THE BILL H. R. 9051, TO REDUCE TAXATION AND IN FOUR PARTS. PART II. WASHINGTON: GOVERNMENT PRINTING OFFICE. 1888. 2.10/25/30 TARIFF STATEMENTS. 643 BESSEMER STEEL INDUSTRY. An industry which consumes one-half the iron ore and one-half the pig-iron that we annually produce. LETTER TO THE HON. WILLIAM D. KELLEY. OFFICE OF THE AMERICAN IRON AND STEEL ASSOCIATION, No. 261 South Fourth street, Philadelphia, March 1, 1888. DEAR SIR: The following information concerning the Bessemer steel industry of this country, the products of which industry will become a subject of discussion in the Ways and Means Committee of the House of Representatives of the Fiftieth Congress, of which committee you are a member, is respectfully submitted for the consideration of yourself and your associates: HISTORY AND PRESENT DEVELOPMENT OF THE INDUSTRY. The first attempts to establish the Bessemer steel industry in this country were made in 1864 by two companies of enterprising American citizens. The works of one company were located at Troy, N. Y., and the works of the other were located at Wyandotte, Mich. The first Bessemer steel made in the United States was made at Wyandotte in 1864, and the first Bessemer steel rails made in this country were rolled at Chicago in 1865 from blooms made at Wyandotte. The works at Wyandotte were afterwards abandoned, having served the experimental purposes for which they were established. Pennsylvania followed New York and Michigan in the erection of Bessemer steel works, and it had the honor of securing the first financial failure among such enterprises in this country, its Freedom Iron and Steel Works, which were erected in 1867, going down disastrously in 1870. Prior to 1870, however, other works had been established, and in that year three works were prepared to make steel rails-one at Troy, N. Y.; one at Harrisburg, Pa.; and one at Newburgh, Ohio. In the same year a duty of $28 per ton on steel rails was enacted by Congress, to take effect January 1, 1871, and with this encouragement several other works were soon built. The whole number of Bessemer steel works in this country at the beginning of 1880 was eleven, of which one was in New York, five were in Pennsylvania, one was in Ohio, three were in Illinois, and one was in Missouri. The whole number which had been built at the beginning of 1888, not including eight small Clapp-Griffiths plants, was thirtyfive, with three in course of erection, of which Massachusetts contained one, New York one, Pennsylvania fifteen, Virginia one, West Virginia two, Tennessee two, Ohio six. Indiana one, Illinois seven, Missouri one, and Colorado one. Of the thirty-five completed works, twenty-one made Bessemer steel rails in 1887, of which Massachusetts contained one, New York one, Pennsylvania eight, West Virginia one, Tennessee one, Ohio one, Illinois six, Missouri one, and Colorado one. The production of Bessemer steel ingots in this country in 1887, including the small quantity made in the Clapp Griffiths works, was 2,936,033 gross tons, and the production of Bessemer steel rails in the same year from ingots made in this country was 2,044,819 gross tons. Our production of both Bessemer steel ingots and Bessemer steel rails in that year was much larger than that of Great Britain or of any other country, and our production of both products has exceeded that of any country for a number of years. Pennsylvania made over 53 per cent. of all the Bessemer steel ingots produced in 1887, Illinois made over 26 per cent., and nine other States made over 20 per cent. Chicago made more Bessemer steel ingots and rails in 1887 than Allegheny County, Pa. Nearly one-half of all the iron ore and nearly one-half of all the pigiron produced in the United States in 1887 were absorbed by our Bes semer steel industry, which also created a market for about one-third of all the fuel and about one-half of all the limestone that our iron and steel industries of every description consumed in that year. Our production of iron ore in 1887 was about 11,300,000 gross tons, and our production of pig iron in the same year was 6,417,148 gross tons. It is an important and even a startling fact that nearly one-half of this immense tonnage was required to meet the wants of our Bes semer steel industry. The raw materials and finished products which were transported on account of our Bessemer steel industry over our railroads and various water-routes in 1887 amounted to about 16,000,000 tons, while the supplies for the workmen employed in the same year in producing these raw materials and converting them into finished products aggregated 1,000,000 tons. The raw materials and finished products received and shipped in the year ended October 1, 1887, by one Bessemer steel company whose accounts we have examined aggregated over 1,000,000 tons, and its payments for freight aggregated $2,185,000, which did not include freight charges paid by purchasers of a large part of its finished products. In the preceding year the payments of this company for transportation aggregated $2,236,000. No exact computation of the large number of workmen directly employed in this country in 1887 in the manufacture of Bessemer steel and in the production of its raw materials is possible, owing to the scattered and multifarious sources from which these raw materials are obtained; while the number of persons engaged in transportation, farming, dairy. ing, general trade, and in domestic, mechanical, and professional service who are indirectly supported in whole or in part by this industry must be many times larger. The aggregate market value of the Bessemer steel produced in the United States in 1887 was not less than $120,000,000, most of which sum was paid in wages to the workmen engaged in producing raw materials and finished products, and a large part of the re'mainder, aggregating probably 30 per cent. of the whole value, was paid for transportation. It may be safely asserted that if our Bessemer steel industry were now to be destroyed as the result of hostile legislation, the prosperity of the whole people of this country would be seriously affected, and the employment of at least half a million persons would come to an end. The wonderful development of this great industry, including the experimental stage which lasted for several years, has been accomplished in less than a quarter of a century. This development has been wholly the result of a protective duty on steel rails, as will now be shown. HOW A PROTECTIVE DUTY FOR OUR BESSEMER STEEL INDUSTRY WAS FIRST OBTAINED. When the manufacture of Bessemer steel was commenced in this country, in 1864, the duty imposed on Bessemer steel rails, the princi pal finished product of Bessemer steel, was 45 per cent., as a manufacture of steel not otherwise provided for, and this duty continued unaltered down to the passage of the act of July 14, 1870, which, as has already been stated, changed the duty to a specific rate of $28 per ton, taking effect January 1, 1871. It had been found in the six years intervening between 1864 and 1870 that the ad valorem rate of 45 per cent. was not sufficiently protective to induce capitalists to invest the large sums of money that were necessary to erect a sufficient number of works to supply the growing demand for steel rails, and it was also feared that the duty mentioned would not prevent the destruction through foreign competition of the few works that had already been established. Steel rails had fallen in price in England from 350 shillings per ton in 1864 to 200 shillings in 1870. We need not stop to inquire whether the prospect of annually increasing the production of steel rails in this country had any influence in bringing down the English price; it is enough to know that, considering all the risks to be incurred in the establishment of a new industry of large proportions, foreign competition had become so severe that further expansion of our Bessemer steel industry was impossible under the existing duty. On January 31, 1867, the United States Senate recognized the inadequacy of the ad valorem rate of duty, and passed a bill substituting a specific rate of 2 cents a pound, or $44.80 per ton, but this measure failed in the House. A number of railroad officers united at this time in a petition to Congress asking for the imposition of a duty of 2 cents per pound on steel rails, or $56 per ton. Erastus Corning, Jay Cooke, J. D. Perry, J. Edgar Thomson, J. Gregory Smith, and many other railroad officers signed this petition. It was not, however, until 1870 that Congress was induced to substitute a specific for an ad valorem rate, but instead of 2 cents or 23 cents a pound the rate was made 14 cents, or $28 per ton. The infiuences which appealed to Congress twenty years ago to protect our undeveloped Bessemer steel industry against the formidable competition of Bessemer steel rails of foreign manufacture, and which prayed that an adequate specific duty should be substituted for an inadequate ad valorem duty, represented chiefly the consumers of steel rails. A few public-spirited citizens who had risked a great deal of money in attempting to establish the new industry also petitioned for protection. But those who had most at stake in the adoption of a sufficiently protective duty, and whose plea had most weight in securing the favorable action of Congress, were the owners of American railroads, who had no faith in a continuance of the decline in prices of English steel rails after American works should be closed as the result of competition which they could not meet, and who were also patriotic enough to believe that steel rails for American railroads should be made in our own country instead of in some other country. Hence the officers of these railroads, with great unanimity, asked Congress to impose a duty of 2 cents a pound, or $44.80 per ton, on foreign steel rails, in the confident expectation that the home competition in the manufacture of steel rails which would thus be created would result in an increased supply of rails and eventually in lowering their price below that which then prevailed. Here is their petition presented to Congress in April, 1870, but written about January 1 of that year. It will be remembered that there were not so many railroads in this country in 1870 as there are now in 1888. The price of foreign steel rails referred to in the petition includes the duty of 45 per cent. |