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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it will require an even greater volume of construction over the next 10 years to replace ships that will be wholly out of date, if we are to catch up for loss of time, that is, to modernize our ships after 1940.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.

It was my privilege to appear before the Merchant Marine, Radio and Fisheries Committee in 1928, in connection with the Merchant Marine Act then under consideration, and I presented to the committee at that time a statement prepared by the National Council of American Shipbuilders, a copy of which I have with me today and which I would like to file with your committee as a part of the record of this hearing.

The CHAIRMAN. Without objection, it is so ordered. (The paper above referred to will be filed with the committee.)

Mr. SMITH. This statement is dated February 29, 1928, and is entitled “Statement of Conditions of the Shipbuilding Industry in the United States' at that time. This statement shows, on page 21, the sources of material entering into the construction of a $15,000,000 vessel, with the approximate amounts from each State. I am sorry I have not suficient copies so that they could be placed before each of you gentlemen, because what is brought out in that statement is the very, very broad distribution of materials which go into shipbuilding and, taking a ship that was actually built and just doubling it to get one of larger size, the distribution of materials made in the booklet is taken directly from the purchase orders for material for a large ship, and it shows in that particular case, with one or two exceptions, that every State participated in the materials which went into the construction of that ship.

The CHAIRMAN. That will be included in the statement you are filing, will it?

Mr. Smith. Yes, sir; that will be included in the statement. On pages 23 to 40, inclusive, of the 1928 statement are shown details relative to the broad distribution of materials used in the construction of a ship. Particular attention is invited to exhibit no. 2, showing that the material purchased on this particular design of ship would be slightly in excess of half of the total cost; that is to say, half of the total cost goes all over the country. Every State in the Union and almost every community manufactures something that goes into a ship. And this is further exemplified in the booklet of which you

have a copy and I ask you for a moment to refer to page 75, which shows a very broad distribution of the material.

The CHAIRMAN. One of the best ways to relieve unemployment would be to build ships, would it not, Mr. Smith?

Mr. Smith. It is a very definite way; yes, sir.
The CHAIRMAN. Carrying the relief to every State of the Union?

Mr. Smith, I know of no broader spread of employment than you get in the construction of ships.

The table on page 75 shows for every State some of the most important products, not by any means all of them. A further analysis made by our national council is in this small booklet, of which each one of you has a copy, taking an entire program of construction about 4 years back, in 1930. With approximately $75,000,000 worth of work under way on commercial work throughout the United States at that time and taking the ships of all types, there has been prepared and shown in that statement the approximate distribution of the materials by classes. Chart no. II of this pamphlet gives some particular information with reference to structural steel products. It shows that for that large program of $75,000,000, the cost of the

structural iron and steel to the shipbuilder was about $10,742,000. It will vary, of course, for ships depending upon their type. It will average from 10 to 15 percent of the total cost of a ship, depending on the particular type of the ship involved.

When a ship is once built, there are necessarily large expenditures during its entire lifetime for upkeep-such as docking and paintingfor surveys, for miscellaneous repairs due to casualties or other causes, and for changes made by the owner in order to keep his ship as near up to date as he can during its 20-year life. So that during the 20-year life of a ship, you again have expenditures that go to American labor broadly distributed throughout the country in maintaining that ship. And when it is in operation, it of course gives continuous employment to American labor through its lifetime, because of the fuel, supplies, and provisions of all kinds used by it which are largely purchased in American markets and give further continuous employment to American labor.

I have endeavored to present to the committee in this statement the most important statistical facts concerning our merchant fleet and concerning the American shipbuilding industry and I would like, at this point, to make a few remarks as to the importance of an American

This phase of shipping has been well presented by the Interdepartmental Committee in its report. The need of American shipping in foreign trade is a factor in the promotion and development of foreign markets for our goods. It has been shown that it is important in the control of our freight rates at all times and that it is of vital interest to the country in time of war in which we may or may not be engaged.

There have been many references to the need of merchant ships in a time of war and I would like to read into the record a brief statement made by Gen. John J. Pershing, Commander in Chief of the United States Expeditionary Forces during the World War, which appears on page 50 of a publication entitled “The American Merchant Marine", published under the auspices of the American Bureau of Shipping in cooperation with the National Council of American Shipbuilders and other groups in April 1933. This statement was made by General Pershing at the Sixth National Conference on the Merchant Marine held in Washington in January 1933. He said:

I feel that I can speak with some authority on this subject. At the head of our armies, 3,000 miles away, the responsibility rested upon me of upholding our country's honor and directing our part in the gigantic struggle which we had chosen to share with the Allies. Everything depended upon sea transportation. Our troops and most of our munitions, materials, and supplies had to come to us from home. Throughout that whole period there was scarcely a day when the danger of lack of sea transportation facilities was not present. It was a desperate race against time, in which we had to depend in large measure upon our Allies for the necessary shipping, in spite of the fact that they were constantly suffering the severest losses by enemy submarines.

Two lessons stand out clearly from that experience. The first is the wisdom of the historic national policy of Great Britain in maintaining a strong merchant marine. But for her merchant fleet and her ability to replace losses rapidly, the U-boat campaign might well have been successful. The other lesson is the unwisdom of America and our risk of defeat because we had practically no ships on the high seas when we entered the war.

In this connection I invite the special attention of the committee to the publication referred to and, if it is not already incorporated in your records, I recommend that it be incorporated as part of your

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records, as it contains a vast amount of historical and factual information concerning the American merchant marine.

You have read statements as to the inability to reach our foreign markets at the outbreak of the World War, due to the lack of American ships to take the place of ships of foreign nations withdrawn for war purposes. In this connection I would like to file with the committee a copy of a photograph which came to my attention not long ago, which shows a particular situation in the city square in Talladega, Ala., taken in 1914, showing one instance of what happened due to our inability to take care of our own goods to foreign markets. Europe said to us: "Sell us your cotton; we need it”. We said to Europe,"Send your ships and get it; we have no merchant marine”. Europe replied, "We need our ships for war purposes, to carry troops and supplies.” Now what is the result? A loss of millions of dollars to cotton growers. There was no market for cotton, because deliveries could not be made; warehouses were overflowing with cotton that could not be shipped. In a report of March 3, 1927, to acompany bill, S. 5792, Senator Jones of the Committee on Commerce stated that

The loss of our farmers and merchants because they could not get their products to the markets that were crying out for them and willing to pay high prices is estimated to have been at least a billion dollars.

The handicaps to operation of American shipping in foreign trade are well known, and they are discussed at some length in the booklet entitled "Some Pertinent Facts Concerning the American Merchant Marine”, pages 1 to 22, which booklet has been filed with your committee. They are also discussed at some length in the statement presented by me to the Committee on Merchant Marine, Radio, and Fisheries in February 1928, also on record with your committee. In these statements it is shown that the greatest handicap in the operation of American ships in foreign trade is the higher cost of ships themselves. It is shown, notwithstanding these handicaps, that the importance of American shipping from a national aspect is such as to justify Government aid in maintaining it for the carriage of a substantial part of our own goods in foreign trade. This higher cost of ships in the United States is inevitable under our high standards of living, which we all wish to maintain, and under our wage scales which are very much higher than those abroad,

The CHAIRMAN. But if we had a policy of stabilized construction running regularly for a number of years, even then there would be some reduction, would there not?

Mr. Smith. Yes, sir; we would reduce that materially if we had a policy or program of continuous construction.

Under the wage scales prevailing in the United States and our high standards of living, American

ships inevitably cost more than ships built in foreign countries where the wage scales are much lower. It seems difficult for those not familiar with shipbuilding to understand the difference between building a highly specialized article like a ship and a quantity-production article like an automobile. I think this committee understands, however, what that difference is. A ship is a highly specialized article like an automobile would be if each automobile were made to order and different from every other one, and is more like a house built to special

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design and wholly unlike any other house. Now, that is a distinct dividing line between the shipbuilding industry and an industry like that which builds in quantity production. A ship is built from information contained in a large number of plans. There are about as many automobiles built by several companies in one day as there are ships built in the United States, in most prosperous times, over a period of 20 years. So that will give you a pretty fair picture of what the difference actually is.

Mr. Culkin. On that point would it not be possible to standardize the production of freight carriers?

Mr. Smith. You might get up to building 10, perhaps, or possibly 20 of a type at one time, but that is about the maximum.

Mr. Culkin. That would eliminate a good deal of overhead, would it not?

Mr. Smith. That would eliminate a good deal of overhead, but would not permit you to produce on a quantity-production basis like sewing machines or automobiles.

Mr. Culkin. I am not talking about that; I am talking about ships.

Mr. Smith. It will reduce it, but never equalize it.

Mr. CULKIN. Do not some of those other countries produce standardized freight ships-for instance, Japan!

Mr. Smith. No, sir. There are attempts at standardization, but only within limits.

Mr. CULKIN. I notice these oil tankers on the coast are substantially of the same type.

Mr. Smith. No, sir; they are quite materially different.
Mr. CULKIN. Are they all different?

Mr. SMITH. Oh, yes, sir. Every company's tankers differ from the others. It is very seldom two tankers are built alike.

Mr. Culkin. For instance, the Sun Oil Co.'s tankers; are not they all alike?

Mr. SMITH. No.
Mr. Culkin. I mean constructed during the same period?

Mr. Smith. They may have five or six that are alike; but, to keep up to date, it means they increase in size, change in form, and have different types of machinery. So that the results of quantity production or even number" production are almost wholly eliminated.

Mr. CULKIN. So standardization here would be impossible, except to a limited extent?

Mr. Smith. Only to a very limited degree do I think it is possible in shipbuilding.

Mr. RABAUT. In that connection I would like to ask if there is not a tendency, therefore, in the shipbuilding industry to hire the older men; is not that true, and they have a chance to get employment, and the artisans in a certain line are not eliminated because they reach a certain age, as they are in the highly specialized industries that have speed-up systems?

Mr. Smith. I was very happy to shake hands a couple of weeks ago with an oldtimer, 75 years old, who was still operating a plant I operated 25 years ago.

Mr. Rabaut. I am very much interested in that.

Mr. SMITH. Those who are trained to the trade and trained in the art

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