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TO DEVELOP AN AMERICAN MERCHANT MARINE

PART I. MERCHANT MARINE POLICY

SATURDAY, MARCH 23, 1935

HOUSE OF REPRESENTATIVES,
COMMITTEE ON THE MERCHANT MARINE AND FISHERIES,

Washington, D. C. The committee met at 10 a. m., Hon. Schuyler O. Bland (chairman) presiding

The CHAIRMAN. I have called the meeting this morning for the purpose of introducing the following reports and recommendations and making them a part of this record.

First, I desire to insert an excerpt from the majority report of the Select Committee of Inquiry into the operations, policies, and affairs of the United States Shipping Board and Emergency Fleet Corporation, in the House of Representatives, Sixty-eight Congress (Rept. No. 2, House of Representatives, 69th Cong., 1st sess.). This committee was appointed under authority of H. Res. 212, adopted March 18, 1924, Sixty-eighth Congress. The committee consisted of Hon. Wallace H. White, Jr., of Maine, now United States Senator, as chairman; Hon. Henry Allen Cooper, of Wisconsin; Hon. Frederick R. Lehlbach, of New Jersey, and Hon. Walter F. Lineberger, of California, as the Republican members; and Hon. Ewin L. Davis, of Tennessee, now chairman of the Federal Trade Commission; Hon. William B. Bankhead, of Alabama, now House majority leader; and Hon. Tom Connally, of Texas, now United States Senator, as the Democratic members. The majority report was written by Hon. Ewin L. Davis and was concurred in by Hon. Henry Allen Cooper, Hon. William B. Bankhead, and Hon. Tom Connally. In the majority report it was stated as follows:

NO LOSSES TO AMERICAN PEOPLE

Much specious argument and misleading propaganda have been disseminated abount the so-called annual Shipping Board losses."

As a matter of fact, there have been no losses to either the Government or the American people, when all the facts are properly considered. The advantages and benefits have far outweighed the expenses incurred in maintaining our important foreign trade routes, even though it be conceded that it might have been done more efficiently and economically. This fact was graphically and cogently illustrated by the occurrence last year, when the western grain farmers of the United States were unable to market their grain abroad for lack of available ocean tonnage. At that time a most serious situation confronted the agricultural interests of the United States, due to the fact that there was an exportable surplus of grain amounting to between 200 and 250 million bushels, for which no market had up to that time been found and the presence of which in the United States operated to demoralize the domestic market and reduce the price of wheat to $1 a bushel and less far below the actual cost of production.

It was apparent that, when the demand for American wheat did arise, if the wheat could be delivered in foreign markets promptly, the result would be relief from depression and a rapid enhancement of price and increased returns to the American wheat grower. The problem was solved by utilizing Shipping Board vessels. And while it is estimated that the actual expense incurred in operating such additional vessels amounted to something less than a million dollars, yet the price of grain by reason of such movement increased more than $650,000,000. Rather a fine return upon the less than million dollar expenditure. On the books of the Shipping Board it probably appeared that the United States lost approximately $15,000 on each Shipping Board voyage. But, on the other hand, the enhancement of the price of American grain, which resulted in increases amounting to between $600,000,000 and $800,000,000, certainly vastly outweighed the initial expenditure for transportation by the Government. The Emergency Fleet Corporation declined to put into service the extra ships to move this grain, but upon appeal to it the Shipping Board directed that idle ships be utilized for the transportation of this grain.

This is but one of many instances of the value of the American merchant marine. In fact, had it not been for the American merchant marine at the close of the World War the United States would probably have paid out in increased ocean freight rates alone more than the total cost of the Government fleet. It was the Shipping Board which brougbt about, through the control of its tonnage, constant reductions in ocean freight rates, which inured to the benefit of American producers, industries, and shippers. This tremendously important fact cannot and should not be overlooked in estimating what the American merchant marine is worth to the American people. The Government-owned fleet has, in fact, been a valuable asset rather than a millstone about the necks of the American people, as some would have the Nation believe.

The American Economist, official organ of the American Protective Tariff League, in its issue of November 6, 1925, aptly described the situation as follows:

" In the New York Journal of Commerce the other day the following news item appeared :

"* It appears that the existence of the Shipping Board fleet offers an insuperable obstacle to the adoption of any of the various European plans for laying up tonnage in order to strengthen ocean freight rates. It is recognized that if rates should advance the Board would be obliged to put more ships in service for the protection of American shippers and consumers.'

“ This states the case pretty fairly. Our Government-owned fleet acts as a sort of protection to the American people against high ocean freight rates; they receive their imports at a less cost, and their exports reach foreign markets at a less cost than would be possible if ocean freight rates advanced. This lower cost of freight transportation brings back to our people, several times over, each year, all that our Government losses' through running its ships for less than they earn.

" The oceau freight to carry is far less than the ships available for carrying it. When two ships offer for one cargo, the shipper makes the rate; and when two cargoes offer for one ship, then the shipowner makes the freight rate. Such rates are now, and for about 4 years have been abnormally low; they are so low that they are unprofitable even to most foreign ships. For a couple of years after the war the Government's ships yielded the Government vast profits; since rates have gone down the profits to the Government have disappeared, but the profits to the people have appeared.

* Many foreign nations, notably Great Britain, went on building new mer. chant ships after the war as if the American fleet of 12,000,000 tons of shipping did not exist, or would be scrapped or laid up. This produced a condition of 'over-tonnage', and it is from that ships are now suffering; but people who have goods to send by ships are not suffering. Those in this country who pay for our $9,000,000,000 worth of imports and exports are not suffering; they are benefiting by low freight rates."

In addition to the enormous savings in ocean-freight rates which it has provided, the percentage of American commerce carried in American vessels has enormously increased over the pre-war period, and the freight money paid out by shippers for carriage in American vessels has remained in America. This sum constitutes a huge total.

“ The value moreover, to the Nation of having a great fleet of American ships at all times available, can be readily appreciated when the condition which

confronted the United States during the World War is recalled. Not only do such ships constitute an asset of the greatest value, from the standpoint of national defense and of independence upon the high seas, but also afford incomparable training in seamanship and a reserve and auxiliary force of trained seamen whose value cannot be overestimated.

" While services like the Army and Navy have only high national defense insurance value in time of peace, the merchant marine has both a high insurance and utility value. No one will gainsay that the Coast Guard, the Lighthouse, the river and harbor, the good roads, the Reclamation, and other services and projects sustained by the Government do not possess the highest value, and provide returns to the Nation so great as to far outweigh the expenditures involved in maintaining such services; and yet, taking only the balance sheet in the Government Accounting Office as a basis, it will appear that none of such services is self-sustaining, and that all of the money expended by the Government finds no direct return-except in the case of customs receipts, one made possible through the development of the rivers and harbors of the Nation."

SHIP TONNAGE AND MEASUREMENT TERMS EXPLAINED

The hearings held in 1928 on the Merchant Marine Act of 1928 contained very complete definitions and explanations of ship nage and measurement terms. I will insert them at this point:

Every floating body will displace its own weight of water. Sea or salt water weighs approximately 61 pounds per cubic foot. If we find the number of cubic feet of that portion of a floating ship which is under water it is a simple matter to determine the ship's displacement.

Since salt water weighs approximately 64 pounds per cubic foot, the total number of cubic feet represented by the under-water portion of the ship multiplied by 64 represents the total number of pounds of water displaced by the ship.

If the total number of cubic feet of the under-water portion of the ship is divided by 35, it will give the number of tons of water displaced, since 35 cubic feet equal 1 ton, or 35 times 64 pounds equals 2,240 pounds.

Let us assume that a ship is afloat in a quiet body of water. The water freezes and becomes a solid mass of ice. (For the purpose of this illustration, the expansion of the ice is ignored. The ship is lifted out of the ice. The cavity in the ice then represents the form of the under-water portion of the ship. We then fill this cavity with water to the level of the surface of the ice. The water is pumped out of the cavity and placed on one side of a scale, the ship is placed on the opposite side of the scale. The scale will then balance.

Now to prove this, if the water on the scale which balances the weight of the ship is again poured into the cavity in the ice and we proceed to put the ship back into the cavity, the water in the cavity is forced aside or displaced until the ship occupies the entire space in the cavity, at which time it will hare displaced all of the water which we previously found equaled the weight of the ship.

Displacement, light.--The weight of the ship, excluding cargo, passengers, fuel, water, stores, dunnage, and such other items which are necessary for use on a voyage.

Displacement, loaded.--The weight of the ship including cargo, passengers, fuel, water, stores, dunnage, and such other items necessary for use on a voyage, which brings the vessel down to her maximum draft.

Deadweight tons.—The carrying capacity of a ship in tons of 2,240 pounds. The difference between the displacement light and the displacement loaded. As an illustration, a ship with a light displacement of 4,000 tons has a draft of 9 feet; at this displacement (4,000 tons and draft of 9 feet) her deadweight

Her loaded displacement would amount to 15,000 tons and she would have a draft for this loaded displacement of 30 feet. Therefore her deadweight would be the difference between the light and loaded displacement, or a carrying capacity of 11,000 tons.

Cargo deadweight tons.—The number of tons (2,240 pounds per ton) which remain after deducting fuel, water, stores, dunnage, and such other items necessary for use on a voyage from the deadweight of the vessel. As an

is zero.

illustration, a vessel of 11,000 tons deadweight takes aboard fuel, water, stores, dunnage, and such other items necessary for a voyage amounting to 1,200 tons, the cargo deadweight available will then amount to 9,800 tons. The cargo deadweight varies according to the weight of the last-named items. In other words, for a long voyage fuel may be carried for a round trip and the quantity of stores proportionately increased, which would reduce the figure for the cargo deadweight tons by a like amount.

Gross tons.-The entire internal cubic capacity of the ship expressed in tons of 100 cubic feet to the ton, except certain spaces which are exempted, such as peak and other tanks for water ballast, open forecastle bridge and poop, excess of hatchways, certain light and air spaces, domes and skylights, condenser, anchor gear, steering gear, wheel house, galley, cabins for passengers (when on decks not to hull), the other items (as enumerated in Measurement of Vessels, published by the Department of Commerce, Bureau of Navigation).

Net tons.The tonnage of a ship remaining after certain deductions have been made from the gross tonnage expressed in tons of 100 cubic feet to the ton. Among the deductions are crew spaces, master's cabin, navigation spaces, donkey engine and boiler, shaft trunks, percentage of propelling machinery space, and other items (as enumerated in Measurement of Vessels, published by the Department of Commerce, Bureau of Navigation).

Register tons.-Register tonnage is applicable to both gross and net; in other words, it can be expressed as gross register tonnage or net register tonnage. However, as a general rule it is ordinarily used with reference to net tonnage.

Power tons. This is used to classify the ship for the purpose of establishing the rates of pay of the ship's officers and is calculated by adding together the gross tonnage and the indicated horsepower of the ship. The result is power tonnage.

Grain cubic.—The maximum space available for cargo measured in cubic feet, the measurements being taken to the inside of the shell plating of the ship or to the outside of the frames and to the top of the beams or underside of deck plating. In other words, if a bulk cargo was loaded such as grain it would flow in between the frames and beams and occupy the maximum space available.

Bale cubic.The space available for cargo measured in cubic feet to the inside of the cargo battens, on the frames, and to the underside of the beams. In a general cargo of mixed commodities the bale cubic applies. The stowage of the mixed cargo comes in contact with the cargo battens and as a general rule does not extend to the skin of the ship. From figures taken from an actual ship, the grain cubic amounts to 641,000 cubic feet and the bale cubic amounts to 470,000 cubic feet.

Cargo stowage factor.—The bale cubic divided by the cargo deadweight equals the stowage factor. In other words, a ship with a bale cubic of 570,000 cubic feet and a cargo deadweight of 9,800 tons would have a stowage factor of about 58 cubic feet.

VALUE OF MERCHANT MARINE TO FARMERS OF AMERICA

In further evidence of the value of a merchant marine to the farm. ers, I wish to call attention of the committee to the 1928 hearings, in which Mr. Fred B. Brenckman, Washington representative of the National Grange, a national farm organization extending from Maine to California and having at that time approximately 800,000 members. Mr. Branckman said:

With 56 percent of our exports composed of agricultural products and confronted with the necessity of expanding our foreign markets in order to dispose of our agricultural surplus, the farmer is vitally interested in the maintenance of an adequate merchant marine.

I simply want to observe, Mr. Chairman, that probably no other class among our people was more seriously embarrassed and more heavily penalized by our lack of merchant ships at the breaking out of the World War than the farmers of the United States. When Great Britain commandeered 1,500 of her merchantmen for war purposes and when our German ships were swept from the ocean, it left us with very inadequate means of getting our products to market. Then it was that we learned the meaning of freight embargoes, and our products, were piled up in warehouses and elevators and upon the docks, with scarcely any ships to transport them. During this emergency the price of transporting a bale of cotton from Galveston to Liverpool rose from $2.50 to $50 a bale. It is estimated that it cost the cotton growers of the South $750,000,000 more to produce the cotton crop for 1914 than they received for it. The major portion of this huge loss was directly due to our lack of shipping facilities. At the same time the cost of transporting a bushel of wheat from New York to Liverpool jumped from 8 cents a bushel in 1914 to 27 cents in 1915 and during the war reached the peak charge of $1.36 a bushel. In this disastrous and expensive fashion we had brought sharply home to us the extreme folly of depending almost exclusively upon the ships of other countries to carry our foreign commerce.

The $3,000,000,000 which we paid for our war-time fleet gave us the ships which were absolutely vital to winning the war and today the Government has operating a portion of what is left of that fieet in the interest of American trade and for the benefit of all our people. It is manifest that the vessels of this fleet must be kept in repair and that there should be adequate provision for replacement unless we are to suffer a painful repetition of the experience of 1914

The Grange, of course, is in favor of giving proper encouragement to private operation to engage in the shipping business, but we consider the merchant marine of such vital importance that if private enterprise is unable to furnish the service and supply the facilities demanded by our expanding commerce, we are strongly persuaded that it would be better for the Government to continue in the shipping business for the time being, rather than to have no merchant marine at all. Much has been said of the losses incurred by the Government under the operations of the United States Shipping Board, but this leaves out of consideration the obstacles and difficulties with which the Board has been compelled to contend. Now, of course, we all realize that fleet was built to win the war and that in the very nature of things the whole or a part of the cost of that fleet will have to be charged off as a war cost and we feel it has not been altogether fair to the Shipping Board to charge all of those losses and deficits that have been sustained to the management of the Board. It also overlooks the service which it has rendered to our people.

Our ocean freight bill is estimated at $720,000,000 a year and if it may be assumed that freight rates are 10 percent lower than would be the case if we had no ships, it is apparent that the operations of the Shipping Board result in a saving of $72,000,000 a year to the American people. The deficit sustained by the Government during the past year, in connection with the operations of the Shipping Board, amounted to only 15 or 18 million dollars, which is a comparatively small sum when compared to the benefits conferred upon the people. In 1926, when the English coal strike was in progress, many of the British ships upon which we were depending were withdrawn and utilized in carrying coal from this country to Great Britain. In this emergency, the Shipping Board placed nearly 100 ships of the reserve fleet into commission, carrying our wheat and cotton to foreign markets, resulting in a saving to the American farmer which has been estimated at $600,000.000. If the Shipping Board should continue to lose an average of $18,000,000 a year, which is not at all likely, because the deficits are steadily declining, the service rendered by the Board to the American farmer alone in `1926 would offset those deficits for a period of almost 36 years

We paid $3,000,000,000 in the time of the war for vessels that we probably could have bought, under normal conditions, for about one-sixth of the amount, and we are paying $120,000,000 a year interest on the money we borrowed to build these ships and we feel, out of all that, the American people are entitled to a merchant marine and one that would be on a sound and continuing basis.

Now, I desire to insert in the record a statement of Dr. Julius Klein, Assistant Secretary of Commerce, in a radio address delivered February 5, 1933:

COMMERCIAL VALUE OF THE MERCHANT MARINE

The importance of this shipping business, both in terms of freight and in expenditures for supplies, labor, and other essentials, is all too little appreciated. Just before the war, our shipping was earning in this traffic about $35,000,000

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