resulting superiority of the one bank over the other in commercial intercourse, was the
cause of the establishment of the Free Zone by the Government of Mexico."
This disproportion in the tariffs of the two countries, as Mr. More-
head acknowledged, made the commercial condition of the United
States towns on the Mexican border a great deal more favorable than the
condition of the Mexican towns. How would the Government of the
United States have acted if Mexico had based on these great differ-
ences a remonstrance against the tariff in force in this country, and
required that it should abolish it and establish one with the same or
higher rates of duty than the Mexican tariff ? And how would it
have felt if remonstrances had been made against the building of rail-
roads in this country, tapping the frontier, because thereby the condi-
tion of the inhabitants of the northern border of the Rio Grande \vt)uld
be bettered ? What would the people of this country think if we should
ask them to repeal the Act of August 20, 1852, because it encouraged
smuggling in Mexico ? The Mexican people feel exactly as the people
of the United States would feel, if the circumstances were reversed.
It would be absurd to consider as an act hostile to this country the
establishment by Mexico of absolute free trade, that is, the abolition of
its custom-houses and import duties ; in other words, the extension of the
Free Zone throughout the whole country, because the United States,
as a neighboring nation, would be the nation likely to profit most by
444 ^be /IDejican jfree Zone,
such freedom of trade; and if such extension could not be justly a mo-
tive of complaint, how can it be so when the free trade is reduced to
a very limited zone ?
JIow Far the Free Zone Favors Smuggling into t/ie United States. —
Having explained in what manner the Free Zone was established and
what were its real purpose and scope, and before I consider the action
of the United States Government on that subject, it will be proper to
examine the main objections against it.
The second impression prevailing in the United States about the
Free Zone, namely, that it was established to injure the United States,
and that it causes a very large smuggling of foreign goods into this
country is equally incorrect, as I will try to show.
It does not seem to me reasonable to suppose that the Free Zone
was established for the purpose of encouraging smuggling, to the det-
riment of the United States Treasury, when in fact it harms Mexico
to a much greater extent than it does this country, as, in order to
injure the United States, Mexico would hardly be willing to injure itself
ten times as much; and if the contraband trade carried on under the
shadow of the Free Zone was a sufficient reason for its suppression, the
interest of Mexico in this matter would long since have settled the
question.
Any human institution can be abused by men. The goods stored
in the frontier towns of the United States, in accordance with the Act
of August 30, 1882, were easily smuggled into Mexico; and yet when
the United States Congress passed that law, it did not intend, assur-
edly, to encourage smuggling to the detriment of Mexico, although
such was practically its result. In the same manner the Governor of
Tamaulipas at first, and the Mexican Congress afterwards, did not
intend in establishing the Free Zone to encourage smuggling to the
detriment of the United States.
Unfortunately, the mistaken impression that the Free Zone injures
the United States has made a great headway among some of the Amer-
ican statesmen, no doubt because they have not carefully studied thi?
subject. The annual loss caused to the United States Treasury, by the
Free Zone, has been estimated to be as high as ^6,000,000, as will
presently appear. Secretary Fairchild, in a report to the Senate, to
which I shall presently refer, expressed that opinion which was then
the general impression of several other officials of the Treasury De-
partment, and even of Committees in both Houses of Congress.
The only way to estimate the loss to the United States Treasury by
smuggling through the Mexican frontier would be to examine what
has been the amount of the importations of foreign goods from the
United States into the Mexican Free Zone. But the United States
custom-houses do not keep an account of foreign goods exported for
Ube /IDejican 3free Zone. 445
consumption in the same, and as most of them go in transit to the in-
terior, the amount of such goods as appears in the reports of the Bureau
of Statistics of the United States Treasury Department only represents
a small portion of the goods exported to the zone which might be
smuggled back into the United States. With a view to ascertain the
exact amount of such trade. Senator Morgan, who has always taken
great interest in everything relating to Mexico, thought it proper to
inquire how much that contraband trade amounted to, and on Febru-
ary 16, 1888, he introduced in the Senate ' a resolution asking of the
Treasury Department whether the Mexican Free Zone encouraged
smuggling across that border into either country, and for the estimated
loss to the United States; and in answer to that resolution the Secretary
of-the Treasury transmitted on the first of the following March a state-
ment ' from which it appears that the total value of the foreign mer-
' Congressional Record,\o\. xix., part II., p. 1720. In the Senate of the United
States, February 16, 1888.
THE MEXICAN FREE ZONE.
Mr. Morgan submitted the following resolution :
''Resolved, That the Secretary of the Treasury is directed to inform the Senate
whether and to what extent the customs laws and regulations of Mexico, in the belt
of country known as the Free Zone of Mexico, extending along our border, have
encouraged smuggling across that border into either country ; the estimated loss of
revenue to the United States from that cause ; the means employed, or that are neces-
sary to prevent such smuggling ; and the additional cost to the United States of the
necessary agencies to prevent the violation of its laws in consequence of the existence
of that Free Zone."
The resolution was considered by unanimous consent, and agreed to.
- Fiftieth Congress, ist Session (Senate Executive Document No. 108), letter from
the Secretary of the Treasury in response to Senate resolution of February 16, 1888,
relative to smuggling in the Free Zone of Mexico. March 5, 1888, ordered to be
printed and referred to the Committee on Foreign Relations :
" Treasury Department, Office of the Secretary,
" Washington, D. C. March /, 1S8S.
"Sir, — I have the honor to acknowledge the receipt of Senate resolution, dated
the l6th ultimo, directing me —
" ' To inform the Senate whether and to what extent the customs laws and regu-
lations of Mexico, in the belt of country known as the Free Zone of Mexico, extend-
ing along our border, have encouraged smuggling across that border into either country ;
the estimated loss of revenue to the United States from that cause ; the means em-
ployed, or that were necessary, to prevent such smuggling ; and the additional cost to
the United States of the necessary agencies to prevent the violation of its laws in con-
sequence of the existence of that Free Zone.'
" In reply I have to state that the only information in possession of this Depart-
ment relative to the subject-matter of the resolution is of a general character. There
is no doubt that the existence of the Free Zone of Mexico furnishes an opportunity for
smuggling into the United States.
"Under the provisions of Section 3005, Revised Statutes, merchandise arriving
in the United States and destined for places in the Republic of Mexico in transit may
446 XTbe /IDerican JFree Zone.
chandise which had passed through the United States into Mexico during
the fiscal year ending June 30, 1887, was $497,654; and adding to that
amount merchandise to the value of $194,774, which was withdrawn
from warehouse and exported to Mexico, making a total of $692,428,
of which only $211,589 was dutiable, tlie balance of $480,839 was free
under the tariff act of March 3d, 1883, then in force. So that, sup-
posing that the whole of that amount had been smuggled back into
Mexico, which could not possibly be the case, l)ecause some of those
goods were needed in the Free Zone and near-by in Mexico, others
legally imported and others smuggled into Mexico, the loss suffered by
the Treasury of the United States would have been in reality insig-
nificant.
The average amount of duties under the tariff act of March 3d, 18S3,
on the whole of the dutiable articles was 47. 10 per cent., and the actual
loss of revenue to the United States, supposing that all foreign goods
imported into Mexico by the Free Zone should have been smuggled
back into the United States, would only amount to $99,658, which is
by no means as large as the amount estimated by the opponents of the
Free Zone and not so much considering the facilities for smuggling
which the frontier affords.
Secretary Fairchild in his answer expressed the views prevailing
among the Treasury officials that there was no doubt that the existence
of the Free Zone in Mexico furnished opportunities for smuggling into
the United States; but the figures he gave showed that if any smug-
gling had been carried on, its amount was really insignificant.
From an official statement, published by the Bureau of Statistics of
the United States Treasury Department, of imports and exports of
merchandise from the United States during the year ending June 30,
be conveyed through the territory of the United States without payment of duties,
under such regulations as the Secretary of the Treasury may prescribe. The total
value of foreign merchandise which thus passed through the United States to Mexico
during the last fiscal year was $497,654. In addition to that amount, merchandise of
the value of $194,774 was withdrawn from warehouse and exported to Mexico, making
a total of $692,428, of which $211,589 was dutiable and $480,839 free under our tariff.
" It has been alleged that a large proportion of the dutiable merchandise thus sent
into Mexico is smuggled back into the United States. This Department has no means
of ascertaining to what extent this is true.
" The principal articles, products of Mexico, which have been subjects of seizure
by the customs officers on the Mexican border, are horses and cattle. So long as our
present tariff on imports is continued, customs officers will be needed to collect duties
and prevent smuggling, and I am not advised that the number and cost of such officials
could be diminished if the Free Zone of Mexico were abolished.
" Respectfully yours,
" C. S. Faiuchild, Secretary
' Hon. John J. Ingalls
" President /rtf tempore United States Senate.
Ube /IDejican jfree Zone, 447
1895, the first year after the Act of August 28, 1894, went into effect,
it appears that the value of the foreign merchandise which passed by
the frontier into Mexico was as follows: Through Brazos de Santiago
$36,510; Corpus Christi, $26,738; Paso del Norte, $35,810; and Sa-
luria, $32,868, making a total of $131,926. So that the total amount
of foreign merchandise imported into the Free Zone from the United
States in the first year after the Act of August 28, 1894, went into effect
was $131,926, and supposing that the whole of it should have been
smuggled back into the United States, the import duties on the same.
at the rate of 41.75 per cent, under the tariff then in force, would
'amount to $55,080, which is a mere trifle, considering the conditions
of the frontier.
For more details showing how insignificant is the smuggling from
the Mexican Free Zone into the United States, and how great the ad-
vantages that this country derives from the Free Zone, I refer the
reader to a letter that Mr. Frank B. Earnest, Collector of Customs at
Laredo, Texas, addressed on February 23, 1895, to the Hon. \V. H.
Grain, Member of Congress from Texas, to an editorial from the Loiver
Rio Grande^ a paper published in Brownsville, Texas, and to a letter
from prominent citizens of Brownsville addressed also to Mr. Crain, all
of which were read by him in the House of Representatives on February
27, 1895.
Even Mr. John W. Foster, who was, when United States Minister
to Mexico, one of the most decided opponents to the Free Zone, and
expressed in the different official communications addressed to the
Department of State the opinion that the Free Zone was a great detri-
ment to the United States, and had been established for the purpose
of encouraging smuggling, changed his views when he went himself to
the frontier for the purpose of making a personal examination of the
subject, and in an official communication (No. 1077), addressed to
Mr. Evarts, Secretary of State of the United States, dated City of
Mexico, December 26, 1879, said as follows :
" In the past two or three years the situation has materially changed. The de-
cline in price of manufactured goods in the United States, and our increased spirit of
commercial enterprise, enables the American merchants on the Texas side of the river
to compete successfully in many classes of goods with the merchants in Mexico, who
import from Europe. The practical result is that, in cotton fabrics and many other
articles, the Mexican frontier is supplied almost entirely from the United States, and
the inducements for smuggling into Texas have greatly diminished. Our customs au-
thorities along the Rio Grande, as well as the citizens in general, informed me on my
recent visit to that region that the smuggling of foreign merchandise from the Mexican
Free Zone had almost entirely ceased. On the other hand, my observation led me to
the conclusion that this Zone was made the base of operations for quite an extensive
system of smuggling of American (as well as European) goods into the interior of
Mexico. It is the practice of the Mexicans to cross the river to the American towns
and purchase our cotton and other goods, and introduce them without hindrance into
f
'^4S Ilbe /iDejican jfree Zone,
the Zona Libre, whence they are clandestinely taken into the adjoining States of this
Republic ; so that the measure which was originally intended to be a protection to
Mexican interests and an obstruction to American commerce in its practical workings
is just now proving to be the contrary. While I cannot regard the continuance of the
Zona Libre as a friendly act toward the United States, my recent visit satisfied me
that it was a much greater evil to Mexico than to our country. The existence of such
a discriminating territory must always be a source of annoyance, and ought to be
abolished if we are ever to have a legitimate and cordial commercial intercourse be-
tween the two countries, but at present it is the occasion of greater damage to the
government and people who created it than to its neighbors."
Considering the matter from a disinterested point of view, it would
certainly appear that, barring a possible increase in the temptation and
opportunity to land and smuggle foreign goods into the United States,
the Mexican Free Zone has been, and still continues to be, a benefit to
American trade, and that any attempt to commit the United States
Government to a hostile attitude toward that institution is only insti-
gated by local interests.
Smuggling on the frontier will never be prevented, as it has re-
cently happened that people were caught smuggling several sacks of
potatoes, which pay practically no duties. Even sewing-machines and
plows, which pay almost no duty at all, are smuggled. Perhaps this is
due, in a great measure, to the conflicting and vexatious documentary
requirements for the importation of small articles at the frontier. If
the Government would allow bringing into Mexico small articles up to
the value of, say, twenty dollars, without requiring any papers, then
smuggling might be considerably reduced, and everybody would have
the opportunity of accompanying the goods to the custom-house and
paying the duties there, as is done on this side, and a great inducement
to smuggling into Mexico would disappear.
Advantages of the Free Zone to the United States. — There is one
aspect of this question which, as I believe, has so far passed entirely
unnoticed. The Free Zone is really an advantage to the United States,
since, as I have already stated, the Mexican system of legislation in
the matter of customs and excise duties has generally been restrictive
and even prohibitory, both by reason of the high import duties levied
on foreign goods and of the existence of interior custom-houses, which
prevailed up to the 30th of June, 1896, and also of State and municipal
taxes, requiring vigilance and restrictions that must necessarily hamper
business transactions. Any relaxation of such a system of restriction
could not but be favorable to foreign nations trading with Mexico, and
especially to a neighboring country like the United States, whose agri-
cultural products and manufactures are mainly, if not exclusively, con-
sumed on the Mexican frontier.
Under the Tariff Act, of October i, 1890, and July 24, 1897, the
Government of the United States has been trying very earnestly to
TLbc /IDejican fvcc %onc. 449
obtain from foreign countries, and especially from the Spanish- Ameri-
can Republics, the free entry, or the admission at a reduced rate of
duties, of some of its products and manufactures, and they naturally
feel pleased when a new agreement is made. And yet the liberal terms
provided by Mexico in favor of the free admission of all the products
and manufactures of this country into our Free Zone has been taken
here as an unfriendly act on our part towards tliis country.
y It is a fact, which has already been commented upon by officials of \
• the United States Government,' that the merchants on the north side \
of the Rio Grande River who clamored most loudly against the Free
Zone were the European merchants, and the reason is very plain. The
United States has, on account of its contiguity of territory, lines of
railways, etc., almost the monopoly of the goods consumed in the Free
Zone, while the European countries cannot send their goods there
unless by long ocean routes and paying expensive railway freight,
which add considerably to their cost and make their prices quite high.
The advantages accruing from a free market are therefore almost ex-
clusively enjoyed by merchants and citizens of the United States,
and it would seem incredible that they should have often been so loud
in their denunciations of that institution, which has really been a boon ^
\ for many of them. /
,• If the Free Zone has inconveniences for this country, although
much less serious ones than those which it has for Mexico, it possesses,
in my judgment, a decided advantage which has remained hitherto
unnoticed. It practically makes a portion of Mexico a free market ^ \
for all the products and manufactures of the United States, since mer-
chandise of all kinds from this country may be imported into and con-
sumed in Mexican territory almost duty free, and be warehoused in
the region of the Zone for an unlimited time. No greater privilege
can be asked for the commerce of a nation, and the only drawback in
this respect that I can see to the Free Zone, in so far as the United
States is concerned, is that it does not embrace the whole of Mexico. '.
Supposing its privileges were extended to the whole of Mexico, would
the United States consider the free admission of their products into that
country as prejudicial to their interests ? How strange, under this
view of the question, does the idea prevailing here appear, that the
Free Zone brings only injury to the United States and has been estab-
lished to the advantage of European goods only, when nmety-five per
cent, of the goods imported there under its franchises are from the
United States.
Estimates of the present population of the Zone range from 60,000
to 80,000 souls. Allowing that 70,000 people find lodgment therein, it
' Mr. Warner P. Sutton, United States Consul General to New Laredo, in an
official despatch dated April 25, 1890, addressed to the Secretary of State.
I
450 Ubc /iDejican jfree Zone.
is evident the question is of importance both to Mexico and to the
United States, on account of the peculiar trade conditions produced by
this ahiiost free-trade belt separating two high-tariff countries.
^ During the fiscal year ending on June 30, 1894, the United States
exported to Mexico $12,441,805 in domestic manufactured goods and
breadstuffs; of these exports, $6,715,688 went through the five customs
districts on the northern border, Brazos de Santiago, Corpus Christi
(Laredo), Saluria (Eagle Pass), El Paso del Norte, and Nogales, Ari-
zona. Of the imports into the United States from Mexico, $8,228,892
came through these same ports. It is impossible to arrive at any exact
figures as to the amount consumed by the inhabitants of the Zone, but
it is estimated by the customs officers at the five points named that
about twelve per cent., or about $813,890, is shipped into the Zone,
and that only about three per cent, of this amount is re-entered for
import to Mexico on the other side and pays the other eighty-two and
a half per cent, of the Mexican tariffs. This would give as a result
that about $800,000 in American goods were consumed by the residents
of the Zone. These figures are comparatively valueless in arriving at
any idea of the purchasing power of the Zone iti the line of American
products, for the reason that this $800,000 constitutes but an item of
the real consumption. It is a well-known fact that the residents of the
/'one buy most of the goods they consume of a staple character from
i ihe American merchants on the north side of the river. Allowing
70,000 people as the population of the Zone, it would be a conservative
i estimate to place the yearly trade at least as high as $3,200,000 in gold, '
i for the Free Zone resident is very much dependent upon the American
I merchants. Based upon these estimates, the purchasing value of the
Zone to the American trade is at least $4,000,000 each year, and by
'■■ many who are in a position to be well informed in the premises, it is
placed at a much higher figure.
' — ^ Disadvantages of the Free Zone to Mexico. — The events connected
with the foreign intervention in Mexico did not permit the natural
effects of the Free Zone to be felt in the country until the Republic re-
turned to its normal condition, that is, until after the termination of
the French intervention and the downfall of the so-called Empire of
Maximilian, events which took place during the year 1867. In Janu-
ary of 1868, I was called to the Treasury Department by President
Juarez, and in my annual report to Congress, on September i6thof
that year, I stated that one of the causes of the then depleted condi-
tion of the Mexican Treasury was the large contraband trade that was
carried on through the Free Zone and enjoyed by the frontier towns of
Tamaulipas; further remarking that the custom-houses of those towns
were hardly able to meet their clerical and office expenses, and that
this fact showed that the establishment of the Free Zone had not made
TLbc /Il>ejican jFree Zone. 451
that region prosper; and that, in my opinion, that institution was not
the proper remedy for the evil which it was intended to cure.
It is true that the privilege of the Free Zone granted to the inhabit-
ants of the northern portion of Tamaulipas to import and consume
foreign goods Avithout paying Federal duties, to store them in their own
houses, and to keep them in bond for an unlimited time, was a power-
ful incentive to smuggling from the Free Zone either to Mexico or the
United States; and that Mexico, which has suffered greatly from that
result, has been obliged, with a view to the repression of smuggling,
to establish a costly, oppressive, and complicated system of inspection;
but protection to smuggling was not the object of the creators of the
Free Zone, nor is it possible that smuggling should have been carried
on to the prejudice of the United States, to the same extent to which
it has been done to the disadvantage of Mexico.
As the duties levied by the Mexican tariff are much higher than
those imposed in the United States, it is evident that the most lucra-
tive contraband trade, and the easiest one to conduct, is that which is