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Mr. SAUGSTAD. Six principal shipping companies and at least twice that many services.

Mr. SIROVICH. Including the Orient?
Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Has she a line to her own German colony in Tientsin?

Mr. SAUGSTAD. I cannot say. The North German Lloyd has opened a service to Singapore and to the Straits Settlements. They opened a line from the Straits Settlements to Australia during the last few months, but sold it. The Hamburg America Co, service to the Far East probably offers the service.

Mr. SIROVICH. How does the foreign tonnage engaged in the continental trade of Germany, France, and the United States compare so far as large ships are concerned? Are they equally balanced in tonnage ?

Mr. SAUGSTAD. I do not understand your question.

Mr. SIROVICH. For example, Professor Haag in testifying yesterday stated that England had about 21,000,000 tons, the United States about 13,000,000, and Germany, France, Italy, and so on, about three to four million; but, when he eliminated the various miscellaneous factors that go into the American tonnage, it developed we have about two million or two and a half million that are engaged in foreign commerce. I am not talking about the inland and intercoastal business; I am talking about the foreign trade, and I was wondering how the foreign tonnage of the United States compared with the foreign tonnage of France and Germany engaging in the international trade?

Mr. SAUGSTAD. You mean the vessel equipment, the type of ships?
Mr. SAUGSTAD. I cannot answer that.

Mr. SIROVICH. So at the present time there are no new ships, as far as you know, being constructed by Germany?

Mr. SAUGSTAD. I know of three fast liners for Far East service.
Mr. SIROVICH. And no appropriation for it?

Mr. Saugstad. No appropriation for it, so far as I know. Now you wanted a statement on the origin of the North German Lloyd ?

Mr. SIROVICH. Yes; I would like, from the historical standpoint, to see how it could help us to trace the ideological development of the great Germant marine marine that finally challenged England's sway over the seas.

Mr. SAUGSTAD. Well, generally, the German merchant marine was developed between the period of 1885 to 1913. More specifically, the real tonnage development, so far as high-powered ships were concerned, was the development between 1898 and 1913. During that 15-year period the German shipping came into not only its colonial trades but into the North Atlantic with services that broke up certain preferential positions of fleets of other nations. The immigration movement into this country was the basis on which all the fast, large German tonnage rested. Two ships are historically responsible and possibly the background for the construction of the British Lusitania and Mauretania, and they were the Kaiser Wilhelm II and the Kronprinzessin Cecilie, both of which are now tied up at Solomons Island, 65 miles below Washington.

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The CHAIRMAN. What are their real names?
Mr. SAUGSTAD. The Monticello and the Mount Vernon.
Mr. SIROVICH. When were they built?

Mr. SAUGSTAD. They came into the trade in 1903 and in 1907, and the North German Lloyd's success in the North Atlantic trade up to that point had produced a competitive condition in shipping and in shipbuilding which helped to bring about the 1903 contract between the British Government and the Cunard Line, the result of which was the Mauretania and the Lusitania.

Prior to that, some German operations were on a contract basis. In 1886 an annual subsidy of 4,400,000 marks was set aside for a period of 15 years for the maintenance of certain specified mail services. Of this sum, 1,700,000 marks was for a line between Germany and China and Japan, 2,300,000 marks for a line to Australia, and 400,000 marks for a branch line connecting Trieste with the line to Australia at Alexandria.

The speed requirements for those lines at that time was 12 knots on ships operating to the Far East, and 1112 knots on ships operating to Australia. The ships to the Far East service were nine in number and were restricted to construction in German yards and must be built of German materials.

The contract was changed in 1893, when the Mediterranean line was discontinued, and, in 1898, the subsidy was increased in certain directions by small amounts. At that time the speed was increased to 13 knots for old steamers and 14 knots for new steamers; that is, under the 1899 contract.

Mr. SIROVICH. Is that for passengers or for cargo?

Mr. SAUGSTAD. For passenger ships; and on the branch lines the speed required was 12.6 knots. There was another contract to the German East Africa Line. Those were the only contracts ever given by the German Government for services and they lasted, in one form or another until the war broke out and Germany lost her colonies.

Mr. SIROVICH. She never gave any subsidy to the North German Lloyd or the Hamburg-American Lines at all, did she?

Mr. SAUGSTAD. Not so far as I know.
Mr. SIROVICH. I mean so far as you have gone?
Mr. SAUGSTAD. Not so far as I know.
The CHAIRMAN. Were there not certain preferential rail rates?

Mr. Saugstad. There were certain preferential rail rates in Germany over the German railroads given to goods moving into the export trade. I believe at one time those rates specified that in order to be effective the goods concerned must be shipped on German lines. But generally the preferences were to German ports. In other words, the competition of the German hinterland business which flows in barges through the canal service and the Netherlands is the menace which creates favored rates to Hamburg. Another problem was that the natural flow of a great deal of German business went southward to the Mediterranean. So, in order to bring it north and into the two large German ports, the German railways did have preferential rates.

Mr. SIROVICH. And the reason perhaps they did not give any subsidy to the Hamburg-American and the North German Lloyd was

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because of the tremendous immigration at that time which was provided from Hamburg and Bremen and Havre.

Mr. SAUGSTAD. The railway preferential arrangements, plus the immigration situation undoubtedly was the cause of the predominance of German big ships in the North Atlantic. There is no question but that the Imperator which today is the Berengaria, the Bismarck which today is the Majestic, and the Vaterland which today is the Leviathan, were all built in the Blohm & Voss yards at Hamburg, I believe, for one company and for one purpose-the immigration traffic.

Mr. WEARIN. Who profited from the preferential rail rates in
Mr. SIROVICH. The Government; the Government-owned railroads.

Mr. SAUGSTAD. Well the ships profited through the effect of the preferential rail rates by diverting cargo into German ships. It was not a matter of the rates on those ships, although there were some through quotations.

Mr. SIROVICH. But if the Government owns the railroads in Germany and gives preferential consideration to any cargoes that go over the rails to German ships, to me that is an indirect subsidy of the Government for the benefit of the merchant marine. Mr. SAUGSTAD. I think you may consider it so.

Mr. WEARIN. Well it would inspire a larger percentage of shipping perhaps to the merchant marine; on the other hand, would not the producer or the processor who was making the shipment profit from the preferential rate!

Mr. SIROVICH. That is true.

Mr. Saugstad. He certainly is placed in a better competitive position in southern Germany, in exporting his goods through a German port against Hamburg or Bremen competition, than he would be if he had

to pay full rates for his rail haul to these ports. The CHAIRMAN. Do you know whether those preferential rail rates obtain

now, or not? Mr. SAUGSTAD. There are some. They were considered so important that during the considerations of the Versailles Treaty they were done away with; but we find now in the filed tariffs and reports of the German railways that they are again in force on certain commodities in certain directions, although they do not specify German ships. They relate only to German ports.

Mr. CULKIN. The growth of the German shipping prewar, then, in your judgment was not due to any governmental subsidy; the aid there, according to your description of it, was more or less nominal ? Mr. Saugstad. Not to any public expenditures.

Mr. Culkin. Not to any public expenditures. At the present
The CHAIRMAN. He said not to any Government expenditures.
Mr. Sargstad. Not to any public expenditures.

Mr. Culkin. What other expenditures are there that relate to any form of subsidy?

Mr. Sauostad. Historians of that period feel that a most effective organization in Germany, so far as German shipping was concerned, was a so-called “navy league."

Mr. CULKIN. That was in the nature of social insurance ?
Mr. SAUGSTAD. It was a propaganda organization.

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Mr. CULKIN. Rather than financial?

The CHAIRMAN. I would like for him to explain it in his own words. Mr. Culkin. You do not mind my asking questions?

The CHAIRMAN. Not at all; I just want to get that clear while he is on that point.

Mr. SAUGSTAD. The German Navy League had a membership of 1,000,000 active and honorary members. It published a periodical that had a subscription of 400,000; it carried on a vigorous campaign for a big navy; it sent its members on excursions through German ports to see ships; held exhibitions with pictures and lectures; supported homes for seamen and gave scholarships for students in navigation schools; and finally, with the funds gathered through the organization, made a present of a gunboat to the German Navy.

At the head of that organization was Admiral von Tirpitz of the Imperial Navy.

Mr. Culkin. There was simply a patriotic influence in back of this?

Mr. Saugstad. Yes, sir.

Mr. CULKIN. Now with reference to the current subsidy, I understand that that runs roughly, outside of the loaning, approximately to about 12 or 15 million dollars a year.

Mr. SAUGSTAD. Possibly; but not regularly.
Mr. CULKIN. The current subsidy?

Mr. CULKIN. And that is subscribed by contributions to their merchant marine ?

Mr. SAUGSTAD. So far as I know.

Mr. SIROVICH. You take the loan given by the German Government to the Hamburg-American Line and the North German Lloyd, which you stated before was 70,000,000 marks

Mr. SAUGSTAD. That is a guaranty by their underwriting their paper to that extent.

Mr. SIROVICH. They are underwriting their paper which God knows if they are ever going to get back. That in itself is an indirect subsidy to the amount of almost $25,000,000.

Mr. SAUGSTAD. It would be at gold par

Mr. SIROVICH. I am talking about the international exchange today.

Mr. SAUGSTAD. About $28,200,000.
Mr. CULKIN. Is that pre-war?
Mr. SAUGSTAD. No, sir.
Mr. SIROVICH. No; that is just here in the last year or two.
Mr. SAUGSTAD. 1932.

Mr. SIROVICH. On the question my good colleague, Mr. Culkin, asked you before, that they did not do very much to subsidize their development of their merchant marine from 1886 down to about 1910, through the questions of our chairman you brought out these railroad differentials and that is a tremendous subsidy when you take into consideration that the Government owned the railroads and they gave concessions to all their exportable products, which de

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veloped the great production of Germany, because people were enabled through this differential on the railroad, and through shipping in German bottoms instead of English bottoms, to send their merchandise throughout the world. And that is what brought about the great competition between Germany and England.

Mr. CULKIN. And this was a nationalistic spirit, of course, developed by this league. Mr. SIROVICH. Exactly; and that is an indirect subsidy.

Mr. CULKIN. Subsequent to the war was German tonnage pretty well wiped out?

Mr. SaugsTAD. All ships of more than 1,600 tons were lost.
Mr. CULKIN. That is, they went to other nations ?
Mr. SAUGSTAD. Yes, sir.
Mr. CULKIN. And they started from scratch, then, in rebuilding?
Mr. SAUGSTAD. Yes, sir.
Mr. CULKIN, How much tonnage have they now, if you know?
Mr. SAUGSTAD. They did have 5,000,000 tons-
Mr. CULKIN. Just approximate it, if you can, Mr. Witness.
Mr. SAUGSTAD. Two million seven hundred' thousand tons, Mr.
Haag testified yesterday as ocean-going ships. The total registered
tonnage in July 1934 was 3,690,000 tons.
Mr. CULKIN. That has been built up since the war, largely?
Mr. SAUGSTAD. Yes, sir.
Mr. CULKIN. And it is on the increase all the time, I assume?
Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. That is modern tonnage with improved speed and, consequently, has the advantage on the seas such as modern tonnage would have?

Mr. SAUGSTAD. Yes, sir. Mr. SIROVICH. Now, could you tell us about the German personnel, so far as the seamen are concerned, the treatment of their seamen and the laboring conditions involved in their merchant marine? You stated in France they retire their men at 50 years of age and give them fishing monopolies, and so on, for old-age security. What does the German Government do?

Mr. SAUGSTAD. There is now in formation certain new policies as to German seamen. It is said, according to the trade papers, that, in conformity with the general German labor policy of breaking off from all international connections, the German Union of Masters and Merchant Marine Officers seceded from the International Union of Mercantile Officers during the latter part of 1934. That is apparently part of the nationalistic movement.

Mr. CULKIN. What is the significance of that secession, if you know?

Mr. Saugstad. Nothing I can state, except possibly as a general result of the nationalistic movement. Effective as of December 1, 1934, certain new wage scales and working conditions were introduced in German shipping. This is also according to the trade papers. The new conditions apply to all vessels of 50 gross tons and over, whereas the old conditions applied to ships only of more than 100 gross tons.

The principal matters relate to working hours, holidays, and overtime. Formerly a ship's crew was required to do overtime work;

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