APRIL 20, 1938.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. BLAND, from the Committee on Merchant Marine and Fisheries, submitted the following

REPORT

[To accompany H. R. 10315]

The Committee on Merchant Marine and Fisheries, to whom was referred the bill (H. R. 10315) to amend the Merchant Marine Act, 1936, to further promote the merchant-marine policy therein declared, and for other purposes, report it back to the House without amendment and recommend that the bill do pass.

GENERAL STATEMENT

The committee held extensive hearings on the bill H. R. 8532, and after considering and amending that bill the chairman by direction of the committee introduced the bill H. R. 10315 now reported, which is the bill H. R. 8532, as amended by your committee. The purpose of the bill as set forth in the title is to amend the Merchant Marine Act, 1936, to further promote the merchant-marine policy therein declared, and for other purposes. A summary of the bill by sections appears later in this report. (See p. 16.)

Under date of November 10, 1937, Joseph P. Kennedy, Chairman of the United States Maritime Commission, pursuant to the Merchant Marine Act of 1936, transmitted to the Congress the Economic Survey of the American Merchant Marine which had just been completed by the United States Maritime Commission (hereinafter designated as Commission). The survey deals with many perplexing problems affecting the ocean-going shipping industry. It is the Commission's belief that the survey will be helpful to the Congress in dealing with problems confronting the industry, and the survey undertakes to point the way for the development of an adequate and well-balanced merchant fleet.

H. Repts., 75–3, vol. 2– -37

The Commission reported that in undertaking the survey every effort was made to secure the cooperation of the best-informed persons in the country; that university professors were sought out and asked to make specialized studies; that ship lines were persuaded to lend members of their operating divisions; that experts on labor relations were retained; that the aid of Government officials were enlisted and experts were borrowed from various departments, and that the efforts of these persons were buttressed, finally, with the entire staff of the Commission, an organization of experts with years of experience in the development of American shipping.

Among the outside experts who contributed to the survey were men each of whom was recognized as an authority in some field of shipping. Among them were Dr. Grover G. Huebner, professor of commerce and transportation at the Wharton School of Finance; Dr. Thomas H. Healy, dean of the School of Foreign Service, Georgetown University; Herbert L. Seward, professor of mechanical and marine engineering, Yale University; Dr. Elmo P. Hohman, associated professor of economics, Northwestern University; Dr. Theodore J. Kreps, associate professor of business economics at Stanford University; Grover Loening, noted aeronautical designer and manufacturer; Dr. M. Ogden Phillips, School of Commerce and Administration, Washington and Lee University; Capt. Felix Riesenberg, authority on the training of seamen; Rear Admiral W. P. Robert (Construction Corps), United States Navy, retired, formerly general inspector of the Bureau of Construction and Repair; Col. James M. S. Waring, industrial analyst of New York; and James Reed, of San Francsico, a former naval constructor and shipbuilder.

Those working on the survey were instructed to take nothing for granted, not even the desirability of having a merchant marine under the American flag.

The economic survey constitutes an invaluable handbook on the merchant marine. It is an outstanding contribution to the literature of the merchant marine, a summary of many of its difficulties, a comprehensive study of its problems, and a complete answer to five major inquiries which cover the entire maritime field. These inquiries are: (I) Should the United States attempt to compete in the international carrying trades?

(II) What are the requirements of the United States?

(III) What is the present status of the subsidized merchant marine?

(IV) What should be the policy of the United States?

(V) What will it cost to maintain an adequate merchant marine?

In answering the first inquiry the Commission found that there are two sound considerations that justify the expenditure of public funds to maintain a foreign-going fleet by the United States. The Commission said:

One of these considerations is the importance of shipping as a factor in the preservation and development of foreign commerce; the other is the relationship that exists between merchant vessels and national defense. Upon these two considerations must rest the case for the maintenance of a subsidized shipping establishment in the international carrying trade.

FOREIGN TRADE NECESSARY

The importance of foreign trade to the United States is demonstrated. The conclusion follows:

The United States is the greatest exporting nation on earth, and is exceeded only by the United Kingdom in the value of its imports. Our trade has been on the upgrade for several years. Exports and imports combined stood at $4,878,000,000 for 1936. For the first 9 months of 1937 our trade reached a total of $4,807,000,000, indicating a figure for the year of approximately $6,500,000,000. Exports normally amount to approximately 10 percent of all movable goods produced in the United States. While this may seem to be a minor proportion, it must be remembered that a 10-percent drop in demand can easily mean the difference between prosperity and depression. On individual items, such as cotton, exports may account for 50 percent or more of the entire production. Elimination of the foreign market for cotton would cripple the entire South, ruining half the cotton growers, and seriously affecting railroads, banks, shippers, brokers, and many other individuals and businesses dependent upon this vital commodity for a living. The consequent loss of purchasing power would have repercussions on every section of the country. In the case of Texas, far more than half of the crop is exported, so that the State's dependence on foreign markets is even greater than that of the rest of the South. What is true of cotton in the South is true to a degree of many other commodities of importance to various parts of the country.

The United States is dependent upon foreign nations for many commodities which either do not exist within our own country or can be produced only at prohibitive cost. More than a quarter of our imports are accounted for by five commodities-rubber, sugar, coffee, silk, and tin-of which only sugar is produced domestically. Other important products for which we must look abroad include tea, bananas, spices, and cocoa.

As

To service our trade requires a network of ship lines connecting our ports with some 600 ports in approximately 120 foreign countries. was ably pointed out by the Commission the success or failure of our foreign commerce will determine whether we enjoy prosperity or depression.

AMERICAN MERCHANT MARINE ESSENTIAL TO AMERICAN FOREIGN TRADE

The findings of the Commission confirm many previous conclusions on the need for an American Merchant Marine for trade promotion and protection. Especial reference is made to the report of this committee submitted on June 20, 1935, in the Seventy-fourth Congress, reporting the bill H. R. 8555, which subsequently became the Merchant Marine Act, 1936. Attention is directed to the report of the Select Committee of Inquiry into the operations, policies, and affairs of the United States Shipping Board and Emergency Fleet Corporation, consisting of seven Members of the House of Representatives, appointed under the authority of the Sixty-eighth Congress, and to the following statement contained in that report of the select committee:

In fact, had it not been for the American merchant marine at the close of the World War the United States would probably have paid out in increased oceanfreight rates alone more than the total cost of the Government fleet. It was the Shipping Board which brought about, through the control of its tonnage, constant reductions in ocean-freight rates which inured to the benefit of American producers, industries, and shippers. This tremendously important fact cannot and should not be overlooked in estimating what the American merchant marine is worth to the people.

American ships serve to stabilize rates in the transportation of cargoes. It has been estimated that the possession of American ships after the World War protected the American people from exorbitant

rates over which they could have had no control if there had not been American operators in trade conferences and American ships to secure reasonable rates.

The Commission found that the possession of a domestic-flag marine provides insurance against possible interruption of service. The Commission said:

For more than half a century, prior to the World War, the bulk of our exports and imports was carried by foreign vessels. Several times during that period we were deprived of a considerable part of the foreign fleet which customarily served our trade. In the present unsettled condition of international affairs the United States should avoid undue dependence upon foreign carriers likely to be withdrawn at a moment's notice.

In the event of war, even with the United States remaining neutral, dependence on foreign ships would place our overseas trade at the mercy of other nations. During the World War the withdrawal of alien vessels resulted in a serious dislocation of our foreign trade at a time when we enjoyed an unprecedented opportunity to expand our business with other nations. Total world tonnage was reduced by the destruction of vessels, idleness of the tonnage of the Central Powers, and the use of ships for military purposes by the Allies. American overseas trade was further affected by the diversion of tonnage to the imperative commercial needs of other countries.

The most serious reduction in foreign-flag tonnage occurred in trade routes far removed from the war zone. Direct trade with the Allies was maintained and even improved since these nations looked to the United States for increased supplies. It was necessary, however, for the United States to secure foreign vessels, to recondition old vessels and build new ones, to divert coastwise steamers to overseas trade routes, and to press into service sailing ships and antiquated steamers in order to provide service to foreign markets.

Today we are faced with the threat of a recurrence of the conditions of the last war. Political uncertainty and international tension are on the increase. If the present antagonisms should result in war, we would be confronted again with the problems which beset our commerce in 1914. The disruption of our trade probably would be much greater in the future as a larger percentage of our trade is now being transacted with nations not having their own shipping facilities.

For these reasons it is important that we maintain a merchant marine of some proportions in the international carrying trade. [Italics ours.]

One of the strongest statements to sustain the necessity of an American merchant marine in the promotion and protection of our foreign trade is contained in the message of President Franklin D. Roosevelt, transmitted to the Congress on March 4, 1935. In that message the President presented to the Congress the issue of whether or not the United States should have an adequate merchant marine (H. Doc. No. 118, 74th Cong.).

The President answered:

To me there are three reasons for answering the question in the affirmative. The first is that in time of peace, subsidies granted by other nations, shipping combines, and other restrictive or rebating methods may well be used to the detriment of American shippers. The maintenance of fair competition alone calls for American-flag ships of sufficient tonnage to carry a reasonable portion of our foreign commerce.

Second, in the event of a major war in which the United States is not involved, our commerce, in the absence of an adequate merchant marine, might find itself seriously crippled because of its inability to secure bottoms for neutral, peaceful foreign trade.

Third, in the event of war in which the United States itself might be engaged, American-flag ships are obviously needed for naval auxiliaries but also for the maintenance of reasonable and commercial intercourse with other nations. should remember lessons learned in the last war.

We

The Maritime Commission, in its economic survey, found that our foreign trade falls roughly into some 20 major trade areas, and that it is necessary to the development of our foreign commerce to be represented in each of these areas.

AMERICAN VESSELS IMPROVE SERVICE

American vessels in a trade tend to improve the service available to our exporters and importers and the Commission so found. American shippers in order to compete successfully require direct, speedy, and reliable service to their markets abroad, and our experience before the war, when American vessels carried but 10 percent of our foreign commerce, demonstrated only too well the disadvantage of having to depend on foreign shipping service. Sailings, as a rule, were slow and infrequent, especially to non-European countries, and in many cases there was no direct service available between our ports and the ports of other nations, so that goods had to be transshipped. This resulted in many delays, especially when vessels for the final leg of the journey were not at hand. For many years merchandise bound for the east coast of South America actually had to be shipped by way of Europe, although this was later remedied, and only on the North Atlantic run, and to some extent in the Caribbean, were shipping facilities at all adequate to our needs. Elsewhere the American exporter labored under a serious competitive handicap.

The service improved after the war because of the existence of an American merchant marine. The Commission said:

The development of an American merchant marine after the war greatly improved the service enjoyed by our exporters and importers, and undoubtedly facilitated the striking increase in our foreign trade during this period. In 1914 there were only 19 American-flag services operating to foreign countries and American overseas possessions. In 1930 there were 83 such services. By 1936 the number had fallen to 58, due to consolidations and the abandonment of some lines during the depression, but the service they offered remained materially superior to that available before the war.

The outstanding benefit to the Nation's foreign trade came from the establishment of regular-line service in the long-voyage, overseas trade routes which before the war were handicapped by indirect transshipment services, insufficient sailings, inferior vessels, lack of regularity, and the concentration of lines at too few American ports. The combined American- and foreign-line services have now been vastly improved. In several instances the improvement was due entirely to the establishment of regular American-line services; in other instances regular services were established by both American and foreign lines. The operation of American lines has made transshipment generally unnecessary. Foreign lines have been forced to establish direct services, and to improve services which were obviously inferior to those enjoyed by rival European exporters.

While part of the improvement in the services would doubtless remain even if existing American lines were replaced by foreign lines, such a situation would again place our traders at a disadvantage. Dependence on foreign lines usually means dependence on lines that are primarily interested in the trade of their own countries. Their services out of American ports are likely to be less certain and permanent and for the most part inferior to those offered their shippers at home.

THE IMPORTANCE OF SHIPFING TO NATIONAL DEFENSE

Even more important than its role in the development of commerce is the vital relationship that exists between the merchant marine and national defense. The Commission found this to be true, and said that many authorities regard the latter consideration as the more important of the two, a view which is supported by the fact that national defense is placed ahead of trade as an objective of the Merchant Marine Acts of 1920, 1928, and 1936. It is obvious that national defense is an important, if not the primary, justification for the maintenance of American vessels in foreign trade.