be admitted to be only a fair profit, justly object? and if a company be deprived of this long distance traffic, will it not be forced to raise rates on other traffic in order to maintain its revenue?

NOTE.--See Extract from Sir T. Farrer's Evidence at page 66.

But, it is also objected, differential rates deprive the inhabitants of certain towns of the natural advantages of their geographical position. This argument would be more persuasive than it is if it were not generally expressed in the very language of Protectionists, if it were not so often a claim of an exclusive right to supply certain markets, and a scarcely concealed dislike to the intrusion of competition. Even supposing that low rates, which enable the produce of remote parts of England and Scotland to be conveyed throughout the length and breadth of the land may interfere with the trade of manufacturers nearer London and other great towns; so may the making of a railway. Places which have one, or districts which are left without any, may be injured by railway communication elsewhere being opened. The existence of any such right as is claimed is questionable. Preserving the natural advantages of one town means preventing the removal of the natural disadvantages of others. In truth, the abolition of differential rates would deprive many places of their natural advantages. That Liverpool is on the sea, and that Birmingham is not, that there is sea communication from the former to London, are circumstances which railways did not create, and to which they must accommodate themselves. Railway Companies are not answerable for the fact that certain kinds of traffic come from a point having the advantage of a sea route; that there is competition at one place and not at another; and that goods may be conveyed from New York to London all the way by sea, or partly by sea and partly by land.

If the rates for all traffic between intermediate places were either made the same as or less than those to terminal points, companies would be compelled to consider whether raising the export and import rates, or reducing those on local traffic, would result in the least loss. If the former course were adopted, as, in the majority of cases it would be, the facilities which manufacturers and merchants now enjoy would be withdrawn; it would be to their interest to ship at the nearest port. The railways would suffer some loss. The inhabitants of intermediate places and the port towns would derive no advantage except the removal of what generally is merely a sentimental grievance. What would a London draper gain if the Manchester and London Shipping rate were withdrawn, and if manufacturers shipped all their goods in Liverpool instead of a portion of them being shipped from London? What would it avail an Essex farmer if Dutch and Belgian produce were sent direct from Rotterdam and Antwerp to London, instead of through Harwich? Would farmers in the South of England be any better off if French eggs and butter were sent by sea to London instead of through Southampton or Newhaven?

GROUPING HERE AND ON THE CONTINENT.

"Grouping," is the name of the familiar arrangement by which collieries or works within a given area are charged equal rates, and are thus enabled to compete on equal terms. In fixing the rates for traffic carried long distances, grouping stations far apart is carried out to some extent. For instance, the rates for tin plates from South Wales and Monmouthshire to Liverpool are the same from the works between Carmarthen on the west, and Monmouth on the east, the distances varying from 160 to 206 miles. So, too, the rates between Scotland and places in England, south of and inclusive of Yorkshire, are divided into groups--22 in the former, and 39 in the latter. Though the practice is not of the first importance to railway companies, it is not without value to them. If "grouping" were prohibited, and the nearest collieries or works could supply all the coal or goods which were required, railway companies might, in some cases, earn as much net profit on the traffic carried as if grouping were adopted. No doubt, however, if the nearest collieries or works charged the public enhanced prices, or if they could not supply the commodities to the extent required by the public, the railway companies would suffer. They would lose not only the traffic which they might have carried, but they would also suffer from the lessened prosperity of districts in which they had an indirect as well as a direct interest.

The chief sufferers, however, from the giving up of "grouping" would be the public; they distinctly gain by the practice, though producers near great towns or sea-ports may lose the benefit of "geographical position." Collieries and works which are "grouped" are enabled to contribute to the available supply. They enter markets from which they would be otherwise shut out; the extent of the trade is thereby increased; the price paid by the consumer may be lessened. In fact, many traders admit, tacitly at least, the value of the practice.

"I think that even if it were distinctly found that the differences in the charges actually made were so disproportioned to the differences in the cost as to be undue and unreasonable, it would not impose an obligation to charge equally."--Lord Blackburn, p. 122.

A few particulars as to grouping on the Continent may be mentioned. It will be found that it has been adopted there for the same reasons as led to it here.

In Germany and Holland grouping is recognised. There, as has been previously mentioned, mileage rates is the principle on which the tariffs are based, and the State practically controls the rates. But some exceptional tariffs for coal and coke are not calculated upon the distance from the place of origin to the station of destination. Sending stations in certain cases, and sea-ports in others, are formed into groups. In Germany, for instance, the sending stations included in the exceptional tariff with Bremen, Hamburg, and other ports in the North of Germany, are divided into seven groups. The first three embrace all the stations in the Right Rhenish district where coal mines exist. Group 1 contains about fifteen stations from 6 to 24 kilometres distant from each other, in a total distance of 245 kilometres to Bremen and 359 kilometres to Hamburg. Group 2 contains about thirty-five stations from 1 to 19 kilometres distant, and Group 3 seven stations at distances varying from 1 to 13 kilometres. The total distances to Bremen and Hamburg are 271 and 385 kilometres respectively. For all stations in the same group there is one tariff, which is for one fixed consignment per week:--

Group 1 ... ... 49 marks per ton. " 2 ... ... 50 " " " 3 ... ... 51 " "

If there are two fixed consignments sent regularly every week for one year, a reduction is made of one mark for every 10 tons, and for

The coal stations of the Rhine Province and Westphalia are also grouped for Dutch, Belgian and French traffic. In the two last cases, however, the differences of distance are very slight. For Dutch traffic the differences of distance between the stations in Group 1 vary from 1 to 16 kilometres in a total distance of 218 kilometres, in Group 2 from 3 to 20 in a total distance of 233 kilometres, and in Group 3 from 1 to 33 in 265 kilometres.

The grouping of the ports in the North of Germany, shows a much greater difference in favour of certain ports. For instance, the same rates are charged from the coal stations to Bremen as to Hamburg, although the former is 114 kilometres further; the distance from Dortmund to Bremen being 237 kilometres , and to Hamburg 351 kilometres The same rates are also charged to the following ports as to Bremen, which is distant from the various coal stations from 221 to 271 kilometres:--

Kilometres. Miles.

Bremerhafen 66 41 beyond Bremen. Geestem?nde 62 38 1/2 " " Harburg 103 64 " " Hittfeld 94 58 " " Nordenhamm 40 25 " "

Thus the "grouping" which is permitted, and indeed actually carried out, by the German authorities, exceeds in degree anything of the kind known on the railways in this country.

In France also, "grouping" of ports is sanctioned with a view to promote competition. The special import and export rates from Dunkirk, Calais, and Boulogne to Paris, which are equal in amount, notwithstanding the differences in distance, may be taken as an example:--

Dunkirk to Paris, 304 Kilometres. Calais " " 296 " Boulogne " " 252 "

DIFFERENTIAL RATES ON THE CONTINENT.

In France, Belgium, and Germany, there are fewer ports competing with railways or with each other than in Great Britain. In each of those countries the principle of mileage rates has been nominally, and, to a large extent, in practice adopted. But in all of them causes similar to those which have here created so-called differential rates have been in operation. In each of them the fact of competition by water is recognised as a reason for charging reduced or special rates; such rates for export or import traffic exist, although the special rates for the latter traffic are fewer than for the former; and there are also special transit rates. All these rates have been established after much consideration. Writing of the discussion of the subject in the Corps Legislatif in 1863, M. Aucoc observes in his well-known work, "Since that solemn discussion, the principle of differential tariffs has been placed beyond question." He adds: "It may be well to mention also that, in the numerous judicial works on the working of railways, not only the legality, but the necessity and equity of conditional and differential rates have been almost unanimously recognised."

The French railway companies have special import and export rates for numerous articles in their classifications which are lower than the ordinary class rates to the port town, and occasionally lower than the class rates from intermediate stations; in which case the special import and export rates may apply. The following table is a comparison of a few import and export rates with the ordinary class rates. The latter, it should be observed, are, in some instances, based on computed, and not on actual, distances.

DUNKIRK AND PARIS.

For traffic between Austrian and Hungarian towns and the Dutch ports in certain articles there are also so-called "Seaport transit rates." For instance, for dried plums, apples and pears from Vienna to Rotterdam, the export rate for lots of 10 tons is m. 41?50 per ton of 1,000 kilogrammes, the local rate being m. 51?60 per ton; for wool from Buda Pesth to Amsterdam the rate per ton of 1,000 kilogrammes in lots of 5 tons, is export m. 67?0, local m. 81?30. These rates are only available for goods destined for export or import; and, as will be seen, they are considerably lower than the rates for the same description of goods for consumers in the port of shipment. There are also exceptional rates for goods traversing Germany to and from the German sea-ports and Austria and Hungary. The following is a comparison between the rates from Bremen to a station on the Danube, and the rates from the latter station to a station situated between that station and the sea-port:--

. For the carriage of large quantities; . For the carriage of one or more truckloads of goods at stated intervals; . For the carriage of goods intended for charitable purposes or for exhibition.

Notice of such exceptions has to be given to the Home Minister. Those reductions must be available for all goods of the same class, to be conveyed on the same line, and under the same conditions; they must be immediately advertised; and they remain in force during the existence of the contract.

The following is an illustration of the special contracts entered into and of the manner in which their existence is notified:--

No use may be made of these rates for the re-despatch of goods at intermediate stations, so as to obtain a cheaper rate than the direct rate.

Agreed to and signed in dupl. at

For large quantities: Per 100 kilos. and 10 km. In consignment of 10 tons in 1 cent. " " 5 to 10 tons 1 1/2 cent. " " 3 to 5 tons 2 " " " 100 kilos. to 3 tons 2 1/3 " with 8 cents per 100 kilos. terminal charges.

For regular consignments in truckloads:

The charges as above for consignments of 10 and 5 tons.

Any fractional distances will be counted as for 10 kilometres, and the weight per 100 kilogrammes, without distinction for different classes of goods. Parts of 10 kilometres and 100 kilogrammes will thus be taken as 10 kilometres or 100 kilogrammes.

Consignments of 5,000 kilogrammes will be treated in the same manner as goods of Class A, and consignments of 10,000 kilogrammes in the same manner as goods belonging to the Classes B, C, D, and the Special Tariff.

A contract has been entered into for the carriage of a large quantity of goods over the Company's lines.

Various contracts have been entered into for the carriage of large quantities of goods on the Southern net of the State Railways.

CENTRAL RAILWAY.

A Contract for the carriage of cattle has been entered into. Further information can be obtained at the Goods Manager's Office, Catharijne Kade 759, Utrecht.

The result is that a considerable portion of the traffic is carried under special agreements, under conditions such as the following, viz.:--

The sender agrees to forward between A and B special quantities, for instance:--

or to forward the whole of his traffic between C and D estimated at a specific quantity for a certain period, for instance:--

In Italy, differential rates have been the subject of public inquiry, and the representatives of some local interests have asked for their abolition. But they exist; and the verdict upon them of the Parliamentary Committee of Inquiry in 1881 was: "It is indisputable that the system of differential rates has helped to strengthen and improve the national industries."

The fact of railways in other countries charging special rates for import, export and transit traffic, is, of course, not a proof of their being right in principle. But the foregoing information may correct loose assertions or suggestions that differential rates are unknown or rare elsewhere. It shows that the railway authorities and the Governments who control the rates in those countries, even while professing to charge mileage rates, have considered it necessary, with the view of promoting and protecting the interests of their trade, to charge differential rates.

In the United States, where there is much competition for the conveyance of long distance interstate traffic, and where remarkably low rates--"war rates," as they are called--are charged, charges for intermediate traffic are not lowered proportionately. In that country differential rates have been much attacked; they have no doubt occasionally been imposed without measure or reason. But they still subsist, and are found useful. As an illustration it may be stated that, at the present time, the rates for the conveyance of flour from Minneapolis to Milwaukee, 335 miles, and to Chicago, 420 miles, are the same; while the rate to Duluth, 164 miles, is only 25 per cent. less.

It may be mentioned that one of the fiercest enemies of differential rates, in a work recently published, declares that the only remedy is to "restore the character of public highways to the railways by securing to all persons the right to run trains over their tracks under proper regulation!" "The Railways and the Republic" , p. 372, by James T. Hudson.

THE INTEREST OF CONSUMERS IN RATES.

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