I was recently waited in Hamburg by two genriemen win investigated the Tarions types of government mésidies for shipowners in other comes for the Maritime Administration. The many hundreds of millions of building and operating rides wish are pad vy the Amerian ginerament to its shipeazers every year most be a matter of high ecorem to the griministration. I told them that I was fruly scarlaced that the easiest way to reduce this beary est item world be to allow the lines in the American trades to run effartite ennferences and to give them the permission to form pocis and to rationalize as is sundri practice in most other trades

This would automatically benefit the American Enes as well 25 America exporters and Importer. The best proof are the trades between the United States and Southamerica, Senthafrica, India, and Australia where laws cr government practices of the other countries give ennference carriers, in dinding the Americans, some protection from mentalled empetition If it dilat lead to pools, it at least meant stability in the trade, and also the American carriers are operating quite excessfully.

I wonder whether the critics of the conference system, particularly in the United States, have ever had a close look at balance sheets as well as prifts and ices accounts of lizer companies worldwide. If they had, they would know that the return on investment in liner shipping is about the lowest of any industry. American liner ship-owners are particularly suffering from the uncertainty under which they have to work. Many of the mare only able to keep their heads above water with the help of subsidies, military contracts, aid cargoes, etc. or because they are part of larger conglomerates.

Why is it that the full benefits of modern transport eoncepts such as containers were achieved in other parts of the world, although these systems have their origin in the United States and were first utilized in the American trades. The reason is that shipowners are still waiting for the approval of an intermodal bill which would permit lines to quote house to house throughrates for full container loads (FCL) under conference authority. The Department of Justice report specifically recommends not to give conferences this authority, how much longer does the American trade have to wait for this most logical benefit of the container system

There can be no doubt, that our patient-the conference system in the American trades-must be cured, But how to do it?

I understand Congressional oversight hearings on the regulated conference system are likely to begin in early summer of this year. This seems frightful when looking at the recommendations of the Department of Justice. But it equally is a unique opportunity for liner shipowners to convince the American government that conferences must be helped in such a way that its members may operate economically in the interest of the trade without legal handcuffs. In this context, I believe that the Congressional committees should keep in mind that national antitrust laws of one country shouldn't be extended to involve worldwide trade. It must be recognized that in international trading half of the business is usually that of the other country.

My recipe to cure the conference system and to which conference-minded shipowners including the Americans would certainly agree, is quite different from that of the Department of Justice:

Conference lines should not be subject to double jeopardy under the Shipping Act and antitrust laws. The exemption of conferences from the antitrust laws as provided in the Shipping Act should therefore apply fully;

Conference lines should be allowed to form pools and to rationalize in order to adjust supply and demand of ships' capacities;

Conference lines should be allowed to have an effective contract system; Conferences should be given intermodal authority to provide the trade with the full benefit of intermodal transportation of a house to house basis;

Conferences should be allowed to merge where new ships' systems make the traditional geographic areas obsolete;

In return conferences are likely prepared to cooperate more closely with the trade. They would: Consult with American Shippers' Councils on all matters of mutual concern, particularly on freight rates and matters of service. (This would naturally imply that as in other countries the formation of Shippers' Councils will also be permitted in the United States.); arrange optimal employment of their fleets which must lead to considerable rationalization and lower

costs; and produce consolidated figures of lines' performance for presentation to Shippers' Councils when discussing rate increases in order to demonstrate that they are not out for excessive profits.

According to my understanding the foregoing would not be contrary to the Shipping Act as it stands. It is only its unrealistic interpretation which makes it look like it.

Liner conferences in the American trades could therefore be placed on a sound basis, if Congress made a clarifying amendment to the Shipping Act. This is urgently needed for the sake of this largest economic power of the world and its liner industry, particularly when looking at the rapidly expanding merchant fleet of the Soviet Union.

All over the Western world, but with special emphasis on the trades to and from the United States, the Soviet Union is building up a tight net of liner services. In the American trades they operate an ever increasing number of vessels as outsiders, including modern container and Ro/Ro ships. They pick up the most remunerative cargoes in most convenient ports and are not at all concerned with the multitude of legal problems their America and other Western competitors face as members of conferences.

With a clarifying amendment to the Shipping Act, as suggested, the American government would automatically strengthen its own merchant marine against this Soviet challenge in the maritime field after the Inouye bill and the Bakke/Averin Agreement apparently ran aground.

I would likewise create the necessary prerequisite for the United States to resume an active role in establishing guidelines for conferences and international liner shipping as envisaged in the UNCTAD Code of Conduct. This Code contains all the elements necessary for a reconciliation of conflicting national interests among developed, developing and even COMECON countries. Application of the Codes would have the further advantage that it would make unilateral protectionistic measures of the United States in liner shipping quite unnecessary, since it contains adequate rules how conference members and national lines should deal with cargo sharing.

Finally I would like to summarize the answer to the question in my heading: "Why is the trade being hurt?"

Because the present excessive antitrust philosophy in some quarters is preventing conference lines in the American trades from offering their clients a better and cheaper service, widely free from malpractices and including all the benefits of intermodal transportations, by not permitting them to handle their business in the same manner as is customary in all other parts of the world. [Whereupon, at 12:55 p.m. the subcommittee adjourned.]

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