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The CHAIRMAN. That can be noted to be inserted in the appendix. Without objection that will be done.

Mr. McVay. Thank you.

The CHAIRMAN. Gentlemen, unless there is somebody else prepared to go on, I will have to adjourn the hearing. We want to get through with these outside witnesses, because when we get the bill before us, we will try not to have all these general statements. We will just confine ourselves to the bill.

Mr. BENDIX. I would like to answer Mr. Haag's last statement regarding propaganda. The CHAIRMAN. You may make a very brief statement.

STATEMENT OF V. B. BENDIX, NEW YORK CITY Mr. BENDIX. I subscribe absolutely to the statement of Mr. Haag just put into the record. Great Britain does need a lot of merchant ships as a matter of national defense. Great Britian is an island empire. She needs merchant ships in times of war and merchant ships in times of peace to feed herself.

No such need is required by the American Government, by the United States, because we have a continental territory here that can feed ourselves and the whole world.

Mr. CROWE. I would like to ask the witness one question. When the World War came along, when we entered, we found that we needed ships; and we built them hurriedly, and they were not very good. We might need them again, might we not?

Mr. BENDIX. Yes, sir. Í subscribe to the principle of an American merchant marine.

It might be well to mention here that Great Britain had the biggest merchant marine in the world when the war broke out; and she also had to build a lot of ships. Whether you have them or not, you will have to build them.

The CHAIRMAN. All right. Unless there is some one else who is ready to speak, we will adjourn until 10 o'clock tomorrow morning; If anybody wants to be heard, let him give his name to the clerk and we will give him a chance to be heard tomorrow.

(Whereupon, at 4:20 p. m., an adjournment was taken until Thursday, Mar. 21, 1935, at 10 a. m.)

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Washington, D. C. The committee met at 10 a. m., Hon. Schuyler O. Bland (chairman) presiding

The CHAIRMAN. I am going to ask Mr. Saugstad to take the stand first this morning. But before I interrogate you, Mr. Saugstad, I want just to make this statement. It has been stated in the Postmaster General's Report for the year 1932, as I recall, that the amount awarded the merchant routes under the contracts following the Jones-White Act, for the fiscal year ending June 30, 1932, was $22,431,791.04, while the cost at poundage rates paid vessels of American registry would have been $3,267,453.33.

I have seen it stated that during the same fiscal year an analysis of postal receipts and expenditures based upon each $100 expended shows that the receipts from second-class mail account for $2.91, while expenditures represented $15.74; or, to put it another way, another tabulation shows that the total revenues from second-class matter were $23,149,305.44, while the expenditures for delivering and handling this same class of matter were $125,293,596.27, or an expense of apportioned expenditures over revenue of $102,144,290.33, which constitutes nothing but a subsidy to the second-class mail interests of the country.

I am making that statement now for the purpose of asking that somebody connected with the Post Office Department verify it and advise this committee what they are paying, now as subsidies to second-class mail, or whether it is self-sustaining.

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The CHAIRMAN. Please give your name to the stenographer.
Mr. SAUGSTAD. J. E. Saugstad.
The CHAIRMAN. And what is your position?
Mr. SAUGSTAD. Bureau of Foreign and Domestic Commerce, De-
partment of Commerce.
The CHAIRMAN. How long have you occupied that position?

Mr. SAUGSTAD. I have been with the Bureau of Foreign and Domestic Commerce for 6 years.

The CHAIRMAN. I believe, Mr. Saugstad, you are the author of these documents that are gotten out, entitled " Shipping and Shipbuilding Subsidies ”, “ Trade Promotion Series, 129 ", and some others!


The CHAIRMAN. Just for the purpose of the record, I wish you would make at this point a statement of the series in sequence, so that we will know exactly where to turn to bring them down to date.

Mr. SAUGSTAD. Series 129 is the latest series on this subject.
The CHAIRMAN. On the subject of subsidies?

Mr. ·SAUGSTAD. Subsidies to shipping and shipbuilding. The original series was 119, beginning with a first edition in 1910, and a second edition in 1923. Series 129, Trade Promotion Series, was begun in 1932, since which time it has been issued in annual supplements in order to bring the material up to date.

The CHAIRMAN. In other words, if a man has this volume which was gotten out in 1932, and which is entitled “ Shipping and Ship Building Subsidies", and then has Trade Promotion Series No. 129

Mr. SAUGSTAD. Trade Promotion Series No. 129 is the latest?
The CHAIRMAN. Oh, this is the latest.

The CHAIRMAN. And then the same series has numbers one, two, and three-well this is one, is it not?

Mr. Saugstad. That is the original; that is the basic report. The supplements are numbered one, for 1932; two, for 1933; and three, a special supplement on ship scrapping, and no. 4 is presently in process for distribution. It has not been released by the Department.

The CHAIRMAN. With those documents one has before him a very complete history of the shipping and shipbuilding subsidies throughout the world?

Mr. SAUGSTAD. As far as it is possible to obtain them; yes, sir.

The CHAIRMAN. Well, without taking up your time with ques. tions on matters which you are probably and I know better advised than I am, I would be glad if you would discuss the question of subsidies throughout the world, taking the nations up in such order as you think proper.

Mr. SAUGSTAD. Mr. Chairman and members of the committee, in making a statement on shipping and shipbuilding subsidies, I appear not as an advocate, but simply as a reporter of facts of law and contract as these may appear in the official records of certain countries which may here come under consideration. I have no opinions and draw no conclusions from these statements, except as the record itself may indicate.

The subject of subsidies is technically, in its simplest form, quite complicated. That complication is multiplied by the number of countries that grant subsidies. The confusion is still enhanced by the question of foreign exchange. I recite these things in order to show the difficulty of laying before the committee any concise picture converted into American dollars so far as amounts of money are concerned.

In approaching the subject, I believe we can best follow it by first considering it by nations; then, if the committee so desires, we may go into the various types of subsidy as these may be comparable by nations. So, to that end, I will try and confine the discussion to two general groupings: First, the group of subsidies

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which is dependent upon annual appropriation; secondly, that which goes into the maritime credit field, which is not necessarily an out-ofpocket contribution.

In order further to clarify these groupings, I believe we can consider them in five general subjects. These do not, by any means, cover all the technical types of subsidies, but they serve to condense the many kinds of special subsidies into broad groupings which will probably meet the requirements of this discussion.

Under the general grouping of annual contributions, I have set up four subheadings. The first of these is subsidies to regular shipping lines; the second is subsidies to tramp or charter tonnage, which does not operate on definite lines; the third is subsidies granted for ship scrapping; the fourth is interest contributions to ship construction loan funds or to public credit granted through the underwriting of maritime securities, and a fifth segregation consists of the loan funds and credit institutions themselves. With these in mind, I will proceed to give a synopsis of the current situation in the principal maritime countries which today give subsidies.

Mr.Siroyich. Would that be confined to direct subsidies and indirect subsidies? Mr. SAUGSTAD. Yes, sir; although I do not so classify them. Mr. SIROVICH. But they come under that category? Mr. SAUGSTAD. They can be so considered; yes, sir. The CHAIRMAN. Except for brief explanatory questions, I believe it is better—and that was the purpose of the doctor's question—to let the witness proceed without interruption.

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Mr. SAUGSTAD. The first country under consideration alphabetically is France. It is also first under consideration usually as having been the leader in experimental policies in subsidizing ships.

France, for 1935, has appropriated 405,650,000 francs for its four subsidized contract services. Mr. Chairman, do you want me to read into the record the gold conversions and current exchange conversions of these figures?

The CHAIRMAN. I think it would be very interesting to do so. Mr. SAUGSTAD. It possibly leads to confusion, but, in one sense, it might clear the record if we do.

The CHAIRMAN. Yes. I think, if you would give the francs and the equivalent in dollars, it would probably be better. I notice in one of your reports that has been done very graphically.

Mr. Šaugstad. Yes. As a matter of policy, we have usually carried conversions of foreign currencies at stabilized rates in equivalents of American dollars until this past year, when the current exchange situation has made it somewhat confusing to accept any figure to cover an extended period.

The CHAIRMAN. I noticed in one of your former reports you gave the francs and then the dollars, and you gave the rate of exchange.

Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. So that, with those facts, if a man had the curfent rate of exchange, he could raise or lower it.

Mr. SAUGSTAD. All right.
The CHAIRMAN. What is the present rate of exchange?

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Mr. SAUGSTAD. The present rate of exchange is 0.0664 cents per franc. That is the average exchange rate as of February 24 to March 2. The gold franc value is 0.0392 cents.

Mr. SIROVICH. You mean about 16 francs to the dollar?

Mr. Saugstad. Yes, sir. Now, returning to the original figure of 405,650,000 francs, that means a gold franc value of $15,800,000. It means at current exchange about $26,800,000.

The greatest amount given to any line under that system is that paid to the Far East services from Marseilles, and that, for 1935, is 202,500,000 francs, equivalent to a gold par value of $7,900,000, or a current exchange value of $13,400,000. That figure represents 80 percent of the loss in the operation of that line during the preceding year, which is the liability of the French Government under the contract. And I may say in passing that that amount has increased since 1923, when it was 45,000,000 francs. In other words, it has increased fourfold in a period of about 12 years, due to the increasing losses in that operation.

The next amount in size is that given to the so-called " French line." Is there any reason for encumbering the record with the French titles of these companies?

The CHAIRMAN. I do not think so. I might just ask for my own information and probably that of the committee, if that is what is known as the C. Ĝ. T.?

Mr. Saugstad. That is the C. G. T.-the Compagnie Générale Transatlantique.

The CHAIRMAN. That is the line that has the Normandie! Mr. SAUGSTAD. Yes, sir. The CHAIRMAN. And operates these big ships? Mr. SAUGSTAD. Yes, sir. The CHAIRMAN. And C. G. T. is the common designation ? Mr. SAUGSTAD. Yes, sir. I will refer to it as the C. G. T. in this discussion. The amount granted to the French line is 150,000,000 francs annually.

The CHAIRMAN. That is commonly known as the “French line", is it?

Mr. SAUGSTAD. Yes, sir; in shipping circles we usually speak of it as such. This at gold par amounts to $5,900,000 and, at current exchange, to about $10,000,000 annually. That amount represents, first, any operating losses that may have taken place over the line during the preceding year; secondly, it represents an additional amount which the company by contract is compelled to pay to its old creditors before it was reorganized.

The third line in the French system is that to South America. The CHAIRMAN. Is that a part of the same French line?

Mr. Saugstad. That is not a part of the French line, although I understand the French line has an interest in the operation.

The CHAIRMAN. Just for clarification at this time, how many reorganizations have there been of the French line! There was one in 1932, in which the Government assumed certain obligations, and one in 1933, was there not?

Mr. SAUGSTAD. How many reorganizations?

Mr. SAUGSTAD. There has been but one reorganization. In 1932 the French Parliament voted a temporary loan of 110,000,000 francs

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