EDWIN J. CLAPP
ECONOMIC ASPECTS
OF THE WAR
CHAPTER VII
STARTING THE COTTON MOVEMENT
In the production, ginning and warehousing of the annual cotton crop, direct employment is given to more than four millions of people, and a livelihood to many more. Upon the successful growth and upon the prompt and satisfactory marketing of cotton are dependent all other business interests of the South, and the earning power of thousands of miles of railway. Moreover, since the South depends upon cotton for its ability to purchase other goods, any deficiency in growth, depression of values or interference with marketing means an immediate adverse affect upon agricultural, mercantile and manufacturing activities in the rest of the country.
It happens that successful marketing of the cotton crop depends primarily upon getting it into the export trade. In recent years two-thirds of the cotton crop has been exported and only one-third consumed in this country.
Interference with the foreign movement is thus the most serious evil that can befall the South, far worse than a partial crop failure due, for example, to the boll weevil. If the foreign market is open, high prices are paid for the cotton that escapes a crop failure. The total cotton value is thus often as large in years of partial crop failure as in years of heavy yield. The twelve million bales of 1910 were worth $100,000,000 more than the 16,250,000 bales of 1911. But if the foreign market or any essential part of it is closed, ruinously low prices greet every participant in the crop. In the midst of apparent plenty, everyone is in want.
Such a result in the South was brought about in the fall of 1914, because of the European War. England, the largest consumer of our cotton, normally takes 3,500,000 bales per year, over one-third of our total cotton exports. Germany and Austria come next and normally take from 2,500,000 to 3,000,000 bales of cotton, nearly one-third of our exports. The war would inevitably have affected the cotton trade adversely. But the effect was accentuated by the threatening attitude of England towards our commerce, which kept the German market for cotton closed until the winter months.
The pressure in the South of those 3,000,000 bales, for which exit was long denied, helped force the price of cotton down to 6 cents per pound. The cost of producing is supposed to average about 8 cents. At this low price of 6 cents, thousands of the little cotton farmers, the rank and file of the South, were forced to part with their product. They had not the financial power to hold the cotton until, along in the spring of 1915, its price rose to 10 cents, owing to a temporary reopening of the path to Germany, the broadening demand of other countries and the activities of our own mills. It was the large planters, dealers, and English importers who were able to hold the cotton and profit from the advance. The farmers were hard hit.
The cotton year starts August 1. About that date begins the export movement of the new crop. In the second half of July, 1914, "spot cotton"---that is, cotton for immediate, not future delivery---was selling in New York for 13 1/4 cents per pound; on July 27, with war threatening, it was 12 1/4 cents. Two days later, with war certain, this price had dropped to 11 3/4 cents. On July 31 the New York and New Orleans Cotton Exchanges closed.
With the entrance of England into the war on August 4, shipping was paralyzed. Most of our commerce has been carried in British and German ships and no such ship dared venture out to sea because both English and German cruisers were on the North Atlantic. The ordinary marine insurance carried on the hulls and cargoes of these ships did not protect them against the danger of capture or destruction. Against this new peril, war risk insurance was necessary.
The German ships never sailed again, but kept their American ports, being so much tonnage withdrawn from the carrying trade. Some British ships were chartered by their government for war services. The remainder were in a position to sail when, a short time after August 1, the British Government insured against war risk British vessels carrying for the United Kingdom; and when, two weeks after the outbreak of the war, the British Admiralty announced that. the North Atlantic route was free of German cruisers. This partially solved the problem of getting American cotton exported to England. But the method of financing such shipments also had broken down., A cotton exporter gets his money by selling to his bank a draft drawn on the English buyer or the latter's bank. Owing to the disturbance of international finance and the paralysis of the London discount market, such drafts became for a time unsalable. Yet in the course of a few weeks this financial difficulty was largely overcome, at least as to shipments which could be satisfactorily insured, and cotton for England went forward in a volume that was substantial, though below normal.
The following table shows the exports to England up to June 1, 1915, compared with exports to England in the corresponding months of 1913-1914.
COMPARISON OF COTTON EXPORTS TO ENGLAND,
BY MONTHS, 1913-1914 AND 1914-1915. IN BALES
|
1913-14 |
1914-15 |
Changes 1914-15 |
|
| August |
77,488 |
6,370 |
Decrease ..71,118 |
| September |
376,426 |
60,980 |
".....325,446 |
| October |
514,105 |
232,065 |
".....282,040 |
| November |
530,355 |
333,700 |
".....196,655 |
| December |
473,028 |
672,396 |
Increase ...99,368 |
| January |
437,231 |
585,534 |
".....148,303 |
| February |
328,794 |
633,574 |
".....304,780 |
| March |
264,999 |
440,490 |
".....175,491 |
| April |
147,298 |
378,828 |
".....231,530 |
| May |
140,618 |
359,675 |
".....219,057 |
| Period Aug. 1 to May 31 |
3,290,342 |
3,593,612 |
".....303,270 |
All this meant that in the early months of the shipping season, the months vital in fixing the price paid the farmer, the largest purchaser of American cotton was not buying. Therefore, there was double reason why the second largest purchaser, Germany, should without hindrance take its share.
For reasons to be explained, direct shipments to Germany were at first very difficult. Hence during the early months of the export season, beginning August 1, cotton had to move into Germany via adjacent neutral European countries. That is, instead of being shipped from the United States to Hamburg or Bremen, cotton was shipped to Genoa, Rotterdam or Copenhagen and forwarded to Germany overland. Or it was shipped to Norway or Sweden, particularly to Gothenburg, and thence forwarded to Germany by sea.
In the month of October these indirect shipments into Germany began to go forward and appeared in our export figures, which showed an increase in shipments to the neutral countries adjacent to Germany, compared with the corresponding shipments in the same month of the year before. But not until January did these increases, representing cotton for Germany, begin to compensate for the loss in direct shipments. This whole situation is illustrated by the following table:
BALES OF COTTON EXPORTED FROM
THE UNITED STATES TO GERMANY,
DIRECT AND INDIRECT
|
------------Germany-Austria------------- |
-----------------Italy-Holland-Scandinavia----------------- |
||||||
| 1913-14 | 1914-15 | Decrease | 1913-14 | 1914-15 | Excess
of 1914-15 over 1913-14 |
||
| August |
73,228 |
52 |
73,176 |
15,267 |
2,246 |
Decrease |
13,021 |
| September |
294,055 |
---- |
294,055 |
63,666 |
33,548 |
Decrease |
20,118 |
| October |
481,726 |
---- |
481,726 |
62,454 |
107,199 |
Increase |
44,745 |
| November |
528,340 |
1,000 |
527,340 |
80,945 |
224,442 |
Increase |
143,497 |
| December |
350,298 |
47,076 |
303,222 |
91,750 |
354,614 |
Increase |
262,864 |
| January |
326,968 |
99,913 |
227,055 |
69,172 |
491,681 |
Increase |
422,509 |
| February |
222,967 |
88,508 |
134,459 |
459701 |
603,652 |
Increase |
457,951 |
| March |
223,144 |
6,112 |
217,032 |
54,657 |
425,076 |
Increase |
370,049 |
| Period Aug. 1 to Apr. 1 |
2,500,726 |
242,661 |
2,258,065 |
473,612 |
2,142,458 |
Increase |
1,668,846 |
Figures later than March are not given; for after March 31, as we shall see, England let no cotton sail for Germany either direct or indirect. Much of such cotton as sailed even in March was held up and bought by England.
The remarkable thing about the table of exports to England is that they show that the total exports of American cotton into England have been larger in the present year than in the past year. The increase for the August 1-June 1 was over 300,000 bales. It was only in the early months of the war that cotton did not move in good volume to England.
Moreover, the decrease in the total cotton movement into Germany and Austria has not been so large as many think. The drop in direct exports to Germany and Austria was 2,258,000 bales. But the increase in shipments via adjacent neutral countries was about 1,668,000 bales. So the real decrease in exports to Germany was perhaps not over 500,000 bales, assuming---and we cannot quite assume--- that Germany got all the excess exports moving to adjacent neutrals.
It is recalled that the New York and New Orleans Cotton Exchanges closed on July 31. For later quotations on the price of cotton we are mainly dependent on individual transactions reported from different parts of the South. All tell the same story of sinking prices.
Cotton had sold in New York for 113/4 cents in the last days of July. On August 10, southern shippers were willing to deliver it to New England factories for 11 cents. On August 21 it sold in Augusta for 10 1/2 cents, on August 26 for 9 1/2 cents. On September 2 cotton touched 8 cents; on October 6, 7 1/2 cents; on October 12 it dropped to 6 3/4 cents; and on October 19 sales from southern points were reported at 6 to 6 1/8 cents per pound. This was a price of desperation. As a matter of fact, cotton on the farm was selling for 6 cents all during September and October. These 6-cent sales are what finally forced the United States to act.
If there had been the customary monthly regularity of movement from the United States to England and Germany, the price of cotton in this country would not have dropped in any such manner as it did. The rapid fall was occasioned partly by the fact that in August and early September little cotton was bought or moved either to England or Germany. The fall was caused partially by the fear of Americans that England would not let cotton move to Germany at all.
Just as long as England could, she fostered this impression, and she allowed a free movement only when an irresistible force was applied to her; namely, the force of a direct demand from Washington. This demand, brought about by irate southern senators, was supplied with a promise of real consequences should it not be met. The story of the quiet English ban upon our cotton trade, and its removal in October, is worth reading.
It is recalled that, under the codification of international law represented by the Declaration of London, cotton was on the "free list"; that is, it was one of those articles which could not be declared contraband by any belligerent. The reason is obvious. It is a prime necessity for the life of civilians and the raw material for the greatest single peaceful industry of countries; namely, the textile trades. Upon the unhampered movement of cotton in international commerce depends the prosperity of the workers in great sections of the civilized world. Excepting after a complicated manufacturing process, cotton is not available for purposes of war.
England, we know, in her Order in Council of August 20, adopted the Declaration of London as her rule of international law, with certain exceptions. Cotton was not affected by the exceptions either in the August 20 Order or in any successive one. That is, England by announcement was pledged to consider cotton as a free good that could move unhindered to Germany in all but German ships or those of Germany's Allies.
During August there was the same initial difficulty in getting cotton started for Germany as in getting it started for England. This cotton normally moves in full shiploads in "tramp" steamers, chartered for the voyage. Most of these steamers are under the German or the British flag. Those under the German flag dared not venture on the seas, which England controlled. Those under the British flag were of course not available to carry cotton to England's enemy. That left for consideration ships of neutral countries: the United States and other neutrals.
Since the United States owned few ships built to cross the Atlantic, the most promising candidates seemed the ships of other nations. These were, however, out of the question with regard to direct exports to Germany, because of the peculiar conditions surrounding hull and cargo insurance, without which no shipowner or shipper can let his property sail. This difficulty is connected with British control of the vessel insurance business for the whole world, a control which was naturally exercised to injure the enemy of England.
As for marine insurance, neutral vessels could without difficulty obtain it from the German and neutral marine insurance companies, including the American. But they could obtain no war risk insurance to cover them in the German trade. The large field of British private companies was closed to them. Neutral insurers, in so far as they participated in the war risk business, confined themselves to lesser risks than on shipments into Germany, in the face of the attitude England was exhibiting toward all such commerce. The War Risk Insurance Bureaus of other neutral governments than our own were restricting their insurance to their own vessels engaged in the home trade. They had no intention of insuring shipments between America and Germany.
Our own Government War Risk Insurance Bureau, established in September, was unfortunately limited by law to insuring American cargoes in American vessels, under the pleasant delusion that there were enough American vessels to carry the cargoes across the sea.
Other neutral vessels being eliminated from the American-German trade through this war risk insurance difficulty, only American vessels remained. With few exceptions, we had no oversea merchant carriers. Most vessels flying the American flag were constructed for the coastwise, Gulf, Caribbean and Great Lakes trades. They were not fit for long transoceanic voyages. The Government Bureau offered to take war risk insurance on these vessels, but required first that they get their marine insurance elsewhere.
Since they were not built for crossing the ocean---which no one knew better than the insurance men---the small American steamers had a long fight to get this marine risk insured. It is not the custom for a single insurer to assume the whole risk of insuring a vessel. Such a risk is jointly carried by a number of insurance companies, or underwriters. So far as oversea insurance is concerned, the American companies have been mere participants with the big English companies in the business. The Americans were unable to secure English aid in furthering shipments to Germany; they long seemed incapable of carrying those risks themselves.
Finally, so Washington claims, the American underwriters were forced to do this insuring by the threat that, if they did not, a bill would be introduced in Congress empowering the Government War Risk Insurance Bureau to enter the marine insurance field. The prospect of perhaps permanent government competition was too much for the American marine companies. They shifted to British insurers some of the risks that they (the Americans) were carrying on English and neutral business, and set free part of their own resources to enable them to handle German trade. The rates charged on steamers not built to cross the ocean were naturally high.
When the cotton exporter had the marine risk on his American vessel covered, he turned to the Government War Risk Bureau and found it quite inadequate for his needs. The government limited the risk on any one bottom to $500,000, hull and cargo included. Even under normal conditions this amount would cover only a very modest hull and cargo. As the demand for American tonnage had brought about a great rise in its value, the shipper found, after he had covered the value of his vessel in the Government War Risk Bureau, that the margin left for the cargo was insufficient. There were occasions when the vessel alone was valued at more than the government's limit.
Eventually Washington instituted a more liberal policy and, in some cases, the insurance limit was increased to $1,000,000. But the time lost in getting this limit extended, after overcoming the other difficulties described, helped hold up direct shipments to Germany for many months. The first American ship in this trade was the Greenbriar, reaching Bremen on January 9, 1915. She was followed by others, mostly vessels withdrawn from the coastwise trade. The high marine risk charged on them was shown to be justified when one, the Denver of the Mallory Line, foundered on her return trip from Germany.
All the cotton that has been shipped direct to Germany the past season has moved in these American steamers. But the capacity of even the considerable numbers of them withdrawn from the coastwise service was totally inadequate to the situation. This is illustrated by the smallness of our exports to Germany from August 1 to April 1: 250,000 bales compared with 2,250,000 bales last year in the same period, a shortage of 2,000,000 bales. If cotton to Germany had moved only in direct shipments in American steamers, the movement would never have afforded the relief which it eventually did afford. There were simply too few American ships and those who knew the situation promised themselves no results of value from the elimination of insurance difficulties that forbade even these few ships to sail.
The fundamental dearth of American vessels for this German cotton trade was early apparent to the government at Washington. The simple way to create such American tonnage was to buy it from foreigners and put it under the American flag. The obvious tonnage in the market was the German, tied up inactive in American ports. All other ships were on the seas earning such rates as never before; no one wanted to sell them.
American laws already allowed the transfer of foreign-built vessels to the American flag, within five years of their construction. In August, 1914, a new law was passed removing the age maximum and permitting ships so entering the American registry to retain their foreign officers. This last measure was designed to remove the last objection to such purchase, in the mind of the American buyer.
Yet no one came forward to buy the German ships, or any others. Nobody felt quite sure of support in exercising his right to purchase belligerent merchant ships in war time and operate them under the American flag. Everyone could count on the active opposition of the British Government to such purchase, an opposition only too plainly indicated in the despatches from London. Under such circumstances the American buyer of a German ship ran the risk of purchasing one which he could not use when purchased.
Precisely this situation was created for the buyer of the former Hamburg-American liner Georgia. In March an American bought this steamer after obtaining, from a representative of Great Britain, what appeared to be an assurance that His Majesty's Government would make no opposition to the purchase and operation of the vessel, provided she did not run in the German trade. She was bought to run to the West Indies and South America. However, with the vessel bought and the money paid, the British Government announced that it would seize the ship if she left port. The buyer had a ship be could not sail.
The case of the Dacia is better known. In December and January Senator Walsh, spokesman for the administration, proved to the satisfaction of the reading public that there was nothing in international law that prevented Americans from acquiring any belligerent merchant vessel they chose, provided the purchase were bona fide and the transfer absolute and unconditional. It was shown that Great Britain's own precedents would not permit her to oppose such transfer. There was considerable miscellaneous criticism of American citizens for neglecting to seize the golden opportunity to upbuild our merchant marine. An American, Edward N. Breitung, tried to seize it.
Breitung purchased outright the Hamburg-American steamer Dacia, which lay in Port Arthur, Texas. He hoisted on her the American flag, signed an American crew and American officers, and loaded her with Texas cotton at Galveston. She was to clear for Bremen. Evidence was submitted of the validity of the transfer, satisfactory to the State Department at Washington.
Great Britain announced that it would capture the Dacia if she sailed. The State Department tried to induce the British Government to let the vessel make just this one trip to Rotterdam, Holland, the Dacia's original destination having been altered in order to improve her chances of getting across. His Majesty's Government, being by this time apparently immune against our communications, could not see its way clear for such a concession.
Yet for England to have seized the Dacia, in the face of English precedents that justified just such transfers, and while complications of other kinds were accumulating in the diplomatic relations of that country and America, would have been clearly impolitic. It happened that the allied French Government was embarrassed by no such conditions, either as to precedents or diplomatic complications. In fact the French precedents did not recognize the validity of transfer of a belligerent's merchant vessel during war time.(9) So England allowed a French cruiser to capture the Dacia and tow her into Brest. There she was thrown into a French prize court.
In view of the reluctance of private citizens to create American tonnage, the administration during the early months of the war determined to acquire the necessary ships with government funds and to arrange for their operation. Two reasons were behind this measure. One of these was a desire to relieve the distress of the cotton states and to start the movement of grain, which for a time was halted by lack of ships. One reason was the desire of the Democratic administration to call into life an American merchant marine, about which the Republicans, without practical effect, had talked and agitated for so many years.
But the main problem was to get cotton moving into Germany. Since private citizens had failed in their attempt to acquire ships and start this movement, the task seemed to many an appropriate one for the government itself.(10) There were men who supported the Ship Purchase Bill on this ground, believing that it would put the government in possession of a large number of ships, and that these vessels would be at the service of the South for the export cotton trade.
Had the administration been entirely frank with the public, the bill might, quite probably, have passed. In such case, government-owned ships without interruption would have carried cotton and food to Germany, bringing back dyes, potash, and other German imports. The British so-called "blockade" would never have been established against such a government line.
The bill was projected in August and September of 1914. It provided for a corporation in which the American Government was to be the main stockholder. The corporation was to have $40,000,000 at its disposal, available for purchasing ships. It was claimed that the ships were needed to carry American products to market. What ships, what products, what market, were not specified. Yet everyone knew that the market that called for our product was Germany, that the product that chiefly required American ships to carry it was cotton, and that the ships available for purchase were the interned German steamers.
For two main reasons England was opposed to the bill. In the first place, the purchase of German steamers would have created in this country credits available for purchases by Germany. More important than that, the British Government could not have continued to exercise against a line backed by the United States the "economic pressure" which they had been exerting, and which they proposed to exert, on Germany.
The British opposition to government purchase of German interned vessels was manifested in the despatches from London and in unofficial warnings at Washington. Eloquent Republican senators denounced the Ship Purchase Bill as likely to involve us in a war with England, and in their speeches solemnly referred to the warnings from London. The administration itself was confused.
Very possibly the country would have stood behind the administration if it had said:
"The South is prostrate. Cotton is 20 cents in Bremen and 6 cents in Augusta. Germany is ready to take large quantities off the southern market and relieve the situation. It happens that we must have American ships to get that cotton through. We propose to buy them, and to buy them where we can get them cheapest and quickest, put them under the American flag and send them full of cotton to Germany."
Unfortunately nothing of this sort was done. Intentions were veiled until no one knew what was intended. The word Germany was taboo, either as a market to be sought or as a source for ships. People in Washington spoke of buying English and neutral ships. It was specifically said that no ships would be bought that would involve us in any difficulty with the belligerents. Officials spoke generally of running the ships "wherever needed," particularly to South America, to develop our trade there.
As to buying other than German vessels, however, England and many neutral countries put embargoes on the sale of their merchant ships away from the home flag; so that proposition was a futile one. And South America, as was easily pointed out, was in no shape to have its trade with us developed. That continent found itself unable to sell to a large part of Europe, and hence was unable to buy from us or anyone else. Vessels in the regular lines to South America were sailing out of New York only half loaded.
That is, the administration seemed to be asking for these ships from an impossible source, to institute South American services which were unnecessary and superfluous. If this was the real purpose of the Ship Purchase Bill, no money should have been voted for it. If it had some other purpose, that purpose ought to have been declared. Under our apparent concern for the displeasure of England, the bill had become a measure to buy ships nowhere in particular and run them everywhere in general. It was on this rock that the project foundered after a stormy contest in the Senate that carried through most of January and February.
It has been seen that American ocean-going ships were necessary to carry cotton to Germany. Private individuals failed to acquire such ships and the attempt to acquire them by public action failed. Long before this result had been worked out in the sensational Republican filibuster in the Senate, the real cotton shippers gave up hope of ever getting much cotton into Germany direct, and bent their efforts towards starting the movement to Germany via neutral ports, in neutral ships.
England met this contingency by two means. One of these was to urge the neutral countries adjacent to Germany to place re-export embargoes on cotton, such as they had placed on many other articles, under virtual compulsion from England. The second means was the fear created in the minds of the shippers that cotton might be declared contraband; and this fear interfered with its shipment to Germany via all neutral countries.
Pressure designed to compel re-export embargoes was first exerted on neutral Holland. In the first days of the war the Netherlands Government placed a re-exportation embargo on cotton, and the ban was never removed until January 9, 1915. This meant that the natural way into Germany was barred: the route through Holland and up the Rhine. In times of peace much of West Germany is so supplied from the oversea world, since Rotterdam, at the mouth of the Rhine, is in Dutch hands.
Another neutral country which maintained an embargo for a considerable period was Italy. The other "adjacent neutrals" at first refused. They contended for the right of their merchants to forward cotton to Germany, since cotton was on the "free list" of the Declaration of London, according to which England---barring certain modifications---professed to be acting.
That England sought deliberately to prevent cotton from moving to Germany via the neutral countries by fostering rumors that cotton was likely at any moment to be declared contraband, cannot be denied. The fear of such an event was such a potent influence in banking and insurance circles that it made cotton exports very difficult. No one knew that cotton might not be peremptorily declared contraband, as copper had been, while cargoes were in mid-ocean. What the situation called for was clear. A definite declaration from England was needed, to the effect that cotton was not and would not be considered contraband of war.
In the latter half of September and early October, attempts were made to have our government get such a declaration from England. If the State Department made an effort in this direction, the effort was not successful. Shippers who pressed for the declaration received at Washington the answer that it would be an affront to ask England to make such a statement. Was not cotton on the "free list" of the Declaration of London, and was not His Majesty's Government guiding itself by the principles of that Declaration, with certain exceptions that did not affect cotton? Therefore, ship cotton freely.
To remove the last vestige of apprehension, Solicitor Cone Johnson, of the State Department, issued on October 10 the following statement of his personal opinion as to the ease with which cotton could move to Germany:
"There is no impedient to the shipment of cotton to any country, not excepting the belligerents. Cotton is non-contraband, for the manifest reason that in its raw state it cannot be used for the purposes of war. In order to be available for use by armies and navies, or forces of the belligerents, it has first to undergo a long process of manufacture. It is ranked as a non-contraband in the London Convention.
"Of course shipments of cotton to foreign countries, if they are to escape detention, must be shipped in American or other vessels flying neutral flags. There is no legal impediment to a shipload of cotton going direct to Hamburg consigned to German spinners, and, personally, I hope to see the exportation of cotton to the countries at war increase. The English give preference, I understand, to Egyptian cotton, but other countries at war, no doubt, are in need of raw cotton. Apparently the American cotton interests should, if they have not already done so, seek out these markets."
The solicitor's optimism did not infect the cotton trade or start the cotton movement. He was right in believing that England was preferring Egyptian cotton, and that there was a market for American cotton in belligerent countries other than England. He seemed to underestimate the subtle difficulties in reaching that market. The trade waited for assurance from someone more closely in touch than the solicitor with the practices and purposes of His Majesty's Government.
That the absence of a definite British declaration that cotton was to be considered non-contraband had prevented export shipments from moving even for neutral consumption, is made clear by a telegram of the president of the New York Chamber of Commerce to Mr. Bryan on October 24. It repeated the reports that the Allies had announced cotton for Germany and Austria as on their prohibited list and had warned vessels trading with Scandinavia, Holland and Italy against carrying cotton for Germany or Austria.
Therefore, the telegram read, even shipments to neutral countries were in danger. They might be brought before a British prize court and have to establish their innocency; yet no one had been told what proofs of innocency would be satisfactory. Therefore, it went on, neither shippers nor insurance companies dared handle trade for neutral countries, to say nothing of Germany. The whole cotton trade was represented to be in a serious predicament. The message then asked that Great Britain be requested to give some authoritative statement of its attitude, both with regard to shipments destined to neutrals and shipments destined to Germany and Austria.
Indeed there was need for relief. Through September and October, cotton had been passing out of the producer's hands at a price of six cents per pound. Speaking broadly, the small southern farmer has been for years in a state of near economic slavery. He lives on credit. When the cotton-planting season comes, the general store gives the farmer on credit the seeds, fertilizer and implements he needs. During the growing season it advances him clothing and food for his family. The understanding is that the debt will be paid when the cotton is harvested. It is frequently paid by direct delivery of cotton to the store, where the farmer is credited at the current cotton price.
So in September and October of 1914, when the current price was six cents, the farmer could not hold his product until better times came. He was in debt; he was living on credit; and unless he turned his cotton in, his credit would be cut off and he would he in positive want. The storekeeper had his bills and notes to meet also; and he, too, generally had to sell the cotton at once for what it would bring.
It cannot be denied that there are large farmers in the South who are financially independent and capable of holding back their product. Some did hold it back. But even of those who could carry the cotton, there was many a cautious spirit who did not care to take the risk of cotton going still lower than the six-cent level which it reached. These men sold at eight and seven or six and one-half cents when they saw cotton falling, and later congratulated themselves on having gotten off so well.
Shippers were pressing the State Department to give them the true remedy for the evil times in the South,---the remedy that worked when applied. In the meantime, the country was full of nostrums for the malady. There was talk of the government buying the entire cotton crop and holding it. There was formed a cotton pool loan fund, which bound northern banks to help out their southern confrères, but little of the fund was ever used. The President headed the "buy-a-bale" movement. The daughter of the Speaker of the House of Representatives planned a "national cotton goods bargain day."
The final sacrifice of patriotic devotion was made by the august judges of the Mississippi Supreme Court, who, according to news despatches from Jackson, of October 26, held court clad in overalls and cotton shirts, while the lawyers argued in the same garb. The function was reported to be part of a local "cotton day," in furtherance of the "wear cotton clothes movement" in the South. War, as General Sherman said, is indeed hell.
While the learned judges were doing their best, those who had studied the export situation were applying other, and more effective, remedies. Discouraged at the failure of their efforts through the State Department, the southern senators finally turned to the British Government direct. On October 22, Senator Hoke Smith, of Georgia, introduced in the Senate a resolution providing for the appointment of a committee of five senators to look into the matter of facilitating shipments abroad. The resolution was passed and the President of the Senate appointed Senators Smith, of Georgia; Vardaman, of Mississippi; Smith, of South Carolina; Jones, of Washington; and Smith, of Michigan. The next day this committee was in touch with the State Department and the British Ambassador. The committee seemed to galvanize the British Government into action.
To have refused the southern senators would have meant legislation to enforce their demands (possibly an embargo on the exportation of something England wanted) ; for the South at that time still held the whip hand in Congress. No one knew this better than the British Government. And there were murmurings also from the great textile centers in New England and the Atlantic states, for the manufacturers had been told by Germany that if they desired the German dyestuffs vital to their industries it would be necessary to send cotton cargoes to pay for them.
Under the pressure thus exerted the British authorities gave way. On October 26, the following letter was addressed by the British Embassy to Mr. Lansing, Acting Secretary of State:
"The British Embassy, Washington, October 26, 1914.
"Dear Mr. Counsellor: in compliance with your request, I telegraphed on the twenty-third instant to my government to inquire what was their view with regard to cotton and whether or not they considered it to be contraband. You addressed this question to me, as you said there seemed to be doubts in certain quarters in this country as to the attitude of my government.
"Last night I received a reply from Sir Edward Grey, in which he authorizes me to give the assurance that cotton will not be seized. He points out that cotton has not been put in any of our lists of contraband, and, as your Department must be aware from the draft proclamation now in your possession, it is not proposed to include it in our new list of contraband. It is, therefore, as far as Great Britain is concerned, in the free list, and will remain there. I am, dear Mr. Counsellor,
"Yours sincerely,
"CECIL SPRING-RICE."
By this same declaration, the heavy restrictions on the export of cotton to neutral countries of Europe, as well as to Germany, were also removed. No one had felt safe shipping to these countries so long as there was danger that England would declare cotton contraband. England had been detaining conditional contraband like meat and copper destined for neutral countries and neutral consumption on the pretext that the goods might be en route to Germany. No compensation was in sight for the cargoes detained and still unloaded.
When the British declaration was once made, certain officials in Washington were quick to see its political value. Not one, but five or ten of them will each admit that he was the one responsible for getting the export cotton movement started. In the Senate, on December 21, Senator Walsh delivered the most complete commentary on the glory for which they were competing. He said:
"I have not dwelt on the just causes of complaint given to our shippers of foodstuffs and cotton to neutral ports. I know nothing of them in detail, but I do know that there never was a day when shipments of cotton from our shores to any port should have been interrupted, save for the want of vessels in which to carry it, and there is no achievement in any arrangement by which they have been finally permitted to move. No blockade has ever been declared, and yet it is notorious that such cotton as goes to Germany, goes with the permission of England."
.
STOPPING THE COTTON MOVEMENT
After the British Embassy's letter of October 26 to Mr. Lansing, England seemed under definite obligations not to interfere with our cotton exports to the Continent. But we were to learn that the hindrances were by no means at an end. On October 30, four days after the note of Sir Cecil Spring-Rice to Mr. Lansing, Denmark for some reason declared an embargo on the exportation of cotton. This closed the route to Germany via Copenhagen which, after Rotterdam---a route already closed---was the most natural entrance into Germany through an adjacent neutral.
Moreover, while England's position as to cotton was now on record, it was also important that assurance should be had from France. In general, that country joins England in such communications. In this case, however, by some unexplained circumstance, Secretary Bryan was not able until December 17 to announce that France also would not consider cotton contraband.
When cotton for Germany direct finally started moving, not the least of the grievances of our cotton trade was the extraordinary rigidity of the British Government with respect to precautions against suspected concealment of contraband in cotton cargoes. It was a sufficient tax upon the patience and resources of cotton exporters that German-bound cargoes should be submitted to the examination of English consuls, the process in some cases including even the sealing of the vessel's hatches by these officials. Even this gave no assurance that the ships would not be detained and searched by British cruisers. The consular certificate and the British seal on the hatches of ships were considered as merely partial proof that cargoes contained only cotton.
The further suggestion was made by England that it would be a valuable precaution against the possibility of detention and search if shippers would have the cotton bales photographed by X-ray process and the photographs sent along with the British consul's certificate as additional evidence that the cotton contained no contraband. The first of these photographic seances took place December 25 at a pier in New York in behalf of the cargo of the City of Macon, an American coastwise steamer bound for Bremen. All this was of course at the cost of the shippers.
But the most serious difficulty with a free cotton movement is to be found in still another episode of the period. On October 27, one day after the State Department had published the note of the British Ambassador, the British Admiralty alleged that the Germans had laid mines in the waters north of Ireland. On October 29 the further news came from England that this measure on the part of Germany might cause England to close the North Sea to shipping.
On November 2 the British Government declared the whole North Sea a military area, mined and dangerous for navigation. It was stated that merchant craft of all kinds would there be exposed to the gravest dangers excepting as they followed the specific sailing directions of the Admiralty. Though this announcement was not issued until November 2, the Admiralty disclaimed responsibility for accidents after November 5. All vessels trading to and from Scandinavian countries and Holland were instructed to come, if inward bound, via the English Channel and the Straits of Dover, whence they would be directed up the east coast of England and thence to destination.(11)
It will be noted that no directions are given for getting through to Germany. This mining of the North Sea had the effect of terrorizing the owners of American ships who were approached with regard to chartering of their vessels for cotton exports to Germany. It had a similar effect on the insurance men approached to insure such boats. As a result, the first American ship sailed for Bremen about the middle of December, though the British passport for cotton had been issued October 26. The requirement that all vessels for Holland and Scandinavia should pass through the English Channel, simplified the British practice of seizing, examining and detaining this traffic.
All this while, the British Cabinet was congratulating Great Britain on the success of the "economic pressure" applied to Germany. At a London banquet for the Lord Mayor on November 9, the Right Honorable Winston Churchill, First Lord of the Admiralty, declared that the economic pressure---Churchill invented the phrase---brought about by the naval blockade, would ultimately spell the doom of Germany as certainly as winter struck the leaves from the trees. On November 27 in parliament he announced: "The economic pressure on Germany continues to develop in a healthy and satisfactory manner."
It is interesting to see his Lordship even as early as November 9 speaking of the "naval blockade" of Germany. Then, as now, the British authorities were exercising by indirection the rights of blockade without undertaking its responsibilities.
Yet Great Britain has successively denied accountability for any distress of the American cotton trade. In the British communication dated February 10, the second answer to our December 26 protest, is found the following:
"Any decrease in American exports which is attributable to the war is essentially due to cotton. Cotton is an article which cannot possibly have been affected by the exercise of our belligerent rights, for, as your Excellency is aware, it has not been declared by His Majesty's Government to be contraband of war, and the rules under which we are at present conducting our belligerent operations give us no power in the absence of a blockade to seize or interfere with it when on its way to a belligerent country in neutral ships. Consequently no cotton has been stopped."
The point, of course, was that England's pressure upon cotton had been exercised so early in the course of its movement that for months it never got far enough to have a chance to be stopped by British cruisers.
While the economic pressure upon Germany was the purpose of England's measures, British merchants were by no means averse to taking advantage of the depressed cotton prices brought about by the stagnant market in the South, and buying their 1915 supply at famine rates. Of the heavy stock of cotton carried in the South during the cotton year 1914-1915, a considerable proportion was in the hands of persons who carried it for British importers and spinners. Some German buyers, as well, profited by the opportunity offered them, buying cotton to hold pending favorable conditions for shipment.
Such circumstances as these elicited a fiery outburst from Governor Colquitt of Texas. Great Britain had bought her cotton low after depressing the price, he said. The business of the South, he declared, was prostrated, its credit was impaired, and thousands of its people were starving. He proposed sending "American ironclads to England's door" to enforce our rights.
Significant of the southern feeling was the adoption of the following resolution by the State Farmers' Union of Louisiana:(12)
"Whereas the cotton farmers of the nation are suffering from the worst depression that has overtaken this country since 1860, and the business interests are correspondingly affected in common with the farmer; and
"Whereas, taking the European War as an excuse, England placed such restrictions on the exporting of cotton from the United States that it caused a ruinous decline in the price of cotton, owing to our inability to ship it to our customers in foreign countries, and England did not relax her interference with the shipment of cotton until her subjects had practically bought a year's supply of cotton at about six cents per pound from our farmers, who were forced to sell in order to exist; and
"Whereas the waters of the seas are the only means of carrying the commodities interchanged between the various nations of this earth; and
"Whereas great injustice resulted from the efforts of some nations to interfere with the untrammeled and free use of the Interchange of commodities of all kinds and interchange of intelligence; so be it
"Resolved by the Louisiana State Farmers' Educational and Co-operative Union of America, that we hereby pledge ourselves to do all in our power to obtain for ourselves and our fellow citizens and mankind generally, the freedom and unhindered use of the seas and of the air, and we hereby respectfully petition our Federal Government to give due notice to all nations, in view of the losses sustained by the people of these United States, that in future we henceforth shall ship all of our products at all times and to our customers in any nation just as in the past; that this nation, being neutral, will not favor one over the other, but will treat all alike, as it ought to do, but that our government proposes to send its own ships, under its own flag, with the products of its own citizens, to its customers in any nation on earth, and will brook interference from no one in protecting the rights and the property and trade relations of its own people."
We have seen that, in the face of all difficulties, cotton in good volume did get moving to Germany, via neutral countries, during November.(13) In a previous analysis of the movement it was assumed that most of the exports to Italy, Holland and Scandinavia in excess of their takings in 1913 may fairly be credited with German destination. In November 1,000 bales cleared for Germany direct; the indirect exports via neutral countries were approximately 143,000 bales. In December 47,000 bales cleared for Germany by the direct route, and 263,000 bales by the indirect. In January 100,000 bales moved directly, no less than 423,000 indirectly, to Germany. In February 89,000 bales were exported by the direct and some 458,000 by the indirect route. In March 6,000 bales cleared for Germany, while the excess movement to neutral countries was 370,000 bales.
The effect of this movement was seen in advancing cotton prices. On November 16 the New York Cotton Exchange reopened, fifteen weeks from the date of closing. In the initial trading, spot cotton was quoted at 7.75 cents per pound. From then until Christmas the price varied between 7.35 and 7.75 cents. On the day after Christmas the price was 7.60 and on January 4 passed 8 cents. During the second half of January it reached 8.50 cents. At that point it held until March 5, when a gradual rise began which carried the price up to 9 cents on March 20.
The great British and German takings had braced the market. The relief was cumulative, and in spite of the British blockade action on March 1, the price advanced to 10 cents on April 9 and to a maximum of 10.60 on April 24.
Yet from the day when Britain made an exception in favor of cotton and allowed us to ship it to Germany, there were English voices that protested against the exception. For some time no real excuse for interfering with the movement could be found. The first one offered came from Sir William Ramsay who, at the end of January, 1915, wrote the London Times advocating the placing of cotton on the absolute contraband list and pointing out that nitro-cotton is an ingredient of all modern powder.
"If copper lies under an embargo, cotton a fortiori should be prohibited. To place it on the list of contraband of war is a necessity, unless the whole theory of contraband is given up."(14)
If Sir William was following the successive British contraband lists he must have known that his government was by no means sacrificing the whole theory of contraband. But the inclusion of cotton in the list was not so simple as it looked.
In the first place, great American interests were at stake. In view of these, the London Daily Mail advised against the Ramsay proposal, and declared that Germany already had enough cotton for military purposes. The Mail suggested that America might retaliate by putting an embargo on ammunition exports to England.
Moreover, the main uses of cotton are so far removed from the purposes of war that to declare it absolute contraband would be an affront to international intelligence. It would be a particularly drastic violation of the Declaration of London, where the common sense of mankind had been expressed in putting cotton on the free list. And it was British representatives who at the London Conference insisted upon including cotton in this list.
Above all, the British Government as a neutral is on record as declaring that no belligerent can make cotton absolute contraband. Such action was attempted by Russia in the Russo-Japanese War. Upon instructions from Lord Lansdowne, the British Ambassador at St. Petersburg protested against this procedure. His letter to the Russian Minister of Foreign Affairs, resulting in forcing Russia to take cotton from the absolute contraband list, read:
"British India is by far the largest exporter of raw cotton into Japan. The quantity of raw cotton that might be used for explosives would be infinitesimal in comparison with the bulk of the cotton exported from India to Japan for peaceful purposes, and to treat harmless cargoes of this latter description as unconditionally contraband would be to subject a branch of innocent commerce to a most unwarrantable interference."
If cotton was to be banned it was imperative that some other way be found of dealing with this commodity, and before long the desired opportunity arose. On February 4 the German Admiralty, in retaliation against England's alleged violations of the Declaration of London and all international law in general, declared the waters around Great Britain a War Zone where enemy merchant ships would be torpedoed and where neutral vessels and citizens would not be safe. The War Zone Decree was to be effective from February 18.
Retaliation by England in the form of a complete stoppage of our exports to Germany was foreshadowed in a cable from the British Government to the British Embassy in Washington, given out for publication on February 5, the day after the War Zone announcement. The cable read in part:
"The apparent intention, however, of the German Government to sink merchant ships by submarines, without bringing them into port or providing accommodation for their crews, and regardless of loss of civilian lives, and the attempt to effect this even against a hospital ship, has raised very seriously the question whether Great Britain should adopt in retaliation more stringent measures against German trade.
"It is recognized that when any such decision to this effect is reached, due care must be taken not to inflict loss upon neutral ships which have sailed before any warning has been given or the decision announced."
This purpose was further indicated in the last paragraph of the note of February 10, addressed by Sir Edward Grey to the American Ambassador at London.(15) On the following day, February 11, Premier Asquith in the House of Commons made a statement thus reported in American press despatches:
Premier Asquith, in an announcement made to the House of Commons this afternoon, said that the British Government was about to take more stringent measures against the trade of Germany.
Replying to a question put by Admiral Lord Charles Beresford "whether the government will place all food and raw material used in German industries on the list of absolute contraband,"' the Premier said:
"The government is considering the question of taking measures against German trade in view of the violation by the enemy of the rules of war. I hope shortly to make an announcement of what those measures are to be."
It is instructive to note the tentative form in which the blockade proposal still remained. To Lord Beresford's question whether Great Britain would place on the contraband list raw materials for German industries, the Premier would only state that the government was considering what measures should be taken. The measure it was considering could as well have been announced. in parliament on February 11 as on March 1, when the blockade was finally proclaimed. But one thing had to be assured: that American public opinion, which in October had revolted against the interference with cotton, would not again revolt. The intimation of Mr. Asquith on February 11, cabled to this country, served to test whether that opinion was still active.
On February 17 a test was again made. Despatches from London stated that a proclamation was momentarily expected declaring "a blockade of the German coast, or, at any rate, the prohibition of foodstuffs destined for Germany." England still left the way clear for a strategic retirement should Washington speak. Washington was silent.
The preliminaries having been completed, on March 1 the now famous March 11 Order in Council was announced by Mr. Asquith in parliament, though it was not formally published until March 15. The announcement produced the desired effect on insurance companies, carriers and shippers. The Order in Council was in practical operation on March 2. When finally promulgated it declared subject to capture all movement of goods to or from Germany whether direct or via neutral countries. Such an Order could have but one meaning: that Great Britain proposed a blockade.
Steamers at once refused to take any more cotton or other shipments of German destination or origin. Insurance was withdrawn on all such shipments, no matter over what route they moved. A large volume of cotton bad been contracted for German delivery, but had not yet moved from this country. Its owners faced a severe situation.
It is interesting to learn how for one month this hardship was modified. An American government official called to ask the Washington Ambassador of Great Britain to do him a personal favor. America, he said, not recognizing the Order in Council or the validity of the British blockade, obviously could not officially ask for a modification of that which we considered non-existent. It is a palpable absurdity to modify what is not. However, could not His Majesty's Ambassador as a personal favor consent to some measure that would permit the cotton shippers, who before March 1 had sold cotton to Germany, to forward their cotton?
The British Ambassador yielded and wrote a telegram. It was sent to London, resulting in the following special cotton dispensation being granted by the British Embassy in Washington, in a communication issued by it on March 8:
"Many inquiries have been received as to the treatment to be accorded to cotton shipped to Europe in view of the restrictive measures proposed to be taken by the Allied Governments.
"As already announced, there is no question of confiscating cotton cargoes that may come within the scope of the Order in Council to be issued. The following arrangement has been come to in London as to cotton consigned to neutral ports only.
"One---All cotton for which contracts of sale and freight engagements had already been made before March 2 to be allowed free (or bought at contract price if stopped), provided ships sail not later than March 31.
"Two---Similar treatment to be accorded to all cotton insured before March 2, provided it is put on board not later than March 16.
"Three---All shipments of cotton claiming above protection to be declared before sailing, and documents produced to and certificates obtained from consular officers or other authority fixed by (Allied) Governments. Ships or cargoes consigned to enemy ports will not be allowed to proceed."
That is, cotton contracted for Germany before March 1 might be shipped to neutral countries up to March 31, though not to Germany direct. The modification of the original Order was a slight one; it merely prevented that Order from being retroactive. Moreover, the provision that vessels should be allowed to proceed or be bought at the contract price meant that England reserved the right to stop and requisition cargoes from America to neutrals in the future.
One vessel with a cargo destined for Germany was allowed to go forward after March 31. The conditions under which the vessel sailed are an instance of what England described as sympathetic consideration of the cotton interests. Due to a lateness in arrival of the S. S. Kina at her berth in Savannah, it became impossible to load her before the end of March. Permission for time extension on this one ship was sought by the State Department from His Majesty's Government. His Majesty's Government, through the medium of the American Ambassador at London, accorded this favor to the State Department in a cable from Mr. Page, dated March 29, 1915. It was firm, as well as kind, and read as follows:
"I am informed by the Foreign Office on the 24th that the S. S. Keit (Kina), in view of the special circumstances of the case, will be permitted to go forward on her prearranged trip from Savannah to Rotterdam, Göteborg, and Copenhagen, provided, however, that her cargo of cotton is covered, with the exception of the date of sailing, by the terms of the agreement recently concluded concerning such shipments, and further provided that there shall be allowed no undue delay to occur in reloading this steamer on arrival at Savannah and in the departure of the steamer from Savannah.
"Sir Edward Greg most earnestly requests that it be distinctly understood that this indulgence must not be used as a precedent for further exceptions from the provisions of the agreement above referred to."
The request was distinctly understood, and no further indulgence was asked. The British allowed the Kina: to go forward. They did not allow her to reach her destination. She was stopped and thrown into a British prize court.
Indeed, it became evident not only that His Majesty's Government, as announced in the Order of March 11, would allow no cargoes to go directly to German ports, but also that even the German cotton for which indirect shipment was nominally permitted was by no means to be allowed to reach its destination. To be sure there was nothing in international law or the English law to justify the stoppage of these neutral cargoes---they were mainly cargoes consigned to forwarders in neutral countries. Yet the contingency was met by the British diplomats. On March 31, as we have seen, during trial of the Wilhelmina case, the British crown lawyers, to the astonishment of this country, produced a new Order in Council empowering His Majesty's Government to requisition the cargo of any neutral vessel in a British port.
The rest was easy. Since a British cruiser could bring into a British port any neutral merchant vessel on the high seas, this Order meant that no vessel carrying goods to neutral European countries, whether cotton or anything else, was exempt from the unloading and impressment of its cargo by England. In order to make sure that no cotton would reach Germany many cargoes destined for neutral consumption were bought by England. For cargoes thus unlawfully seized the compensation promised by His Majesty's Government was by no means sufficient. The interference with established trade, the breaking up of commercial relationships, were matters of more serious import than the values of the shipments directly involved. If you in Scandinavia buy a cargo of cotton and never receive it, I may be relieved by Great Britain from loss on this particular shipment. But I get no more orders from you. You will not order what cannot be delivered. One of the country's large cotton exporters wrote on May 17:
"The exporter of cotton today can sell at a good price cotton to Sweden, Norway, Holland and Switzerland for immediate delivery or for next fall's shipment, but he is prevented from so doing by the fact that under the British Orders in Council every bale is subject to detention and seizure though shipped in neutral, even American ships. It is obvious that the spinner in Sweden or the dealer in Norway cannot afford to buy and pay cash for cotton when the chances are that there will be delivered to him not the cotton itself, but a claim against some government for detention and seizure of his goods."
It is, of course, far from a handicap to the British manufacturer of cotton goods, when competitors in Scandinavia find their supplies of raw cotton scarce and high in price. The British market is kept flooded with diversions of neutral-bound cargoes. On August 5, 1915, despatches from Washington quoted the Department of Commerce as stating that British exports of cotton goods and cotton yarns to Scandinavia and Holland in the first six months of 1915 showed a great increase over 1914. At the same time that our exporters are hindered in their exports to European neutrals, British raw cotton dealers expand their re-exportation of cotton imported from us. In June, 1915, Holland and Sweden each took from England five times as much raw cotton as in June, 1914.
In March and April, 26 cargoes of cotton destined for neutral European ports were held up in England. The "unofficial" Foreign Trade Advisers of the State Department were conferring with the British Embassy in Washington in an attempt to get these shipments released or paid for. On May 20 the pressure was so great that the British Foreign Office included a reference to cotton in the press statement which it gave out, primarily regarding the detained meat cargoes.(16) It was stated that the cotton would be purchased in accordance with the "agreement" reached with American cotton interests regarding cotton shipped in March. It was averred that this arrangement was highly satisfactory to the cotton interests and that "His Majesty's Government were given to understand that the provisions of the arrangement were acceptable to the United States Government."
The cotton interests had no means of bringing to Britain knowledge of how little satisfactory to them was an arrangement which limited to one month the continuance of their trade with neutral countries and Germany. Our government, to indicate that England was under a misapprehension in supposing that it approved of any arrangement supporting the Order in Council, ordered its Foreign Trade Advisers to withdraw from conferences with the British Embassy until England clearly understood the matter. Three days later the British Ambassador issued an official statement saying that the unofficial arrangements in question of course did not in any way involve a departure by either government from its expressed views regarding the blockade.
Not until June had Britain begun making payments on the cotton. On July 19 Sir Robert Cecil announced in parliament that $3,500,000 had been paid on the seized cargoes, which by this time were sixty in number.
The procedure through which our shippers had to go, in order to get any return for their detained shipments, was one of unexampled complexity. When the ship sailed from this country duplicate copies of papers, such as shipping documents and contracts, were to be given to British consular officials in our ports. The papers were forwarded to London and arrived in England at about the same time as the cargo which was detained for examination. The papers were referred to the British Admiralty, thence to the Foreign Office and finally to the Board of Trade. The Board of Trade took two weeks to examine the contracts. The papers were then sent to the Admiralty and by it to the Foreign Office, which had to deal with the shipper.
In the meantime six weeks were consumed. The shipper felt by this time that be ought to have his cargo freed or paid for. The "arrangement" by which the Admiralty detained cargoes provided that they should be purchased "at contract price" or released. If the shipments were contracted for when they left this country, the price appeared in the contract. If they were sent to a broker---for example, in Gothenburg---to be sold, the fair price was obviously the market price at Gothenburg on the date when the cotton would have arrived, had it not been detained by England. But when the American owner attempted to get payment on either of these bases, the British Foreign Office was willing to do no more than make a payment "on account" (maximum ten cents per pound), insisting that the eventual price, should be arbitrated.
On July 20 the Board of Trade announced a ruling that detained cotton cargoes whose ownership had passed to Germans would be confiscated without payment.
One of the most novel forms of "pressure" which Great Britain has exercised has been applied to cotton dealers in this country. Many of the most prominent are associate members of the Liverpool Cotton Exchange. The Liverpool Exchange has sent these American dealers, to be signed, an agreement not to deal directly or indirectly with enemies of His Britannic Majesty. Those who so sign will have their names posted in the Liverpool Exchange and receive preference by the Liverpool members. By implication, those who do not sign will be blacklisted by those who handle the great cotton trade of England.(17)
These then were the measures which England took to stop the movement of American cotton to Germany. The "blockade" made contraband of everything. In the spring of 1915 this was explained by His Majesty's Attorney General to a group of British scientists, who, better versed in natural science than international law, followed the lead of Sir William Ramsay and, even after March 1, demanded that cotton should be made contraband. The Attorney General explained that the blockade prevented everything from going to Germany by sea and hence it would be superfluous to name cotton as an especial object of embargo. The Order in Council, he said, was very effective in preventing cotton from reaching England's enemies. Moreover, he continued, to declare cotton contraband would be to set a precedent which might return to plague Great Britain in the future.
The effectiveness of the British policy in preventing the Germans from buying and getting our cotton is measured by the fall in cotton prices in the American market.
We have seen that the cotton market reached its high level at the end of April. Though shipments toward Germany had been cut off on March 31, the effect of the great British and German imports carried through. But early in May the trend of prices began to reflect the apprehension of the market as to the future, an apprehension that was justified as the months went by.
The German takings were over. What might have been exported to that country lay a dead weight on the market. Spot cotton in New York, which was 10.60 cents per pound on April 24, dropped to 10.05 cents on May 6, Through May and June it averaged 9.50 to 9.75 cents. By the middle of July the July option had sunk to 8.25 cents. The prospect for a successful marketing of the 1915 crop had indeed become bad.
What is the military value to England of all this economic pressure that she is exercising in the South,?. Will the German ammunition makers in the fall of 1915 be embarrassed for cotton? It is used mainly in the form of gun cotton to make charges for the artillery and torpedoes. Certainly no reports from the front indicate that the German heavy artillery is sinking into a state of inactivity and there seems to be no excessive economy of torpedoes. That any such result will occur can be asserted or expected only by those who shut their eyes to the plain facts of the case.
At the opening of the cotton shipping season, August 1, 1914, the stock of cotton in Bremen (to say nothing of the stock in German spinners' hands) was 109,000 bales, a quantity in excess of other recent years. The direct imports of American cotton into Germany from August 1, 1914, to April 1, 1915, were 242,661 bales. Adjacent neutral countries in the same period imported 1,668,846 bales more than in the same months last year. Assuming that all these excess imports of adjacent neutrals were destined for Germany, the total stock which that country had up to April 1, 1915, amounted to 2,220,507 bales.
It is likely that part of the excess exports to adjacent neutrals were for the consumption of these countries themselves. In particular, it is possible that Italy needed considerably more cotton than last year to supply her own textile mills, which appropriated some of the foreign trade in cotton goods with countries that Germany bad difficulty in reaching, such as Mediterranean lands and South America.
Assume, therefore, that Germany to April 1 had 2,000,000 bales of American cotton to meet her requirements. This is only 800,000 bales short of our exports to both Austria and Germany in the year ending August 1, 1914. Moreover, what of the 150,000 bales annually raised in Turkey? What of the 100,000 bales of Persia; and the 1,000,000 of Russian Turkestan? Is there any doubt that the Jewish dealers who handle this Russian trade smuggled a part of it into Germany, to get the high prices which Germany, alone of all buyers, was offering during the winter? Why in May did England forbid the export of Egyptian cotton to Italy, if it was not moving through to Germany?(18)
No one can imagine that the military will not be able to meet its needs from the vast store at hand, not only its needs for this year but also for a long time to come. Besides, so Hudson Maxim says, there are substitutes for raw cotton in making the explosive gun cotton. One, he informs us, is cellulose.
Great Britain is aware of all this. She knows that in the case of cotton, as in the case of grain, the military is fully supplied. The pressure will fall upon the civil users of these products, if it falls at all. The hope is that the pressure on these civil users will become unbearable and that they will force the military to sue for peace.
What is the prospect of a cotton famine in the German textile industries? For certain reasons, Germany needs less cotton than formerly. She has a large export trade in cotton goods. In 1912 this trade amounted to $31,055,000. Since the Orders in Council of March 11 placed a ban on all German exports, even if shipped from neutral ports, the only countries Germany can reach are those accessible by land or via the Baltic, which England does not control. Other oversea shipments have ceased. The only foreign markets still available are Turkey, Roumania, Bulgaria, Austro-Hungary, Switzerland, Holland and Scandinavia. In 1913 the shipments to these countries from Germany were about $4,000,000,(19) or only 13 per cent of her exports of cottons. Therefore less raw material than normal is needed to work up for the export trade.
Yet there is reason to believe that more cotton could have been used by German textile industries than was sent them from the 1914 crop. It is recalled that up to April 1 we sent to Germany about 250,000 bales; and to adjacent neutrals 1,650,000 bales more than last year. Assuming that 250,000 bales of our excess exports to adjacent neutrals were actually destined for these neutrals, it appears that up to April 1 we sent Germany, directly and indirectly, about 1,650,000 bales. With regard to German consumption, other estimates agree pretty nearly with those of Ambassador Gerard, who in December wired the State Department that in the year 1914-1915 Germany could take about 2,000,000 bales, Austria about 800,000, together 2,800,000. If that is the case, 1,150,000 bales more of the 1914 crop could have been sold to the Teutonic Allies.
If this cotton had been allowed to move, it would have probably kept the price since May 1 at or near 11 cents. At 11 cents per pound, 1,150,000 bales would have meant sales of $63,000,000 of cotton to Germany, to say nothing of the better prices that holders of cotton would have received for sales to American mills. Above all, the large quantity of the 1914 output which we are carrying into the 1915 crop year (beginning August 1) would have been considerably reduced. All this indicates the sacrifice which the South is demanded to make to a blockade which, the American Government says, England does not lawfully maintain.
With the great German-Austrian market closed by a blockade, the prospects for this 1915 season are not bright. The yield will be a good one. Early reports of a larger acreage reduction have not proved true. There has been some reduction in the use of fertilizer, especially of the potash elements, but this reduction will not greatly affect the crop, the first year it occurs.
It is simple to illustrate why no large acreage reduction is not made. As a southern planter I may know it to be in the general interests of the South, and of high prices in general, that the cotton acreage should be reduced. But I want the higher prices to apply to as much cotton as I can raise. Therefore I will let the other fellow carry out the reduction in acreage. No considerable voluntary curtailment of independent agricultural producers has ever yet come to pass. We look for a good crop; namely, at least 12,000,000 bales.
Much of the 1914 crop will be carried over. In April Mr. Harding, a member of the Federal Reserve Board, speaking before the Baltimore Chapter of the American Institute of Banking, estimated this carryover at 5,000,000 bales, due to the fact that by April foreign and domestic spinners bad already laid in supplies with an eye to the future, in excess of their current requirements. More recent estimates place the surplus at 4,000,000 bales. In any case it will be very large. The visible supply of cotton in the world at the end of July, 1915, was 2,500,000 bales higher than last year. The quantity of the 1914 American crop still in the hands of producers was 1,000,000 bales more than usual.
There is a simple solution to the crisis that confronts the South. Another autumn like the last will ruin it. The present and prospective elimination of the German-Austrian market through an unlawful blockade is the largest single element depressing prices and threatening the future. Nothing would clear the situation like the lifting of that blockade. If it is not lifted, and if cotton prices are not to sink to low levels, either the cotton raisers must have advanced to them money with which to hold millions of bales of cotton until something happens---perhaps peace---to restore the normal purchasing power of the world, or someone else will have to carry enough cotton to relieve the weight on the market.
The problems here involved go far beyond the limits of this book. The financial aid necessary will be in the nature of a valorization of the cotton crop. Banks which are asked to participate in the proceeding point out that the South is not built to hold the export cotton crop. It has not the warehouses. The export quota moves abroad and is held there. Besides this physical difficulty, the financial risk of carrying cotton for the indefinite period that this war may last is very great.
In the middle of July, 1915, a renewed agitation arose in England for making cotton contraband. The British Government announced its definite intention of confining European neutrals to the quotas of cotton which they had imported in normal years. The London Times suggested that Britain spend $175,000,000 to buy up the amount of American cotton usually sold to the Central Empires and European neutrals and then declare it contraband. The cotton so bought was to be held off the market until the close of the war. It was the most magnificent bribe ever proposed. His Majesty's Government has not adopted the suggestion.
From the British Embassy at Washington, near the end of July, seemed to emanate a suggestion that a cotton pool be formed, under the auspices of England and America, to distribute among the cotton interests such shipments as England would allow to go forward to neutral countries. It was said that England would abolish her policy of detaining cotton moving to neutrals if America would agree to ship neutrals no more than their normal takings.
All these false remedies for the disease remind us of those proposed in the fall of 1914. Now, as then, the true remedy is the recovery of the closed German-Austrian market. Now, as then, we need to think straight, to ask with the power at our command and to break a blockade which we declare is illegal and which threatens with ruin an entire section of the country.
