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Deputy Candace, according to these reports, is of the opinion that the contract-service system in its present form should cease and that there should be a national company formed to maintain and run the few absolutely necessary services. A subsidy could then be granted to the new organization, which would be far less than the total grant at present allocated to contract services. It is suggested that the savings should form a special fund to be used within 2 years for paying a subsidy of about 100 francs per ton for old tonnage scrapped, provided that 1 new ton is built for every 2 tons scrapped. This reverses the Japanese process of paying the subsidy on the new tonnage built and not on the old tonnage destroyed. The proposal, it is claimed, would result in orders for some 400,000 or 500,000 tons of new ships.

Deputy Candace, it is reported, considered that the present services to the Far East, the north Atlantic, the West Indies, and South America, all of which were discussed in the committee, are in fact state services, for the state has guaranteed not only the 80 or 90 percent of losses on two of them at least, but has also guaranteed the interest on loans necessary for them to carry on. He apparently has proposed to define the exact limits of the public-service fleet and to have it returned to a private-contract base under a central company for all services. He is reported to have stated that the state fleet does not exist principally to make profits but simply to carry out public service and that he does not think necessary to have it so nearly administered by the state as it is now. If these proposals are accepted, tonnage would be reduced to that necessary for public service only. At present, he claimed, the state assumes responsibility for services that are not of such a nature.

The bill is reported to provide:

Article 1: During a period of 2 years, as of the enforcement of the present law, a premium of 100 francs per gross registered ton will be granted to any French shipowners who will scrap in France, either French or foreign tonnage, provided they will have new tonnage built in France, in the proportion of 1 new built ton against 2 scrapped tons.

Article 2: All present agreements between the State and the steamship companies will be canceled within 3 months, as of the enforcement of the present law.

Article 3: New agreements to be concluded by the state will only apply to imperial lines, the list of which will be drawn up by the government.

Article 4: A managing committee will supervise the strict application of article 3 of the law. It will organize and intensify the relations between France and its colonies. It will control the operations of the imperial lines.

Article 5: An advisory committee, composed of 15 members, will be created. It will be consulted in connection with all questions interesting the independent steamship companies, and, generally, the commercial policy of the government.

The CHAIRMAN. Is that a committee of the Chamber of Deputies?

Mr. SAUGSTAD. It does not say. The report does not indicate whether it is a Chamber of Deputies or a private committee.

Previously there have been blocs formed within the Senate and the Chamber of Deputies for merchant marine consideration, but there is nothing to indicate that that is the case here at this time.

Mr. Saugstad. Yes, sir. Now, Mr. Chairman, that is all I have to say on France.

The CHAIRMAN. What would be the next subject that you would take up-Great Britain ?

Mr. Saugstad. We carry it alphabetically, so Germany would be the next.

The CHAIRMAN. All right; go ahead with Germany.

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Mr. SAUGSTAD. In Germany there are no subsidized regular shipping lines; that is, under contract to operate in certain itineraries. There is no available information which tells what official expendi

be made on an annual basis. The German Government does not issue an official budget in such detail that we are able to segregate any amounts that may be paid to shipping.

In a broad sense, I can say that certain laws have been enacted during the past 3 years which provide for certain payments to ships and shipowners, but the philosophy that governs those payments is the attempt of the German Government to reduce unemployment. And the sums of money that have been set aside have been taken out of appropriations originally made for the purpose of reducing unemployment. In other words, it rests entirely on a social basis.

Under that provision, in 1933 a sum of 20,000,000 reichsmark was granted to German shipowners, payable partly at 3 pfennig per day per gross ton during the period of operation of a ship, and partly at 20 percent of the amount of wages and salaries of the ship's personnel.

Mr. SIROVICH. What year was that? Mr. SAUGSTAD. 1933. The grant was exhausted by October 1933. It was later announced to be prolonged for an indefinite period. We have no official information as to the continuance of the policy, nor of the amount involved. That sum at reichsmark gold par value of $0.2382 cent would amount to about $4,800,000, or an equivalent at present exchange of $0.4043 to about $8,100,000.

Are there any questions on that one point?
Mr. SIROVICH. Have not the German Government given any sub-
sidies prior to 1932?
Mr. SAUGSTAD. Oh, yes; historically; certainly.
Mr. SIROVICH. You are talking since the Hitler Government came
into operation ?

Mr. SAUGSTAD. Yes, sir.
Mr. SIROVICH. I mean, what happened to the North German
Lloyd and the Hamburg American prior to that time, and to the
other lines that go to different parts of the world?

Mr. SAUGSTAD. I am trying to confine my discussion to the present picture. Now, if you are referring to the historical data

Mr. SIROVICH (interposing). Yes; I am. Mr. SIROVICH (continuing). And want me to go back to 1885 and 1886, and so on, I will be glad to do so.

Mr. SIROVICH. Yes; and show how Germany developed its merchant marine.

Mr. SAUGSTAD. May I state this position first and then go back and take that up? (See p. 178.)

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Mr. SIROVICH. Yes; surely.

Mr. SAUGSTAD. For ship scrapping, in 1932, an amount of 12.000,000 mark was set aside in the form of subsidized loans for ship scrapping

Mr. SIROVICH. Was that in 1933, too?

Mr. SAUGSTAD. 1932. This was free of interest and for the purpose of providing 30 mark for each gross ton of old-vessage tonnage scrapped, payable to the owner of the vessel. This amounts, at gold par, to $2,865,000, or a dollar equivalent at current exchange of about $4,850,000.

In 1932, also, the German Government extended its credit through a guaranty of 70,000,000 mark to the big German liner companies and 7,000,000 marks to the German tramp-ship owners.

Mr. SIROVICH. How much was that again! I did not get that.

Mr. SAUGSTAD. Seventy million mark to liners and 7,000,000 mark to the tramp companies.

Mr. SIROVICH. That was in 1932?

Mr. SAUGSTAD. 1932. This amounts at gold par to $16.750,000; or, at current rates of exchange, to $28,200,000. That credit was advanced at a time when the big German companies were practically in a condition of insolvency caused by their extremely large credits with a group of German banks and also the moratorium stoppage of American indemnity payments for the German tonnage. I have not the official figure, but it appears that earlier credits were extended to the companies, possibly in anticipation of an amount of something like $35,000,000 which has not been turned over to the German owners under the moratorium. We can only say, in commenting on this, that the German Press seems to feel that the German banking group has held out possibly unreasonably for their own protection in this position. Despite that, the fact remains that the German Government guaranty of this amount caused the German banking group to extend those loans and in connection therewith the companies also received extensions from the Netherlands bankers who also had extended considerable credit.

Mr. SIROVICH. Would you consider that a loan, or would you consider that an indirect subsidy that the Government never expects to

Mr. SAUGSTAD. I do not know. I do not know the details on that at all. Now, in 1934, another policy was put in force in Germany concerning which we have very little official information. Roughly, it was stated that a shipowner may receive a subsidy of one-fifth of the contract price of a new vessel which he may lay down and, in addition, 4-percent interest on the remaining four-fifths as contribution.

Mr. SIROVICH. Four-percent interest on the 80 percent?
Mr. SAUGSTAD. Yes, sir.
Mr. SIROVICH. Which the Government gives as a contribution ?

Mr. SAUGSTAD. Apparently. That is the information which we have. The latter item is in the nature of a loan for a 6-year period, repayable from anticipated profits after that.

Mr. SIROVICH. You mean the 4 percent, then, is only a loan?
Mr. SAUGSTAD. It is.
Mr. SIROVICH. Not a contribution?

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Mr. SAUGSTAD. It is a loan.

Mr. SIROVICH. To be paid back from profits if there should be any profits?

Mr. SAUGSTAD. If there should be any profits. I may say that it is practically impossible to recite accurate details of the financial operations of the German shipowners, the German banking group, and the German Government at this time. Mr. CULKIN. How about the amount of contribution; have

you

the amount of that?

Mr. SAUSTAD. Yes. The original authorization was 8,700,000 marks, which was later increased; we have it reported, to 10,000,000 marks, or more.

Mr. SIROVICH. What is that for?
Mr. SAUGSTAD. This is a 1934 loan.

Mr. Sirovich. How much have they put away for construction funds, for renovation, and for construction of new ships?

Mr. SAUGSTAD. There is none I know of.
Mr. SIROVICH. No money at all in the present appropriation?

Mr. Saugstad. No money at all in the present appropriation, so far as I know,

Mr. SIROVICH, How about 1932, 1933, and 1934. Is there any money in the appropriation of the German Reich for the construction of new ships?

Mr. SAUGSTAD. Not so far as I know. I may say generally, about the situation in Germany, that during the past 2 years the official policy as laid down is that of decentralizing the major groups. It seems to be the policy of the German Government, according to the official spokesman, to promote the idea of company personality instead of management personality. In other words, the German steamship industry has been built up in a centralized manner by individuals and groups of outstanding individuals over a period of

Mr. SIROVICH. How does that square with the future of the Hamburg-American Line and the North German Lloyd Line under the present administration; is that a policy of decentralization, too?

Mr. Saugstad. The point is they are decentralizing the merger operation, and the trade papers of northern Europe indicate that the reason for the resignations of practically all of the technically qualified old-line managers in those lines during the past year has been due to that decentralization.

Mr. SIROVICH. Has not that begun to disintegrate the German merchant marine, in contradistinction to those who built it up in

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Mr. Saugstad. I cannot answer that; I can merely say that the merger, as a whole, has agreed through its board to turn over certain parts of its business to other entities such as the Hamburg-South American Line, the two African lines, the Levant Line, and the most recent information is that the Hamburg-American Co. and the North German Lloyd, under new agreement, have established certain definite lines of operation.

Mr. SIROVICH. So as to eliminate the principle of competition and the great overhead that goes with competition; that is the purpose of the decentralization?

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Mr. SAUGSTAD. The purpose of centralization was to eliminate competition.

Mr. SIROVICH, Exactly. The CHAIRMAN. The purpose of decentralization, you say? Mr. Saugstad. The purpose of centralization originally was to eliminate competition.

Mr. Culkin. This is having the same effect—this decentralization-by eliminating competition and zoning the world to particular lines; is that the effect of it?

Mr. SIROVICH. Exactly, and decentralizing it.
Mr. SAUGSTAD. Will you repeat the question?
Mr. Culkin. Read the question, Mr. Stenographer.
(The question was read as above recorded.)

Mr. SAUGSTAD. I can only repeat that spokesmen for the German Government indicate that the necessity for elimination of competition through concentration has passed and that the influence of the German Government, through reorganization and coordination of all German industry along broad economic lines, will have the desired effect.

Mr. Culkin. The fact is, of course, the present policy of the Germans is very aggressive in all trade routes of the world, is it not?

Mr. Saugstad. Oh, certainly; in many trades.

Mr. Culkin. More aggressive than it has been at any time since the World War?

Mr. SAUGSTAD. Possibly. They have more tonnage and they have reestablished their lines.

Mr. CULKIN. They are coming back?

Mr. SAUGSTAD. Yes, sir. The declaration of policy on that point was expressed last year by the mayor of Bremen, Dr. Markert, who said that the future policy of Germany would be to make 3,000,000 tons of ships do what 5,000,000 tons had done before. In his speech of announcement of the policy laid down at Hamburg by the spokesmen there

Mr. SIROVICH. Outside of rebuilding and reconstruction, how can they do it, except by the elimination of competition, which they are not doing through the decentralization of their merchant marine and not centralization as they did in the past?

Mr. SAUGSTAD. Possibly through restricting companies to certain trades.

The CHAIRMAN. It would take Dr. Markert to answer that question. As a matter of fact, they found that the centralization theory did not work as well as decentralization?

Mr. SAUGSTAD. It has been the practice of more than one government during the period of depression and disturbed exchange conditions, to request in exchange for public credit the elimination of national competitive lines. That has been general practice in the European countries.

Mr. CULKIN. It might be material to inquire right there whether or not that is the practice on this side-a national attempt to eliminate competing lines?

Mr. SAUGSTAD. I am not competent to discuss that.

Mr. SIROVICH. How many trade routes has Germany at the present

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