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at self-preservation, to accomplish retrenchment both by cutting down wages and abandoning conservative and comparatively, expensive methods of lumbering on its timber-land holdings in this country; instead of leaving small wood for future growth, it would have to strip the lands of every available stick of pulp wood and would very likely be forced to realize further by marketing all the hard wood thereon. It would aim to keep going long enough to get all it could out of its timber lands, mills, and water powers before abandoning them.
We firmly believe that removing the duty from paper would not only not be in the interest of forest preservation in this country, but would lead to the immediate destruction of the timber on the 5,000,000 acres held by paper manufacturers, and as much more as they could get hold of.
We know of no way by which this result can be avoided if we are brought into competition with free paper, which is what Canada seeks. We believe that the movement in Canada in favor of putting an export duty on pulp wood, or prohibiting its exportation, is not likely to be successful, because it is not founded on any sound or just principles; and we further believe that if it should be successful it would result in such great injury to Canada that such a policy would be short lived.
One of Canada's greatest assets is her forests, but they are only profitable to her in so far as they are productive. We sympathize with any bona fide desire on her part to perpetuate her forests and are willing to submit to any reasonable restrictions in our operations in the Canadian woods which have that end in view, but Canada has a very great area of timber lands, and they can produce a large annual yield without impairing them-all that her mills and ours will want for generations to come.
Canada is exporting $33,500,000 worth of forest products a year, and is doubtless eager to increase her markets for lumber, etc., and her exports thereof. Her exports of pulp wood in 1907 amounted to about $5,000,000. It looks inconsistent, to say the least, for her to scek to increase her exports of lumber generally and to check the exports of one particular variety, especially as pulp wood is very generally distributed throughout the Dominion. The consumption by the United States is insignificant compared with Canada's extensive supply.
We are therefore forced to the conclusion that the opposition to exporting pulp wood is not based on any genuine apprehension on behalf of forest preservation. On the contrary, we have conclusive evidence in published statements of the exponents of this policy that the real motive is to hamper the industry in the United States in order to build it up in Canada. The movement is supported by the Canadian paper and pulp manufacturers, who desire to increase their output and to secure a market for it in the United States. In other words, they wish to withhold from us the raw material which we desire and force us to take the manufactured product.
This attitude is inconsistent with their own general tariff policy, which admits our raw material free and raises a high barrier against manufactured products. For example, Canada imported free of duty in 1907 from the United States about $8,000,000 worth of raw cotton, but our own manufactured cotton goods going into Canada
have to pay duties ranging from 20 to 35 per cent. In addition, Canada gives to England a preference of 33 per cent on cotton goods, also made from the raw cotton which we furnish. Canada is also taking from us annually about $28,000,000 worth of coal and coke (all free of duty except 50 cents per ton on bituminous coal) to run her mills to make goods which the United States could furnish her if it were not for her tariff.
Although the Province of Ontario has actually prohibited the export of pulp wood cut from crown lands, and the Province of Quebec discriminates against us by charging 25 cents more per cord for stumpage on pulp wood if it goes to the United States than if manufactured in the Dominion, it seems improbable that either the Canadian people or the government will ever sanction so unfriendly and unusual an act as placing a general prohibition or embargo upon the exporting of pulp wood.
It would seem, however, to be only the part of prudence for this country to prepare itself should such hostile action be taken. We advocate, therefore, that the countervailing duties provided for in sections 393 and 396 should be remodeled so as to make their appli. cation more sweeping in case Canada assumes an aggressive attitude. Should your committee clesire our views more in detail as to how this should be done, we shall be glad to submit them.
So far as this company therefore is concerned, it is content to have the tariff remain as it is, with the exception of the countervailing clause and the possible addition to the administrative act of the tariif of a provision which will prevent foreign manufacturers from selling their output in this country at lower prices than prevail in their home markets.
Mr. UNDERWOOD. I see that most of your factories are Incated in New York, Maine, and Vermont. What percentage of the output of paper do your factories represent north of the Potomac River and east of the Allegheny Mountains? Mr. LYMAN. I should say about 60 per cent, as a rough calculation.
Note.--In 1905, according to the census, it was 54 per cent; in 1907, estimated, 47 per cent.]
Mr. UNDERWOOD. Being a large producer of the paper that is manufactured within that territory, I presume that you ship your paper from the nearest mill to the market that demands that supply, 'do you not; in other words, if you were shipping to Boston you would send from the mill nearest Boston?
Mr. LYMAN. If the sizes suit our machines, and if the quality suits the customers.
Mr. UNDERWOOD. As a rule you have your mills built for that purpose,
do Mr. LYMAN. We do not have them built for any particular locality; that is, we do not build them for a market that is nearest at hand.
Mr. UNDERWOOD. You manufacture for the market nearest at hand,
Mr. LYMAN. We manufacture for the country. In the case of New York City, where there is such a great permanent demand, if we put up a mill that was favorably situated to supply that market we would undoubtedly consider the sizes of the rolls used in the New York market, but there would be no guarantee that they would be permanent.
Mr. UNDERWOOD. Does the paper that you ship to the Boston market come from mills more contiguous to the Boston market than from your other mills?
Mr. LYMAN. Yes, naturally, in so far as we can we try to have the average freight rate a minimum.
Mr. UNDERWOOD. Under those circumstances, what is your average freight rate in covering the product to the Boston market from the mills that are contiguous ?
Mr. Lyman. I can only say from general knowledge. We have departments that have their specialties, and no one person in our company knows all the details of all our departments; but I should say that probably 10 cents a hundred is the minimum rate. Mr. UNDERWOOD. Long tons or short tons? Mr. Lyman. Ten cents a hundred pounds. Mr. UNDERWOOD. That would be $2 a ton. Mr. LYMAN. Two dollars a short ton.
Mr. UNDERWOOD. Well, as to the New York market, what would the freight rate come to in the delivery of your product?
Mr. Lyman. That will average probably 15 cents, or $3 a ton.
Mr. UNDERWOOD. What is the distance of the contiguous mills of your company to the Boston market!
Mr. LYMAN. The nearest mill that makes newspaper is the distance from the Connecticut River at Bellows Falls to Boston, which I do not know.
Mr. UNDERWOOD. Estimate what it is.
Mr. UNDERWOOD. What is the distance from your contiguous mills to New York ?
Mr. LYMAN. From 50 miles above Albany, and as Albany is about 145 miles, that would make it about 200 miles.
Mr. UNDERWOOD. What is the nearest distance to Boston from the nearest Canadian mill?
Mr. LYMAN. The nearest Canadian mill that I know of, and that I have in mind, is at Ottawa, which is distant about 300 miles from Boston.
Mr. UNDERWOOD. What is the distance to New York from the nearest Canadian mill!
Mr. LYMAN. Well, I think it would be the same as from Ottawa, although I think Boston must be a little farther from Ottawa than New York, but probably about the same distance.
AUDITOR. It would be 400 miles from New York. Mr. UNDERWOOD. Now, what would it cost for the transportation of a ton of paper from the Canadian mill that is situated 300 miles from Boston to Boston? You stated that the cost from your mill to Boston would be about $2 for 116 miles. What would be the freight rate from the Canadian mill to Boston ?
Mr. LYMAN. Well, I should say that would be probably 15 cents a hundred.
Mr. UNDERWOOD. That would be about $4.50.
Mr. Lyman. Excuse me, but it strikes me that it is futile to have these guesses and then try to form conclusions based upon those, when, if you wish, I will put in a table of the exact figures; in fact, that has all been submitted to the Select Committee, and therefore I did not attempt to burden ourselves with memoranda of those details.
Mr. UNDERWOOD. What I wanted was this: As I read your statement through, you did not deal in the freight rate. I desired to ascertain those facts, but if you prefer to put that in in a supplemental paper, very well.
Ir. Lyman. I will say that the reason why I did not take up the freight rates was that I think you can eliminate them on both sides of the equation; that they do not cut much of a figure one way or the other, except that we have to consider freight on our wood; but as for the freight on the paper, there are some portions of the United States which some Canadian mills can reach for less than some of the American mills, and some points which some of the American mills can reach, naturally, cheaper than the Canadian mills.
Mr. UNDERWOOD. I took it that this shipment of paper was a good deal like a shipment of coal or lumber; that the freight rate was a very material factor in reaching the market, and that when your mills went southward, going away from the Canadian market, you have the advantage of the difference in distance. Are not the western mills located very much nearer the market in which they sell their products than the Canadian mills?
Mr. Lyman. My impression is that the difference diminishes the farther away you go; that is, as you go farther away from the mills the rates draw nearer together. Is that not so, Mr. Chable?
Mr. CHABLE. The rates from Canadian mills to western points are exactly the same as from places like Otis, Me., or Berlin, N. H. They take what is known as the Berlin rate.
Mr. LYMAN. The Canadian railroads fix that up so as to put the Canadian mill on an equality with the United States mill.
Mr. UNDERWOOD. There are a good many mills located in the West, which are doing a paper business, are there not?
Mr. LYMAN. Yes.
Mr. UNDERWOOD. And they are a good many hundred miles nearer the markets in St. Louis and Kansas City and New Orleans than the Canadian mills, are they not?
Mr. LYMAN. Not a good many hundred miles, I do not think.
Mr. UNDERWOOD. How far south is the farthest paper mill located in the United States; South or West !
Mr. LYMAN. You are speaking of news paper?
Mr. LYMAN. The farthest south is at Turners Falls, in the East; and in the West I should say that was at Appleton, Wis., so far as I know. At Kansas City there is a paper machine started by a newspaper publisher, and I would hardly put that in the category of a mill. It has never been a success, and it does not make its own pulp.
Mr. UNDERWOOD. According to that, Wisconsin is then your farthest southern mill, and the Canadian mills that manufacture paper are largely in eastern Canada, and not in western Canada?
Mr. LYMAN. Mostly in Quebec, yes.
Mr. UNDERWOOD. So that for the western and south western market, the mills located in Wisconsin are very much nearer that market than the Canadian mills, are they not?
Mr. LYMAN. Well, that is a question. That hinges on one's knowledge of the relative distances geographically. [Appleton, Wis., to New Orleans, about 1,000 miles. Ottawa to New Orleans, about 1,300 miles.]
Mr. UNDERWOOD. I judged they were, and I wondered if there was any reason in freight rates or otherwise that you knew of, and if so, I would like to have you state it.
Mr. LYMAN. I would consider that there was—as I understand it, the freight rates from those Canadian mills are made equal to the rates from the Wisconsin mills and the Minnesota mills, to such points as those.
Mr. UNDERWOOD. Do you mean to say that the railroads give the same rates now under this new interstate-commerce law from the Canadian mills located at Quebec, to Kansas City, that a mill in Wisconsin would give?
Mr. LYMAN. The Canadian roads can make any rate they want, which of course is not controlled by the Interstate Commerce Commission.
Mr. UNDERWOOD. I understand that you state that as a fact?
Mr. LYMAN. As a general principle, the Canadian roads make very low rates to help out the Canadian industries.
Mr. UNDERWOOD. Can you state it as a fact that the rate is the same; that there is no advantage to the Wisconsin mill over the Canadian mill in freight rate going to St. Louis or Kansas City?
Mr. LYMAN. I am not stating that as a fact, unless it can be corroborated by some gentleman here. I think it is a little higher.
Mr. UNDERWOOD. Do you know how much?
Mr. UNDERWOOD. I am talking about the general paper business. I knew from your statement that you have no mills there. The freight rate differential in favor of the American mill must be a dollar or two a ton on paper, is it not?
Mr. LYMAN. In some instances it is a dollar or two in favor of the Canadian mill, as I have stated. Now, it will all come to this, that in my opinion the freight rates are practically the same, and the differences are obscured by other more important factors of cost.
Mr. UNDERWOOD. I notice that your capital stock amounts to something like I believe you have 22 millions of common stock, 17 millions of preferred, and 17 millions of bonds.
Mr. Lyman. You have those figures reversed as to the stock. We have 22 millions of preferred and 17 millions of common.
Mr. UNDERWOOD. Does that represent an actual investment, or was that stock issued at a valuation in putting it into the new company?
Mr. LYMAN. The properties that were taken in were taken at an appraised value, and what they actually cost nobody knows but the people who were connected with them before the International Paper Company was formed. They were taken in at what was considered to be a fair value, and most of those who were to take part in the formation of the International Company were anxious to have every other person's property put in at the minimum price so that their own valuation would not be diluted.
Mr. UNDERWOOD. You do not know whether that represented the actual cost, the original cost of the plants, or not?
Mr. LYMAN. Nobody knows that. Their appraised value was had at a time of very great depression and very small earnings; and if the formation of the company had been postponed a few years, until there was general prosperity, I presume that they would have been appraised at a very much larger figure; that is, the owners would not