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Reports of Committee on Foreign Relations 1789-1901 Volume 6 pp468-469 300dpi scan (VERY LARGE!)

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the merchandise had to pay an ad valorem duty they would put the invoice value as low as possible in accordance with the actual export costs.

(2) Liabilities of the islands to the United States.—The sugar crop is an enormously expensive one to raise. It requires fifteen to sixteen months to mature, and employs hundreds of laborers to each plantation and sugar mill. The planter must, therefore, borrow large amounts of money to mature it, giving a lien upon the crop as a security to his factor. The factor in turn borrows the necessary amounts from the San Francisco banks. On an average this lien amounts to nearly or quite half the market value of the crop. I have estimated it for safety at about one-third that value, or $3,000,000.

(3) Many plantations have also mortgaged debts held in San Francisco. The amount of these is not fully known; but I am sure of at least $2,500,000, and believe the real amount to be much more than that.

(4) The value of the plantation properties held by Americans was assessed by the Hawaiian Government in 1883 at $10,180,104. This was assumed to be about two-thirds the real value. This value has been created almost wholly since 1876 out of the ground, buildings, and machinery.*

(5) Other productive properties held by Americans are the interisland mercantile marine, two railroads and equipment, a marine railway, warehouses, etc., all of them the creation of the treaty. The estimate of $1,500,000 is a very low one. The value of these properties far exceeds the sum of their mortgages and capital stock indebtedness. No man is rated in this argument as an American citizen unless he has the right to vote in the United States without naturalization and has the right to the protection of our Government under public law.

The most striking feature of this exhibit is the very large profit to the United States—so large that it seems at first unaccountable; but the great discrepancy between the exports and imports will vanish when we take full account of the fact that the whole carrying trade and mercantile business is ours in both directions. All economists regard transportation and mercantile functions in the passage of commodities from the purchaser to the consumer as a part of the production. To the value of our produce at San Francisco must be added all further accessions of value until it finally leaves our hands and passes into those of the Hawaiian. Add, then, to the invoice value of our exports the cost of transportation, commission, and insurance until we have put the produce into the Hawaiian's hands, and the $36,000,000 becomes not far from $44,000,000. It costs the Hawaiian not far from one-sixth of the value of his crop to get it to San Francisco. Deduct that from $54,000,000 and we have $45,000,000. Thus if we reckon Hawaiian values against Hawaiian values the exchange becomes less unequal, as it should, for the real exchange takes place in Hawaii. It is there that

* This is reckoned as profit for the following reasons: Among the commodities which we send to the islands, and also among those which we buy in Europe and send there on Hawaiian account, are machinery, building materials, etc. These are used in construction. The labor which is employed, the improvements which come from cultivation, and the natural appreciation of land make up together the final value of the property. The cash outlay directly applied to the creation of this value is, of course, small in comparison with that value. Whatever cash value has been so applied is already accounted for and included in the table showing values delivered to Hawaii. The value of the properties thereby acquired should of course appear on the other side of the account, and also in the list of profits, for such it clearly is. It pertains, however, to the capital-stock account and not to simple mercantile profit The figures here given largely understate the value of these properties.


our own products finally leave our hands, and it is there that Hawaiian values first come into our hands.

The Committee on Ways and Means, seeing that our exports in nine years have shown on invoice value of $23,000,000, while our imports show $54,000,000, have hastily concluded that the apparent balance of trade against us of $31,000,000 had to be liquidated in coin and exchange. In fact, only about $13,000,000 is liquidated in that way, and the $18,000,000 remaining is paid over to our own people and may be reckoned as a gross profit already realized. Over $9,000,000 has gone to American shipping, nearly $3,000,000 to San Francisco commission houses, nearly a million to the banks, over $2,000,000 for interest on loans and advances, and over $3,000,000 as dividends and miscellaneous profits.

In addition to this we hold $6,500,000 of Hawaiian debts which they must liquidate out of future shipments, and have created $15,000,000 worth of magnificent productive properties in the islands out of the soil by the combined action of capital and labor. It would be difficult to find in all the annals of trade and production a result more gratifying.

The Committee on Ways and Means have taken it for granted that the loss of revenue to the Treasury is equal to the computed remission of duty. This is a grave error.

First. The tariff on sugar for more than twenty years has been so graduated as to become more and more forbidding, and, finally, prohibitory as the grade and quality of raw sugar increases. This excludes all eatable raw sugar from the grocery trade and makes it more profitable to the refiner to buy the lowest grades he can get. But if raw sugar is duty free, it is the interest of the refiner to buy the highest grades and the interest of the planter to make them. Accordingly the Hawaiian planter makes the highest grades, not exceeding No. 20, above which grade he must pay duty.

But without the treaty he would do as the Cuban does, i. e., make them of as low grade as possible, so as to pay the minimum duty. The Committee on Ways and Means has computed the remitted duties on Hawaiian sugar as actually imported in the highest grades at $3.18 per cwt. prior to June 30, 1883, and $2.40 per cwt. subsequently; but Hawaiian sugars, which would have been imported had the treaty never existed, would have been in lower grades and paying presumably the same average duty as all imported sugars. This was, prior to 1883, about $3.41 per cwt. and about $1.96 subsequently. Of course we can not reckon a duty we never could have collected as a loss of revenue. Instead, therefore, of losing on sugar $23,000,000 in nine years the loss has not been over $18,000,000.

Second. But this loss must have had very large compensations to the Treasury. Fully five sixths of the Hawaiian crop has been bought and paid for by exports, transportation services, and otherwise, for which the treaty has created a demand, and for which no demand would have existed elsewhere without the treaty. Our exports to third countries could not possibly have been diminished by it. Now, the free entry of Hawaiian sugar has no doubt caused us to purchase from third countries less dutiable sugar. Obviously the exported values withheld from the purchase of dutiable sugar remain available for other purchases. The full value of our exports must come back to us somehow, and if we get less dutiable sugar we must get just so much more of something else. The only question is whether this "more of something else" pays as much duty as the sugar would have paid. Probably it does not; and so far there is a loss, because some of these residual values come

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