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Mr. SAUGSTAD. I am not familiar with the arrangements at all. It may be that the general operations of Italian tonnage into the Near East has something to do with it.

Mr. Sirovich. And do the Polish people use these ships in Danzig?
Mr. SAUGSTAD. These ships run to New York.
Mr. SIROVICH. Where do they run from?
Mr. SAUGSTAD. Gdynia.

This morning you made inquiry as to the amortization of the Rer and the Conte di Savoia. I am unable to add much to that; but one development took place last year that might have some bearing on that point, although this is largely a matter of finance, reduction of capital and so on, so far as the owning company is concerned, and there is no way of pointing to the two vessels as such; but I am making a statement on the subject generally.

The financial reconstruction plans of the Italia merger were adopted in the early part of 1934, under the auspices of the Italian Government and the Institute for Industrial Reconstruction, to which we referred this forenoon.

The increase of the company's capital from 158,400,000 lire to 576,000,000 lire, was provided by the issue of 4,176,000 new shares, of a nominal value of 100 lire each, to be offered at par to all stockholders, in the ratio of 29 new shares for 11 old shares of 100 lire each. All shares not disposed of are to be taken up by the Industrial Reconstruction Institute. The Institute also took over certain other securities, to be used for the payment of other unsettled debts.

The Italia merger was granted a loan of 170,000,000 lire by the official Maritime Credit Institute, while the Cosulich Co., a member of the combine, was granted a loan of 30,000,000 lire by the same institution. The combine previously borrowed 100,000,000 lire from the Maritime Credit Institute for 15 years at 5.3 percent annual interest rate in October 1933, and borrowed 50,000,000 lire from the Consorzio per Sovvenzioni su Valori Industriali.

That is all I can tell you or say to you about the financial operations of the company that owns the Rer and the Conte di Savoia.

Mr. SIROVICH. Are they selling their stock on the market here?

Mr. SAUGSTAD. I do not know that they are selling stock on the American market. I have no knowledge of that.

Now, I will take up the Japanese data.

Mr. Sirovich. Would you say, before going on to the Japanese situation, that the tonnage of Italy has been gradually increasing, year after year, since the adoption of their principles in 1926, by the building of new tonnage and the reconditioning of old ships? In other words, does Italy have more tonnage today, in 1935, than they had in 1926?

Mr. SAUGSTAD. I cannot answer that comparatively.

I might say that the record I have here shows that in 1925 the total Italian registered tonnage, 100 gross tons and over, was 3,028,661 gross tons. In 1930, it had increased to 3,331,226 gross tons. In 1931, it remained practically static at 3,335,673 gross tons.

Mr. SIROVICH. What year was that?
Mr. SAUGSTAD. 1931.

In 1932, the tonnage amounted to 3,390,572 gross tons. it had declined to 3,149,807 gross tons.

Now, as of July 1, 1934, it had declined to 2,928,396 gross tons, or a decline of 221,411 gross tons from 1933 to 1934. Mr. SIROVICH. Are you taking the total over 100 tons? Mr. SAUGSTAD. Yes, sir.

Mr. Sirovich. I have got a statement here of Mr. Haag that when we reduce the world's tonnage to ocean-going types competing in the international carrying trade, we have a world total of about 36 million tons, of which Great Britain has about 13,500,000; Japan' slightly over 3,000,000; the United States slightly less than 3,000,000; Germany, 2,700,000; France about 2,250,000; and Italy about 2,100,000.

Mr. SAUGSTAD. That is a fair statement.
Mr. SIROVICH. That refers to the international trade.

Mr. Saugstad. Mr. Haag was, of course, referring there to the larger ocean-going types. I do not recall whether he used the 1,500 gross tons or the 2,000 gross tons base.

Mr. SIROVICH. I think about 1,500 gross tons, if I am not mistaken.

Mr. SAUGSTAD. I do not recall, but I think that there has been a general decline during the past year or two in tonnage. In other words, the scrapping programs of the past 2 or 3 years have resulted in the doing away of documented tonnage that was of no commercial use; and you will recall discussion the other day on Germany, that the Government is fostering a general policy of making less tonnage do more work. The discussions have revolved around the

proposal making 3,000,000 tons do the work of 5,000,000 tons formerly.

Mr. SIROVICH. That means the elimination of unnecessary competition.

Mr. SAUGSTAD. It means the elimination of slow, unnecessary, uneconomic tonnage, I presume, and, the higher speed, greater efficiency, and general commercial possibilities of a modern ship over a slow, old type of ship.

Are there any further questions on the general subject of Italy?
The CHAIRMAN. I have none.

JAPAN

Mr. SAUGSTAD. The Japanese Government at the present time has a system of subsidized services which is known as "ordered services."

The CHAIRMAN. Known as what?

Mr. SAUGSTAD. “Ordered services”, under the Ministry of Communications. The term “ordered services", I presume, we could translate into “contract services,” for all practical purposes here.

There is a small bounty given for ship-scrapping and the construction of new vessels; and there are some items in connection with the Japanese steel bounties which may have some effect on the general problem of the cost of construction.

In 1934 the Japanese merchant fleet was probably the most profitable national commercial fleet in the world. In Japanese shipping the year was marked by the reemployment of all sea-going Japanese tonnage, by the improvement of fleet quality through the State-aided scrap-and-build plan, by resumption of dividend payments by several companies, and by redemption of debts by leading companies.

In Japan as well as in Italy, there was a reduction in the total of registered tonnage. Whereas, on July 1, 1933, Japanese tonnage was

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listed at 4,258,159 gross tons, according to Lloyd's Register; it had declined to 4,072,707 by July 1, 1934, a decrease of 185,452 tons.

Perhaps the most interesting development in the Japanese fleet during the year past has been the progress made toward elimination of idle tonnage. While scrapping obsolete Japanese tonnage has materially aided this condition, the general upward swing of the Japanese tonnage market has caused reemployment to a point of practical elimination of idle vessels considered in the sea-going category.

According to the figures compiled in the Transportation Division of the Bureau of Foreign and Domestic Commerce, there was practically no laid-up tonnage in Japan as of July 1, 1934; that is, if no consideration is taken of the Japanese tonnage temporarily laid up at that time, due to the San Francisco strike.

According to the Ministry of Communications of Japan, as of October 1934, there were laid up in Japan 375 vessels of 63,241 gross tons. The bulk of this tonnage was made up of junks, there being not more than four or five sea-going craft of more than 1,000 gross tons included.

Mr. SIROVICH. How many?

Mr. SaugsTAD. About four or five sea-going ships. The main tonnage—that is, the 63,241—was considered almost entirely of junks.

Mr. SIROVICH. To what do you attribute this unusual and remarkable return to prosperity to Japan-to the war in Manchukuo and the utilization of her merchant marine to transport cargo and men, to the strike in San Francisco?

Mr. SAUGSTAD. Not to the strike in San Francisco. The strike caused some idleness in Japanese tonnage. But the official reportscommercial reports-from Japan indicate that, certainly, the increase in prices of heavy industries and the increased activity of shipping companies is possibly very largely due to the increased operations in Asiatic waters.

Mr. SIROVICH. In China and Manchuria?
Mr. SAUGSTAD. Yes, sir. That is, according to the official reports.

Mr. SIROVICH. Yes, sir; and, also, due to the tremendous industrial development that has taken place, has been going on for the last year or two, in which Japan has been throwing her goods into all the markets of the world, through the depreciation of the yen, and thus bringing Japanese goods into competition and underselling the world's markets.

Mr. SAUGSTAD. I cannot say as to that, sir.

According to the Kobe Shipping Exchange, the allocation of Japan's freighters as of January 1 of this year, throughout the world trades, was as follows:

In the Japan to Atlantic coast and Gulf ports there were 26 vessels of 243,223 gross tons.

Operating in European waters there were 32 vessels of 290,349 gross tons.

The CHAIRMAN. That has been a recent growth, that entry into the Gulf coast and around in that neighborhood, has it not?

Mr. SAUGSTAD. Why, no, sir; it is not recent. The Gulf coast business has been fairly stable for quite a number of years, due very largely, of course, to the cotton exports.

Japan to the Pacific coast of North America, 45 vessels, of 419,340 gross tons.

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Japan to Australian and Indian Ocean waters, 33 vessels, of 275,841

Japan to the South Seas and Straits Settlements, 77 vessels, of 507,067 gross tons.

And in the coasting trade about 286 ships, of 1,297,427 gross tons.

I cite these as a general distribution of Japanese tonnage in world trade.

Mr. Sirovich. What have been the particular imports and exports along the Atlantic coast, outside of Baltimore, Newport News, and the Gulf ports, where they have been taking cotton and scrap iron?

Mr. SAUGSTAD. I have no knowledge.

Mr. SIROVICH. I understand, Mr. Chairman, that we have a lot of testimony from men in Massachusetts that they have been bringing fish from Japan to Atlantic coast ports.

The CHAIRMAN. I do not know that their fish have come in in Japanese ships.

Mr. Sirovich. Which came into competition with the fishing industry at Gloucester, Mass.

The CHAIRMAN. I do not think that they came necessarily on Japanese ships.

Mr. SIROVICH. Yes. They brought in their fish from Japan, from Japanese boats. They brought the fish into Boston and Gloucester, selling the fish there cheaper than the fisherman in that area can even go out and fish it.

Mr. SAUGSTAD. We now come to the so-called "ordered services" the equivalent of the contract service system of other countriesJapan under consideration here.

To the general contract or ordered system of services the Japanese Government distributes subsidies in an annual amount of about 10,000,000 yen. There are some current variations between the budget proposals made by the Ministry of Communications and the allowances finally approved by the Ministry of Finance and the Diet. I can say, as a general statement, that the usual request of the Ministry of Communications is about 12 million yen; and for the past 2 or 3 years the actual appropriations have been 10,500,000 yen for 1934, and 9,996,000 yen for 1935.

Mr. SIROVICH. What is the current valuation of the yen in American exchange?

Mr. SAUGSTAD. The average for the period February 24 to March 2 was 28.283 cents.

Mr. SIROVICH. So that would mean an appropriation of between 3 million and 3million dollars?

Mr. SaugstAD. Yes, sir, at that exchange ratio.

Mr. SIROVICH. Is that the total subsidy that Japan gives as an ordered subsidy?

Mr. SAUGSTAD. Yes, sir.

Mr. Sirovich. That is about the lowest we have had, of all the nations, so far?

Mr. SAUGSTAD. Well, the exchange situation, of course, creates that figure. Normally, we speak of the Japanese subsidies as being $5,000,000, in round figures, annually. In point of money, Japanese subsidies range the lowest in the world today, for the services rendered.

Mr. SIROVICH. They are the lowest in the world?

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Mr. SAUGSTAD. I do not mean-
Mr. Sirovich (interposing). For its population?

Mr. SAUGSTAD. I mean in the category of the five principal maritime nations. The Netherlands and Norway are included in the general large group of maritime countries, but they pay less than Japan.

Mr. SIROVICH. From the standpoint of the comparison of populations they would be paying more?

Mr. SAUGSTAD. Which?
Mr. SIROVICH. Holland, the Netherlands.

Mr. SaugsTAD. I hardly believe so. I could not answer that ofishand.

But, in considering Japan, Italy, France, Great Britain, and the United States, you will find that the Japanese is the lowest in the scale of total payments. I might say that, in dealing with the maritime nations, for the purposes of finance, we usually divide them, or include in the first group the nations that have a total gross tonnage of about 3 million tons and upward; and in the second grouping those that have a total gross tonnage of about 1% million gross tons and downward.

There is a margin, apparently, in the maritime nations, which stops at 1,500,000 gross tons; and there are no countries-there are some that come just below 3,000,000 but, between the group of nations having a gross registered tonnage of 1,500,000 and the group having a gross registered tonnage of 3,000,000 and upward, there are none. There is just a blank space. So, we take the first category, when we treat them as the principal maritime nations, based on the registered tonnage of those nations. That is what I had reference to when I stated Japan was the lowest among five in that

category. The present budget proposals and the last official reports are for an appropriation of 12,067,000 yen for the ordered services for 1936. That was the estimate. We do not have the amounts actually approved by the Diet. It has been reported that the proposed subsidy for 1936 will be curtailed by the Ministry of Finance.

The CHAIRMAN. Does the Diet approve every year the subsidy for that year?

Mr. SAUGSTAD. Yes, sir.
The CHAIRMAN. Very much like our appropriations?
Mr. SAUGSTAD. Yes, sir.

The process, briefly, is that the Ministry of Communications prepares a budget for the services; and the Ministry of Finance approves or disapproves or curtails it, which has been the practice for the past 2 or 3 years; and the Diet, of course, retains the privilege of approving the recommendations of the Ministry of Finance or altering them.

For instance, in connection with the construction subsidy system, which ends on the 31st of this month, in the proposals to continue that the Ministry of Finance has won its point, apparently, of having it greatly reduced.

There are some changes from previously published statements of the amounts allotted to certain lines. For example, the San Francisco service of the Nippon Yusen Kaisha, the N. Y K., was allotted 3,540,000 yen for 1936, as compared with an estimate of 2,747,163 yen for 1935; while the Seattle service of the same company was allotted 1,674,000 yen in the 1936 estimates, as compared with 1,702,580 yen for 1935.

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