The Denmark mares should be bred to the best Filipino stallions, and the mare progeny of this union bred back to the Denmark stallions and the stallion progeny stood to the native mares.

The last type is the Thoroughbred. Two excellent specimens only of this breed were selected. They should be put to Filipino mares and the progeny bred to Morgans and Arabs.

The native horse has in the last few years become attacked by a frightful scourge of surra; but this disease, which is a species of glanders, has been carefully studied and, while as yet no cure has been discovered, it has been found that it is preventable and that it is not likely to attack horses except in cases where the skin, especially of the mouth, is lacerated. Great loss from this cause has resulted, but it is believed that it is now under control. The Philippine government purposes to devote much attention to this subject of the betterment and increase of the various domestic animals that so well contribute to the internal economy of a country.

Experience of the past six years has proved that an imported animal, especially the mule, with the proper care remains serviceable in the Philippines.

Many of the mares selected will be used for the service of the government, and incidentally for breeding. I earnestly renew my recommendation that nothing but mares should be furnished for all work purposes, including the mounts for cavalry, in the islands whenever their service is practicable.

Experience has shown that they will certainly do as well as geldings, and when they are worn-out or condemned for such service they will bring two or three times more than the gelding will to-day in the Philippines, and can be bred and therefore contribute to the internal

economy.

THE GOVERNMENT COLD-STORAGE AND ICE PLANT AT MANILA.

This plant was constructed in 1901 by the military government and paid for out of Philippine funds. It is one of the best and most complete plants in the world and excellently performs the functions for which it was built and maintained. It has always been operated, even under government control, at a large profit. The Philippine Commission have been under the impression that it is the kind of property that should be in private hands and not run by the government; that the government should not allow itself to maintain a plant in competition with private plants, where the public exigency does not so demand. They have, therefore, determined to sell the entire plant with the realty to private parties, and have authorized this Bureau to negotiate such sale in the United States.

The minimum price determined upon is $1,000,000, which would appear fair and equitable and present a good chance to private interests for profitable investment and an assured income in Manila. There are indications that the sale will be shortly consummated.

COMMERCE.

The summary of commerce, giving in detail the import and export trade of the archipelago, has been issued by the Bureau at regular monthly intervals during the past year, the work of the statistical division.

By means of this bulletin the public is placed in touch with commercial conditions in the islands, the statistics being so arranged as to serve as a systematic and permanent record of Philippine trade during American administration. Such a record can be fully appreciated only by one who has endeavored to prepare the same covering a number of years, and has encountered here and there the numerous lapses and incongruities that exist in the records of former sovereignty. Endeavor has been made to abridge these deficiencies as far as possible by the collection of data from various sources, the preparation of comparative tables of trade during different periods, as well as the use of graphic charts illustrating important features of Philippine commerce. In addition, and with a view to giving as wide publicity as possible to opportunities for investment and business matters generally, there are published, in connection with the statistical data avaliable, articles bearing on the resources and industries of the islands.

The following comparative table will show the imports and exports by values:

Referring briefly to the condition of trade, official returns up to June last show a sharp decrease in the export business, the purchasing power of the islands being reduced fully $3,000,000 as compared with the value of native products sold during the previous year. From more recent advices it is learned that the land area under cultivation for future crops is nearly as large as in ordinary years, and the effect of past conditions, such as the plague of locusts, so disastrous to agriculture, the epidemic of rinderpest, causing the death of many farm cattle, and other causes beyond the power of the government to control, is now gradually wearing off.

The imports from all countries aggregated $33,220,761, as against $32,971,882 in 1903. Included in this trade for the past year were: Food stuffs valued at $15,690,910 (rice imports being worth $11,548,814); cotton goods, $4,919,840; metal and metal manufactures, $3,430,334; paper and manufactures of, $753,930; oils, $617,179; other articles, $7,808,568.

Since September, 1903, by act of the Commission, articles for use of the insular government have passed through the different customshouses subject to the same duty charge as merchandise imported by private firms and are now included in monthly statements to this

Bureau. Supplies, however, for the Army and Navy come in duty free. The business referred to is quite large, and by reason of many of the purchases being made in markets of the United States our trade with the islands is much heavier than heretofore, so much so that, excluding Asiatic territory from which large shipments of rice have been received, we now rank as the leading import country in addition to holding most of the export trade.

Of the exports, hemp is valued at practically the same as last year, the larger part of the trade, while still with the United States, shows a loss during the twelve months of more than a million and a half dollars, and shipments to that amount appear to have been diverted into English channels. This is further demonstrated by the record of United States imports for periods during which hemp cargoes from Manila by way of the United Kingdom would have time to reach here, receipts for the first quarter of the present fiscal year being far below those for the same months of 1903, and made up to a greater extent by indirect shipments. In view of the provisions of section 4, act of March 8, 1902, by which American hemp buyers are entitled to a refund of the duty paid on exports to this country, the only explanation for the present drop in trade as a whole is found to be, it has been alleged, in the statement that there is much hemp of an inferior grade being offered. It is understood that consumers in this country, while awaiting an improvement in the situation, use other fiber wherever it is possible to do so, sisal, the principal substitute, showing an importation of $16,000,000 (nearly all from Mexico), or an increase of $3,000,000 worth over the consumption a year ago.

Copra, the product of the cocoanut palm, shows a decided falling off, its loss approximating $2,000,000. It is alleged that the small amount of rainfall in certain sections has interfered with the crop. However, the growth and preparation of the cocoanut is a profitable industry with the natives, and there is little doubt that the setback is but temporary.

One large American cocoanut-oil manufactory has reported to the Bureau that it is in the process of moving its plant from San Francisco to Manila to convert copra into oil and supply the trade in this country, and thereby eliminate the large freight cost of the raw material to the United States, as well as to make cheaper initial purchases in the islands.

Philippine sugar trade has suffered, and although there is a slight increase in the tobacco trade over 1903, in both the crude and manufactured article, the figures are considerably below the usual average when compared with previous years.

PROPOSED MODIFICATION OF PHILIPPINE TARIFF.

Inasmuch as the practical application of the tariff schedules in operation since November 15, 1901, and approved by the Congress of the United States March 8, 1902, naturally developed certain inequalities, a revision thereof was deemed advisable. With this idea in view, a committee composed of customs experts and Philippine business men was appointed to take evidence of persons interested, and to make report to the Philippine Commission as to changes needed in the existing tariff law, so as to enable the latter to recommend to Congress amendments to the law in such particulars as experience has shown the said law to be defective, inconsistent with itself, or oppressive in the matter of prohibiting useful importations.

This committee sat in Manila and availed itself of every source of information. The conclusions of the committee were reached after a careful discussion, and with one or two exceptions its report represents the unanimous opinion of the committee.

This report, together with the recommendations of the Philippine Commission and the collector of customs for the Philippine Islands, was transmitted to the War Department, and the original tariff and the changes suggested have been published side by side and will be given wide publicity in the United States, and suggestions and recommendations have been invited.

The descriptive language in many paragraphs in the old tariff has been changed for the purpose of securing more exact definition and description of articles without any change in the rates of duties which have been found to be equitable, imposing no undue burden on the commerce of the islands. In some cases the rates of duties have been increased and in others the rates have been reduced, the general average appearing to be to secure for most articles, except those of luxury, a rate of approximately 20 per cent.

Perhaps the most important change has been made in the machinery schedules, which have been removed from the specific to the ad valorem basis and the rates thereon ranging from 5 per cent on agricultural machinery to 20 per cent on electrical machinery, such as dynamos and motors, recommended.

Provision has been made for samples imported by commercial travelers to the value of $2,000 to be imported under bond free of duty. The provisions for the free entry of personal effects have been made more liberal.

After the commercial bodies and others to whom the proposed tariff has been transmitted have submitted to this Bureau such suggestions and recommendations as they may care to make, all of the same will be carefully considered by the Secretary of War, and the final revision of the tariff schedules will be undertaken and transmitted to the Congress.

SEPARATE TARIFF FUND IN UNITED STATES TREASURY TO CREDIT OF PHILIPPINE ISLANDS.

The amounts collected in the United States on products of the islands and on account of tonnage dues since March 8, 1902, to and including June, 1904, are shown by the following statement, which constitutes a separate fund in the United States accruing to the Philippine Islands:

The foregoing statement shows the collections under each heading made since the date of the passage of the act. The amounts collected have continued to show considerable variation, exceptional shipments of sugar arriving at ports of the United States during the months of September, October, November, and December of 1903 being largely the cause of the increase noticed in those months.

Of the funds mentioned, the Treasurer of the United States has, upon request of the Secretary of War, deposited with the Philippine depository in New York, to the credit of the treasurer of the Philippine Islands, to and including June of 1904, the sum of $721,885.80. Refundable export duties during the period March 8, 1902, to June 30, 1904, have amounted to...

United States collections for the same period.

Difference or net loss sustained by insular revenues on account of
refunds...

$1,050, 906. 00

721,885. 80

329,020. 20

The effect of the operation of the act of March 8, 1902, upon the revenues of the islands is far from what it is believed was the intention of that legislation. Instead of a benefit to the islands, it has resulted in a constant loss. The act provides that duties collected on imports from the Philippines into the United States shall be turned over to the insular treasury. It also provides that on goods shipped to the United States from the Philippines on which no import duty is collected in the United States, the amount of export duty collected in the Philippines shall be subject to refund from insular revenues. shown above, under these provisions there has resulted a drain on insular revenues because of large refunds of export duty on shipments of manila hemp, which is admitted into the United States free of duty. At the same time the legislation has had the effect of diverting the hemp direct to the United States.

COASTWISE TRADE.

As

On page 6 is quoted the legislation passed in the last session of Congress. It will be seen that this legislation deferred until July 1,