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tries was carried in British ships and about 25 percent of the trade between countries foreign to the British Empire was carried in British ships.

Shortly before the war, they carried about one-half of the world's trade. Their merchant marine was naturally the largest in the world and Germany's was second largest. The British merchant marine was about 4 times the size of the German merchant marine. But I would like to point out: The countries that occupied a very prominent and dominant position before the war, such as Great Britain and Germany, in the case of Great Britain, while her tonnage is slightly less than it was before the war, and Germany's also is less than it was before the war, I want to bring out this point along the lines that were stated here previously, that when you attempt to make comparisons by tonnage alone the figures are very deceiving. Because while the British have slightly less than they had before the World War and Germany has less, yet when you consider the increased speeds of the tonnage built since the war, the carrying power is more than before the war. Now, the countries who occupied a weak position before the war and saw the vital necessity of maintaining their own merchant marine came into the picture and built up their shipping to meet their needs and, with such countries as Great Britain and Germany regaining their former position, those are the conditions that have brought about this over-tonnage condition in the world today.

The CHAIRMAN. In other words, America is not subject to the charge of overtonnage, but these other countries are the ones that are?

Mr. Haag. The difference of tonnage between 1922 and today in the world is still in excess somewhat of over 3,000,000 tons. During the post-war era, the Unted States scrapped more tonnage than it built and, if other nations had scrapped in proportion and built as little as did the United States, there would be no idle tonnage in the world today.

Mr. CROWE. I understood you to say, Mr. Witness, that $35,000,000 a year, I believe, would build up our tonnage. Then I want to ask: I notice you say 282 vessels carrying 1,900,000 «gross tons, have received benefits of $120,000,000. What has been built out of that $120,000,000 to show substantially for the money spent? Has it been improved or wasted?

Mr. Haag. On the first question that you ask, how much has been done with the money spent: I pointed out that in 4 years there were invested $142,000,000 in about 31 vessels.

Mr. CROWE. How long then would it take this $35,000,000 a year to build up our tonnage, if we have gotten that far with $120,000,000?

Mr. Haag. If we build at the rate of 35 vessels a year for the next 7 years when 86 percent in number and 77 percent of the tonnage becomes 20 years old, we will then have produced 245 vessels of about 1,300,000 tons and when the speeds of those vessels are considered, changing from 10 to 14 knots, we will have a more efficient merchant marine as a result of that replacement program than we have today, because we have to count in the modern ships we have today.

Mr. HAMLIN. Do I understand, Mr. Haag, that before the war too little interest was taken in America in our merchant marine and that it was at a very low ebb, in general terms?

Mr. Haag. That is absolutely correct.

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Mr. HAMLIN. And even post-war, it has even grown worse since the war?

Mr. Haag. I would not say it has grown worse since the war. Mr. HAMLIN. Yes; worse since the war. Mr. Haag. I would not say it has grown worse since the war. Mr. HAMLIN. Not worse? Mr. Haag. No. We have improved our position very much since 1914, because then we only had about half a million tons and today we have 3,000,000 tons of ships operating on regular routes in the foreign trade.

Mr. HAMLIN. And largely this gain since the war has been due to our scrapping obsolete vessels, we may say, and building new ones?

Mr. HAAG. No; it is as a result of using what the Government acquired from its war-time activities; not only the vessels they built, but the vessels they acquired in other ways by seizure, requisition, and so on. Those vessels were utilized and put to work under the act of 1920, which

Mr. HAMLIN. And may I ask why-in concrete terms, not going into the details, perhaps--why have we been failing? Why, before the war, has the United States merchant marine been taken no notice of, practically, and has been sinking along? And, even since the war, while it has gained some, it has not gained much, not a great deal. What are the reasons for that, concretely, perhaps? Mr. Haag. We have to go back to the period of sail. Mr. Hamlin. Yes. Mr. Haag. During the first half of the last century, the United States could compete with any nation in the world in building ships, also in the operation of ships. We could operate our ships with fewer men in the crew. That was stated by an eminent British shipping authority.

The CHAIRMAN. Those were the days of the clipper ships? Mr. Haag. Those were the days of sail and the clipper ships. We had abundant raw materials in the United States; we had naval stores, lumber, and cotton. Now when the transition took place from sail to steam and from wood to metal, we lost the advantage we had. Great Britain saw the end of the wooden sailing vessel much sooner than we, and by 1870, 82 percent of the vessels building in Great Britain and Ireland were of metal construction, compared with 8 percent in the United States. Mr. Hamlin. We could have done the same thing?

Mr. Haag. We could have done the same thing, but we led the world in competing with clipper ships and we held on to clipper ships, and the steam tonnage of the United States did not exceed the sail tonnage until 1893, while all of the other countries

The CHAIRMAN. May I ask right there, just to bring it out at this point: Was it not a fact that after the War of the Rebellion the l'nited States turned to the inland, to the interior, to the building up of our railroads? Mr. Haag. Yes. The CHAIRMAN. And the building up of the interior of the United States, and we were taken away from the sea, because it was not attractive?

Mr. Haag. There were several reasons for the decline in our shipping in the foreign trade. As the Chairman pointed out, one of the

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reasons for the decline was the building up of our vast interior which diverted both capital and interest from the sea.

Simultaneously with this undertaking began the substitution of metal vessels for those of wood and the adoption of the steam-driven vessel to replace the sailing ship.

The advantage America once had in building ships cheaper was transferred to Great Britain who was supplied abundantly with the raw materials necessary for the construction of iron and steel ships and steam machinery.

Great Britain forged ahead rapidly, and at the outbreak of the war the British mercantile marine was the largest, the most up-to-date and efficient of all the merchant marines of the world. It comprised nearly one-half of the world's steam tonnage and was over 10 times as large as the American merchant marine.

Mr. Hamlin. They were then a move ahead of us, we will say? Mr. Haag. They were a move ahead.

Mr. Hamlin. They were a move ahead of us Yankees. Now, just one question more: Concretely, without going into details, perhaps, what would you suggest as a way for us to get up to Great Britainto get ahead of her, which I favor?

Nr. Haag. My opinion is that I would not try to get ahead of Great Britain.

Mr. HAMLIN. We can do it.

Mr. Haag. We can perhaps do it, but I would say that we should strive to have as competitive a merchant marine as there is in the world, based on our needs of commerce and national defense.

Mr. Hamlin. Largely gotten through a subsidy?
Mr. Haag. It can only be gotten through a subsidy.

Mr. Crosby. Mr. Haag, you spoke of a policy of scrapping ships. Now, just what was that policy; where did it originate, and what types of ships were scrapped?

Mr. Haag. The conglomeration of ships inherited by the Board as a result of its wartime activity was such that many of them were useless for competition in the foreign trade, or in the domestic trade. Take the three-hundred-odd wood ships that were constructed at a cost of $250,000,000, of course, they could not compete anywhere. The lake types we had to construct to go through the locks, and take some of the smaller types of ships like those built by the Submarine Boat Corporation, they were too small for overseas work, and a lot of those ships were junked although comparatively new, along with others we acquired that were old ships, that had outlived their useful life--foreign enemy ships, and so on. So that amount of tonnage the United States scrapped, some of which it could have unloaded on the world market, as some other nations did, but we scrapped it.

The CHAIRMAN. And if we had unloaded it, it would have created further competitive conditions?

Mr. HAAG. Yes, sir; it would.

Mr. O'LEARY. Is it your contention that all of those ships that are tied up, we will say, at Staten Island, in the East River and Hudson River, are they all obsolete?

Mr. Haag. They are all obsolete; insofar as modern competitive ships are concerned.

Mr. O'LEARY. As a matter of fact, all of the ships that were built by the Emergency Fleet Corporation, they are all obsolete?

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Mr. Haag. I would not say "all"; I would say practically all of the 10-knot ships, where no reconditioning has been done, are obsolete ships, when you consider it from the standpoint of modern competition, where economies effected in the last dozen years are such that it makes it almost impossible for such ships to compete with modern vessels.

Mr. Rabaut. Mr. Haag, a little while ago you referred to a sort of standard ship for $3,800,000. Would you give us an example of that type of ship, starting in with the construction, how much the Government is supposed to loan on it, and then give us a standard route and something about the mail subsidy. Is the mail subsidy figured on the measurement basis?

Mr. Haag. The mail subsidy is figured on the mileage basis at a certain rate per mile, depending on the size and speed of vessel.

Mr. RABAUT. I would like to get down to a unit and take this as a unit-not in long detail--and find out how much money would be loaned on such a ship, for instance, in construction.

Mr. Haag. All construction loans are based on the owner furnishing 25 percent. No loans by the Government shall be for a greater sum than three-fourths the cost of the vessel, to be repaid within 20 years. The rate of interest on loans made varied somewhat, but it was finally fixed at 32 percent.

The CHAIRMAN. By statute?
Mr. Haag. By statute.
The CHAIRMAN. For ships in the foreign trade.

Mr. Haag. Yes. Now I cannot at this time give you figures for a specific route, but I will give you sometling which I think will answer the question sufficiently to cover your point.

Mr. RABAUT. Yes.

Mr. Haag. When I spoke of the $4,600,000 vessel, that was an approximate average cost of the 31 vessels launched during 1929–1932. But let us take a vessel that cost a million dollars and, say, we have the mail payments I mentioned for replacements

Mr. RABAUT. You say the cost? Mr. Haag. The average cost, yes; the cost, say, is a million dollars. Now that vessel built abroad, and I am not making a definite statement as to how much it will cost abroad, but it may run six hundred thousand, between six and seven hundred thousand dollars. Let us assume that it is $600,000. You have a $400,000 difference between the American and the foreign ship; it costs $400,000 more for the American ship. Now that principal, that investment in principal, must be absorbed by the American, plus the carrying charges, whatover the terms are, the rate of interest and so on, over whatever the term of the contract may be. Mr. RABAUT. By that, you mean the interest rate on the difference? Mr. Haag. Yes. Mr. Rabaut. Of $400,000? Mr. Haag. Yes. You have the principal to equalize and you have also the interest on the higher amount. Mr. Rabaut. That extra burden? Mr. Haag. That extra burden. Then you also have the insurance itern on the extra burden. Now that is, roughly, so far as capital and insurance charges are concerned, the amount that has to be

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absorbed by the American owner and which the Government is helping them to absorb by furnishing the mail pay.

Then that ship in operation, say, with the British ship, the wages on the American ship may run at this time about between $3,000 and $3,500 a month and on the British ship they would probably run about $2,000 to $2,300. Now that difference in wages, plus the additional higher cost for feeding the American crew, as compared with the foreign crew, and also the difference in the upkeep of that vessel, which we call repairs or maintenance, because of the repairs being done in the United States, they are necessarily higher than the foreign.

So in your operating costs, you have wages, subsistence and maintenance, which are higher than on the corresponding foreign ship. Then you have capital charges, principal and carrying charges. Now the mail pay was supposed to be given on a mileage basis, whatever that ship happened to be; if she was a 13-knot ship, I think it was $4 a mile, which was supposed to cover and equalize those differences.

The CHAIRMAN. I may say I think probably there will be some testimony produced based on different ships.

Mr. Igoe. I think that is the best explanation of the subsidy that has been given yet.

Mr. Rabaut. I thank the witness for that; it is very good.

Mr. Culkin. Mr. Witness, are we well abreast with the English now in the matter of naval architecture? I mean, have we a wellequipped corps of naval architects who are competent to design and construct these ships today?

Mr. Haag. Our naval architects and marine engineers are equal to any in the world.

Mr. Culkin. Where was that ability at the time they built this pre-war tonnage; where was this experience when we constructed all of this tonnage that was immediately obsolescent?

Mr. HAAG. I will give you the answer to that and this is something that I think should be emphasized and understood, because it is the crux of our whole situation as it involves the obsolescence of our ships and our inferior place among the maritime nations.

Because of our neglect for 50 years before the World War, we were suddenly plunged into the World War. Now that requires a great deal of tonnage, particularly when you are sending an army over seas. I speak with authority, because at the time I was engaged as chief draftsman and later became chief constructor and had to do with every shipyard in the Uniged States at some time or other, and also had to do with the preparation of the plans that were used for the types of the vessels that we constructed. And if there is any blame, I will take the blame for what appears to have been neglect or lack of experience. The War Department says, “We must send a certain number of divisions to France; you have to provide us with ships within a certain time.”. Well, when you have an important industry which is nothing more than an infant in size, and attempt a shipbuilding program the equal in tonnage of seven maritime countries, you are starting a job. And that is precisely what we did and that involved contracts for 3,200 vessels of twelve and a half million tons. We had neither the men nor the yards, and, over night, we expanded our industry from 61 yards to 341, increasing the shipyard personnel from 50,000 to 350,000 in twenty months.

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