There is a very brief statement on one page that I would like to read in that connection, as showing the consistent policy which Great Britain adopted. Briefly, it says, in 1381:

That for increasing the shipping of England, of late much diminished, none of the King's subjects shall hereafter ship any kind of merchandise, either outward or homeward, but only in ships of the King's subjects, on forfeiture of ships and merchandise, in which ships also the greater part of the crews shall be the King's subjects.

Then the Navigation Act of 1651 says:

That no merchandise, either in Asia or Africa or America, including the English plantations there, should be imported into England in any but English-built ships, and belonging either to England or English plantation subjects, navigated also by an English commander, and three-fourths of the sailors to be Englishmen, excepting such merchandise as should be imported directly from the original place of their growth and manufacture to England solely; and that no fish should henceforward be imported into England or Ireland, nor exported thence to foreign ports, nor even from one of their own home ports, but what should be caught by their own fisheries only.

In 1660, in the reign of Charles II, the act of 1651 was confirmed and its provisions were augmented as follows:

That no sugar, tobacco, ginger, indigo, cotton, fustic, dyeing woods of the growth of the English territories in America, Asia, or Africa shall be transported thence to any other country than those belonging to the Crown of England under penalty of forfeiture; and all vessels sailing to the plantations were to give bonds to bring said commodities to England.

It was the British navigation acts that led to the early acts in this country, the purpose of which was to bring about reciprocal relations. The policy of Great Britain was a consistent policy, extending over hundreds of years, and it is a policy which they adhered to rigidly, even as far as reciprocal relations was concerned with the West Indies, until 1849; and I bring that in simply to show the firmness or the steadfastness with which they have held to their acts in behalf of British shipping; and the consistent policy they have followed.

Now, Mr. Chairman, I have had several comments in connection with the interdepartmental committee's recommendations, that appear in their report, on page 21 and from there on. I do not know that it is necessary to read the recommendation in full [reading]:

Recommendation 1: That the United States should have a merchant marine, to be privately owned and operated by citizens of the United States, composed of the best equipped and most suitable types of vessels capable of serving as an adequate naval and military auxiliary in time of national emergency and of carrying at least one-half of the foreign commerce of the United States. We endorse that, of course [reading]:

Recommendation 2: That vessels of this merchant marine be built in the United States, be operated under the American flag, and be manned by American officers and men.

As you no doubt know, it is permissible under existing law to build American vessels in foreign shipyards and operate them in the foreign trade of the United States, either under the foreign flag or American flag. In my opinion, it is imperative in the development of an American merchant marine in foreign trade that the ships for this trade be built in American shipyards. Advantages to American labor have already been pointed out. The ships themselves become important factors in national defense. A ship built in a foreign yard

thrga foreign flag could be immediately seized by a foreign country for other use in time of war involving those nationals. If built in an American yard or flying the American flag, the ships are, of course,

jest to our own control in the event of war. The requirement that our merchant vessels receiving Government aid should be built to meet the needs of the Navy Department in time of emergency is in itself suthcient to require that they be built in American yards on Fins developed in the United States and approved by our nationals. Reading:]

Recommendation 3: That the 1929 Convention for the Safety of Life at Sea be aproved and, further, that vessels be built to the highest possible standard of Berptuof construction and be provided with the most effective devices for the protection of life at sea.

The National Council of American Shipbuilders believes very stingly that ratification of the Safety of Life at Sea Convention of 1 by Congress and by the Senate is a very important step in the velpment of our American merchant marine, and it is hoped that the convention may be ratified at this session of Congress. It is beeved that the above recommendation as written by the interdepartmental committee with the words "highest possible standard"

ld be changed to read "highest practicable standard."

Ihat international convention, as you know, sir, was participated in by the United States, and they went to the other side with a comte plan, which was considered very carefully by all of the nations present and which plan resulted in a considerably higher degree of safety of ships than the plan that was proposed by any other nation present; and many of the recommendations of the American committee were imbedded in the treaty as finally drawn.

The CHAIRMAN. Do you know how many nations that were represted have agreed to that plan!

Mr. SMITH. Yes, sir; I have that right here. In fact, it has been rat.fied by nearly all of them, except Japan, I think. There are five or six that have not ratified yet. Japan is the only large maritime nat.on that up to date has not ratified it, outside of the United States; and it has been ratified by a sufficient number of nations, so that it is in effect under the terms of the treaty.

The CHAIRMAN. Except not in effect as to the United States.

Mr. SMITH. Its provisions are being observed in all new designs at i all ships built under the act of 1928, which incorporated the provisions of the 1929 treaty, but it has not been ratified and is not, therefore, in full force and is not as fully effective as it would be if it were rat.hed by Congress,

The CHAIRMAN. Do you think, if the Senate should fail to ratify that agreement, it would be desirable for the committees to consider suh features as are not in dispute and enact them into affirmative

Mr. SMITH. Well, I would not like to say for the moment; but I tink, sir, that might be helpful. The only items in dispute are, I th. na, on close examination, found to be without any foundation as to farts

The CHAIRMAN. One reason that I asked that question is that I understand that if the treaty had been ratified the system of dual

trol, if I may express it in that way, would have been obliterated. ahat was one of the things which led to the Mohawk disaster.

1:536-35-24

Mr. SMITH. Well, I think that-my recollection is that either one or the two methods can be accepted. Is that not right? I think I am right, sir, that either the right and left or the starboard and port designation may be used, whichever is chosen.

The CHAIRMAN. So long as we have designated one?

Mr. SMITH. So long as we have designated one.

The CHAIRMAN. And do not have the men in the pilothouse observ. ing one set of rules and the men somewhere else observing another set of rules. In other words, we ought to do away with that possibility of mistake.

Mr. SMITH. I think the intent was that it could be accepted-I would not like to be quoted on this-I think the intent was that it could be adopted by any one line, either right and left or port and starboard.

The CHAIRMAN. My own thought is that it ought to be in affirmative legislation.

Mr. SMITH. There ought not to be any possibility of misunderstanding as a result of that.

The CHAIRMAN. It ought to be covered by legislation and, if the treaty should not be ratified, we ought to have some affirmative legislation, so that there could not be that misunderstanding.

Mr. SMITH. Well, that certainly ought to be perfectly clear as far as the rules are concerned, whatever we do [reading]:

Recommendation 6, paragraph 1: That a capital subsidy be provided to take care of differentials between domestic and foreign cost of construction of vessels in foreign trade and to take care of the cost of such special features as may be required by the Navy Department, to be paid directly to the shipbuilders; but if such ships are entered in the coastwise trade, the owner should be required to reimburse the Government pro rata based on the life of the ship.

In connection with this subject of differential on shipbuilding costs, it, like all factors involved in a determination of a measure on which subsidy is to be granted-it is difficult to determine. The exact determination of the differential is, of course, impossible. It fluctuates a little, perhaps, every day; and it fluctuates with the rate of exchange; it fluctuates with the changes in the prices of materials; it fluctuates with the changes in labor charges; and it is, consequently, somewhat-it is complicated and difficult. At the same time, it is practicable to get at a reasonably close approximation as to what that differential is, but it will have to be

The CHAIRMAN (interposing). That differential should not be written into affirmative law, but should be left to the determination of some governmental agency?

Mr. SMITH. Well, sir, I am not sure about that. If it could be written into law, with an up-and-down provision, with the right of an agency to vary it within limits, up and down, it might simplify the problem. I am not prepared to make a definite recommendation on that, but I think it should be considered, sir, that, with a possible 25 percent, say, adjustment up or down, by an administrative body or a semijudicial body or whatever body might have charge of administering it.

I would like to point out to the committee the impossibility in determining the exact difference in cost between the construction of a ship in the United States and the construction of a ship to the

des abroad. Access to detailed labor rates in foreign shipyards 19 1. st wholly available and classification of employees is somewhat dferent Exact material costs are difficult to obtain and the fluctu

rate of exchange has an immediate effect upon the differential. It pra ticable, however, to obtain fairly close approximations as te these differentials, by careful study of the factors of labor, materal, and overhead entering into the cost of construction both in the United States and abroad. A great deal of study has already been patron this subject of different als by the Shipping Board Bureau,

a whom the National Coune 1 of American Shipbuilders has of op rate i, to obtain a formula from which approx mate shipbuilding a.ferent als may be obtained.

I won d like to emphasize to the committee my opinion that any atter it to secure cost differentials for each and every type of ship beat in the United States as compared with a smilar ship in any

of several foreign nations would be entirely too complicated to be of any practical value, and that all that can be done is to determore differentials on a broad basis, as simply as possible, subject to mosi teations from time to time only as affected by fluctuations in the rate of exchange or major changes in the price structure due to Win Ganges or important changes in the prices of materials.

1'e fit al result will have to be some kind of a compromise figure. Wale pointing out the difficulties in establishing these differentrols, the shipbuilders do not appear in opposition to this recomriation if Congress, in its judgment, thinks it is the best way to over ome this particular handicap to the ship operator.

It might be practicable to write into a bill specific differentials for shits of various types and speeds, subject to modifications, up or down, within prescribed limits, by the maritime authority. If this as not done, it should then be left wholly to the maritime authority to establish the differential in each case to some definite formula. The one developed by the Shipping Board Bureau, it is believed, world be satisfactory for this purpose.

Then the specification recommendation as to the disposition of the present laid-up fleet [reading]:

Recomendation 14: That the disposition of the present laid up fleet under control of the Shipping Board Bureau be determined by the Federal maritime any having in mind the desirability of scrapping that part of the fleet wh.. sa imittedly obsolescent and retaining the balance of the fleet until such time as new construction insures sufficient naval auxiliaries for national defense and thereafter giving further consideration to the scrapping of said balance of the feet as being beyond economical usefulness,

The National Council of American Shipbuilders are commenting upon that because they feel that it is an important factor in this development of an American merchant marine; and their thought is that it should be resurveyed, with a view to scrapping that part of it which is admittedly obsolescent and of reserving the balance of it solely for national-defense purposes or other emergency conditions, and not as an operating fleet for a commercial profit, because the ships are so old that they cannot play an important part in the upbuilding of the American merchant marine.

I stated that while the other recommendations relate more specifically to operating problems, many of the recommendations are of

distinct interest to the shipbuilder, and with your permission I would like to comment upon them as follows:

Recommendation 4, that the highest standards in proficiency of personnel should be developed and maintained.

That is recommended.

Recommendation 5, that the merchant marine should be operated and maintained so as to protect the interests of the shipper of American products in having adequate service and parity of rates to foreign markets.

That is recommended. And then paragraph 2 of recommendation 6 relates to the construction-loan fund. While, of course, the operator is the one that has to borrow the money to build the ships, it does seem to us, nevertheless, that a continuation of the construction-loan fund is desirable.

This is essentially an operating problem, as to whether a subsidy is or is not needed. Its determination, if needed, presents some complications because of the fact that competing lines are frequently of different nationalities and are in competition in some cases over parallel routes, and in other cases only over a part of prevailing routes. The problem as to the basis of determination of the subsidy would require careful study by the maritime authority in each case. From the standpoint of national defense it seems desirable that appropriations should be made to effectuate the Merchant Marine Naval Reserve Act of 1925 [reading]:

Recommendation 6-4: That the use of the construction-loan fund and insurance fund be continued and that its purpose be broadened to meet emergency needs and extraordinary situations.

The National Council strongly recommends the continuation of the construction loan fund as a means of financing private operators in the building of ships for foreign-trade services. It is believed that a discontinuance of this fund will be diastrous to American shipping in foreign trade and, while it recognizes the desirability of the investment of private capital in the building of ships, it is believed that this will be extremely difficult to obtain at the present time, and that a continuance of the policy of loans from the construction loan fund, as provided by existing law, is essential.

The CHAIRMAN. Do you think that the rate should still be as at present?

Mr. SMITH. I think so. For foreign trade I think it is established at 32 percent, not less than 32 percent.

And then recommendation 6, paragraph 2, relates to the operating subsidy. That is purely an operating problem, but it is similar to the determination of the differential for shipbuilding; and that would present its problems as to many services that would have to be studied. Now, as to whether that is needed or not is wholly a question for the owner, and that is not for us to comment upon [reading]:

Recommendation 7. That for the purpose of administering the above forms of Government aid and in order to coordinate all governmental functions in maritime affairs, it is recommended:

The National Council of American Shipbuilders recognizes that some form of maritime authority must be set up to administer the various problems involved, that they relate both to shipbuilding and to operation, and that the exact form of that body needs to be worked