* * *

a year, and was spending for supplies and other purposes in this country about $26,000,000. As against these two figures, our shipping in 1931 (a very low subnormal year) earned no less than $187,000,000 in freight carrying and spent about $141,000,000 in this country for supplies, wages, other items of operation, etc. There is no doubt whatever that much of this business-doubly precious in those gaunt times-would have been lost if it had not been for the valuable help of the new shipping laws. It seems to me that it would be as ill founded a policy to abandon the merchant-marine services we have built up as it would be to tear up thousands of miles of our railways and highways and to invite foreign nations to rebuild them with their capital and labor. We have the ships just as we have our domestic transportation systems, and they are ships that are well able to hold their own in the company of those of any other nation.

BENEFITS OF THE MERCHANT MARINE TO THE NATION

I now wish to insert a statement made by a former chairman of the Shipping Board before this committee during the merchant marine investigation held in 1931. Mr. T. V. O'Connor, then Chairman of the Shipping Board, stated:

During the period 1921-30 the water-borne foreign trade of the United States amounted to over 900,000,000 tons of freight, valued at $74,000,000,000. It is significant to note that American ships, which before the war carried less than 10 percent of our commerce, during this 10-year period carried over 40 percent, or upward of 360,000,000 tons of freight valued at nearly $25,000,000,000. Passenger and freight revenues accruing from this vast movement of traffic totaled approximately $9,000,000,000. On the most conservative estimate, fully one-third of this revenue must be credited as a direct gain to American labor and industry through the possession of a strong merchant marine.

As already indicated, the vessels of the Shipping Board operated from 1917 to 1920, inclusive, at a substantial profit to the Government.

Subsequently shipping conditions throughout the world were such that losses were sustained by the Board's fleet. Up to the end of the fiscal year 1930 these losses totaled something less than $100,000,000.

However, in incurring this loss, the fleet handled business which brought to the Government, and consequently to the American people, gross revenues amounting to approximately $2,180,000,000. Had not the American merchant marine; then owned almost entirely by the Government, aggressively competed for and secured this business, it would have been handled by ships of foreign registry.

When we consider that foreign ships are built abroad, that their earnings are largely invested abroad, and that they are manned almost entirely by foreigners who spend most of their money in other lands, the meager financial benefits accruing to this country from foreign ship operations become at once apparent. On the other hand, the earnings, wages, and purchases involved in the operation of Amercan ships ar all transactions which directly benefit the Government and people of the United States. For this reason the American merchant marine, most of which is now privately owned, has in no small degree been an effective instrument in the stimulation of domestic industry and labor.

When we come to consider the way in which an adequate merchant marine opens up additional foreign markets, we enter into another phase of the benefits derived from having a merchant fleet of our own. Aside from the stabilization of rates, and the consequent savings in freight charges to American exporters and importers, the records of the past 10 years must convince the most skeptical that trade does follow the flag.

Whereas in the decade prior to 1914, the value of our foreign trade carried in American ships averaged but $300,000,000 annually, during the decade 1921-30 it averaged $2,600,000,000 per annum.

In 1914 only six American-flag ships, of 70,000 gross tons, were operated in our trade with Europe. In 1930 there were 232 American ships, totaling 1,500,000 gross tons, and our trade with that region had increased 50 percent. In 1914 there were five American ships, of 23,000 gross tons, operating between the United States and South America. In 1930 the number had been increased to 90, and our trade had increased 200 percent.

In 1914 we had no American ships trading to the African Continent. Today we have 22 ships, totaling 125,000 gross tons, and our trade has increased 325 percent.

Our trade with the Orient tells the same story. In 1914 there were five American ships operating from Pacific coast ports to the Far East. In 1930 the number had grown to 140 ships, of a million gross tons, and our trade just before the depression showed an increase of 380 percent.

In this brief statement setting forth the savings in freight rates, the promotion of foreign trade, and the stimulation to industry and labor afforded by a strong merchant marine under the American flag, it has been possible only to indicate in the broadest way a few of the results achieved. It should be stated in conclusion that the expense involved, large though it has been, has resulted in the establishment of ocean services operating to all our principal foreign markets. The American shipper and traveler is assured of dependable carriers, furnishing regular service at reasonable rates, and the country at large possesses a marine auxiliary force which in time of national emergency will prove indispensable to the United States Navy.

VALUE OF SHIPPING AND SHIPBUILDING INDUSTRY TO NAVY

Next I wish to insert a statement made in 1882 by Hon. William E. Chandler, then Secretary of the Navy:

The interests of the Navy are inseparably involved with those of the commercial marine of the country.

The protection of commerce is the first object of the Naval Establishment and unless efficient preparation for such protection is made a single war may destroy a nation's merchant fleet beyond hope of recovery. The carrying trade once diverted is slow to return to its old channels. As the merchant marine is dependent at critical periods upon the Navy, so, on the other hand, the Navy, no matter how strong it may be, must in emergency avail itself of the resources of the merchant marine.

Referring then to the war between the States, Secretary Chandler said that this was clearly shown during that war. He said further: At its outbreak, the Navy had normally a tonnage of 105,271 tons. To increase it, 215,975 tons of shipping were bought. These purchased ships were ill-suited for war purposes, but they were nevertheless indispensable. If 10 years before the war our maritime necessities had been recognized and the relations of the Navy and the merchant marine had been understood and organized, the Government might have saved millions of dollars and have had in the beginning vessels capable of capturing the English-built commercedestroyers and blockade runners.

As the Navy must in emergencies resort to the merchant marine for ships, it must also draw upon it for officers and men to supply its deficiencies. The Naval Establishment is further dependent on the merchant marine through its relation to the ship-building interests. It must be able to build ships within the country and all the requirements for ship building must here exist. The plants and the skilled mechanics must be here, but the ordinary demands of the Navy will not support a single establishment and ship builders cannot exist unless they find employment and profit in building commercial vessels. If, therefore, the present downward tendency of the merchant marine is unchecked, the Navy will soon be in a position that in the event of war it will be unable to build a single vessel or to recruit its numbers by officers and seamen of nautical experience.

It may be argued that capital would be put into shipping if shipping were profitable. The reply is that shipping would become profitable if it received as fair treatment as other forms of investment. All the interests liable to suffer from foreign competition are protected, but that commercial industry in which international competition is sharpest, in which rival nations come face to face, is left by the Government to take care of itself.

If manufacturers are protected and nothing is done for shipbuilding, capital will seek employment in manufactures for which the Government guarantees a return. Even our transcontinental railways, which had nothing to fear from foreign competition, have received grants which, in comparison, places the interoceanic carrying trade under fatal disadvantages.

135956-35-18

VALUE OF MERCHANT MARINE TO THE FARMERS AND TO THE NAVY

Mr. Homer L. Ferguson, president of the Newport News Shipbuilding & Dry Dock Co., is a recognized authority on the merchant marine and on the value of the merchant marine to the public generally and also to the Navy. Mr. Ferguson was formerly a naval officer. In the hearings held before this committee in 1928 Mr. Ferguson said:

In the Boer War, in which we had no part, the withdrawal of ships from the normal trade and the increased rates of insurance and the increased rates of cargo carrying resulted in the fact that we paid for a large part of England's

*

In the Spanish War we had no shipping, so we immediately started out to buy ships. The ship-owning nations had a lot of old ships which were about to peter out. They sold these ships to us and they were a godsend to us, because we were at war. At the same time, their sale permitted those foreign nations to replace the old ships with new ones. * * In the World War we were fortunate enough to have left with us a large number of German ships and, of the 2,000,000, soldiers who went to France, a million went in the ships of our Allies; 500,000 went in interned ships like the Leviathan, the America, and so forth, and 500,000 went in American-built ships. We pressed into service every ship that could cross the ocean and during that war we spent about $3,500,000,000 on shipping, most of which never got in the war at all. At the beginning of that war, the entire mercantile marine of Great Britain cost less than $2,000,000,000.

Whether we have a merchant marine or not, we have already paid for it. We certainly have paid for its lack. As recently as the British coal strike, the ships that were carrying our trade were withdrawn from our services, as a result of which they were not available to move crops of the United States. The Shipping Board was able to put into that service from 50 to 75 ships and also to ship wheat and cotton out of Gulf ports.

66

Secretary Hoover gave it as his opinion that the putting of those spot" ships into that service to move the grain and cotton meant some $650,000,000 for the grain owners of the United States; because, after those ships were put in the service, the wheat increased that much in price from that to which it had dropped when it looked like it was not going to be moved.

STATEMENT OF SENATOR WHITE

I next wish to call attention to the statement made by Senator Wallace White, of Maine, formerly a member of the committee and chairman at the time of the 1928 hearings. Senator White, in a later statement, said:

From 1922 to 1932, our water-borne commerce amounted to 953,000,000 tons and the freight rates and passenger fares totaled in these 10 years 9 billions of dollars. Carrying one-third of this commerce in American ships meant the return to American interests of 3 billions of dollars and the payment to foreigners of 6 billions of dollars. If we had been without American ships and had carried only 10 percent, as before the war, we would have paid to the foreigners not $6,000,000,000, but $8,100,000,000, and Americans would have received not $3,000,000,000, but $900,000,000.

In testimony before this committee in 1931 it was stated that prior to the depression in 1921 the Shipping Board actually turned large sums of money into the Treasury and that the total returns to the Treasury up to that time, or subsequently, were $193,447,865.

It was also testified that, in addition, the Shipping Board rendered to the War Department without charge services valued at $98,500,000, and to the Navy Department services valued at $8,500,000, bringing the total of direct returns and savings to the Treasury to $300,447,865.

It was also testified that from 1918 to 1925 the total appropriation for operating losses and expenses of the Emergency Fleet Corporation had amounted only to about $250,000,000, or some $50,000,000 less than the corporation had saved the Treasury.

VALUE OF PRIVATE SHIPYARDS TO THE NAVY

Speaking of the value of merchant ships as a naval auxiliary, Mr. Ferguson, whom I have previously quoted, said:

As merchant ships form a naval auxiliary of tremendous importance, likewise the private shipyards form a naval auxiliary of tremendous importance in case of difficulty.

The navy yards are absolutely unable to handle the necessary work in time of war; it was impossible for them to take care of the needs of more than the naval fleet during the war, so that the private shipyards did a tremendous lot of work not only on private merchant ships, but on naval vessels during the war-amounting in the last war to about $70,000,000 worth of work. The additions to the Navy and the demands of the Naval Establishment were so great that they needed all of the shipbuilding resources of the country and, of course, the shipyards and the repair yards were recruited up from about 25,000 or 50,000 men before the war to about 400,000 men before the shipbuilding program was concluded. They are potential navy yards.

That is all I desire to bring to the attention of the committee at this time.

(The committee thereupon adjourned subject to the call of the chairman.)