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sections of the country can be attracted to our merchant marine. This is believed to be essential.

Although the Commission has no specific legislation to suggest at this time, I would like to draw the attention of the committee to the situation that exists in the regulation of shipping.

The Maritime Commission is charged with responsibility for the development of an adequate merchant marine. Many other agencies, however, exercise some jurisdiction over maritime affairs. A preliminary survey indicates that not less than 50 bureaus are concerned, directly or indirectly, with the control of shipping. This diffusion of authority means a costly duplication of effort, divided responsibility, interdepartmental rivalries, and lessened efficiency. Some division of responsibility is, of course, desirable and necessary. Much of it, however, could and should be eliminated.

The greatest duplication occurs between the Maritime Commission and the Bureau of Marine Inspection and Navigation of the Department of Commerce. The Bureau sets standards for the safety of vessels and has supervision over their inspection. This function is also performed by the Commission with respect to subsidized vessels. The Bureau, through its authority over shipping commissioners, supervises the contracts of employment of seamen, the enforcement of these contracts, and the arbitration of any disputes that may arise during the voyage. At 12 ports a service is maintained for purposes of employment. The examination and rating of licensed personnel is also subject to this Bureau. Any misconduct or negligence of seagoing personnel is subject to the quasi judicial power of the Bureau

plishing required in utmost imongress.

clear that there will be instances where the duties authorized by Congress for the Commission to perform will overlap with those duties which the Bureau of Marine Inspection and Navigation have to perform. Some of the duties of these agencies should be combined, thereby disposing of many of the overlapping and paralleling functions. The maritime industry and the Government both will profit by_such a step.

In general, the proposals I have discussed are covered in the economic survey submitted to the Congress. They are deemed by the Commission to be of the utmost importance and constitute the minimum changes required in the act to make it reasonably capable of accomplishing the purposes outlined. However, there have been suggested many other amendments of lesser importance, most of which are merely clarifying in nature. I shall not undertake a detailed discussion of these matters unless the members of the committee desire to make specific inquiries, as there is a brief discussion of each in the committee print which has been made available.

In conclusion, may I say that the Commission offers these suggestions in the belief that they will help to ameliorate the impassé with which we are confronted. We do not regard these brief amendments as a penacea for the ills of shipping. The best that can be hoped is that, over a period of time, the changes recommended will help to solve the two most serious ailments of the subsidized lines— the replacement problem and the situation with regard to labor.

It may well be that, even with the changes recommended, and with the payment of liberal subsidies, shipping cannot be preserved as a private enterprise. That remains to be seen. The Commission is determined to give private initiative every opportunity to succeed. make the objectives of the act more likely to attainment.

I wish to repeat that this is a trial-and-error proposition. If it succeeds, well and good. If it fails, the Commission will return again to the Congress with additional suggestions and for further instructions.

The CHAIRMAN. We are much obliged to you, Mr. Kennedy; this is a very illuminating and helpful statement.

May I ask the members of the committee: Have you any questions to ask?

Senator VANDENBERG. Mr. Kennedy, you said the greatest obstacle to the re-creation of private investment in shipping facilities is the hesitancy of private capital to go into shipping. You cannot cure that hesitancy, can you, just in a maritime act ?

Mr. KENNEDY. Not at all. But as it applies particularly to this act, Senator, there are certain provisions which make it impossible to get private capital here. But with the elimination of at least some of the situations covered by these amendments we hope the ensuing conditions will at least make the industry more attractive for private capital.

Senator VANDENBERG. I can understand that. But would you not agree there is a necessity for a. much broader legislative program to recreate capital confidence ?

Mr. KENNEDY. It seems to me I should confine myself to the Maritime Act.

Senator VANDENBERG. I think you should. But I should be greatly interested in your personal reactions.

Mr. KENNEDY. I should be very glad to give you that any time off the record.

Senator VANDENBERG. If that question is an inappropriate one, surely this one is: I was greatly struck by your argument that the earnings during 5 good years should be exempt so they can be a cushion for the 5 bad years. I was going to ask you if that would not be a good argument for the repeal of the surplus-profits tax, but I suppose that would not be a good question to ask, either.

Mr. KENNEDY. I think probably not.

Senator VANDENBERG. In relation to the labor question I think you probably put an appropriate emphasis on the fact that unless the labor situation can be corrected it is perfectly futile to undertake any maritime legislation at all; we might as well go out of business.

Mr. KENNEDY. That is right, sir.

Senator VANDENBERG. We hear a great many stories about insubordination and general lack of discipline on the sea, rising sometimes not only to the point of annoying passengers but actually endangering them. Has the Commission ever made a study of those conditions; and if the committee wished to consider that subject, could you provide us with information! Mr. KENNEDY. Plenty.

The CHAIRMAN. Plenty of information bearing out the charges that are made?

Mr. KENNEDY. Yes, sir; that is right.
Senator VANDENBERG. In other words, it is not just idle gossip?
Mr. KENNEDY. That is right, sir.

Senator VANDENBERG. It is reality?
Mr. KENNEDY. Very definitely.

Senator VANDENBERG. Then, Mr. Chairman, I hope the committee will go into that subject before it attempts to go into the other one.

The CHAIRMAN. You need not worry about that; there will be plenty said about it.

Have you any further questions?
Senator VANDENBERG. No.
The CHAIRMAN. Senator Gibson?
Senator GIBSON. No; thank you.
The CHAIRMAN. Senator Guffey?
Senator GUFFEY. No; thank you.
The CHAIRMAN. Senator Radcliffe ?
Senator RADCLIFFE. No.
The CHAIRMAN. Senator Clark?
Senator CLARK. No; thank you.
The CHAIRMAN. Senator Davis?
Senator Davis. I believe not; thank you.

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Senator SHEPPARD. No.
The CHAIRMAN. Senator Nye?
Senator NYE. No; thank you.
The CHAIRMAN. Senator Pepper?
Senator PEPPER. No; thank you, sir.

The CHAIRMAN. May I ask a question: Do you make a definite recommendation that the Bureau of Marine Inspection be transferred to the Maritime Authority?

Mr. KENNEDY. No, sir; I think it is rather presumptuous upon our part to make a suggestion to take a bureau away from a department of a Cabinet officer. I think that should be within the discretion of the committee and the Congress.

The CHAIRMAN. I might say that a subcommittee of this Committee on Commerce—a subcommittee on safety at sea—is inclined to make that very recommendation; and before these hearings are ended I think we shall ask the Department of Commerce to come here and give their views regarding that. Mr. KENNEDY. Yes, sir.

The CHAIRMAN. But you did give arguments to indicate the desirability of some adjustment? Mr. KENNEDY. Yes; that there is a conflict between us.

Senator CLARK. Mr. Kennedy, perhaps you gave this explanation before I came in, late. But I should like to ask you what is the justification for putting aviation under the Maritime Commission?

Mr. KENNEDY. Senator, I presented quite an argument here, regarding that.

Senator CLARK. Then I should be very glad to read that, in the record.

The CHAIRMAN. I think you will find in the record a very extended argument on that subject.

Senator SHEPPARD. As I understand it, Mr. Kennedy, the Commission is directed by the act of 1936 to go into the question of air commerce over the seas?

Mr. KENNEDY. Yes, sir; and to make a study, and to make recommendations for legislation.

The CHAIRMAN. I was very much impressed, Mr. Kennedy, by what you had to say about building abroad. I am frank to say that when I first heard the rumor that that was to be recommended, it went a little bit crosswise with me.

Mr. KENNEDY. Yes, sir.

The CHAIRMAN. Possibly, because I have some shipbuilders in my territory, of course.

However, you gave very convincing arguments; and I want to ask you this question, since you did not state this particular point:

You spoke of the three bids for construction of a sister ship to the
Manhattan?
Mr. KENNEDY. Yes, sir.

The CHAIRMAN. You stated the amounts of the rejected bids; you did not state the amount of the accepted bid.

Mr. KENNEDY. I have that here, sir. It is approximately $15,750,000. That is on an adjusted price. The comparable price with the prices that were given here, would be $17,500,000, as against $21,308,000 and $21,947,000. Those latter were the two nearest bids.

The CHAIRMAN. And you gave the figures as regards the ships built in the Netherlands? Mr. KENNEDY. As $10,500,000.

The CHAIRMAN. Suppose you had had a bona fide bid from the concern located in the Netherlands, of the amount you have just named: Would you, with your philosophy, have felt that you should accept that, or would you have felt that the comparable American bid was sufficiently near it to justify it?

Mr. KENNEDY. I think in this case the bid of the Newport News Co. was a bid we could very properly accept.

The CHAIRMAN. I suppose it is a rare instance when you find actually building in an American or foreign yard, a ship comparable to what you hope to build ?

Mr. KENNEDY. I think it is only from a very strange coincidence. And, of course, this ship was started in 1934. And by the time you readjust currencies and allow for increases in wages and decreases, in certain parts of the country, you have at best a scientific guess. But I wanted to make that clear; because if Congress feels it is a very definite idea, it is not so.

The CHAIRMAN. Is it your judgment that if we should give you the authority suggested, then the Maritime Commission would actually proceed to accept bids from abroad?

Mr. KENNEDY. I think that if there were an actual chance to accept foreign bids, everybody would begin sharpening pencils, very generally. Because when you consider the amount of subsidy to be granted to United States Lines for the operation of the ship, they were very close to the point where they could not have put any more capital into that particular ship and have had it pay, at all; it would have been a losing proposition from the day they took it on, if they had had to put any more capital into the ship.

So that automatically, whether they desire to build the ship or whether we desire to give them a construction differential that might have brought it up to about $17,500,000, the company itself would not have been able to spend any more money and then operate the ship successfully.

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The CHAIRMAN. Suppose we were to give you this authority :: Would there have to be any special inducement in the way of an advance fee, to induce the foreign builder to present a bid! Or would he actually be willing to take his chance?

Mr. KENNEDY. I think if he felt there was a reasonable chance of his getting the bid, provided he was 100 percent less than the American company, then there might be some real attempts to make some bids. But if they thought we were just trying to get the bids in order to compare them with American bids and in order to make our work less difficult, then I doubt verv much if there would be any attempt to figure it out. Because after all, it is an expense to take the plans and prepare a bid.

The CHAIRMAN. Of course the foreign builder would have in the back of his head, all the time, the decision or knowledge or conviction that his bid would be rejected if you had any ample excuse to accept the American bid?

Mr. KENNEDY. In other words, if the bid was not more than 100 percent differential, or else in the other proposals we felt there was, collusion, then very definitely that would be the case.

The CHAIRMAN. Are there other questions? (No response.)

The CHAIRMAN. Mr. Kennedy, are there other members of the Commission who will testify?

Mr. KENNEDY. Well, Mr. Chairman, anyone whom you wish to appear is available. I merely have a staff here to answer any questions directed to the Commission.

The CHAIRMAN. But you are speaking for the Commission?
Mr. KENNEDY. Yes.

The CHAIRMAN. You spoke about one member of the Commission being in opposition. Is he in opposition to all of it?

Mr. KENNEDY. No; he is only in opposition to the plan of putting them into effect now. And that is Commissioner Moran, who was on the committee that passed this legislation in the House. He feels we should take a longer period of time before we do anything about it. But it seems to me that time is moving rather rapidly; and you cannot build a ship by just pushing it down the ways. We are trying to get it done very quickly.

But he is in sympathy with the ideas.

The CHAIRMAN. Mr. Kennedy, if I understand you, it is your con-tention that under the law as it is now written, and with the powers that you now possess, it is unlikely that you could build any considerable number or any appreciable number of ships?

Mr. KENNEDY. I would say that is very definitely true, based on all the discussions we have had with private owners. I would say that we could not give the assurance to the committee, today, that we could build a half dozen ships.

The CHAIRMAN. On the other hand, I assume it to be your conviction that if we give you this added legislation, then there is a reasonable hope than you may proceed in the building of ships?

Mr. KENNEDY. Otherwise they could not get a permanent operating subsidy, unless they give some assurance that they are going into the construction of ships in an orderly replacement program. If there is not, then you will find no subsidy, and you will note it very quickly.

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