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Mr. SAUGSTAD. Yes, sir.

Mr. MANSFIELD. Can you tell us how it is in England, Italy, and Germany!

The CHAIRMAN. I think he is going to take up, Mr. Mansfield, each one of those countries separately. I have no objection to his answering that question right now, however.

Mr. SAUGSTAD. I expect to deal with it as we go along, Mr. Chairman, if it is convenient to the committee.

Mr. WALLGREN. According to those figures, then, we have spent about the same amount of money as France and we have not as good a merchant marine as they have ?

Mr. SAUGSTAD. I do not know. The CHAIRMAN. This witness undertakes to speak only as to facts and not to give opinions.

Mr. SIROVICH. He has qualified his statement by saying he is only reporting things and not commenting:

The CHAIRMAN. And is not giving opinions. Proceed, Mr.
Saugstad,

Mr. Saugstad. The next subject is subsidies to tramp shipping in France. By a law enacted last July, on the 12th day thereof, which became effective a month later, the French Government undertakes to subsidize noncontract ships for operating on the seas and in the long coastal trades of France, under certain restrictions. The interesting part of that program is not the navigation-bounty principle which is applied, but the way the funds are raised. The means of obtaining funds for the management of this policy is to increase the import duties by a maximum amount not to exceed 4 percent, and thereby raise funds which are to be redistributed to the French cargo ships.

The original appropriation for the first year's operation is 90,-
000,000 francs. That is for the year 1935.
Mr. Sirovich, Is this 4 percent an import duty on everything?

Mr. SAUGSTAD. The categories are not mentioned in the law, but are to be determined by a decree to follow. It was estimated before the House of Deputies at the time the bill was under consideration that this would produce a revenue of 140,000,000 francs a year. The effective period

The CHAIRMAN. How much would that be? Mr. SAUGSTAD. About $9,000,000. The first year's operation of 90,000,000 francs at gold par is about $3,500,000, and at current rates of exchange about $6,000,000.

The effective period for this policy is 2 years. There are certain nationalistic restrictions. The vessel must be manned by French citizens, the majority ownership must be French citizens, any French company chartering or having an interest in foreign ships is not eligible under the law, and no ships built or purchased abroad after May 1, 1934, are eligible.

The principle of payment is known as a “ton-day basis.”; that is, the number of days that a ship is on a voyage is multiplied by the number of gross tons of the vessel and to the result are applied certain basic rates, which are qualified through a system of coefficients determined by speed and by other considerations,

Mr. Chairman, do you want me to state for the record all of the details of that system?

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The CHAIRMAN. I think it would be very interesting.
Mr. SAUGSTAD. All right.

Mr. SIROVICH. You say they utilized the gross tonnage or the net tonnage ?

Mr. SaugsTAD. The gross tonnage. On power-driven vessels up to 500 tons gross there is paid 30 centimes per ton per day; from 500 to 1,000 tons gross an amount of 25 centimes per day; from 1,000 to 3,000 tons gross, 20 centimes per ton per day; from 3,000 to 5.000 tons gross, 17 centimes per ton per day; and from 5,000 to 10,000 tons gross, 14 centimes per day. For ships over 10,000 tons, 10 centimes per day.

Mr. SIROVICH. For tramp steamers?

Mr. SAUGSTAD. Yes, sir; general-cargo .vessels, which are not confined necessarily to any contract route.

There is an increased allowance for speed. For vessels making from 10 to 14 knots a 10-percent allowance is added and a 30-percent allowance is made if they are passenger ships. I said cargo and charter vessels. Passenger vessels may come under the charter classification. From 14 to 16 knots,

Mr. SIROVICH. You would not consider a passenger vessel a tramp steamer, would you?

Mr. SaugsTAD. She may be on a cruise.
Mr. SIROVICH. I see.

The CHAIRMAN. You draw the distinction of not running on a regular line?

Mr. SAUGSTAD. Yes, sir; or I would rather make the distinction of not operating under a contract line.

For 14 to 16 knots, 30 percent additional is granted on cargo vessels and 50 percent on passenger vessels; from 16 to 19 knots, 60 percent additional; from 19 to 23 knots, 90 percent additional; and over 23 knots, 120 percent additional.

Mr. SIROVICH. And have they such tramp steamers?

Mr. SAUGSTAD. Not unless they would take the Normandie and put her in a cruise sometime, and that would not mean anything.

Mr. SIROVICH. Then this is only for window dressing?
Mr. SAUGSTAD. It is the law.
Mr. SIROVICH. Anticipating the future.

Mr. Saugstad. To qualify for these subsidies, these vessels must produce a certain number of miles per day on an average per voyage. Thus the 14-knot vessels or more must make good 90 miles per day on the average; those that make 12 to 14 knots. 85 miles per day average; 11 to 12 knots, 65 miles per day average; 9 to 1i knots, 55 miles per day; and less than 9 knots, 35 miles per day.

There are certain variables within certain trades and these variables are managed through a mathematical coefficient system which is applied to each trade and ranges from zero to two. In other words in certain trades, the coefficient means that certain ships get nothing and in other trades, they may get twice the allowance if the two coefficient is applied to them. These vessels may receive postal pay under exactly the same conditions as contract ships.

The first results of this law, which went into effect in August, were published at the end of September 1934, and indicated that as a result of the law 147,000 gross tons of vessels had come out

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of lay-up and been recommissioned; 40,900 gross tons had been laid up, resulting in a net gain of about 106,000 gross tons in employment of French ships at sea.

That, Mr. Chairman, is all I have to say on the subject of subsidies to tramp shipping in France.

Mr. WELCH. Mr. Chairman, by way of comparison, according to the statement of the witness, it should be noted that the French Government pays $27,000,000 for subsidies to only 4 lines, whereas the United States Government pays approximately the same amount in subsidies to 44 lines.

Mr. SIROVICH. How about the tonnage of the 44 lines as compared to the tonnage of the 4 French lines?

Mr. SAUGSTAD. I cannot answer that question. I can only suggest that the lines you refer to are systems; that they include more than one trade route; that the C. G. T. Line, for instance, includes four different operations. So that it is not strictly comparable to say that these are four lines. At the outside, I presume the French system will not have more than 10 routes, as compared with the number you mention.

Mr. SIROVICH. How about the tonnage of the vessels on those 10 routes?

Mr. SAUGSTAD. I cannot answer that question without a comparison of the record.

Mr. WALLGREN. Have you any knowledge as to private lines that are operating without subsidies?

Mr. Saugstad. No, sir; I have not. We have some estimates, but I do not now have before me what percentage of the total French feet is included in subsidized lines. I do not recall the figures and would not want to guess at them.

Mr. Sirovich. Is there any registration of French ships under any foreign flags? I mean is there any French company that operates under different nationalities than their own?

Mr. SAUGSTAD. I have no knowledge of that.

Mr. SIROVICH, Because I understand in reading over the reports that we have certain American ships that have been built here that are operating under foreign government registries. Mr. SAUGSTAD. I am not familiar with that.

Mr. WALLGREN. There are, however, private lines operating and that have been operating for many years; is that not so?

Mr. SAUGSTAD. Oh, certainly.

Mr. WALLGREN. Is there any preference given in the matter of carrying mail?

Mr. Šaugstad. No. Any French ship is entitled to carry mails tendered it by the French Postal Administration and to receive there for the Universal Postal Union rates, or perhaps other rates fixed by the French Government. Mr. MANSFIELD. Do tramp ships engage

it? Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Does the French Government avail itself of the option of taking 25 percent of the cargo space and passenger space on most of the ships on the different routes? Mr. SAUGSTAD. I do not know. The CHAIRMAN. Presumably that is with its colonial possessions,

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Mr. SAUGSTAD. Yes, sir.

Mr CULKIN. Do those two disbursements cover the whole field of French subsidy?

Mr. SAUGSTAD. No, sir.
Mr. CULKIN. Including the 405,000,000 and the 90,000,000?
Mr. SAUGSTAD. No, sir.
Mr. Culkin. There is more that you have not described ?
Mr. SAUGSTAD. Yes, sir; I have not finished.
The CHAIRMAN. Proceed.

Mr. SAUGSTAD. The next subject under French subsidies is the interest contributions on loans covering mortgages on ships built by French shipowners, either in France or in foreign countries. The appropriation for 1935 under this head is 21,500,000 francs, an amount at gold par equal to $840,000 or at current exchange to about $1,420,000.

Mr. SIROVICH. How is that contribution given to interest?

The CHAIRMAN. I think the witness will cover that entire field if he is just permitted to go ahead and develop that, and then ask questions.

Mr. SAUGSTAD. The interest contribution of the French Government is one-half of the interest charge on that portion of a loan underwritten by the Government itself with certain variations. Under the original law of 1928, it was found that the 50-percent liability of the Government resulted in some cases in the operator paying a very small sum and it was therefore fixed as a limit that no matter how low the interest rate fell the French shipowner must pay not less than 2 percent of the interest share on cargo ships, nor less than 3 percent on passenger ships. Does that answer your question?

Mr. SIROVICH. Yes.

Mr. SAUGSTAD. Now, the developments under that policy were these: There was set aside an annual contribution by law of 6,000,000 francs for a term of 5 years. It was found that that amount of money was not necessary; so, in order to give a further aid, the French Government by subsequent amendments to the law authorized the expenditure of one-half of the interest rate on 85 percent of the loan, which would, in that case, cover not only the Government's position as the mortgagee, but also one-half of whatever interest might be paid to others holding interest in the ship. And finally, in 1931, the money still not having been expended, they authorized one-half of the interest contribution on the basis of 100 percent of the value of the vessel under construction. That, however, was made as a special contribution in the interest on account of the exchange rates at that time.

The basis on which these interest contributions are made rests upon the fifth subject that I outlined this morning, which is the extension of public credit by the French Government on mortgages on vessels. In 1928, the French Parliament authorized the Credit Foncier, which is the leading French real estate bank, to advance an amount of 200,000,000 francs annually for 5 years against ship mortgages. At the expiration of the 5-year period, the authorization was again extended for 4 years to a total amount of 125,000,000 francs annually. This means that the total authorization of that bank under its charter operations permits it over a period of 9 years to advance 1,500,000,000 francs, or an equivalent at gold par of about $59,000,000 and at current exchange rates about $100,000,000.

The extent to which the Government authorized the bank to underwrite the paper was 50 percent of the value of the tonnage under construction or building, but that limitation may be increased if the borrower, in addition to his mortgage on the vessel, adds a bank guarantee. In that case, the Credit Foncier may advance 70 percent of the value of the vessel.

The CHAIRMAN. That is for construction purposes?

Mr. SAUGSTAD. Or for purchase. In addition, if the owner or borrower puts up additional collateral, the bank may advance 85 percent of the value of the vessel.

The financial results of that law up to the end of September 1934, the report of which covered only the first period of operationthat is, from 1928 to 1933——show that during the first period an amount equal to 441,235,000 francs had been advanced, of which 80,187,787 francs had been repaid; or, roughly, 18 percent of the Do you want me to state for the record the tonnage and the amount

involved? It is in these publications and it is a lengthy, detailed statement. I wonder if we could not merely extract it from the record here and insert it. The CHAIRMAN. Yes, insert it in the record. (The data above referred to is as follows:)

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loan.

REORGANIZATION OF COMPAGNIE GÉNÉRALE TRANSATLANTIQUE

AND CONTRACT OF 1933

In 1933 the Compagnie Générale Transatlantique was completely reorganized by law and a new contract was concluded, covering three services previously operated under individual contracts. This was accomplished (1) by law of July 20, 1933, authorizing and covering the reorganization of the company; (2) by another law of July 20, 1933, authorizing the minister of the merchant marine to enter into an agreement with the Compagnie Générale Transatlantique, after that company had been reorganized; and (3) by the contract and regulations finally adopted.

DEVELOPMENTS LEADING TO REORGANIZATION

In 1931 the Government of France officially recognized a serious financial crisis in the operations of the Compagnie Générale Transatlantique. The company's accounts for 1930 showed a deficit of 30,423.079 francs ($1,192,584), as compared with a gross profit of 107,306,354 francs ($4,206,409) and a net profit of 16,781,928 francs ($657,851) for 1929. The company had ordered many vessels during recent years, and payments due shipyards by 1931 totaled 276,000,000 francs ($10,819,200). Due to the depression in world trade, 30 of the company steamers were laid up.

Plans for reorganization came up for consideration in the French Parliament in December 1931. These included: (a) Temporary reduction in capital and partial write-off of operating deficit, subsequent increase of capital to be supplied by another French steamship company and a shipbuilding company; (b) a moratorium on the annuities of 35,000,000 francs ($1,372,000) excessprofit duties due the French Treasury ; (c) increase in subsidies to the New York line to 25,000,000 francs ($980,000) for 4 years, and 20,000,000 francs (8784,000) for the next 10 years; and (a) reimbursable advances of 160,000,000 francs ($6,272,000) from the French Treasury, or a Government guaranty of a loan in that amount.

The Chamber of Deputies passed such a bill the latter part of December 1931, but when it was received by the Senate, that body refused to take it under

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