The bill would, first, exempt Guam from the application of the coastwise shipping laws; second, permit U.S.-flag vessels engaged in commerce between the United States and Guam to receive the operation and construction subsidies presently available to U.S.-flag vessels engaged in foreign commerce; and third, define United States-Guam trade as "foreign" for ratemaking purposes.

The probable effect in our judgment of these changes in existing law will be improved ocean transport for Guam-more frequent service, in newer ships, at lower cost-while maintaining, through established maritime subsidy programs, the competitive position of U.S.-flag vessels in the United States-Guam trade. Exemption from the coastwise laws will permit foreign vessels to carry goods between the United States and Guam, thereby introducing the possibility of competition in service and freight rates. The definition of United States-Guam trade as "foreign commerce" will permit subsidized U.S. carriers to serve Guam without return or reduction of subsidy payments, a financial burden that we believe has been reflected in Guam's high freight rates. U.S. ships engaged in "foreign" trade with Guam will be eligible for construction subsidies; as a result, as vessels in the service become obsolete they can be replaced with new and more efficient carriers built in U.S. yards. The authorization of foreign commerce rates will permit international shipping competition to determine the level of ocean freight rates between the United States and Guam; and available evidence indicates that the rates probably will be lower than the rates now prevailing in the United States-Guam trade. With that trade defined as foreign, a U.S.-flag vessel will be fully eligible for the operating subsidies that permit U.S.-flag vessels to meet the competition of foreign rates without hardship to the carrier. The situation under existing law is not, in our opinion, a satisfactory one. There are presently two U.S. carriers serving Guam. Foreign-flag vessels are not permitted to carry goods from the United States to Guam, but, since security restrictions relative to Guam were lifted last year, foreign vessels are permitted to call in Guam en route from one foreign area to another. The U.S. carriers, when operating vessels only between the United States and Guam are entitled to no subsidy whatsoever. When operating subsidized vessels between the United States, Guam, and foreign ports, the owner must rebate annually a portion of the construction subsidy he has received in the form of a percentage of current revenues because of his service to Guam. At the same time, the operation subsidy paid to the owner annually is appropriately reduced each year because of the service to Guam. In our judgment, the effect of all of this is limited service and a higher level of freight rates than are applicable to U.S. service to more distant ports in the Philippines and Japan. We submit that if it is necessary to subsidize a U.S. carrier in connection with service to Guam (as in this case by high freight rates) it would be more appropriate to do so through the usual subsidy machinery than by placing the burden upon the territory, which is not in a position to assume it.

The present situation gives rise to two possibilities, both adverse to the national interest. The first is a shift by Guam away from importing from the United States and to the importation of foreign goods on foreign ships. This in the face of what we believe is a real desire on the part of the people of Guam generally to import and use U.S. products. Obviously, we would hope, and expect, that the bulk of Guam's commerce would be with the United States, but at the same time we realize that the government of Guam and the people want the most for their money. We realize also that given the proximity to Guam of such countries as Japan there will be some areas in which U.S. producers will not be able to compete, even under the most favorable conditions. However, if U.S. producers lose the Guam market because of high shipping costs, we believe it both unfortunate and correctible. This legislation might prevent the latter possibility.

The second adverse possibility stems from the assertions of one of the carriers serving Guam that the existing situation will of necessity worsen resulting in even higher freight rates at best, or the termination of U.S. maritime service to Guam at worst. If this is true, increased freight rates would only serve to aggravate the possible shift in trade noted above, while termination of service would, we believe, be wholly contrary to the best interest of the United States. The carrier has stated that in the near future the wartime vessels now being operated between the United States and Guam will have to be replaced. Assuming the absence of a subsidy, the freight rate structure required to support the cost of acquisition and operation of the new vessels would be substantially

higher and conceivably prohibitive. We can neither prove nor disprove this possibility, but the statement on its face is not unreasonable and, we believe, warrants some concern. This legislation might prevent the foregoing.

It should be noted that by the acts of June 14, 1934 (48 Stat. 963), and April 16, 1936 (49 Stat. 1207), American Samoa and the Virgin Islands were exempted from the application of the coastwise shipping laws of the United States and, therefore, the exemption of Guam would not be inconsistent with the treatment accorded the other territories.

This legislation would also indirectly affect the Trust Territory of the Pacific Islands, an area over which the United States exercises full jurisdiction but not sovereignty. The trust territory, like Guam, is largely dependent on imports to supply its needs, and utilizes Guam as its principal transshipment point. Thus the extent and cost of service to Guam have a material bearing on the trade activities of the trust territory. Both the Governor of Guam and the High Commissioner of the trust territory have urged departmental support of this proposal. We believe that section 2 of the bill is not clear. We therefore suggest that lines 3 and 4 on page 2 be deleted and the following substituted:

"tween the United States, its districts, possessions, or territories other than Guam, and Guam".

The Bureau of the Budget has advised that while there is no objection to the submission of this report from the standpoint of the administration's program, it appears by no means certain that enactment of H.R. 7028 would achieve intended objectives, such as improved shipping service at lower rates and maintenance of the present level of trade between the United States and Guam. In these circumstances and in view of the considerable cost to the Federal Government that may result from payment of operating and construction subsidies, the Bureau of the Budget believes it would be desirable to defer consideration of this legislation until alternate approaches have been thoroughly explored and the most satisfactory solution to the problem has been found.

Sincerely yours,

KENNETH HOLUM, Assistant Secretary of the Interior.

Hon. HERBERT C. BONNER,

DEPARTMENT OF THE NAVY,

OFFICE OF THE SECRETARY,

OFFICE OF LEGISLATIVE AFFAIRS,
Washington, D.C., November 12, 1963.

Chairman, Committee on Merchant Marine and Fisheries,
House of Representatives, Washington, D.C.

MY DEAR MR. CHAIRMAN: Your request for comment on H.R. 7028, a bill to amend section 21 of the Merchant Marine Act, 1920, as amended (46 U.S.C. 877), and for other purposes, has been assigned to this Department by the Secretary of Defense for the preparation of a report thereon expressing the views of the Department of Defense.

The bill would exclude Guam from the operation of the coastwise laws of the United States, redefine commerce or trade between the United States and Guam as foreign commerce or foreign trade, and treat common carriers by water engaged in transportation between the United States and Guam as in foreign commerce for purposes of rates and regulations. The effect of these changes would be to open the United States-Guam trade to foreign-flag vessels, while authorizing the subsidization of U.S.-flag vessels engaged in such trade.

The Department of the Navy on the behalf of the Department of Defense defers to the views of the Department of Commerce on H.R. 7028.

There appears to be a typographical error in the bill. The citation in the title and on line 4 of page 1 should read "(46 U.S.C. 877).”

This report has been coordinated within the Department of Defense in accordance with procedures prescribed by the Secretary of Defense.

The Department of the Navy has been advised by the Bureau of the Budget that there is no objection to the submission of this report on H.R. 7028 to the Congress.

Sincerely yours,

C. R. KEAR, Jr., Captain, U.S. Navy, Deputy Chief (For the Secretary of the Navy).

DEPARTMENT OF STATE,

October 29, 1963.

Hon. HERBERT C. BONNER,

Chairman, Committee on Merchant Marine and Fisheries,
House of Representatives.

DEAR MR. CHAIRMAN: This is further to our letter of June 18, 1963, in response to your letter of June 14, 1963, in which you requested the comments of the Department of State on H.R. 7028, a bill which would exempt Guam from the coverage of the coastwise laws of the United States, thereby allowing foreignflag vessels to transport goods between the United States, its territories, and Guam.

The Department of State perceives no foreign policy considerations which would lead it to support H.R. 7028, thereby excepting Guam from the laws requiring the reservation of trade between the United States and its noncontiguous territories to American-flag vessels.

The Bureau of the Budget advises that from the standpoint of the administration's program there is no objection to the submission of this report.

Sincerely yours,

FREDERICK G. DUTTON,
Assistant Secretary

(For the Acting Secretary of State).

The CHAIRMAN. The committee is honored to have as its first witness, Mr. Aspinall, the gentleman from Colorado and chairman of the Interior and Insular Affairs Committee.

Mr. Aspinall.

STATEMENT OF HON. WAYNE N. ASPINALL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO

Mr. ASPINALL. Mr. Chairman and members of the committee, it is my pleasure to appear before this committee. I have had the pleasure of looking over a great deal of your work as it comes through the House procedures, especially with my responsibility on the Objectors Committee, and I do wish to say with my interest in the people of Guam and the responsibility which the committee chairman has in this particular matter, I am glad to appear here in behalf of your bill, Ĥ.R. 7028. The records of your committee will show that on August 20, 1963, I introduced a similar bill, H.R. 8177.

My relationship and experience with the Guamanian people and their progress in self-government during my years in the Congress has been enjoyable and rewarding. Thirteen years ago Congress extended the present form of self-government to Guam with the enactment of the Organic Act of Guam. This was a fitting tribute to a people who, although not then American citizens, had fully adopted the American way of life and whose devotion to our country and its ideals never faltered during 22 years of an enemy occupation of their island.

The present political status of Guam is such that the Congress of the United States reserves its powers to deal with Guam's problems. In every session of Congress the House Committee on Interior and Insular Affairs has had to consider some legislation relating to Guam. We have come to know these problems intimately. In this session of Congress, our committee reported and the House passed, by unanimous consent, a bill (H.R. 6225) which authorizes $34.5 million in loans and $10.5 million in grants to assist Guam not only in recovering from the devastation of a typhoon which struck in November 1962, but to

complete a long-neglected rehabilitation program having its origins in the World War II devastation of that island.

Guam did not seek nor did it receive a handout. It wanted and it will get nothing more than the opportunity of helping itself. It still faces a tremendous and difficult task in bringing itself up to the full level of our stateside communities. The extent of its accomplishments toward this goal will be one of the standards by which the countries of the Far East will measure our Nation.

The instant legislation will not, nor is it intended to, solve all of Guam's problems. It will, however, assist immeasurably in solving some of those problems. American citizens of Guam would pay no more for American products shipped on American vessels to Guam than the residents of the countries of the Far East pay for similar products shipped in similar vessels.

The legislation to which I previously referred, and which would provide Guam with funds for rehabilitation and reconstruction, will also assist in the development of its economy. The success of this entire program will, in no small measure, be enhanced if our American merchant marine can service Guam in the same reliable, efficient, and economical manner as it services the foreign ports of the Orient. Mr. Chairman and members of the committee, the people of Guam have had my interest for many decades, but especially since I came to Congress in 1949. I visited Guam first in 1954. I know of no people who have proven themselves to be more loyal when they were nationals, not citizens of the United States, and since the time that they

have become citizens.

Our committee recently, with the help of the Members of the House and now with the Members of the Senate, approved some legislation which will give them a lift as far as rehabilitating their island from the havoc of war and the ravages of recent hurricanes.

I am not an expert, Mr. Chairman, in the legislation which appears before your committee at this time. I would simply say that in my opinion others of the United States and related to the United States receive the benefits which this legislation would permit, and I think the people of Guam have as much entitlement to it as any other peoples that I know.

With that, Mr. Chairman, I finish my statement.

The CHAIRMAN. Are there any questions, Mr. Tollefson?

Mr. TOLLEFSON. No. I just want to commend the chairman of the Interior and Insular Affairs Committee who is also one of the objectors for recognizing a sound bill when it passes the objectors and not standing in the way of its enactment into law.

Mr. ASPINALL. May I reply and state that when I find legislation that comes from this committee, I find it in a pretty finished form and, as a rule, it is eligible to have the approval of the House of Representatives.

Mr. TOLLEFSON. It certainly goes through a hassle on this committee.

I appreciate your coming.

Mr. ASPINALL. Thank you very much, Mr. Tollefson.

The CHAIRMAN. Mr. Downing?

Mr. DOWNING. No questions. It is a pleasure to have the chairman here.

The CHAIRMAN. Mr. Pelly?

Mr. PELLY. No questions.

The CHAIRMAN. Mr. Glenn?

Mr. GLENN. No questions, Mr. Chairman.

The CHAIRMAN. We appreciate your coming over.

Mr. ASPINALL. Thank you for the courtesy of permitting me to appear before you this morning.

The CHAIRMAN. The next witness is Mr. Won Pat, the speaker of the Guam Legislature.

We are glad to have you, Mr. Won Pat.

STATEMENT OF ANTONIO B. WON PAT, SPEAKER, SEVENTH GUAM LEGISLATURE

Mr. WON PAT. Good morning, sir, and thank you.

Mr. Chairman and members of the subcommittee, I am Antonio B. Won Pat, speaker of the Seventh Guam Legislature. Before I proceed with my statement I would like to thank the chairman and the members of the committee for your gracious consideration in affording me the opportunity to testify in support of H.R. 7028 before I return to Guam.

I appear before you today under the authority of Resolution 32 of the Seventh Guam Legislature which respectfully requests and memorializes the

President of the United States, the Congress of the United States, and the appropriate executive agencies of the United States, particularly the Federal Maritime Commission

To study the-

possibility of permitting a subsidy to American vessels carrying cargo to and from Guam.

This resolution was transmitted to the Speaker of the House of Representatives and appears in the Congressional Record for June 6, 1963, at page A3555.

The Guam Legislature is a unicameral body composed of 21 members elected at large. As speaker of this legislative body, I am the highest elected official within our territory. Our population exceeds 70,000, of whom 25,000 are military personnel, their dependents, and civil service workers, all of whom are temporarily stationed within the territory.

Guamanians became American nationals when Guam was ceded to the United States by Spain under the Treaty of Paris in 1898, and the Guamanians became American citizens by act of Congress, August 1, 1950. After some 65 years under the administration of the United States, Guam and its residents are as American as the world's series or the Fourth of July.

Guam lies some 5,100 miles southwest of San Francisco and some 3,200 miles southwest of Honolulu. Tokyo is 1,350 miles north of Guam, Manila is 1,500 miles to the west and Australia is only 1,800 miles to the south. Geographically, Guam lies within the shadow of Asia and it is one of that continent's offshore islands. This proximity to Asia, together with its natural features adaptable for a harbor and for airfields, has led to Guam's becoming the American military bastion in the Far East.