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ships today are getting better than a fair share of the traffic, because they are modern and they are as fine a ship as there is afloat today of the cabin liner type.

Mr. SIROVICH. Now to what do you attribute their unusual success, eren though they do not measure up in speed and tonnage to these foreign ships?

Mr. HAAG. Primarily because the rate on the cabin liner is somewhat less than on the first-class passenger liner.

Mr. Sirovich. Now let us come to the cargo ships. Have we any cargo ships today that are comparable to these ships of foreign nations in speed and modernity? Mr. Haag. We have not. Mr. SIROVICH. We have not? Mr. HAAG. No.

Mr. SIROVICH. Now is it your theory, since this is a hearing on a subsidy, that if we would develop these three principles, we might develop a merchant marine such as you call to our attention, because I have been enlightened myself, because England has 21 million tons of ships and we are supposed to have, you said, over 13 million tons.

Mr. Haag. Over 13 million tons, yes, of 100 gross tons and upward and including miscellaneous types.

Mr. Sirovich. And when it comes down to the elimination of all the extraneous and miscellaneous conglomeration and of all the decrepit ships, all we have to compete with, as I understand you, is about 2 million tons of modern ships?

Mr. Haag. Just a little under 3 million; but with that 3 million, insofar as competitive power is concerned, it is the last among the six principal nations.

Mr. Sirovich. In other words, the American people ought to know, as far as our cargo and passenger ships are concerned, that we are the last of all the civilized nations of the world in standing?

Mr. Haag. We are the last among the principal maritime nations
when it comes to cargo ships and to the superliners.
Mr. MANSFIELD. And age?
Mr. Sirovich. And still, since you are a very brilliant authority,
Tou will agree with me
Mr. Haag. I do not agree I am a brilliant authority.
Mr. Sirovich. Well, you are; there is no doubt about it. From
1850 10 1860, of the tonnage of the world at that time, England had
about 5,900,000 tons; we had about 5,500,000, and the rest of the
entire world put together only had about 5,500,000.

Mr. Haag. That is about right.
Mr. SIROVICH. Do not you think that a proper subsidy by the
Government, with proper regulation, with a proper differential on
the construction of ships in America and Europe, with a proper
differential to take care of the operating expenses and American rates,
if we had a commission to look after that and to regulate it, we can
still build up in the next 7 to 10 years a merchant marine that would
be equal to that of any nation of the world?

Mr. Haag. We can match the competition of any nation in the world on that basis.

Mr. Sirovich. Let us take up, therefore, the principles of a subsidy. If we subsidize the shipyards that are constructing ships for our American operators and used a differential based on the cost of

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production in America, and gave a subsidy to the shipyards for that differential, that would look after the difference of cost of construction; is that right?

Mr. Haag. Well, the shipyard gets that today; it is reflected in the American cost. The shipyard gets that differential today.

Mr. SIROVICH. Then the American operator is put at a disadvantage when he comes to purchase the ship, when you compare American standards of living and of workmanship in comparison to foreign countries.

Mr. Haag. Well the mail pay that is given takes care of the
Mr. SIROVICH. But we are going to take away
Mr. IGOE. Now, let him finish.

Mr. Haag. The mail pay today does just the very thing you mention; it wipes out that differential.

Mr. Igor. They have been getting plenty of money; it is just a question of what they do with that money.

Mr. Haag. In other words, the mail pay equalizes the American and foreign costs both as to capital and operating costs.

Mr. SIROVICH. What I want to bring out is the fact that in the message of the President to the House and the message sent to this committee, the President is opposed to the mail subsidy; he prefers to give a direct subsidy and to provide that this subsidy will operate under given conditions and the given conditions are, first, that this differential between European costs and our own costs of construction will be equalized so that the American operator has a ship which is on a parity with the foreign operator; is that right? Mr. Haag. That is correct.

Mr. Sirovich. The second thing is where you have a differential would be in the operation of the ship; is that right?

Mr. Haag. That is correct.

Mr. SIROVICH. Now, do you think that we could equalize that differential in operation by a subsidy which could be diminished year in and year out, if we had a commission or a group of representatives of the Government that would be either a board or in an advisory capacity to the shipping interest, that would hold down the great salaries that officials are getting and see that the ship is run on a basis of economy, plus the principle of seeing there is a minimum rate for traffic all over our country?

Mr. Haag. Well, the shipping business is a very hazardous one. There are years of depression. It is very difficult to forecast what the conditions will be, say, in the next 10 years. The nominal life of a ship is 20 years and when a contract is made for building the ship you expect at least to get the use of 20 years out of it. In any contract that is made, consideration should be given as to what the conditions will be over the life of this ship on which the Government helps to equalize the cost differential between American and foreign countries,

Now, supposing in the next 3 years business picked up and profits were made. It is a very difficult thing and I am not qualified to say what a reasonable profit is. You have to anticipate lean years. Not knowing how many lean years there will be out of the 20, it may not be fair to the company to limit their profits because they may not be able to set up a proper reserve fund to take care of the lean years.

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I believe that all companies will cooperate with this Government so that if the business is so good as to make real profits they will work hand in hand with the Government, which will result in a possible reduction in the subsidies paid out by the Government. Mr. Igor. Why do you think that?

Mr. Haag. Well I just have the feeling that the industry is willing to cooperate, if the Government, on the one hand, assists to enable them to compete successfully with foreign ships.

Mr. Igoe. That has not been the history of the industry, has it? Mr. Haag. We have had a very poor history of the shipping industry. Mr. Igor. Along that very line, isn't it? Mr. Haag. Take the 50 years prior to the World War, our shipping in the foreign trade was on the decline; very few paid any attention or were interested in American shipping. Then the world war started. Before we got into the war is the one time that the attention of the entire country was called to the importance of the shipping industry, because when the commerce reached the seaboard there were few ships to carry it beyond.

Mr. Igoe. But since the war, they have been getting plenty of money from the Government.

Mr. Haag. Now, since the World War-excepting the period up until about March 1920, the water-borne volume of world trade de. creased almost continually. At no time has there been such a depression in the world shipping industry as during the post-war period. It was during this period that the United States Government pioneered trade routes essential to the commerce of the United States.

Mr. Igoe. The Government was not conducting the Dollar Line, was it?

Mr. Haag. It was conducting an around-the-world service.
Mr. Igor. And at the same time this man Dollar was drawing down
three or four hundred thousand dollars a year.
Mr. Haag. I do not know about that.
Mr. Igor. You do not think he was helping the Government make
& success out of the shipping industry, do you?
Mr. Haag. I am not in a position to pass judgment on that.
Mr. Igor. I understand you are quite familiar with all the facts
connected with the shipping industry.

Mr. Hang. No; I do not pretend to be familiar with all the facts
connected with the shipping industry. I am familiar with some facts.
Mr. Igor. Are you familiar with that fact?
Mr. HAAG. No.
Mr. IGOE. Who is familiar with it?
Mr. Haag. I should think those handling the finances on the Board.
Mr. Igoe. Is it not true, Mr. Witness, that an investigation was
conducted somewhere here in Washington involving these different
mutes that had to do with 30, 35, or 40 different routes, and a com-
plete and a full hearing was had; is that true?
Mr. Haag. Yes, to my knowledge that is true.
Mr. Igoe. Now who is the man that has that testimony?
The CHAIRMAN. That testimony is public, is it not?
Mr. Igoe. I understand it is not public.
The Chairman. Is not that the Black testimony?

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Mr. Igoe. No; it is not the Black testimony. You had a witness here, Mr. Crowley

The CHAIRMAN. Mr. Crowley was in this interdepartmental investigation.

Mr. Igor. Yes, sir; and he is the man who has the testimony, and that is the testimony I think this committee ought to have.

Mr. Sirovich. It is in this record here (indicating).
Mr. IGOE. No; it is not in there.

The CHAIRMAN. It is in the individual reports of each one of those lines.

Mr. IGOE. It is in the individual reports of each one of those lines and I understood this witness suggested a subsidy of $35,000,000 a year for about 4 years would build up a pretty good fleet of cargo vessels.

Mr. Haag. I said it would build up a splendid fleet of cargo vessels costing about a million dollars each in American shipyards.

Mr. IGOE. That is even better than I said; yet the testimony in the report here indicates that the shipping industry of the country has been receiving a little more than $30,000,000 a year for several years past and it is estimated the cost of carrying the mail which they did carry was only $3,000,000, so that they have had a subsidy of about $27,000,000 a year. Now what have they done with it?

Mr. Haag. They have had a subsidy since they started which averaged 20 million a year, roughly.

Mr. Igoe. That is not what this report indicates.

Mr. HAAG. For 6 years they have had a total of $120,000,000, which is about $20,000,000 a year.

The CHAIRMAN. As I tried to point out yesterday, there were several other considerations passing to the Government besides the carrying of the mail for which it was paying.

Jr. Culkin. Do all of the payments amount to $31,000,000 including the mail and everything?

The CHAIRMAN. Not for the whole period.
Mr. CULKIN. For 1 year, I mean.
The CHAIRMAN. For last year?
Mr. Haag. It was $29,650,000 during the fiscal year 1934.

Mr. CULKIN. What was the total subsidy paid by the Government for mail and all other contributions?

The CHAIRMAN. The report shows the total subsidy, but it does not give the break-down.

Mr. Culkin. What I am getting at is the total amount paid towards the construction or in any way towards the encouragement of the American merchant marine. What was the total amount paid last year?

Mr. HAAG. $29,650,000.
Mr. CULKIN. During the life of this subsidy, the total was what?
Mr. Haag. One hundred and twenty million for 6 years.

Mr. SIROVICH. To what do you attribute the phenominal growth and development of the British merchant marine? Is it due to a subsidy, or to what?

Mr. HAAG. The British merchant marine, the policy there has been to foster the shipping lines of Great Britain. When steam came it, just before the middle of the last century

Mr. SIROVICH. You mean the Cunards?

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Mr. Haag. Yes; the Cunard Line was probably one of the first; the Royal Mail was another one.

Mr. Sirovich. They received subsidies? Mr. Haag. I might say this, that about 90 years ago the mail pay or the form of subsidy granted by the British Government was nearly the same as that, in principle, under the act of 1928. Mr. Culkin. The English subsidy? Mr. Haag. Yes. The contract entered into, I think, with the Royal Mail Steam Packet Co. shows they paid on the mileage basis for the purpose of expanding the trade of Great Britain; also for making available ships for national defense mounted with the heaviest guns available at the time, and the contract reads very closely in principle to that of our 1928 act insofar as aiding their shipping in the liner trades are concerned.

Now not until this last year have they done much in aiding what they call their cargo ships; but in the last few months I think they are aiding those ships.

Mr. CULKIN. Does Great Britain allow those fabulous salaries to their head officials that our American merchant-marine supervisors have been getting?

Mr. Haag. I am not acquainted with the salaries of the British shipping officials; but I have heard it said that the salaries are large. Mr. Culkin. Is there any limitation to their earning capacity? Mr. HAAG. Their earning capacity--that is, in salaries? Mr. CULKIN. In salaries and dividends. Mr. Haag. That I do not know. Mr. Culkin. So that they can put away enough to amortize their ships, so as to build and replace their ships with new ones for the fold obsolescent ships they have? Mr. Haag. I am not acquainted with that.

Mr. Culkin. You are not acquainted as to the formula of foreign countries in the replacement of obsolete ships?

Mr. Haag. To the best of my knowledge, insofar as it applies to the greatest shipping nation in the world, I think for many years the British Empire have replaced about 1,000,000 tons a year.

Mr. Culkin. And what are the principles under which it retires Mr. Haag. That I am not acquainted with. The CHAIRMAN. As a matter of fact, Mr. Haag, Great Britain for a period from 1650 down through 1849 had practically a monopoly in her ships to all of the trade of the world dealing with Great Britain, Mr. Haag. Well a great part of the trade of the world.

The CHAIRMAN. And in that way she built up her connections all though the world. Mr. HAAG. Yes. The CHAIRMAN. And she has her associations. Mr. Haag. That is correct. The CHAIRMAN. Which enabled her to build up her trade. Mr. Haag. They have very strong maritime organizations. As a matter of fact, even a couple of years ago in the trade of the British Empire between the Empire countries, about 90 percent of that trade was carried in British ships, although that trade is open to all countries. About 60 percent of the Empire trade with foreign coun

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