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signed jointly by the Premier, the Minister of Communications, and the Minister of Finance. We have discussed the British tramp-ship law. It is significant that a statutory committee is held responsible for its operation, a committee which has its own checks and balances. It is significant also that the president of the board of trade in discussing the bill on the floor of the House warned against a rigid system in these words:

Even the most skillful and farsighted shiphuilders, engineers, and shipowners will discover a good deal under this scheme that they did not already know. We want to take advantage of that. We, therefore, provide that this scheme shall be in force for 12 months in the first instance; if it is found to be in the national interest to increase it for a further period it will be very easy for the House to express that view and to give effect to its decision.

Control means more than power. It means confidence. I believe legislation in maritime countries today is becoming more a process of control bodies and the shipping industry reaching agreements on policy and jointly laying such agreements before legislative bodies for approval,

and less a process of making a battleground of legislative bodies. The first step in any program to minimize abuse and confusion is the establishment of proper control into which is built technical integrity, intellectual honesty, and representative character.

The Government of the United States has now been actively interested in American shipping for_20 years. Two schools of thought are expressed in the result: First, Government ownership and operation, as established in connection with the ship-purchase bill in 1915 and 1916, which resulted in establishment of the Shipping Board and the Emergency Fleet Corporation; second, transfer of shipping to private industry during a period of 12 years by a full regional board. Neither policy has been clearly successful because of many factors; jointly the two policies have made some progress.

If the measure of our maritime shame in 1913 was the carriage of 10 percent of our foreign trade, then, by the same token, the measure of our maritime pride in 1935 may well be the current 35-percent share. This accomplishment has been made without previous experience, without previous establishment in world trades, and in a period of the worst depression ever experienced in the sea trades. The achievement of the 25-percent gain on the part of American ships in 20 years will be remembered long after abuses are forgotten.

I know of no major shipping organization in the world today that has substantial reserves, proper equipment, credit, firm entrenchment in trade, and with standing in the shipping world, that has been built in less than 1, 2, or 3 generations of men.

As for foreign subsidy policies, these also have seniority to ours. On the 3d day of July this year, the Government of France can celebrate its one hundredth anniversary in granting credit for the establishment of steamer services to carry mails in the Mediterranean. On the following day, July 4, the Cunard Steamship Co. may celebrate its ninety-sixth anniversary as mail-contract carrier for the British Government.

I cite these cases by way of showing contrast in national experience with shipping and with ship-subsidy policies, for whatever lessons we may draw from them. I thank you.

The CHAIRMAN. We are very much indebted to you, Mr. Saugstad, for your presence here, the information you have given us, and cer

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tainly for your very comprehensive summary in which at least one member of this committee heartily concurs.

Mr. SAUGSTAD. Thank you, sir.

Mr. SIROVICH. Mr. Chairman, if I am in order, I would like to move it is the sense of this entire committee that we give a vote of thanks to Mr. Saugstad for the brilliant, illuminating, and constructive contribution he has made to the question of shipping.

(There were cries of "second the motion." The motion was carried.)

Mr. SAUGSTAD. I thank the committee, sir, and you, Mr. Chairman.

The CHAIRMAN. And we would be very glad, Mr. Saugstad, if with the permission of Senator Copeland, and I am sure he would grant it, the memorandum which you are preparing for him could be incorporated in this record, too.

Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. I will talk to Senator Copeland about it and I may say that our proceeding here on the subject of the policy to be pursued in the presentation of a bill is in agreement with Senator Copeland's idea and I hope that is the best way to conduct it.

(The memorandum referred to appears as S. Doc. 60 (74th Cong., 1st sess.) entitled “Merchant Marine Policy and Shipping and Shipbuilding Subsidies.")

The Chairman. Now, Mr. Smith, we will be glad to hear you.

1

STATEMENT OF H. GERRISH SMITH, PRESIDENT NATIONAL

COUNCIL OF AMERICAN SHIPBUILDERS

Mr. Smith. Mr. Chairman, I am appearing here on behalf of the National Council of American Shipbuilders, representing approximately 90 percent of the shipbuilding and ship-repairing industry of the United States.

I would like finally to comment upon some features of the interdepartmental committee's report; but, before doing so, it is necessary to point out what appears to me to be the fundamentals underlying the problem that confronts you and, with the purpose of showing those fundamentals, I have prepared a brief statement and have referred to two or three publications that have been prepared by the national council and which I think are pertinent to this subject.

The CHAIRMAN. Do you desire to have those incorporated as part of the record ?

Mr. Smith. Yes, sir; I would like to have them incorporated as part of the record. I will refer to them as I make my statement if that is in order, sir, and ask that they be incorporated as we refer to them. There are copies of them that have been placed before the various members present.

As I understand the problem confronting you gentlemen, it is to establish and maintain upon the seas for the development of our foreign commerce and for national security an American-built, Americanoperated merchant fleet adequate to carry 50 percent of our own goods in foreign trade.

Mr. Ålfred Haag, of the Shipping Board Bureau, has presented to you figures showing that the approximate amount of American tonnage engaged in this trade today, including oil tankers but excluding

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Great Lakes tonnage, is 3,000,000 gross tons, which tonnage is carrying about one-third instead of one-half, of our exports and imports combined, in foreign trade. It seems to me that is the starting point. We have a fleet of that size today and the problem is how we can maintain our present position, which Mr. Saugstad stated so clearly has been built up in a short period of some 20 years.

In establishing this figure of 3,000,000 gross tons, we took into account the figures of our foreign trade during the last 10 years and the probabilities of what it may be in the immediate future. The figures show that the foreign trade of the United States from year to year is about 11 to 14 percent of world foreign trade. The figures also show that the tonnage of American shipping in foreign trade is about 5 to 7 percent of the tonnage of world shipping. Theoretically, therefore, the United States would be entitled to own and operate the same percentage of shipping that its foreign trade represents of world trade or, approximately, 6,000,000 instead of 3,000,000 gross tons.

A careful analysis of the foreign trade of the United States for the past 10 years and its probable volume for the future indicates that its present volume, which is less than half of that in 1929, is a conservative figure to use for the future and, as stated, about one-third of this volume, instead of the greater part as cited in the preamble to the Merchant Marine Acts of 1920 and 1928, is being carried by 3,000,000 tons of American ships. It seems, therefore, that as a starting point in a study of the shipping problem that we must figure on maintaining in foreign trade, as a very conservative figure, at least 3,000,000 gross tons of American shipping.

As a second point, it is recognized the world over that the average life of a ship is about 20 years. Congress must contemplate, therefore, the renewal of 3,000,000 gross tons of shipping once in every 20 years, or on the average 150,000 tons a year, which would be the equivalent of at least 15 ships each of 10,000 gross tons, or a larger number of smaller ships. I cannot see, sir, any possible way of our maintaining our position on the seas without taking that factor directly into account.

Starting with the above figures, it is next necessary to consider the present status of the 3,000,000 gross tons of shipping now in our foreign trade, particularly in comparison with the shipping of those foreign nations with which we niust compete. With the purpose of showing the facts on this subject, the National Council has prepared a booklet entitled “Some Pertinent Facts Concerning the American Merchant Marine”, a copy of which, sir, I would like to file as a part of the records of this hearing.

The Chairman. Without objection, that may be done.

(The paper above referred to will be found as a part of the appendix to this record.)

Mr. Smith. The pertinent facts have been set forth in this booklet in what I hope is a concise manner, where they are definitely available for quick reference to give the most important facts in connection with our American shipping.

The Chairman. And containing the source of the information? I notice the authority is given in each case.

Mr. SMITH. Yes, sir.

The CHAIRMAN.'As, for instance “from the Bureau of Foreign and Domestic Commerce, Department of Commerce."

While the United States has lagged behind and has built almost no cargo tonnage during the past 10 years, Japan, as well as Great Britain, has made rapid strides in the construction of high-speed cargo vessels, as shown on pages 55 and 56 of the booklet. As a matter of fact, since 1929, Japan has built, according to the records we have, 39 cargo vessels ranging from 14 to 18 knots in speed and aggregating about 277,000 gross tons.

Replacement of our ships has seriously lagged behind, so that while it will require an average annual construction of 150,000 gross tons of ships in the United States to maintain our present position in foreign trade, it will require an even greater volume of construction over the next 10 years to replace ships that will be wholly out of date, if we are to catch up for loss of time, that is, to modernize our ships after 1940.

What I have stated here are some of the essential facts; the booklet referred to contains a great many others, but I have attempted to bring out the important statistical facts upon which I feel the problem that confronts you gentlemen depends.

Without for the moment discussing the importance of American shipyards and shipbuilding from the point of view of national security, it is of importance to point out to your committee what the shipbuilding industry really is and what it means to American industry and to American labor. In this connection, the attention of the committee is invited first to table no. XIII on page 77 of the booklet, which shows private shipbuilding establishments in the United States which, with their present facilities or with very moderate additions thereto, can build or repair sea-going commercial vessels. In addition to this list, there are listed as operating under the Code of Fair Competition and Trade Practice for the Shipbuilding and Shiprepairing Industry, fully 100 other smaller yards scattered throughout the United States, on the seaboard, on the Great Lakes, and along the great rivers, and that does not take into account any of the yards that are classed as boat-building establishments, of which there are many hundreds.

I have heard discussed several times before this committee the percentage of the cost of a ship which goes to American labor, and it appeared to me it was somewhat confused and I would like to clarify it. In my opinion, confirmed by a careful study of the National Council of American Shipbuilders on the subject, from 80 to 85 percent of the entire cost goes to American labor. It must be understood, however, that this includes not only the labor within the shipyard itself, but also the labor performed on all of the materials and equipment that are purchased by the shipyard and used in the construction of the vessel. All of the work within the shipyard is labor. When a shipyard buys material, as for instance a piece of machinery, the industry making this machinery performs labor upon it and it in turn buys raw matrials such as steel, copper, lumber, and other products, which, in turn, use labor in their production. So that if you trace the production of any one of these products you will find that in producing ingot copper or steel, or lumber, that labor has again been performed, so that finally everything is labor except the intrinsic value of the material in the mines, field, or the forests of the country.

on this chart, Great Britain has built 50 times as much cargo tonnage in the past 10 years as has the United States.

A further point to be noted is that most of the cargo ships built during the war period were of prewar design, so that from a standpoint of design such ships are at the present time approximately 20 years of age, and, in comparing the age of ships, it must be recognized that the older the ship, like any other article, the more out of date it becomes. There has been a great advance in the science of naval architecture since the war, both in the form of ships and in the design of machinery. As you gentlemen know, the amount of fuel required, which is one of the very important parts, called "items", in the cost of ship operation, is dependent upon the horsepower necessary to drive the ship at a given speed. If you better the form of a ship, make it easier to go through the water, you will reduce the amount of power required; if you increase the efficiency of your machinery design, you will decrease the amount of fuel necessary to produce a horsepower.

Studies of recent ships which have been published in some of the technical journals of the British Shipping Record, show improvement in form of ships alone, since the war, has produced increased efficiencies of 25 percent. The same studies show greatly increaesd efficiencies in machinery design. So that due to the form of ships and design of machinery combined, it has been actually possible to operate modern ships of the latest design with approximately one-half of the fuel required to operate a ship of the same size of pre-war design. Or, conversely, you can get a considerably higher speed out of a ship of the same size now for the same fuel consumption than you can out of a ship designed before the war.

I would like to emphasize a point brought out by Mr. Alfred Haag in his statement before this committee, that the efficiency of the fleet cannot be measured by its tonnage alone, but that there must be taken into account in addition its age and the speed of its ships. In this connection, I invite your attention to table V, on page 52 of the booklet that I have previously referred to, which confirms the figures given you by Mr. Haag-in fact they were furnished us by the Shipping Board Bureau-to the effect that Great Britain stands at the top of the list in tonnage, in speed, and in age; that the United States stands second in tonnage and fifth in speed, and at the bottom

Therefore you cannot in any sense measure the efficiency of our fleet by its tonnage.

It is now pertinent to see what the United States is doing at the present time as to new construction. This is clearly illustrated graphically by chart 7 on page 49 of the booklet. The black line on this chart shows that from the beginning of 1933 up to date the United States has had under construction less merchant tonnage than any other important maritime nation. Actual figures appear on page 50. These figures show that on September 30, 1934, the total volume of merchant tonnage under construction in the United States were 22,225 tons out of a total world construction of about 1,311,000 tons, or less than 2 percent of the world total. As a matter of fact, the only commercial work the United States had under construction at that time was two oil tankers and a few small craft, but no seagoing cargo or combination passenger and cargo ships of any type.

of the list in age.

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