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third edition

international
economics
ROBERT C. FEENSTRA ALAN M. TAYLOR
University of California, Davis University of California, Davis

Worth Publishers
A Macmillan Higher Education Company
Senior Vice President, Editorial and Production: Catherine Woods
Publisher: Charles Linsmeier
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Marketing Manager: Tom Digiano
Marketing Assistant: Tess Sanders
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Development Editors: Jane Tufts and Bruce Kaplan
Associate Development Editor: Mary Walsh
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Director of Digital and Print Development: Tracey Kuehn
Associate Managing Editor: Lisa Kinne
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Printing and Binding: RR Donnelley

Cover Photo Credits: © Ocean/Corbis

Library of Congress Control Number: 2013957830

ISBN-13: 978-1-4292-7842-3
ISBN-10: 1-4292-7842-0

© 2014, 2008, 2012 by Worth Publishers

All rights reserved.

Printed in the United States of America

First printing

Worth Publishers
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New York, NY 10010
www.worthpublishers.com
About the Authors

Bud Harmon
Robert C. Feenstra and Alan M. Taylor research associates of the National Bureau of Economic
are Professors of Economics at the University of Research, where Feenstra directs the International
California, Davis. They each began their studies Trade and Investment research program. They have
abroad: Feenstra received his B.A. in 1977 from both published graduate level books in international
the University of British Columbia, Canada, and economics: Offshoring in the Global Economy and Product
Taylor received his B.A. in 1987 from King’s College, Variety and the Gains from Trade (MIT Press, 2010),
Cambridge, U.K. They trained as professional econo- by Robert C. Feenstra, and Global Capital Markets:
mists in the United States, where Feenstra earned his Integration, Crisis and Growth (Cambridge University
Ph.D. in economics from the Massachusetts Institute Press, 2004), by Maurice Obstfeld and Alan M. Taylor.
of Technology in 1981 and Taylor earned his Ph.D. in Feenstra received the Bernhard Harms Prize from
economics from Harvard University in 1992. Feenstra the Institute for World Economics, Kiel, Germany,
has been teaching international trade at the under- in 2006, and delivered the Ohlin Lectures at the
graduate and graduate levels at UC Davis since 1986, Stockholm School of Economics in 2008. Taylor was
where he holds the C. Bryan Cameron Distinguished awarded a Guggenheim Fellowship in 2004 and was
Chair in International Economics. Taylor teaches awarded a Houblon-Norman/George Fellowship by
international macroeconomics, growth, and economic the Bank of England in 2009–10.
history at UC Davis, where he also holds appoint- Feenstra lives in Davis, California, with his wife,
ments as Director of the Center for the Evolution of Gail, and has two grown children: Heather, who is
the Global Economy and Professor of Finance in the a genetics counselor; and Evan, who is a musician
Graduate School of Management. and entrepreneur. Taylor also lives in Davis, with his
Both Feenstra and Taylor are active in research and wife, Claire, and has two young children, Olivia and
policy discussions in international economics. They are Sebastian.

v �
To our parents
Brief Contents
PART 1 Introduction to International Trade PART 5 Introduction to International
Chapter 1 Trade in the Global Economy 1 Macroeconomics
Chapter 12 The Global Macroeconomy 411
PART 2 Patterns of International Trade
Chapter 2 Trade and Technology: The Ricardian PART 6 Exchange Rates
Model 27 Chapter 13 Introduction to Exchange Rates and
Chapter 3 Gains and Losses from Trade in the the Foreign Exchange Market 435
Specific-Factors Model 59 Chapter 14 Exchange Rates I: The Monetary
Chapter 4 Trade and Resources: The Approach in the Long Run 473
Heckscher-Ohlin Model 87 Chapter 15 Exchange Rates II: The Asset
Chapter 5 Movement of Labor and Capital Approach in the Short Run 521
between Countries 123
PART 7 The Balance of Payments
PART 3 New Explanations for International Chapter 16 National and International Accounts:
Trade Income, Wealth, and the Balance of
Payments 567
Chapter 6 Increasing Returns to Scale and
Monopolistic Competition 165 Chapter 17 Balance of Payments I: The Gains
from Financial Globalization 609
Chapter 7 Offshoring of Goods and
Services 197 Chapter 18 Balance of Payments II: Output,
Exchange Rates, and Macroeconomic
PART 4 International Trade Policies Policies in the Short Run 663
Chapter 8 Import Tariffs and Quotas Under
PART 8 Applications and Policy Issues
Perfect Competition 233
Chapter 19 Fixed Versus Floating: International
Chapter 9 Import Tariffs and Quotas Under
Monetary Experience 715
Imperfect Competition 279
Chapter 20 Exchange Rate Crises: How Pegs
Chapter 10 Export Subsidies in Agriculture and
Work and How They Break 757
High-Technology Industries 327
Chapter 21 The Euro 811
Chapter 11 International Agreements: Trade,
Labor, and the Environment 367 Chapter 22 Topics in International
Macroeconomics 859
Index I-1

vii �
Contents

Preface xxvi

PART 1 CHAPTER 1 Trade in the Global Economy 1

Introduction to 1 International Trade 3
International Trade The Basics of World Trade 3
HEADLINES Sum of iPhone Parts: Trade Distortion 5
APPLICATION Is Trade Today Different from the Past? 5
Map of World Trade 7
Trade Compared with GDP 11
Barriers to Trade 12
“First Golden Age” of Trade 12
“Second Golden Age” of Trade 14
HEADLINES A Sea Change in Shipping 50 Years Ago 15

2 Migration and Foreign Direct Investment 16

Map of Migration 16
Map of Foreign Direct Investment 19

3 Conclusions 23
Key Points, Key Terms, and Problems

CHAPTER 2 Trade and Technology: The Ricardian Model 27

PART 2
1 Reasons for Trade 29
Patterns of
Proximity 29
International Trade
Resources 30
Absolute Advantage 30
SIDE BAR Can Comparative Advantage Be Created? The Case
of “Icewine” 31
Comparative Advantage 32
SIDE BAR David Ricardo and Mercantilism 32

2 Ricardian Model 33
The Home Country 33
The Foreign Country 37

� viii
 CONTENTS ix

APPLICATION Comparative Advantage in Apparel, Textiles, and

Wheat 38

3 Determining the Pattern of International Trade 40

International Trade Equilibrium 41
APPLICATION Labor Productivity and Wages 46

4 Solving for International Prices 47

Home Export Supply Curve 47
International Trade Equilibrium 51
APPLICATION The Terms of Trade for Primary Commodities 52

5 Conclusions 53
Key Points, Key Terms, and Problems

CHAPTER 3 Gains and Losses from Trade in the Specific-Factors

Model 59
1 Specific-Factors Model 61
The Home Country 61
The Foreign Country 64
Overall Gains from Trade 64
APPLICATION How Large Are the Gains from Trade? 65

2 Earnings of Labor 66
Determination of Wages 66
Change in Relative Price of Manufactures 68
APPLICATION Manufacturing and Services in the United States:
Employment and Wages across Sectors 71
APPLICATION Trade Adjustment Assistance Programs: Financing the
Adjustment Costs of Trade 73

3 Earnings of Capital and Land 74

Determining the Payments to Capital and Land 74
HEADLINES Services Workers Are Now Eligible for Trade
Adjustment Assistance 75
Numerical Example 77
What It All Means 80
APPLICATION Prices in Agriculture 80

4 Conclusions 82
HEADLINES Rise in Coffee Prices—Great for Farmers,
Tough on Co-ops 83
Key Points, Key Terms, and Problems
x CONTENTS

CHAPTER 4 Trade and Resources: The Heckscher-Ohlin

Model 87
1 Heckscher-Ohlin Model 88
Assumptions of the Heckscher-Ohlin Model 89
APPLICATION Are Factor Intensities the Same Across Countries? 91
No-Trade Equilibrium 92
Free-Trade Equilibrium 94

2 Testing the Heckscher-Ohlin Model 98

Leontief’s Paradox 99
Factor Endowments in 2010 100
Differing Productivities across Countries 102
HEADLINES China Drawing High-Tech Research from
U.S. 105
Leontief’s Paradox Once Again 107

3 Effects of Trade on Factor Prices 110

Effect of Trade on the Wage and Rental of Home 110
Determination of the Real Wage and Real Rental 113
Changes in the Real Wage and Rental: A Numerical Example 115
APPLICATION Opinions toward Free Trade 117

4 Conclusions 119
Key Points, Key Terms, and Problems

CHAPTER 5 Movement of Labor and Capital Between

Countries 123
1 Movement of Labor between Countries: Migration 125
Effects of Immigration in the Short Run: Specific-Factors
Model 125
APPLICATION Immigration to the New World 128
APPLICATION Immigration to the United States and Europe
Today 129
HEADLINES Call for Return of Border Controls in Europe 130
HEADLINES The Economic Windfall of Immigration
Reform 131
Other Effects of Immigration in the Short Run 133
Effects of Immigration in the Long Run 134
Rybczynski Theorem 139
Factor Price Insensitivity Theorem 140
APPLICATION The Effects of the Mariel Boat Lift on Industry
Output in Miami 140
APPLICATION Immigration and U.S. Wages, 1990–2006 142
 CONTENTS xi

2 Movement of Capital between Countries: Foreign Direct

Investment 144
Greenfield Investment 145
FDI in the Short Run: Specific-Factors Model 145
FDI in the Long Run 147
APPLICATION The Effect of FDI on Rentals and Wages in
Singapore 149

3 Gains from Labor and Capital Flows 151

HEADLINES The Myth of Asia’s Miracle 151
Gains from Immigration 152
SIDE BAR Immigrants and Their Remittances 155
APPLICATION Gains from Migration 156
Gains from Foreign Direct Investment 159

4 Conclusions 160
Key Points, Key Terms, and Problems

CHAPTER 6 Increasing Returns to Scale and Monopolistic PART 3 

Competition 165 New Explanations
1 Basics of Imperfect Competition 168 for International
Monopoly Equilibrium 168 Trade
Demand with Duopoly 169

2 Trade Under Monopolistic Competition 170

Equilibrium without Trade 172
Equilibrium with Free Trade 174

3 The North American Free Trade Agreement 178

Gains and Adjustment Costs for Canada Under NAFTA 178
HEADLINES The Long and the Short of the Canada-U.S. Free
Trade Agreement 179
Gains and Adjustment Costs for Mexico Under NAFTA 179
HEADLINES NAFTA Turns 15, Bravo! 180
HEADLINES Nearly 20 Years After NAFTA, First Mexican Truck
Arrives In U.S. Interior 181
Gains and Adjustment Costs for the United States Under NAFTA 184

4 Intra-Industry Trade and the Gravity Equation 187

Index of Intra-Industry Trade 188
The Gravity Equation 189
APPLICATION The Gravity Equation for Canada and the United
States 190

5 Conclusions 193
Key Points, Key Terms, and Problems
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xii CONTENTS

CHAPTER 7 Offshoring of Goods and Services 197

SIDE BAR ”Foreign Outsourcing” Versus “Offshoring” 199

1 A Model of Offshoring 200

Value Chain of Activities 200
Changing the Costs of Trade 203
APPLICATION Change in Relative Wages Across Countries 205
Change in Relative Wages in the United States 206
Change in Relative Wages in Mexico 211

2 The Gains from Offshoring 212

Simplified Offshoring Model 213
Production in the Absence of Offshoring 213
Terms of Trade 216
APPLICATION U.S. Terms of Trade and Service Exports 219

3 The Politics and Future of Offshoring 222

HEADLINES How to Destroy American Jobs 224
HEADLINES Caterpillar Joins “Onshoring” Trend 225
The Future of U.S. Comparative Advantage 225

4 Conclusions 226
Key Points, Key Terms, and Problems

­­­­PART 4 CHAPTER 8 Import Tariffs and Quotas Under Perfect

International Trade Competition 233
Policies 1 A Brief History of the World Trade Organization 235

2 The Gains from Trade 236

Consumer and Producer Surplus 236
SIDE BAR Key Provisions of the GATT 237
Home Welfare 239
Home Import Demand Curve 241

3 Import Tariffs for a Small Country 242

Free Trade for a Small Country 242
Effect of the Tariff 242
Why and How Are Tariffs Applied? 246
SIDE BAR Safeguard Tariffs 247
APPLICATION U.S. Tariffs on Steel and Tires 248

4 Import Tariffs for a Large Country 256

Foreign Export Supply 256
Effect of the Tariff 257
 CONTENTS xiii

APPLICATION U.S. Tariffs on Steel Once Again 261

5 Import Quotas 263

Import Quota in a Small Country 263
HEADLINES Banana Wars 265
HEADLINES Sugar Could Sweeten U.S. Australia Trans-Pacific
Trade Talks 266
APPLICATION China and the Multifibre Arrangement 269

6 Conclusions 272
Key Points, Key Terms, and Problems

CHAPTER 9 Import Tariffs and Quotas Under Imperfect

Competition 279
1 Tariffs and Quotas with Home Monopoly 281
No-Trade Equilibrium 282
Free-Trade Equilibrium 283
Effect of a Home Tariff 284
Effect of a Home Quota 286
APPLICATION U.S. Imports of Japanese Automobiles 288

2 Tariffs with Foreign Monopoly 291

Foreign Monopoly 291
APPLICATION Import Tariffs on Japanese Trucks 293
HEADLINES The Chickens Have Come Home to Roost 295

3 Dumping 296
Numerical Example of Dumping 298

4 Policy Response to Dumping 298

Antidumping Duties 299
APPLICATION United States Imports of Solar Panels from
China 299
APPLICATION Antidumping Duties Versus Safeguard Tariffs 302

5 Infant Industry Protection 304

Free-Trade Equilibrium 306
Tariff Equilibrium 306
APPLICATION Examples of Infant Industry Protection 308
Government Policies in the Solar Panel Industry 308
U.S. Tariff on Heavyweight Motorcycles 310
HEADLINES Solar Flares 310
Computers in Brazil 314
Protecting the Automobile Industry in China 316
xiv CONTENTS

HEADLINES Milestone for China Car Output 316

HEADLINES Shanghai Tie-Up Drives Profits for GM 318

6 Conclusions 320
Key Points, Key Terms, and Problems

CHAPTER 10 Export Subsidies in Agriculture and High-

Technology Industries 327
1 WTO Goals on Agricultural Export Subsidies 329
Agricultural Export Subsidies 329
Other Matters from the Hong Kong WTO Meeting 330

2 Export Subsidies in a Small Home Country 331

Impact of an Export Subsidy 332

3 Export Subsidies in a Large Home Country 334

Effect of the Subsidy 334
APPLICATION Who Gains and Who Loses? 336
HEADLINES G8 Shifts Focus from Food Aid to
Farming 339
HEADLINES Hunger and Food Security Back on Political
Agenda 340

4 Production Subsidies 340

Effect of a Production Subsidy in a Small Home Country 341
Effect of the Production Subsidy in a Large Home Country 343

5 Export Tariffs 343

Impact of an Export Tariff in a Small Country 344
Impact of an Export Tariff in a Large Country 345

6 Export Quotas 347

APPLICATION Chinese Export Policies in Mineral Products 349

7 High-Technology Export Subsidies 351

HEADLINES China Signals Support for Rare Earths 352
“Strategic” Use of High-Tech Export Subsidies 352
Effect of a Subsidy to Airbus 355
Subsidy with Cost Advantage for Boeing 357
APPLICATION Subsidies to Commercial Aircraft 358

8 Conclusions 361
HEADLINES EU Seeks $12 billion from US over Boeing
Aid 362
Key Points, Key Terms, and Problems
 CONTENTS xv

CHAPTER 11 I nternational Agreements: Trade, Labor,

and the Environment 367
1 International Trade Agreements 370
The Logic of Multilateral Trade Agreements 370
Regional Trade Agreements 373
Trade Creation and Trade Diversion 375
Numerical Example of Trade Creation and Diversion 375
HEADLINES China-ASEAN Treaty Threatens Indian
Exporters 376
Trade Diversion in a Graph 377
APPLICATION Trade Creation and Diversion for Canada 380

2 International Agreements on Labor Issues 380

Labor Side Agreement Under NAFTA 381
Other Labor Agreements 382
HEADLINES Wal-Mart Orders Chinese Suppliers to Lift
Standards 384
HEADLINES American Tariffs, Bangladeshi Deaths 386
HEADLINES U.S. Suspends Bangladesh’s Preferential Trade
Status 387

3 International Agreements on the Environment 388

Environmental Issues in the GATT and WTO 388
Does Trade Help or Harm the Environment? 391
Examples of the Environmental Impact of Trade 394
The Tragedy of the Commons 396
International Agreements on Pollution 400
APPLICATION The Kyoto Protocol and the Copenhagen Accord 402

4 Conclusions 404
HEADLINES Dismal Outcome at Copenhagen Fiasco 405
Key Points, Key Terms, and Problems

CHAPTER 12 The Global Macroeconomy 411 PART 5 

1 Foreign Exchange: Currencies and Crises 412 Introduction to
How Exchange Rates Behave 413
International
Why Exchange Rates Matter 414
Macroeconomics
When Exchange Rates Misbehave 415
Summary and Plan of Study 416
HEADLINES Economic Crisis in Iceland 417

2 Globalization of Finance: Debts and Deficits 418

Deficits and Surpluses: The Balance of Payments 418
Debtors and Creditors: External Wealth 421
xvi CONTENTS

Darlings and Deadbeats: Defaults and Other Risks 422

Summary and Plan of Study 423

3 Government and Institutions: Policies and Performance 424

Integration and Capital Controls: The Regulation of International
Finance 424
Independence and Monetary Policy: The Choice of Exchange Rate
Regimes 426
Institutions and Economic Performance: The Quality of Governance 427
Summary and Plan of Study 429
HEADLINES The Wealth of Nations 429

4 Conclusions 431
Key Points, Key Terms, and Problems

PART 6 CHAPTER 13 Introduction to Exchange Rates and the Foreign

Exchange Rates Exchange Market 435
1 Exchange Rate Essentials 436
Defining the Exchange Rate 436
Appreciations and Depreciations 438
Multilateral Exchange Rates 440
Example: Using Exchange Rates to Compare Prices in a Common
Currency 441

2 Exchange Rates in Practice 443

Exchange Rate Regimes: Fixed Versus Floating 443
APPLICATION Recent Exchange Rate Experiences 444

3 The Market for Foreign Exchange 449

The Spot Contract 449
Transaction Costs 450
Derivatives 450
APPLICATION Foreign Exchange Derivatives 451
Private Actors 452
Government Actions 452

4 Arbitrage and Spot Exchange Rates 453

Arbitrage with Two Currencies 454
Arbitrage with Three Currencies 455
Cross Rates and Vehicle Currencies 456

5 Arbitrage and Interest Rates 457

Riskless Arbitrage: Covered Interest Parity 457
APPLICATION Evidence on Covered Interest Parity 459
Risky Arbitrage: Uncovered Interest Parity 460
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 But it is not merely in ship-building, but in ship-repairing that the
genius of those responsible is fully shown. Some of the
achievements which have been wrought in this way are scarcely less
remarkable than the work of building the ship from the beginning. It
would be impossible here to go through all the historic occasions
when the ship-builder’s art has been so exceptionally manifested,
but it is pertinent to our inquiry to mention some of the most
interesting. One of the most recent was the repairing of the P. & O.
China, after she had been on the rocks at Perim for several months.
The damage was so serious that Harland and Wolff had to
reconstruct her entire bottom, and the docking of her for repairs was
supposed to have been a notable engineering feat. The American
liner now called the Philadelphia, of which we gave an illustration on
another page, some years ago caused consternation by getting so
far out of her course whilst proceeding down channel that she ran on
to the dreaded Manacles, south of Falmouth. Eventually she was got
off, but her damage was very great, and she had to be taken round
to Belfast, where she was practically rebuilt with an improved stern,
and entirely new engines and boilers. Since then she has continued
to ply her voyages across the Atlantic without let or hindrance. Most
readers will also remember the Scot, the famous South African liner,
which had a marvellous career for record breaking. She was owned
by the old Union Line before they amalgamated with the Donald
Currie Company. This same vessel was taken to Belfast, placed in
dock, cut in two, and lengthened by building over 50 feet into her
midship body, and a like operation was performed on the Hamburg-
American liner, Auguste Victoria, at the same yard. The Germans
themselves in a similar way lengthened the steamship Wittekind,
which was taken into dock at Geestemünde. But without doubt the
most notable case of all was that of the White Star liner Suevic. This
was a comparatively new ship, and was on her way home from
Australia via the Cape of Good Hope, and with her tonnage of
12,531, is the largest vessel steaming from the United Kingdom in
the Australian trade. She had entered the English Channel, but being
out of her reckoning, had the bad luck to run on to some of the
dangerous rocks off the Lizard, as many of my readers will doubtless
recollect. The illustration facing page 296, which is taken from a
photograph made at the time, shows this fine ship in her sad
predicament. Happily, it was found that only her fore part was
ashore, and after strenuous and brilliant work, quite two-thirds of her
were cut off by means of blasting, and, not without grave peril, towed
all the way up Channel to Southampton, where this greater portion
was docked, and the present writer remembers the sad and
sorrowful sight she presented lying alongside the quay. But the firm
of Harland and Wolff, who had made her, at once set to work to build
a replica of the bow portion which had been left on the Lizard rocks,
and this, also after a perilous passage from Belfast to Southampton,
was towed round to the dock, where the other two-thirds were
awaiting. The illustrations here given show the stern portion of the
Suevic lying in dock at Southampton, with all the breakage cleared
ready for the new bow, and the replica of the forward portion just
arrived from Belfast and being warped into the dock to be joined on.
The two parts were effectively joined together—a wonderfully clever
shipbuilding achievement—and the Suevic partly modern and partly
old, has long since been restored to her original route as a perfectly
sound and satisfactory ship.
THE “SUEVIC” ASHORE OFF THE LIZARD.
From a Photograph by Gibson & Son, Penzance.
THE STERN PART OF THE “SUEVIC” AWAITING THE
NEW BOW AT SOUTHAMPTON.
From a Photograph by Reginald Silk, Portsmouth.
THE NEW BOW OF THE “SUEVIC” AT ENTRANCE TO
DOCK.
From a Photograph by Reginald Silk, Portsmouth.
 CHAPTER XII
THE SAFETY AND LUXURY OF THE
PASSENGER

In the course of our story we have treated with less

consideration the aspect of luxury which, to some minds, is at once
the most obvious and most striking feature of a steamship, whether
yacht, liner, or excursion steamer. But since we set forth not to write
a treatise on marine furniture and upholstery, but to show, step by
step, how the modern steamship has come to be what she is, it was
essential that we should have kept strictly to the main points of our
task. Nevertheless, we should have fallen short of our duty had we
omitted to give some idea of the care which is paid to make the ship
take on the dual personality of hotel and ferry. It is inevitable that the
ship in any age, whether of sail, steam or petrol, should be
influenced by the forces at work ashore. Caligula’s galleys (of which
a detailed description was given in the author’s “Sailing Ships: The
Story of Their Development from the Earliest Times to the Present
Day”) were not in discord with the debasing influences at work on
shore, and after due allowance has been made, it cannot be
regarded as a healthy sign that modern tastes have to be catered for
with such luxuriance, and that steamship companies even go so far
as to advertise their graceful, stalwart ships as hotels. Not that one
would wish to revert to the hardships and utter discomforts which
had to be endured by the transatlantic passengers less than a
hundred years ago, when the ship, after contending against waves
and wind, at last came staggering into port to the intense relief of
everyone concerned. Pitching and rolling, washed fore and aft,
swept from one gunwale to the other, a hell afloat for the timid and
sea-sick, and a source of the gravest anxiety to her officers, she was
too small to be equal to her task, too barely furnished to make life
other than just tolerable.
Cooped up in bad weather below, where ventilation was sadly
lacking; crowded with men, women and children going out to the
New World to try their fortunes; with hard, scanty sleeping
accommodation that was not even human in its comfort; gangways
crowded with mean luggage, and no proper commissariat
department; no refrigerating machinery, no preserved foods, but a
medley of animals on deck to be killed and consumed as required—if
they were not washed overboard by the unkindly Atlantic seas—it
was no wonder that when at last the dragged-out agony was ended
the passengers stepped ashore with firm resolutions never more to
entrust themselves to the uncertain vagaries of the sea and its ships.
 CHARLES DICKENS’S STATE-ROOM ON THE
“BRITANNIA.”
By permission of the Cunard Steamship Co.

When Charles Dickens crossed in January of 1842, not then was

the experience one of delight or anything approaching thereto. The
ship on which he travelled to America was the Cunard Britannia,
bound for Halifax and Boston with the mails. Of the other features of
this early steamship we have already spoken, but some of the
impressions which Dickens has left us regarding the comfort, or the
want of it, on board this ship are worthy of attention by those who
find cause for complaint even in the perfectly appointed travelling
Atlantic “hotels” of to-day. Something of the appearance of his state-
room may be seen by looking at the illustration facing this page,
which is here inserted by the courtesy of the Cunard Company. “That
this state-room had been specially engaged for ‘Charles Dickens
Esquire and Lady,’” he remarks in his “American Notes,” “was
rendered sufficiently clear even to my scared intellect by a very small
manuscript announcing the fact, which was pinned on a very flat
quilt, covering a very thin mattress, spread like a surgical plaster on
a most inaccessible shelf.” He speaks of his cabin as an “utterly
impracticable, thoroughly hopeless, and profoundly preposterous
box.” What he thought of the Britannia’s saloon is depicted for us in
no sparing terms. “Before descending into the bowels of the ship,” he
adds, “we had passed from the deck into a long, narrow apartment,
not unlike a gigantic hearse with windows in the sides; having at the
upper end a melancholy stove, at which three or four chilly stewards
were warming their hands; while on either side, extending down its
whole dreary length, was a long, long table, over each of which a
rack, fixed to the low roof, and stuck full of drinking-glasses and
cruet-stands, hinted dismally at rolling seas and heavy weather.”
What he would have thought of the saloon and the state-rooms on
the Mauretania, with their glaring contrast to the accommodation on
the lively little Britannia, we need not stop to imagine. The fare in
those days from Liverpool to Boston was thirty-eight guineas.
Nowadays, for one-half that sum life on an Atlantic liner can be
pleasant and luxurious.
As steamships became bigger, the conditions of travel became
gradually more tolerable, but it was not until the influence of the first
White Star Oceanic that a revolution was made in these matters.
Quite apart from the superior qualities of her hull and engines she
was more thoughtfully arranged with a view to making the
passenger’s life at least as comfortable as was then thought
possible. Some of these improvements we have already noted in the
course of our story, but it is worth remembering that in the
amelioration of the passenger’s lot the White Star Line have not
been in the rear. Among other items, they have to their credit the
honour of having originated on board ship the placing of the saloon
and passenger accommodation amidships, instead of right aft;
installing electric bells, providing separate chairs in the saloon,
instead of using the old-fashioned, uncomfortable high-backed
forms, which were thought good enough for the ocean voyager;
installing self-acting water-tight doors, supplying third-class
passengers with bedding, eating and drinking utensils—for in olden
days the emigrant had to provide not merely his own supply of food
for the voyage, but everything he required of all sorts excepting
water. It was the White Star Line which was the first to supply an
elaborate system of Turkish baths for first-class passengers. But it
was the Oceanic which was the turning-point in steamship comfort.
All else that has since followed has been not a little influenced by
this ship. For us to go through a detailed list of the wonderful
comforts which are obtainable on board the modern passenger
steamship would convey the impression of reading through an
advertisement catalogue. Already the reader is in possession of
some knowledge of the really wonderful equipment which is to be
found on the modern ocean-going steamship. Nothing has been
omitted that could well have been added. Nowadays, in spite of the
extravagant waste of space which such a proceeding involves, many
of the best steamships are fitted with single-berthed state-rooms, so
that to be thrust into acquaintanceship with a perfect stranger is no
longer essential for the whole voyage. Dickens’s “preposterous box”
has grown into an exceedingly comfortable apartment, and the
millionaire may hire for the voyage the regal suite with bedrooms and
dining-rooms, its fire-places, mirrors, sconces, bedsteads and the
rest, as perfect as in the most extravagant metropolitan hotels in
New York or London. With the ship’s smoke rooms, veranda cafés,
libraries, lounges, writing rooms, orchestras, telephones from the
state-rooms, lifts from one deck to the others, a newspaper printed
ready for him each morning as he comes down to breakfast with the
latest American and European news transmitted to the ship over-
night by wireless telegraphy; with gymnasia to keep him fit and well
during the voyage, with Turkish baths, a high-class cuisine, the
opportunity of dining either à la carte or table d’hôte without extra
charge, whilst all the time the good ship is breaking records each
voyage to get him back to mother earth as quickly as ever can be—
what else is there left to the ingenuity of man to devise for the
increased comfort of the much-pampered and still-grumbling
passenger?
 THE VERANDA CAFÉ OF THE “LUSITANIA.”
From a Photograph. By permission of the Cunard Steamship Co.

FIRST-CLASS DINING SALOON OF THE “ADRIATIC.”

From a Photograph. By permission of Messrs. Ismay, Imrie & Co.
 The illustration facing page 300 shows the veranda café just
alluded to, which is placed high up in the sky on the Lusitania. Since
it faces aft, no inconvenience can be felt through the speed at which
the vessel is rushing through the air. But who that stood on the deck
of the Clermont or the Charlotte Dundas could ever have imagined
that this spacious café should form just one small section of a
steamship? It is the Germans who have to some extent set the pace
within recent years in steamship luxury. Anxious for the patronage of
the wealthy American who was accustomed to the luxurious
comforts of the best hotels, the German-American lines began to
lead the way in showing that the steamship could be made as
glorious within as any shore building, notwithstanding the restrictions
necessarily laid upon an object that is subjected to the buffetings of
wind and wave. Low ceilings gave way to high; simplicity was
conquered by ornate decoration, and this in no vulgar but an
exceedingly artistic manner. Stereotyped arrangements of saloons
and cabins gave way to something more in accordance with the
requirements of good taste and elaborate comfort. A free use of
applied art by the highest craftsmen in paintings, carvings and so on;
magnificence in place of more or less ample comfort—these have
been the principles which have actuated the Teutonic internal
steamship arrangements ever since the ’nineties. The Kaiser
Wilhelm der Grosse came as a sensation in this respect, and in
regard to her decorations alone was the handsomest vessel in the
world. The rise of German prosperity, and, therefore, the appearance
of what economists demonstrate to be the immediate sequel—an
instant desire to expend money in all sorts of self-indulgence—has
been followed by a readiness on the part of the steamship
companies to put forth the greatest material comfort that is
practicable on board ship. German decorative art was in a peculiarly
happy position to be able to supply all that was necessary to make a
steel tank resemble a palace. Conventional dolphins and anchors
were ousted by mosaics and exquisite woodwork, and a new sphere
for what was original, but yet suitable, in art was opened. On such
ships as the George Washington and the Berlin it is possible to
regard a standard of applied art which cannot be easily equalled, still
less surpassed by anything of the kind ashore. It was the German
ships which were the first to break away from the convention of the
long tables which divided up the saloon, and to introduce a number
of round tables more in accordance with the interior of a modern
restaurant. And what has been found to be best in this respect in the
German ships has not been long in being copied in the rival national
lines.

DINING SALOON OF THE S.Y. “LIBERTY.”

From a Photograph by W. A. Kirk & Sons, Cowes.
 GYMNASIUM OF THE S.Y. “LIBERTY.”
From a Photograph by W. A. Kirk & Sons, Cowes.

The White Star Adriatic, whose saloon is shown opposite page

300, in addition to her many elements of floating luxury, has a
number of other features which are notable for any steamship.
Besides her lifts, she has a large Turkish bath establishment and a
salt-water bath big enough to swim in. Like some of the German
ships, she has also a gymnasium under the direction of a competent
instructor, where one can enjoy saddle exercise, or practise rowing
mechanically. There are also electric light baths and an orchestra of
skilled musicians. But even these un-shippy features are not
confined to the big steamers, and the illustrations opposite page 302
show respectively the gymnasium and the dining-saloon of the
steam yacht Liberty, one of the most modern and luxurious yachts,
which is owned by Mr. Pulitzer, the well-known American millionaire
newspaper proprietor.
But if the luxury of human desires is catered for on shipboard, so
also is personal life. Infectious disease has to be provided against,
especially in the case of ships carrying emigrants. Dispensaries and
hospitals are carried, with their proper equipment, and it is not so
long since the world was thrilled by the announcement that on one of
the swiftest mail liners a case of appendicitis manifested itself, and
had to be attended to without delay. When the moment arrived the
engines of the great ship were stopped in mid-Atlantic while, with
great courage and admirable nerve, the surgeon performed
successfully the delicate operation on the unfortunate man.
So also, in a manner entirely different, is the safety of the
passengers provided for, and to an extent that is not excelled even
by the fine railway systems on land. With two or three thousand
souls on board, all of whom could be sent into eternity in a few
minutes, besides large quantities of cargo and precious mails, it is no
wonder that not a thing is omitted that could conduce to the most
efficient preservation of life and matter. From the safety valves of the
engines to the elaborate apparatus on the navigating bridge, the
word “safeguard” is spelled out in every single detail. Some of the
more important essentials we have already spoken about, but there
are others that we must not omit to mention, which find a place in the
up-to-date steamship. Besides the duplicate steering gear, the
elaborate system of water-tight doors, water-tight double-bottoms,
powerful pumping engines, the life-boats, life-buoys, and life-belts—
the first of these being placed as high as possible, so that, in case of
emergency, they are as far above the water as can be—there is a
fire alarm installation which leads to the bridge-house, and a highly
efficient fire-extinguishing apparatus. With the introduction of electric
light in place of oil lamps no doubt the dangers of fire have been
minimised; but the hold and the bunkers must needs be kept well
ventilated. On the German liners and on the Fall River Line
steamboats electric thermostats are distributed over the principal
parts of the ship and connected with an electric fire-alarm system
extending to every part of the crew’s quarters, which enable the
extinguishing apparatus to be set working at once. Gas generated
from chemicals which together possess great extinguishing virtues,
is introduced into burning hold or bunker by means of an engine, so
that one of the deadliest enemies of a ship at sea is not merely
capable of control, but even of extinction.
 Having regard to the speed at which steamships are now
compelled to traverse the oceans, it is essential that all the
recognised facilities for accurate navigation are taken advantage of
in the modern liner. To prevent any possibility of mistake the engine-
room telegraph is provided with a means of replying, so that the
commander is able to tell whether the order has been understood.
Further still, an apparatus informs him whether the order has been
correctly carried out, and in the event of any of these complicated
mechanisms breaking down, the speaking tube is still available.
Speed indicators to register the number of revolutions made by the
screws, mechanical logs, and deep-sea sounding machines, Morse
signalling lamps, powerful sirens (especially useful in fog when in the
vicinity of other shipping and the coast), are all now employed to give
to the ship a safe and speedy passage, and to relieve the anxieties
of the over-burdened modern captain.
But in two respects especially has electricity within the last few
years shown itself to be of the greatest service to the ship at sea.
Taking them in the reverse order of their chronology, there is first of
all the system of submarine signalling so recently installed. This
takes advantage of the fact that water is a conductor of sound, and
with a speed more than four times quicker than air. In the case of fog
overtaking a steamer approaching land, or the vicinity of a channel
marked by buoys or lightships, it is possible to obtain warning by
sound when sight is denied, and this at a distance of four or five
miles. The submarine bell is attached to buoy or lightship, whilst the
receiving apparatus is attached to the interior of the ship’s hull at the
bows. From there the signals are conveyed to the chart-house by
means of telephones. One receiver is placed on each bow inside the
plating of the ship between the keel and the water-line, so that the
bell may be located on either side. A very interesting instance of the
utility of submarine signalling was afforded recently in the case of the
Kaiser Wilhelm II., which, owing to a dense fog, was anchored off
Cherbourg. Her tender was awaiting her just outside the harbour,
and sounded her submarine bell to indicate the direction to be
steered in order that the big liner might make port. At a distance of
no less than fifteen miles away the Kaiser Wilhelm II. picked up the
signals by her receivers, and was enabled to find her way into the
French harbour by this means alone.
Still more wonderful is the invention of wireless telegraphy, which
has come to the ship as the greatest blessing and boon within recent
years. With the general principles of its working the reader is, no
doubt, already familiar, and the present volume need not enlarge
upon them, but the accompanying illustration will be found
interesting as showing the Marconi room with a telegraphist at work
on a Cunarder. For a distance of 2,000 miles from Liverpool wireless
connection can be maintained between the ship and the shore,
whilst passing liners many miles apart are enabled to communicate
with each other to their mutual benefit and safety. Whilst these pages
are being printed a transatlantic wireless service has been instituted
between Europe and America, and it is indisputable that the next
naval war will be considerably influenced by the employment of
wireless gear on board battleships, cruisers, scouts, and the bigger
mosquito craft. Of the invaluable aid which already the wireless
system has been to the steamship in peace we could give countless
instances had we the space; but the following will suffice to show its
utility within the last two or three years. On May 28th, 1907, the
German liner Kaiser Wilhelm der Grosse, whilst on her voyage was
enveloped in a dense fog and passed, without sighting, close to
another steamer sailing in the same direction. The German ship,
however, heard the other’s sirens, and knowing that the Cunard
Caronia was on the same track, and might run some chance of
collision with the unseen vessel, the German captain sent a wireless
message to the Caronia, and two hours and a half later received a
reply from the latter which showed that the third steamer was on the
Cunarder’s course, and might have been a danger to her.
 THE MARCONI ROOM ON A CUNARD LINER.
From a Photograph. By permission of the Cunard Steamship Co.

A clear case of the avoidance of costly salvage was afforded in

April, 1910, when the Allan liner Carthaginian, which had left
Liverpool a week earlier for St. John’s, Newfoundland, was disabled
at sea owing to the breaking of a piston-rod. She was able by means
of her “wireless” to inform the same owners’ Hesperian of her
mishap, and the latter received the news when a hundred miles west
of Malin Head, County Donegal. The Hesperian thereupon went to
her sister’s assistance, and took the ship, with her 800 emigrants on
board, in tow for the Clyde. Still more interesting is the thrilling
rescue which was obtained from the sinking liner Kentucky by the
Alamo, which took place in February, 1909. The following statement,
taken from a daily newspaper of the time, needs no embellishing,
and the simple facts speak once more for the triumphant victory
which the new telegraphy has obtained over some of the terrors with
which the sea is inevitably associated:—
“A full statement obtained to-day from Mr. W. F. Maginnis, the
operator in the Kentucky, who sent the wireless message received
by the Alamo, is a most dramatic narrative. The wireless telegraphic
apparatus was installed in the Kentucky just before her departure on
a 14,000-mile cruise round Cape Horn, and to it forty-five men owe
their lives.
“Early on Friday morning, during a heavy storm, the engineer
informed Mr. Maginnis that the ship was doomed. An hour later Mr.
Maginnis got into wireless communication with the Alamo, then
about ninety miles away, but not until noon was it possible for the
captain to get an exact observation of his position.
“‘Half an hour before that,’ says Mr. Maginnis, ‘the electrician
came to me and said that the water was creeping up and that the
dynamo power would soon be lost. All hands were then directed to
abandon all other work and devote themselves to keeping the water
away from the dynamo. The turbine engine and dynamo were
wrapped in canvas and power was thus preserved until the vital
message was despatched.’
“When the Alamo at 3.30 p.m. reached the Kentucky, the deck of
the sinking vessel was almost awash. The crew, despite the high
seas, were rescued by the boats without mishap, and when they had
clambered on board the Alamo they immediately gave three cheers
for Mr. Maginnis.
“The Kentucky was insured for £14,000. Her seams opened wide
during the storm.”
 CHAPTER XIII
SOME STEAMSHIP PROBLEMS

I have left till the end of the story the consideration of some of
those points which, though of the highest interest to many who are
anxious to know something of the intimate character of the
steamship, may seem to some readers to possess a special rather
than a general concern. However, now that I have shown the
manifold manner in which the steamship has advanced from a thing
of scorn to a vessel of admiration, and have indicated as far as
possible within the limitations at my disposal the ways and means
that have brought this about, we may pertinently stop to consider for
a few moments some of the problems which still have to be
encountered even to-day, when naval architecture and marine
engineering have attained to such heights of perfection. I shall
endeavour, as, indeed, has been my aim throughout the course of
this volume, to make myself perfectly clear without the employment
of more technicalities than may be necessary. To the reader who
may happen to form one of that large class who regard the ship,
whether propelled by sails or by steam, with an admiration that
verges on affection, I need offer no apology; for no one can possibly
reverence the ship and, at the same time, be content to remain in
ignorance about her complex nature.
Perhaps there is no feature of the steamship which is less
suspected of being misunderstood than the propeller. To the average
mind, its character is apparently so self-evident as barely to require
any unusual consideration. But its introduction as a means of ship-
propulsion has been the cause of a good deal of miscomprehension,
and has set to work the keen brains of some of the most able
mathematicians in order to determine the exact relation which it