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the United States from the standpoint of subsidy, when you take it from the standpoint of construction, I think we have far outstripped France in the generous way in which we have treated our merchant marine, and we ought to have had better results.

Mr. PENNYPACKER (National Council of American Ship Builders). Mr. Chairman, in regard to the construction loan fund, I have here a statement which was prepared by the Shipping Board showing the status of their construction loan fund as of March 1, 1933. It is not quite up to date. At that time, the total authorized loans from the construction loan fund for both new construction and reconditioning was $147,734,794.66.

The CHAIRMAN. Does that show what payments have been made?

Mr. PENNYPACKER. No; that is just simply the authorization and that includes both new construction and reconditioning.

Mr. SIROVICH. Does it show how much money there was for construction and reconditioning purposes altogether?

Mr. PENNYPACKER. There is a table here; I have given the total of the table. The table shows an authorization for new vessels completed, not completed, and the total.

Mr. SIROVICH. That is only $147,000,000 that you just read?
Mr. PENNYPACKER. Yes, sir.

Mr. SIROVICH. That $147,000,000 is what has already been authorized for construction and reconditioning up to the 1st of January 1933.

Mr. PENNYPACKER. Up to March 1, 1933.

Mr. SIROVICH. Which is $47,000,000 more than the total amount that the French Government showed in 9 years with their 1,500,000,000 francs?

Mr. PENNYPACKER. Yes, sir.
Mr. SIROVICH. So it again proves how generous we have been.

Mr. PENNYPACKER. Out of that total, loans of $116,000,000 plus have been authorized for new construction alone; the balance was for reconditioning.

Mr. SIROVICH. At what interest is that being paid; does it show!

Mr. PENNYPACKER. No, sir; the interest rates are not given in that table.

The CHAIRMAN. That would hardly conform with the report of the Post Office Department which gave a table on page 43 showing that the United States Shipping Board has loaned the following sums in connection with the above construction program to mail contractors at rates of interest varying from one-eighth of 1 percent to 31,2 percent, and for reconditioning, which total $107,593,957.32, the additional sum, or the difference between these figures and those you gave probably being loans made to ships that did not have ocean-mail contracts, as this undertakes to show only loans that were made to ships that had ocean-mail contracts.

Mr. PENNYPACKER. I think possibly there is some other difference there. The figures I quoted were authorized loans; perhaps the figures you have read were loans actually made.

The CHAIRMAN. I was reading from part 1 of the first day's hearings before this committee. The same information is contained in the Message of the President, which you probably have, on page 9. I have called the Shipping Board and am trying to get the figures. Mr. SAUGSTAD. To complete the record on the French section, I want to say that these loans are made under two classes, short-term and long-term. There is a short-term loan which is for 5 years and under which the repayment periods are fixed in the mortgage. The long-term loans are for not to exceed 20-year periods and they are amortized through annuities; in other words, annual payments that include both the interest and the principal.

Then just one more thing: At the time the French Government authorized a 100-percent interest base to which the Government might contribute one-half, they also authorized a 40-percent increase of the Government share provided it did not exceed the appropriation of 6,000,000 francs annually.

Mr. CULKIN. You did make the statement a moment ago, Mr. Saugstad, that repayments were in a certain amount. I did not catch the amount.

Mr. SatGSTAD. The repayments are over a period of 20 years or less, depending upon the loan period.

Mr. CULKIN. I know; but I mean the amount of the payments. I think it is in the record, but I did not catch the amount-the repayments on those loans. Mr. SAUGSTAD. 80,000,000 francs; about 18 percent of the loans

(Statement made on May 6] Mr. SAUGSTAD. Mr. Chairman, I have just four brief items which bring up to date some points that we discussed here in March when I was before the committee.

The first of these relates to a bill which was introduced in the Chamber of Deputies of France on the 14th day of March and which undertook to accomplish three things. The bill is in the nature of approval of a supplemental agreement dated March 7, 1935, between the French Government and the Compagnie Generale Transatlantique, and provides as follows:

First, that the state shall pay amortization, as to the principal and interest, on the Normandie;

Second, that the Government shall guarantee interest and principal of loans to cover operating deficits for 1933 of 45,000,000 francs, and for 1934 of 10,000,000 francs, in excess of the total subsidy of 150,000,000 francs annually;

Third, that operation accounts of the Normadie shall be distributed in accordance with the agreement of July 20, 1933, and, that in view of the state undertaking the payment for the Normandie, the insurance agreement on that vessel for account of the state is canceled.

Deputy Candace introduced a resolution in the Chamber of Deputies to cancel the contract system as it now exists and to reconstruct it on a limited basis under one national company. We have no further information as to the position of that proposal before the Chamber. If anything comes in before we close these hearings I will submit it.

I may say that when Deputy Candace introduces a measure it always receives very serious consideration because he is one of the principal promotors of the French merchant marine and is an author of one of the standard works on the French merchant marine.

Deputy Candace, according to these reports, is of the opinion that the contract-service system in its present form should cease and that there should be a national company formed to maintain and run the few absolutely necessary services. A subsidy could then be granted to the new organization, which would be far less than the total grant at present allocated to contract services. It is suggested that the savings should form a special fund to be used within 2 years for paying a subsidy of about 100 francs per ton for old tonnage scrapped, provided that 1 new ton is built for every 2 tons scrapped. This reverses the Japanese process of paying the subsidy on the new tonnage built and not on the old tonnage destroyed. The proposal, it is claimed, would result in orders for some 400,000 or 500,000 tons of new ships.

Deputy Candace, it is reported, considered that the present services to the Far East, the north Atlantic, the West Indies, and South America, all of which were discussed in the committee, are in fact state services, for the state has guaranteed not only the 80 or 90 percent of losses on two of them at least, but has also guaranteed the interest on loans necessary for them to carry on. He apparently has proposed to define the exact limits of the public-service fleet and to have it returned to a private-contract base under a central company for all services. He is reported to have stated that the state fleet does not exist principally to make profits but simply to carry out public service and that he does not think necessary to have it so nearly administered by the state as it is now. If these proposals are accepted, tonnage would be reduced to that necessary for public service only. At present, he claimed, the state assumes responsibility for services that are not of such a nature.

The bill is reported to provide: Article 1: During a period of 2 years, as of the enforcement of the present law, a premium of 100 francs per gross registered ton will be granted to any French shipowners who will scrap in France, either French or foreign tonnage, provided they will have new tonnage built in France, in the proportion of 1 new built ton against 2 scrapped tons.

Article 2: All present agreements between the State and the steamship companies will be canceled within 3 months, as of the enforcement of the present law.

Article 3: New agreements to be concluded by the state will only apply to imperial lines, the list of which will be drawn up by the government.

Article 4: A managing committee will supervise the strict application of article 3 of the law. It will organize and intensify the relations between France and its colonies. It will control the operations of the imperial lines.

Article 5: An advisory committee, composed of 15 members, will be created. It will be consulted in connection with all questions interesting the independent steamship companies, and, generally, the commercial policy of the government.

The CHAIRMAN. Is that a committee of the Chamber of Deputies?

Mr. SAUGSTAD. It does not say. The report does not indicate whether it is a Chamber of Deputies or a private committee.

Previously there have been blocs formed within the Senate and the Chamber of Deputies for merchant marine consideration, but there is nothing to indicate that that is the case here at this time.

Mr. SaugsTAD. Yes, sir. Now, Mr. Chairman, that is all I have to say on France.

The CHAIRMAN. What would be the next subject that you would take up-Great Britain?

Mr. SAUGSTAD. We carry it alphabetically, so Germany would be the next. The CHAIRMAN. All right; go ahead with Germany.

GERMANY

Mr. SAUGSTAD. In Germany there are no subsidized regular shipping lines; that is, under contract to operate in certain itineraries. There is no available information which tells what official expenditure may be made on an annual basis. The German Government does not issue an official budget in such detail that we are able to segregate any amounts that may be paid to shipping.

In a broad sense, I can say that certain laws have been enacted during the past 3 years which provide for certain payments to ships and shipowners, but the philosophy that governs those payments is the attempt of the German Government to reduce unemployment. And the sums of money that have been set aside have been taken out of appropriations originally made for the purpose of reducing unemployment. In other words, it rests entirely on a social basis.

Under that provision, in 1933 a sum of 20,000,000 reichsmark was granted to German shipowners, payable partly at 3 pfennig per day per gross ton during the period of operation of a ship, and partly at 20 percent of the amount of wages and salaries of the ship's personnel.

Mr. SIROVICH. What year was that?

Mr. SAUGSTAD. 1933. The grant was exhausted by October 1933. It was later announced to be prolonged for an indefinite period. We have no official information as to the continuance of the policy, nor of the amount involved. That sum at reichsmark gold par value of $0.2382 cent would amount to about $4,800,000, or an equivalent at present exchange of $0.4043 to about $8,100,000.

Are there any questions on that one point?

Mr. SIROVICH. Have not the German Government given any subsidies prior to 1932?

Mr. SAUGSTAD. Oh, yes; historically; certainly.

Mr. SIROVICH. You are talking since the Hitler Government came into operation?

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. I mean, what happened to the North German Lloyd and the Hamburg American prior to that time, and to the other lines that go to different parts of the world?

Mr. SAUGSTAD. I am trying to confine my discussion to the present picture. Now, if you are referring to the historical data

Mr. SIROVICH (interposing). Yes; I am.

Mr. SIROVICH (continuing). And want me to go back to 1885 and 1886, and so on, I will be glad to do so.

Mr. SIROVICH. Yes; and show how Germany developed its merchant marine.

Mr. SAUGSTAD. May I state this position first and then go back and take that up? (See p. 178.)

X

Mr. SIROVICH. Yes; surely. Mr. SAUGSTAD. For ship scrapping, in 1932, an amount of 12,000,000 mark was set aside in the form of subsidized loans for ship scrapping

Mr. SIROVICH. Was that in 1933, too? Mr. SAUGSTAD. 1932. This was free of interest and for the purpose of providing 30 mark for each gross ton of old-vessage tonnage scrapped, payable to the owner of the vessel. This amounts, at gold par, to $2,865,000, or a dollar equivalent at current exchange of about $4,850,000.

In 1932, also, the German Government extended its credit through a guaranty of 70,000,000 mark to the big German liner companies and 7,000,000 marks to the German tramp-ship owners.

Mr. SIROVICH. How much was that again? I did not get that.

Mr. SAUGSTAD. Seventy million mark to liners and 7,000,000 mark to the tramp companies.

Mr. SIROVICH. That was in 1932 ?

Mr. SAUGSTAD. 1932. This amounts at gold par to $16,750,000; or, at current rates of exchange, to $28,200,000. That credit was advanced at a time when the big German companies were practically in a condition of insolvency caused by their extremely large credits with a group of German banks and also the moratorium stoppage of American indemnity payments for the German tonnage. I have not the official figure, but it appears that earlier credits were extended to the companies, possibly in anticipation of an amount of something like $35,000,000 which has not been turned over to the German owners under the moratorium. We can only say, in commenting on this, that the German Press seems to feel thai the German banking group has held out possibly unreasonably for their own protection in this position. Despite that, the fact remains that the German Government guaranty of this amount caused the German banking group to extend those loans and in connection therewith the companies also received extensions from the Netherlands bankers who also had extended considerable credit.

Mr. SIROVICH. Would you consider that a loan, or would you consider that an indirect subsidy that the Government never expects to get back?

Mr. SAUGSTAD. I do not know. I do not know the details on that at all. Now, in 1934, another policy was put in force in Germany concerning which we have very little official information. Roughly, it was stated that a shipowner may receive a subsidy of one-fifth of the contract price of a new vessel which he may lay down and, in addition, 4-percent interest on the remaining four-fifths as a contribution.

Mr. SIROVICH. Four-percent interest on the 80 percent?
Mr. SAUGSTAD. Yes, sir.
Mr. SIROVICH. Which the Government gives as a contribution?

Mr. SaugsTAD. Apparently. That is the information which we have. The latter item is in the nature of a loan for a 6-year period, repayable from anticipated profits after that.

Mr. SIROVICH. You mean the 4 percent, then, is only a loan?
Mr. SAUGSTAD. It is.
Mr. SIROVICH. Not a contribution?

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