of ocean freight rates and their adjustment on a fair competitive basis as compared with foreign shippers; to gain the trade-building benefits from regular American steamship services and their agencies abroad; and to meet the needs of the national defense. EFFECT ON SHIPBUILDING INDUSTRY The committee also pointed out that the maintenance of adequate, efficient shipyards and trained personnel is a matter of national importance. This industry has several times, during the past 10 years, been on the verge of virtual disintegration due to lack of work. Any lasting solution of the merchant-marine problem will assist in solving the shipbuilding problem and incidentally provide work for the many durable-goods industries on which it draws for material for shipbuilding. STATUS OF AMERICAN SHIPPING The report brought out that during the past 10 years our contributions to world tonnage have been relatively small, amounting to only 843,000 tons out of a total of 15,570,000 tons for the world as a whole. It also showed that we have a small number of passenger and combination vessels under 10 years of age, representing largely the new construction under the Merchant Marine Act, 1928, and well suited to trade and defense requirements; but that we have an almost total lack of fast modern cargo vessels and tankers and are largely dependent for freighters upon the slow and inefficient war-built fleet now nearing the end of its economic life and increasingly expensive to maintain and operate. ESSENTIALS OF NATIONAL POLICY From its study of the world shipping situation and the relative position of the American merchant fleet in foreign trade, the committee felt that an effective and consistent national shipping policy is clearly essential for the United States at this time; that without a consistent program to provide the necessary degree of permanency, even the merchant marine we have been able to build up since the World War will gradually but surely disappear; that the rehabilitation of our merchant marine is of paramount importance to our commerce and military security; and that our higher shipbuilding and operating costs, resulting from the higher standards of living in this country, make it essential that the Government provide the necessary assistance to offset these handicaps and assure the maintenance of an adequate American merchant marine. PRESENT MAIL SUBSIDIES The major principles laid down in the Merchant Marine Acts of 1920 and 1928 are sound. The mail-contract system established under the latter act is largely responsible for such improvements in our ocean shipping services as we have been able to attain and has made it possible for vessels under the American flag to live in foreign trade. While it is recognized that the present system is lacking in important respects and needs readjustment, the public interest in the merchant marine, as well as protection of the legitimate interests of shipping lines under their present contracts, requires that the aid afforded under them should be continued until some other form of assistance to the merchant marine has been adopted and its substitution for the present form has been arranged by agreement with the individual holders of existing contracts. PROPOSED DIRECT SUBSIDIES The fact that the present system of Government aid to the merchant marine seems to link such aid to the carriage of the mails has caused a great deal of misunderstanding in the public mind as to the service which the payments cover and this in turn has brought about much uncertainty within the shipping industry, making it difficult to provide adequately for the future. The mail-contract system should therefore be revised to eliminate connection with the carriage of the mails which should in future be paid for on a poundage basis. The subsidy under the new arrangement should be granted to American-built vessels used in establishing and maintaining regular service on essential trade routes between the United States and foreign ports, but preferably not to more than one line in the same trade route. Vessels granted such aid should meet the requirements of the various trades, as agreed upon at the time the subsidy is granted, as to size and speed, and any new vess!s hunt for service under the subs, ty system should be built to the bighest star fard of safety, suitability, and efficiency, and subject to approval by the Navy Department The necessity for the subsidy arises from both construction and operating differentiais Due to the fact that the capital differential is the main consideration in the determination of an ocean shipping subsidy, and the further fact that this charge reinsins the same through it the life of the shap, subsidy contracts should be for the perich of the ve-seis a life, ustav consı fered 20 years. The operating deferential, on the other hand, is likely to vary from time to time to permit adjustment to any changed con litions, there should be proviBota for review of the contract terms not more often than once every 2 years, LETTING OF CONTRACTS In awarding of contracts for new services where competitive bidding is feasible, the governmental supervisory body should advertise the requirements as to vessels and service for the routes to be wihmi fizevi and contract awards should be made on the basis of the bids, and with particular regard for the responsibility and expericnice of the bidders as provided for in letting Government contracts generaliv. Bids should be checked against data prepared to show the construe tion diferential on a general percentage basis and the difference in operating costs between an American-flag service and ita privcipal foreign competitors on the given route Account should be taken of the type, tortage, and speed of vessels, the volume of traffic and other conditions on the trade route Whale the differentials should thus be used as an aid in determining the reasonableness of ba is, their use as a direct mess ire of the subsidy is regarded as impractical le de to the impossiblity of definite determination of either construction or operating differer tiais. Where competitive bidding is not possible due to there being only one company qualfed to render the service the contract sbonid be negotiated, with use of eur struction, and operating differential data as a guide VEMEL REPLACEMENT Probably the most evader t fai`ir g in the present system is the lack of adequate provision in the Merchant Marine Act, 1928, for vesse; replacement mich res pacement should be provided for through bulding requirements in the sub-siy ec-tract, specifically stating the type, size, at d speed of the vessel as well as t'e period wit in which construction must be begin Trade and mutary neevis alinazi be of prime consideration in fixing construction requirements Pats for mit stips to be constructed should be subject to approva, by the Navy Department. Becsuse of the importance of vessel repla emert in the merchant marize programa, a mista ital part of the construction wihiiv payme: ts to be determited at the time the cor tract is entered into, shoud be reserved for such use. CONSTRUCTION LOAN FUND A!! vessels constructed under the Merchant Marine Acts of 1920 and 192% were buit through the aid of the construction loan fund. Under present con fitions it is apparently impossible to secure from private sources for long periods of time such amounts as are necessary for the construction of a modern vosei Iterefore, tras find should be continued, providing for a fixed and uniform interest rate to ail borrowers GOVERNMENTAL SUPERVISORY AGENCY The determination of trade routes to be served and the number and type of vesseis required concerns several departments of the Government Ite ques tions should therefore be determined by an interdepartmentai es muuttee representing those departments. Thus conimiter should also have fur diky of passing upon the terms of individual contracts for trade-route services Ine administration of contracts, however, should be performed by a single governmental agency, preferably under the direction of an Assistant Secretary of Commerce to be designated for that purjame PATRONAGE OF AMERICAN SERVICES In the committee's preliminary report attention was called to the fact that American vessels are now carrying only one-third of our foreign commerce. This was attributed, at least to a large extent, to the lack of appreciation on the part of our shippers in foreign trade of the value of American shipping services. RATE CONFERENCES. It must be recognized that it would be to the benefit neither of the American shipping industry nor of the American producer and shipper if the cost of ocean transportation was lower from foreign ports than obtainable from here. Almost all American lines are members of rate conferences, which provide the accepted method of stabilizing ocean freight rates and which tend to equalize rates in world trade. All lines operating from United States ports in foreign trade should be required to adhere to the conference rates in their particular trades, otherwise there will be no stability in world ocean freight rates; and through conference connections between operators from United States ports and operators from foreign ports, an equitable relationship between rates to competitive markets should be established. In this manner, the vicious circle of rate cutting could be eliminated, bringing more healthy conditions of competition in foreign trade. For these reasons adequate powers should be given to a governmental regulatory agency to require all lines, foreign as well as American, operating from United States ports to foreign ports to adhere to conference rates, otherwise our merchant marine will be at a disadvantage in competition. JAMES A. FARRELL, Chairman Special Merchant Marine Committee. JANUARY 17, 1935. SOME PERTINENT FACTS CONCERNING THE AMERICAN MERCHANT MARINE (Submitted by National Council of American Shipbuilders, New York City) FOREWORD The following statements, charts, and tables present information concerning the relation of American shipping to our foreign trade, the status of the American merchant marine in comparison with those of other nations, and the relation of American shipbuilding to American shipping together with a brief analysis of Government aids granted by maritime nations to their merchant marines. SYNOPSIS PART I. SUMMARY OF AMERICAN SHIPPING AND FOREIGN TRADE Mandate of Congress Congress has mandated: "That it is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergeny, ultimately to be owned and operated privately by citizens of the United States." This expression of the wish of Congress is contained in the preamble of the Merchant Marine Act of 1920, and is reaffirmed in the Merchant Marine Act of 1928. Ship Operation, a Business The operation of ships privately owned is a business that must show a return on the investment to insure its permanence. Domestic and Foreign Shipping A merchant marine should be broadly considered under two divisions: (a) That part engaged in domestic trade; (b) that part engaged in foreign trade. Staps operated in our domestic trade are restricted to American-built vens is, and are subject to our own control in eompetition with other domestic means of transportation ps operated in our foreign trade are in competition with the vessels of other ratious and must be al le to compete with such vessel on an equal basis if their operation is to be successful Handicaps to Operation in Foreign Trade. The American operator in foreign trade suffers a handicap because of higher operating costs resulting from (as the higher cost of building shaps in the United States; ibi the higher cost of otheers, crew, and shore staffs The American operator is also hat dicapped because of subsidies paid by foreign nations to their private stap operators. Government Aid to Shipping. The handicaps to operation in foreign trade can only be overcome by some form of Government aid. Importance of Shipbuilding. Shipbuilding is an important national naset, (a) for the building of ships for our merchant marine; (b) for the bunding of naval and other Government vesacin; te for the employment of American labor. While, under existing law, vessels to operate in our foreign trade may be buit abroad, nevertheless, Congress has recognized the necessity for their construction in American shipyards as evidenced by section 203 of the Merchant Marine Act of 1928 Stap Replacement Program A ship replacement program, is an essential part of any permanent merchant marine program in order that each operating service may have a percentage of modern tottage to compete with similar services of other nations. PART II. WORLD Shipping Percentage of Water-borne Foreign Trade Carried in O ir Own Vesse's American vessels carry approximately one-thard of our foreign trade while fore.gr vessels carry two-thirds Comparison of International Tra le and S) pping The United States foreign-trade fleet is ess than 7 percent of the world s foreach-tra le fleet, wille our percentage of world trade in nearly 15 percent. Ownership of World Sea geng Merchant }ext O it of a tota' sen going world feet of 49 000 000 gross tots, Great Britain ownæ over 16 500,000 gross ters and the United States owi» 9,000,000 gr-188 tous, of wi, chi lesa ti an 3,000,000 are engaged in foreign trade. Growth of Werad Stat pob Since 1900 Great Britain has launched nearly half of the tonnage la inched throughout the word The United States fleet increased very rap. By daring the World War period Word Tontage in Eruga Trade Oils In fervia tra-le ale furre are through it the world approximately 38 000,000 gr na tots of sinjjing, including vessels which are telj» rarily la. i up Share of Shipping of Principal. Nations in the Carriage of Their Own Frega Irade The vessels of principal foreg hat, la carry over 50 percent of their own foruen trade, wist. Albericais veves carry olu), one tord of our own ferta tra le Modern. I noage in Princijal Merchant Frets Ine United States is beland every other principal martile nation in the percentage of its merchant fleet reprime Lite-i by Hemieru tonnage. Modern Cargo Feets of Pr.. C., a. Nat. is Te United Statexas far beland every other nation in the percei tage of its cargo fleet which has been hat dang the past 12 years Merciant Tonnage Bit in Principal Nati us Since † a beginning of 1928 Jonnage unter ect. træet. i. in the United States it ervas i gr......ally during 1929, 1950, and 1961 beca se of Pe Mere) ast Marine Act of 1928, Since 1931 mere' ant ship construction in t'as coultry has decited to praetically zero at tia present time Le United States Low stai. is 1. ¡ll 'ær 9 in rank among the principai maritime nat ons in tonnage un ier constructi›n. Comparison of Tonnage, Speed and Age of Principal Merchant Fleets Great Britain's merchant fleet stands number 1 in tonnage, speed and age, while the United States fleet stands number 2 in tonnage, number 5 in speed, and number 8 in age. Vessels Building or Recently Built Abroad At the present time there is considerable activity in the construction of cargo vessels and tankers in Great Britain, Japan, and other foreign countries. PART III. AMERICAN SHIPPING American Vessels in Foreign Trade At the beginning of 1934 there were 2,702,000 gross tons of American vessels actively engaged in our foreign trade. Types of Vessels in Our Foreign-Trade Fleet Over 50 percent of the tonnage of our foreign-trade fleet is composed of freighters. Rate of Obsolescence of Our Foreign Trade Fleet By the end of 1941 nearly 90 percent of our foreign-trade fleet will be over 20 years old. Vessels Certified for Operation on Ocean Mail Routes On June 30, 1933 there were 362 vessels, aggregating nearly 2,100,000 gross tons certified for operation on ocean mail routes. Effect of Technical Progress on Obsolescence Technical progress in ship construction during recent years has increased the rate of obsolescence very appreciably. Replacement Program a Necessity If the United States is to maintain its present position in the carriage of world trade it is necessary to replace at least 150,000 gross tons of vessels annually. Shipping Serves Every State in the Union Every State produces many articles which are exported abroad. Approximately 80 percent of our exports are carried abroad by means of ships. PART IV. AMERICAN SHIPBUILDING AND SHIPREPAIRING Characteristics of Shipbuilding Industry Shipbuilding is a highly specialized industry requiring many technical and skilled employees. Methods of mass production cannot be applied to this industry. Materials Used in Shipbuilding The shipbuilding industry is a great consumer of raw materials and equipment which are produced by every State in the Union and which are manufactured by almost every known industry. Number and Location of Shipyards and Ship Repair Yards Shipyards and ship repair yards for the construction of seagoing vessels are located along the Atlantic coast, Gulf coast and the Pacific coast of the United States. There are 93 shipbuilding ways in the coastal shipyards, representing an approximate maximum output of 900,000 gross tons of vessels a year. Employment in Shipbuilding and Ship Repairing While employment in shipbuilding and ship repairing declined from the beginning of 1930 to a low point in the middle of 1933, since that time it has been increasing due primarily to the construction of naval vessels in private shipyards. Hours and Wages in Shipbuilding versus General Manufacturing While the number of working hours per week is less for shipbuilding than for general manufacturing the per capita hourly rate and the weekly earnings are greater in shipbuilding than in general manufacturing. Shipbuilding, a National Asset The shipyards not only furnish employment in the construction of vessels but their facilities and technical staffs are at all times available for the construction of both merchant and Government vessels in a time of national emergency. Present Status of Commercial Shipbuilding At the present time merchant shipbuilding is at a very low ebb. |