Mr. SCHWAB. The option of each partner was that he could accept his pay all in bonds or half bonds and half stock.

Mr. COCKRAN. You mean to say that each partner had the choice of that?

Mr. SCHWAB. Yes, sir.

Mr. COCKRAN. And do you mean to say that some took common stock

Mr. SCHWAB. No; I will not say each partner-the minority partners, up to a given amount.

Mr. COCKRAN. Would you have this committee understand that partners who were given choice between taking bonds and common stock took common stock?

Mr. SCHWAB. No; I misstated that.

Mr. COCKRAN. Yes.

Mr. SCHWAB. Let me put this clearly. Mr. Carnegie would accept nothing but bonds

Mr. COCKRAN. How much bonds did he get?

Mr. SCHWAB. You will have to ask him that; I don't know. Mr. COCKRAN. What did you take for your stock? Mr. SCHWAB. I took a certain number of bonds. my bonds, and my recollection is-I am not sure bonds and part stock for my stock.

Mr. COCKRAN. Which stock?

Mr. SCHWAB. Some preferred and some common.
Mr. COCKRAN. I want to get the proportion.

Mr. SCHWAB. I don't remember it.

Mr. COCKRAN. You can not state that?

Mr. SCHWAB. I can not state it.

Mr. COCKRAN. You could, I suppose

I took bonds for that I took part

Mr. SCHWAB. If I looked it up I have no doubt I could.
Mr. DALZELL. Is that very important?

Mr. COCKRAN. I will state what the purport of it is. I think it is very important in this inquiry. I want to show, if I may, I want to ask this witness whether the mere fact of this consolidation and the right practically to be able to charge $28 a ton was valued in the incorporation at $550,000,000.

Mr. SCHWAB. It was not valued at anything.

Mr. DALZELL. That is a conclusion, and he has given you the fact. Mr. SCHWAB. I have given you all I know.

The CHAIRMAN. We will have to take a recess now, and we will ask you to come back here at 2 o'clock.

Mr. SCHWAB. Could you not excuse me?

The CHAIRMAN. We will adjourn until 2 o'clock.

AFTER RECESS.

The CHAIRMAN. Mr. Schwab, I want to ask you if you can tell us the price of the production of steel abroad?

Mr. SCHWAB. Merely in a general way, Mr. Chairman; only in a general way.

The CHAIRMAN. You seemed to have a pretty clear idea about it in 1890.

Mr. SCHWAB. I try to have to-day, also.

The CHAIRMAN. What information or knowledge have you now on the subject?

Mr. SCHWAB. I could not give you the same detail that I did of iron manufacture. I can give you a good general estimate of the cost abroad. For example, I know that pig iron can be produced in different parts of Germany at from $9.50 to $12 a ton to-day, depending upon the location and character of the pig.

The CHAIRMAN. Against $14 here?

Mr. SCHWAB. About $14 to $14.50 here. I think the freight is about $2.50 on an average.

Mr. DALZELL. You mean from Germany?

Mr. SCHWAB. Yes; that is, the German pig iron.

Mr. DALZELL. You mean the freight from Germany is $2.50?

Mr. SCHWAB. Yes, sir; not much more than that.

The CHAIRMAN. The cost of converting into steel?

Mr. SCHWAB. The cost of converting that into rails in Germany is about the same as it is here.

The CHAIRMAN. So the difference in cost is the difference in the cost of the pig iron?

Mr. SCHWAB. The difference in cost is to-day about the difference in the cost of the pig iron.

The CHAIRMAN. That is in Germany. How about England?

Mr. SCHWAB, England is probably just a little cheaper, although it is not widely different. If they get their ore from Spain, they make it probably about the same as Germany. If they have local ores, perhaps they make it a little cheaper.

The CHAIRMAN. What is the main reason for the additional cost of the pig iron here?

Mr. SCHWAB. Raw materials and freights being higher.

The CHAIRMAN. Their iron is nearer their coal mines?

Mr. SCHWAB. Yes. They assemble it cheaper than we do. They assemble their materials cheaper than we do.

The CHAIRMAN. I do not suppose they do it any cheaper than we can at Birmingham?

Mr. SCHWAB. No; we do it cheaper at Birmingham than they do in England.

The CHAIRMAN. You think the cost of pig iron in Birmingham would be less than the cost in England?

Mr. SCHWAB. I know it would be.

The CHAIRMAN. The cost of converting the steel is about the same? Mr. SCHWAB. In Birmingham it is about the same.

The CHAIRMAN. Can you give us any information on other branches of the steel industry?

Mr. SCHWAB. What one, for example?

The CHAIRMAN. Well, any.

Mr. SCHWAB. Yes; I shall be glad to answer you. I am here for that purpose. I shall be very glad to give you any information you desire.

The CHAIRMAN. What do you say about billets?

Mr. SCHWAB. Billets and rails are nearly in the same class. It costs about $1 a ton more to make rails than to make billets; otherwise there is no difference.

The CHAIRMAN. How about structural steel?

Mr. SCHWAB. Structural steel costs about $3 a ton more to make$3 to $4 more than rails. Steel plates likewise are in about the same class.

The CHAIRMAN. Tin plates, for instance?

Mr. SCHWAB. I could not give any information about them.

The CHAIRMAN. We have pretty full information about those. What else do you manufacture?

Mr. SCHWAB. In steel lines?

The CHAIRMAN. Yes.

Mr. SCHWAB. You have covered the field pretty well, unless you go into specialties. I mean by specialties tools, forgings, axles, wheels, and minor branches of the steel industry. Other than that you have covered the field pretty well. I can not give much information about wire. I have been out of touch with that for some years.

The CHAIRMAN. Do you make wire rods?

Mr. SCHWAB. I do not.

The CHAIRMAN. Any other information you can give us with reference to the steel industry we shall be glad to have.

Mr. SCHWAB. If there is anything specific you want to know-any specific question you will ask me, I will do the best I can to answer

you.

Mr. HILL. I would like to ask a few questions. You were president of the United States Steel Company from 1901 to 1905?

Mr. SCHWAB. Yes, sir.

Mr. HILL. I want to ask you this question: With other things remaining equal, would the removal, in part or in whole, of the duty on steel rails affect the price?

Mr. SCHWAB. I want to answer that question, because it is a very important one-a question to which I have given a great deal of thought and is the gist of this whole thing. This is my opinion only. With every condition equal, a steel rail can be made as cheaply in the United States as in any part of the world. The cost of making a steel rail depends entirely on two things, and only two things. The first is raw material and the second is labor, and nothing else enters into it. Give us the same conditions with reference to raw material and labor as in other parts of the world, and rails will cost us the same, and we will not need any tariff; but if you want to keep the transportation cost up, if you want to keep supplies up, the refractories and the numerous things that go into steel, the main cost of which is labor; and you want to conserve your raw materials, which has been a much agitated subject recently, you will have to protect us with a tariff or put us in the same situation they are abroad.

Mr. HILL. I want to ask you, simply as a business proposition-I asked you that question simply as a leader to another question-is the price of steel rails fixed for the world in the United States? Mr. SCHWAB. Not that I know of.

Mr. HILL. Is it not fixed by the International Rail Syndicate in London?

Mr. SCHWAB. If it is, I know nothing of it, and I know I manufacture rails and I am not a part of it. I mean I have never heard of it.

Mr. HILL. I know that, but I want to read a statement from our consular report, and I would like your opinion or your knowledge

in regard to it. It is an official report of the United States consul, who is quoting from a book by Mr. J. Stephen James on the steel industry, and he says finally:

The United States Steel Corporation, the German Steel Syndicate, and the International Rail Syndicate, which last has its headquarters in London, controls the output of some 4,000,000 tons of rails annually in the United States, Germany, and the United Kingdom.

Have you any knowledge concerning that?

Mr. SCHWAB. I have heard of the two syndicates, the German Steel Syndicate and the International Rail Syndicate. They are well known all over Europe. As to the alliance between those two syndicates and the Steel Corporation I know nothing, nor have I heard of anything.

Mr. HILL. In 1905, when you were president of the United States Steel Company, there were shipments of steel rails made from Baltimore as low as $18.60 a ton.

Mr. SCHWAB. Quite right.

Mr. HILL. Was there any profit to the company on that shipment? Mr. SCHWAB. I can not say, except that I know this, that in 1901, when I was president of the Steel Corporation, the conditions, as they existed in 1901, as I think I said before the Industrial Commission, the removal of the entire tariff would not hurt us. I want to point out distinctly and clearly as I did in the explanation of my cost this morning, that the conditions between that time and the present time have very materially changed. If we want to go back to those conditions and put our raw materials in at those low figures and reduce our labor and other expenses as we did at that time, personally I would not care whether there was a tariff or not.

Mr. HILL. Since 1901 the uniform price of steel rails in the United States has, without any variableness or shadow of turning, been $28? Mr. SCHWAB. Quite right. It was fixed, I think, along about-I can not be sure about this-1895 or 1896 originally, but about that time the price of $28 per ton for steel rails was fixed by agreement of all the rail manufacturers in this country, or most of them. It went along until this great break came in 1897 or 1898-I am not sure of that year and that continued for a couple of years. The price of rails was again fixed at $28 at that time, and it has never changed. Mr. HILL. And all parties are selling at that price? Mr. SCHWAB. Absolutely, so far as I know.

Mr. HILL. How does it come about that steel rails have for the last five years remained at $28 without any collusion with anybody else? Mr. SCHWAB. I will tell you. Take the present times as the best illustration. There is not a manufacturer of rails in the United States to-day-I, for example, as a rail manufacturer, feel that if I were to vary that price of $28 for rails, which seems to have been recognized by all rail manufacturers as a fair price, and giving a fair profit-if I were to vary that 10 cents a ton to-day I would precipitate a steel war, to use such a word or expression, that would result in running my works without any profit. Everybody, by tacit and mutual understanding, feel the same thing about that. I would not vary the price of my rails under any circumstances, not if I knew it was to get 100,000 tons in orders, for the reason that my competitor next door would put the price down to $1 a ton, or half

a dollar a ton even, and we would be in a position where we would be running without any profit at all.

Mr. HILL. You think absolute uniformity for the last few years in price of steel rails at $28 is without agreement?

Mr. SCHWAB. Absolutely.

Mr. HILL. Without collusion between the parties?

Mr. SCHWAB. Yes. I will say

Mr. HILL (interrupting). Now, in 1901, when you were president of the United States Steel Corporation, shiploads of rails were sent to Vladivostok and to the East for construction of the Trans-Siberian Railroad.

Mr. SCHWAB. Quite so.

Mr. HILL. Have you any objection to stating what the price was? Mr. SCHWAB. No. If I knew, I would very gladly state. I can probably get the information. My recollection is

Mr. HILL. I want to say, frankly, the prices in Baltimore were on the left-over end of an Argentine contract from some previous years, an unfinished contract.

Mr. SCHWAB. I think the price was about $21 at Baltimore, was it not?

Mr. HILL. There were two shipments, one at $21.80 and one at $18.60.

Mr. SCHWAB. My best recollection was it was about $21. For years I have exported great quantities of rails, and similar things during that period, at low prices, without profit, or, at least, with very little profit, because it enabled me to make my home product just that much cheaper. That is an old argument, and I do not need to go into that, but it is a true one.

Mr. HILL. While you were president of the United States Steel Company, was there any agreement made with the United States Steel Company that it would not ship abroad tin plate in excess of the amount of the previous years if a certain amount of black plate were bought from them by the Welsh manufacturers?

Mr. SCHWAB. That is not true.

Mr. HILL. You have heard that statement before, have you not? Mr. SCHWAB. I never have.

Mr. HILL. There was no agreement between the United States Steel Company and any foreign concern during your term?

Mr. SCHWAB. No, sir.

Mr. HILL. Was there any international agreement with reference to wire nails?

Mr. SCHWAB. No agreement with reference to any manufactured article of the steel corporation while I was its president.

Mr. HILL. I am very glad you know that.

Mr. UNDERWOOD. Mr. Schwab, the cost of making pig iron in Germany is considerably higher than it is in England, is it not?

Mr. SCHWAB. There is not so much difference.

Mr. UNDERWOOD. Is not the transportation charge to the furnace for ore and coke much higher than it is in England?

Mr. SCHWAB. In Germany?

Mr. UNDERWOOD. Yes.

Mr. SCHWAB. No, sir.

Mr. UNDERWOOD. I thought the mines were not located so conveniently for manufacture.