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the free entry of Hawaiian sugar up to No. 20 put the refinery into the following difficulty: It must not permit the sugars to go upon the open market. How was it to prevent it? By making it more profitable to the planter to sell to the refinery than the grocery store. How was it to do that? First, by paying a maximum price for the raws, and, second, by keeping down the price of refined sugar to points which should not exceed the price of raws by more than a certain small percentage. The maximum price of the raws was the Manila basis, and if the price of the refined exceeded the Manila basis by more than a certain small percentage the Hawaiian sugar would be tempted into the grocery trade direct.
Congress has been saturated with the idea that Spreckels has bought Hawaiian sugar at his own price, appropriating the remitted duty to himself and at the same time increasing the price of refined sugar. The idea is absurd and impossible. The truth is just the reverse. The command of prices for raw sugar up to the Manila basis rests with the planter, and Spreckels must yield or provoke a competition in which the planter is sure to win. Above, the Manila basis the planter can not go without loss to himself. Spreckels, moreover, has been obliged to sell refined sugar at lower prices than he could command if the Hawaiian crop were out of the way. To restore the duty would crush the planter, leaving him to Spreckels' dictation and give him (Spreckels) the power of exacting a larger price for his output without fear of any competition from the planter. The effect of the treaty upon the monopoly has been to hold up the price of raw sugar to the full normal price and to bring the price of refined nearer to that of raws than it would otherwise have been.
(2) The second source of competition is a new refinery. Mr. Spreckels himself controls, as a majority stockholder, only one plantation on the islands. He has a minority interest in each of four others (unless he has acquired more since 1884). He and his friends together can not control more than a fourth part of the Hawaiian crop except by buying it on terms satisfactory to the planters. Suppose the other planters to become dissatisfied with the terms of purchase he may offer, what is to prevent them from joining hands and starting a new refinery in San Francisco to work their own sugars? Nothing, except the want of an inducement. The question of capital offers no difficulty if there is anything to be gained. What would constitute an inducement? Not the prospect of profit on the sale of refined sugars unless they are prepared to crush Spreckels out completely and set up a new monopoly in place of his. But a genuine inducement would be established at once if Spreckels were to insist upon paying too low a price for their raw sugar. Suppose the cost of Asiatic sugar, duty paid, in San Francisco is 5 cents and Spreckels will only pay the Hawaiians 4| cents. Suppose two-thirds of the planters refuse and start a new refinery. A war of rates instantly follows. How low can Spreckles afford to sell refined sugar? As low as the price of Asiatic sugar plus the cost of refining. How low could the planters afford to sell sugar? As low as the cost of raising raw sugar, shipping it to San Francisco, and refining it. When Spreckels has touched the bottom price the planter is still making the full profit on his raw sugar, but nothing on his refined, and Spreckels is making no profit out of his refinery.
This is precisely what has happened. When Spreckels dropped from the Manila to the Cuban basis some of the California stockholders and some of the keen Yankees in the island thought he was going too low. They clubbed together, and, with the aid of San Francisco capitalists who hold Hawaiian plantation stocks, they started a new refinery. They
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did not expect to make much profit out of refined sugar, but they do expect to get the fullest price of their raws. The ultimate result of this contest will depend upon whether Spreckels is right in his assertion that the Cuban basis is the normal price of sugar.
GENERAL RESULTS OF THE TREATY.
The treaty has developed a trade with the islands which, relatively to the population, is enormous, and of which the profits have been and still are exceedingly large. The profits have not, as generally supposed, accrued to the great sugar monopoly, but chiefly to the American shipping which was evoked by the treaty, to the mercantile houses which have handled the merchandise, and to the investors who have advanced the capital to open and develop the productive properties. These profits have been nearly double the remitted duties and four or five times as great as the probable loss of revenue.
So far has the treaty been from benefiting a monopoly of refined sugars in California that it has restricted its powers and embarrassed it, and may even yet destroy it. The refinery is powerless to obtain the benefit of the remitted duties in any degree whatever. It must pay them in full to the consignee of the planter, who, in turn, pays them, and more besides, over to our shipping, banks, mercantile houses, and investors. The remitted duties never leave the country.
The treaty has brought up a mercantile marine of our own, employing American-built steamers and sailing vessels, and the entire commerce, amounting to $12,00O,000 annually, is in our hands. It is the only foreign commerce to-day which we can call our own. Before the treaty the sugar and rice imported at San Francisco came chietiy from Asia and the East India Islands, where it was bought with London exchange and shipped in foreign vessels.
The treaty has had no assignable effect whatever upon the sales of sugar in the Mississippi Valley. These sales would have been the same and would continue to be the same without the treaty as with it. San Francisco is the natural source of supply of sugar for almost the whole country west of the Kansas Missouri line, and of a considerable territory still further east. The only real competition of San Francisco in that region is the Louisiana planter, who has no more right to complain of it than of the competition of New York. This competition is independent of the treaty. Congress can not prevent it, and ought not to if it could, for it is a normal and healthy one.
XI. Also the following article in the forum for march, 1893, on "hawaii and our future sea-power," and written by capt. a. t. mahan.
[The Forum, March, 1893.]
HAWAII AND OUR FUTURE SEA POWER.*
The suddenness so far, at least, as the general public is concerned, with which the long-existing troubles in Hawaii have come to a head, and the character of the advances reported to be addressed to the United States by the revolutionary government, formally recognized as de facto by our representative on the spot, add another to the many significant instances furnished by history that, as men in the midst
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* Copyright, 1892, by the Forum Publishing Company.
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