The most peculiar feature of the old regime in the Philippines is to be found in the regulations of the commerce of the islands. In the Recopilacion de Leyes de los Reynos de las Indias, the code of Spanish colonial legislation, a whole title comprising seventy-nine laws is devoted to this subject. For thirty years after the conquest the commerce of the islands was unrestricted and their prosperity advanced with great rapidity. (87) Then came a system of restrictions, demanded by the protectionists in Spain, which limited the commerce of the islands with America to a fixed annual amount, and effectively checked their economic development. All the old travelers marvel at the possibilities of the islands and at the blindness of Spain, but the policy absurd as it may seem was but a logical application of the protective system not essentially different from the forms which it assumes today in our own relations to Porto Rico, Cuba, and the Philippines.

Restrictions on trade of Asian goods

The Seville merchants through whose hands the Spanish export trade to the New World passed looked with apprehension upon the importation of Chinese fabrics into America and the exportation of American silver to pay for them. The silks of China undersold those of Spain in México and Perú, and the larger the export of silver to the East the smaller to Spain. Consequently, to protect Spanish industry and to preserve to Spanish producers the American market, (88) the shipment of Chinese cloths from México to Perú was prohibited in 1587. In 1591 came the prohibition of all direct trade between Perú or other parts of South America and China or the Philippines, (89) and in 1593 a decree -not rigorously enforced till 1604- which absolutely limited the trade between México and the Philippines to $25,000 annually for the exports to México, and to $500,000 for the imports from México, to be carried in two ships not to exceed three hundred tons burden. (90) No Spanish subject was allowed to trade in or with China, and the Chinese trade was restricted to the merchants of that nation. (91) 

All Chinese goods shipped to New Spain must be consumed there and the shipping of Chinese cloths to Perú in any amount whatever even for a gift, charitable endowment, or for use in divine worship' was absolutely prohibited. (92) As these regulations were evaded, in 1636 all commerce was interdicted between New Spain and Perú. (93) A commerce naturally so lucrative as that between the Philippines and New Spain when confined within such narrow limits yielded monopoly profits. It was like a lottery in which every ticket drew a prize. In these great profits every Spaniard was entitled to share in proportion to his capital or standing in the community. (94) The assurance of this largess, from the beginnings of the system, discouraged individual industry and enterprise, and retarded the growth of Spanish population. (95)

Le Gentil and Zúñiga give detailed descriptions of the method of conducting this state enterprise (96) after the limits had been raised to $500,000 and $1,000,000 respectively for the outgoing and return voyage. The capacity of the vessel was measured taking as a unit a bale about two and one-half feet long, sixteen inches broad and two feet high. If then the vessel could carry four thousand of these bales, each bale might be packed with goods up to a value of one hundred and twenty five dollars. The right to ship was known as a boleta or ticket. The distribution of these tickets was determined at the town hall by a board made up of the governor, attorney-general, the dean of the audiencia, one alcalde, one regidor and eight citizens. (97) To facilitate the allotment and the sale of tickets they were divided into sixths. Tickets were ordinarily worth in the later eighteenth century in times of peace eighty dollars to one hundred dollars, and in war time they rose to upwards of three hundred dollars. (98)

Le Gentil tells us that in 1766 they sold for two hundred dollars and more, and that the galleon that year went loaded beyond the limit. (99) Each official as the perquisite of his office had tickets. The regidores and alcaldes had eight. The small holders who did not care to take a venturc in the voyage disposed of their tickets to merchants or speculators, who borrowed money, usually of the religious corporations, at twcnty-fivc to thirty per cent per annum to buy them up and who sometimes bought as many as two or three hundred. (100) 

The command of the Acapulco galleon was the fattest office within the gift of the Governor, who bestowed it upon "whomsoever he desired to make happy for the commission," and was equivalent to a gift of from $50,000 to $100,000. (101) This was made up from commissions, part of the passage-money of passengers, from the sale of his freight tickets, and from the gifts of the merchants. Captain Arguelles told Careri in 1696 that his commissions would amount to $25,000 or $30,000, and that in all he would make $40,000; that the pilot would clear $20,000 and the mates$9,000 each. (102) The pay of the sailors was three hundred and fifty dollars, of which sevcnty-five dollars was advanced before the start. The merchants expected to clear one hundred and fifty to two hundred per cent. The passenger fare at the end of the eighteenth century was $1,000 for the voyage to Acapulco, which was the hardest, and $500 for the return. (103) Careri's voyage to Acapulco lasted two hundred and four days. The ordinary time for the voyage to Manila was seventy-fivc to ninety days.(104)

Careri's description of his voyage is a vivid picture of the hardships of early ocean travel, when cabin passengers fared infinitely worse than cattle today. It was a voyage "which is enough to destroy a man, or make him unfit for anything as long as he lives;" yet there were those who " ventured through it, four, six and some ten times." (105)

Acapulco in New Spain had little reason for existence, save for the annual fair at the time of the arrival of the Manila ship, -and the silver fleet from Perú. That event transformed what might more properly be called " a poor village of fishermen " into " a populous city," for the space of about two weeks. (106)

The commerce between the Philippines and México was conducted in this manner from 1604 to 1718, when the silk manufacturers of Spain secured the prohibition of the importation of Chinese silk goods into New Spain on account of the decline of their industry. A prolonged struggle before the Council of the Indies ensued, and in 1734 the prohibition was revoked and the east and west cargoes fixed at $500,000 and $1,000,000 respectively. (107) The last nao, as the Manila-Acapulco galleon was called, sailed from Manila in 1811, and the final return voyage was made in 1815. After that the commerce fell into private hands, the annual exports were limited to $750,000 and the ports of San Blas (México), Guayaquil (Ecuador), and Callao (Perú) were opened to it.

Other changes were the establishment of direct communication with Spain and trade with Europe by a in national vessel 1766. (108) These expeditions lasted till 1783 and their place was taken in 1785 by the Royal Philippine Company, organized with a capital of $8,000,000, and granted the monopoly of the trade between Spain and the islands. (109) The Manila merchants resented the invasion of their monopoly of the export trade, and embarrassed the operations of the company as much as they could. (110) It ceased to exist in 1830.

By this system for two centuries the South American market for manufactures was reserved exclusively for Spain, but the protection did not prevent Spanish industry from decay and did retard the well-being and progress of South America. Between México and the Philippines a limited trade was allowed, the profits of which were the perquisites of the Spaniards living in the Philippines and contributed to the religious endowments. But this monopoly was of no permanent advantage to the Spanish residents. It was too much like stockjobbing, and sapped all spirit of industry.

Zúñiga says that the commerce made a few rich in a short time and with little labor, but they were very few; that there were hardly five Spaniards in Manila worth $100,000, nor a hundred worth $40,000, the rest either lived on the King's pay or in poverty, (111) "Every morning one could see in the streets of Manila, in the greatest poverty and asking alms, the sons of men who had made a fine show and left much money, which their sons had squandered because they had not been well trained in youth” (112) The great possibilities of Manila as an entrepot of the Asiatic trade were unrealized; for although the city enjoyed open trade with the Chinese, Japanese, and other orientals (113) it was denied to Europeans and the growth of that conducted by the Chinese and others was always obstructed by the lack of return cargoes owing to the limitations placed upon the trade with America and to the disinclination of the Filipinos to work to produce more than was enough to insure them a comfortable living and pay their tributes. That the system was detrimental to the economic progress of the islands was always obvious and its evils were repeatedly demonstrated by Spanish officials. Further it was not only detrimental to the prosperity of the islands but it obstructed the development of México.

Grau y Monfalcon in 1637 reported that there were fourteen thousand people employed in México in manufacturing the raw silk imported from China. This industry might be promoted by the relaxation of the restrictions on trade. It would also be for the advantage of the Indians of Perú to be able to buy for five pence a yard linen from the Philippines, rather than to be compelled to purchase that of Rouen at ten times the price. (114) But such reasoning was received then as it often is now, and no great change was made for nearly two centuries.