now is a part of the Department of Commerce, has made a material contribution to the work. Without the cooperation of these two bureaus during the past year, the presentation of this material in concise form at this time would have been a practical impossibility. Perhaps 50 percent of the source material on this subject is derived from the joint field services of the State and Commerce Departments, another 25 percent from the library of the Department of Commerce, and an equal amount from the Document Division of the Library of Congress.

(2) SEA PERSONNEL

In the discussion, we have touched upon sea personnel, and it may be helpful to the committee to have a general summary of developments in this direction, wholly without technical details. I am not competent to discuss the philosophy of social legislation; nor do policies relating to professional qualifications and working conditions of seamen come within the scope of my work. There are, however, some obvious developments in the trends of social security, as applied to seagoing personnel, which come within the facts of law and contract here discussed, and which are a matter of record.

Increased nationalism within maritime countries has been accompanied by increased social legislation. This policy is becoming apparent in the sea trades. Adjustments, which may appear desirable or necessary, are not so freely left to the natural checks and balances of an active international industry. The depression period and changing social philosophy during the past decade indicate that some of the social aspects of the world shipping industry are definitely altered. Forward-looking statesmanship may well include their consideration. Results of this change are obvious.

On April 1, 1934, France extended the general social insurance law to French seamen and their families.

The funds allotted to German shipping

Mr. CULKIN. Might I ask a question right there?

The CHAIRMAN. Yes; but it breaks the continuity of the statement, of course.

Mr. CULKIN. Of course, I can go back and ask it a little later, but I thought it might be better if I asked it right at this point. The CHAIRMAN. Possibly it would, just at this point.

Mr. CULKIN. Can you tell us what was that social security law that was extended to the French seamen?

Mr. SAUGSTAD. It is the general social insurance law of 1928 covering French salaried employees.

Mr. CULKIN. All French workmen?

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Which was passed in 1910, affecting child labor, and so forth.

Mr. SAUGSTAD. Insurance only, and which last year was applied to seamen for the first time, on April 1.

The funds allotted to German shipping during the past few years are reported to have been almost entirely set aside from general funds for the relief of unemployment.

Italian law and contract provide retirement benefits, not only for seagoing personnel, but for shore personnel and administrative. staffs, and the organic relations covering subsidized services are such that contracting companies assume this burden as a contract provision.

135956-3522

Japan, only a few years removed from feudalism, provides employment protection which, in instances, seems large to western minds.

During the deliberations of the House of Commons of Great Britain, the Labor position, in its relationship to the proposed trampship subsidy program, was concisely stated by Mr. Logan in the House debates on the bill in the following words:

*

It is fundamental in Christian ethics, whether or not it be the morality of the business world, that the man who works and has a home to support must be enabled to maintain that home. * A nation is made up of its people, not of its ships. A ship without men is of no avail. As I have said, we on the labor benches are not little Englanders and we are not trying to hamper trade. We are here to see that the men engaged in this industry receive better treatment than they now get if this concession is made to the industry. That is logic; it is reasonable and sensible. If any agreement is reached which means the giving of national money to an industry, the men who work in that industry must be taken into consideration.

(3) ABUSE IN SUBSIDIES

I bespeak the tolerance of the committee on the subject of the tendency to abuse in subsidy systems. I know of no subsidy system yet devised which has been entirely free from a tendency to abuse. History and record indicate this to be so, and the cause seems to lie, first, in an inherent predatory instinct in man which may lie dormant but which springs to life when he thinks he can get something for nothing, or when he thinks he can get more than he may be entitled to. This tendency seems doubly active if the object of plunder is an impersonal force such as a government.

A second cause of depredation may be said to lie in rigid technical law, subject to nontechnical administration, a combination which lacks the first essential element in dealing with sea trade, namely, flexibility.

I believe I have read every contract the Government of Great Britain ever signed for its packet system. I am sure I have read all that have appeared in the published sessional papers of Parliament during the past century. I have read all the reports on these contracts by the British Treasury, the Admiralty, and the postmasters general. Eighty-two years ago, the House of Commons, through a select committee on the packet services, held hearings covering thousands of printed pages of testimony, on problems of mail contracts similar to those we have under consideration. Anyone who believes we have a monopoly on abuse should read them.

I have here a document, an official report by the Court of Audits of France to the President of France, in which the court finds itself unable to audit the 1918-22 operations of French ships for Government operation, charges manipulation of billions of francs of receipts and expenditures, charges shipping companies with pocketing receipts and paying expenses for account of the State, and mentions names of companies we have discussed during the past few days. I could clutter up this record with pages of instances of abuse, if it served any useful purpose.

I hold no brief for abuses which have become evident in our own system. My sole reason for mentioning past abuses is to give weight to consideration of measures undertaken by governments in the maritime countries to stop abuse.

(4) CORRECTIVE MEASURES

We have discussed the three-way control system of the French Government. All decrees issued by the Government of Italy are

signed jointly by the Premier, the Minister of Communications, and the Minister of Finance. We have discussed the British tramp-ship law. It is significant that a statutory committee is held responsible for its operation, a committee which has its own checks and balances. It is significant also that the president of the board of trade in discussing the bill on the floor of the House warned against a rigid system in these words:

Even the most skillful and farsighted shipbuilders, engineers, and shipowners will discover a good deal under this scheme that they did not already know. We want to take advantage of that. We, therefore, provide that this scheme shall be in force for 12 months in the first instance; if it is found to be in the national interest to increase it for a further period it will be very easy for the House to express that view and to give effect to its decision.

Control means more than power. It means confidence. I believe legislation in maritime countries today is becoming more a process of control bodies and the shipping industry reaching agreements on policy and jointly laying such agreements before legislative bodies for approval, and less a process of making a battleground of legislative bodies. The first step in any program to minimize abuse and confusion is the establishment of proper control into which is built technical integrity, intellectual honesty, and representative character. The Government of the United States has now been actively interested in American shipping for 20 years. Two schools of thought are expressed in the result: First, Government ownership and operation, as established in connection with the ship-purchase bill in 1915 and 1916, which resulted in establishment of the Shipping Board and the Emergency Fleet Corporation; second, transter of shipping to private industry during a period of 12 years by a full regional board. Neither policy has been clearly successful because of many factors; jointly the two policies have made some progress.

If the measure of our maritime shame in 1913 was the carriage of 10 percent of our foreign trade, then, by the same token, the measure of our maritime pride in 1935 may well be the current 35-percent share. This accomplishment has been made without previous experience, without previous establishment in world trades, and in a period of the worst depression ever experienced in the sea trades. The achievement of the 25-percent gain on the part of American ships in 20 years will be remembered long after abuses are forgotten.

I know of no major shipping organization in the world today that has substantial reserves, proper equipment, credit, firm entrenchment in trade, and with standing in the shipping world, that has been built in less than 1, 2, or 3 generations of men. As for foreign subsidy policies, these also have seniority to ours. On the 3d day of July this year, the Government of France can celebrate its one hundredth anniversary in granting credit for the establishment of steamer services to carry mails in the Mediterranean. On the following day, July 4, the Cunard Steamship Co. may celebrate its ninety-sixth anniversary as mail-contract carrier for the British Government.

I cite these cases by way of showing contrast in national experience with shipping and with ship-subsidy policies, for whatever lessons we may draw from them. I thank you.

The CHAIRMAN. We are very much indebted to you, Mr. Saugstad, for your presence here, the information you have given us, and cer

tainly for your very comprehensive summary in which at least one member of this committee heartily concurs.

Mr. SAUGSTAD. Thank you, sir.

Mr. SIROVICH. Mr. Chairman, if I am in order, I would like to move it is the sense of this entire committee that we give a vote of thanks to Mr. Saugstad for the brilliant, illuminating, and constructive contribution he has made to the question of shipping.

(There were cries of "second the motion. The motion was carried.)

Mr. SAUGSTAD. I thank the committee, sir, and you, Mr. Chair

man.

The CHAIRMAN. And we would be very glad, Mr. Saugstad, if with the permission of Senator Copeland, and I am sure he would grant it, the memorandum which you are preparing for him could be incorporated in this record, too.

Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. I will talk to Senator Copeland about it and I may say that our proceeding here on the subject of the policy to be pursued in the presentation of a bill is in agreement with Senator Copeland's idea and I hope that is the best way to conduct it.

(The memorandum referred to appears as S. Doc. 60 (74th Cong., 1st sess.) entitled "Merchant Marine Policy and Shipping and Shipbuilding Subsidies.")

The CHAIRMAN. Now, Mr. Smith, we will be glad to hear you.

STATEMENT OF H. GERRISH SMITH, PRESIDENT NATIONAL COUNCIL OF AMERICAN SHIPBUILDERS

Mr. SMITH. Mr. Chairman, I am appearing here on behalf of the National Council of American Shipbuilders, representing approximately 90 percent of the shipbuilding and ship-repairing industry of the United States.

I would like finally to comment upon some features of the interdepartmental committee's report; but, before doing so, it is necessary to point out what appears to me to be the fundamentals underlying the problem that confronts you and, with the purpose of showing those fundamentals, I have prepared a brief statement and have referred to two or three publications that have been prepared by the national council and which I think are pertinent to this subject.

The CHAIRMAN. Do you desire to have those incorporated as part of the record?

Mr. SMITH. Yes, sir; I would like to have them incorporated as part of the record. I will refer to them as I make my statement if that is in order, sir, and ask that they be incorporated as we refer to them. There are copies of them that have been placed before the various members present.

As I understand the problem confronting you gentlemen, it is to establish and maintain upon the seas for the development of our foreign commerce and for national security an American-built, Americanoperated merchant fleet adequate to carry 50 percent of our own goods in foreign trade.

Mr. Alfred Haag, of the Shipping Board Bureau, has presented to you figures showing that the approximate amount of American tonnage engaged in this trade today, including oil tankers but excluding

Great Lakes tonnage, is 3,000,000 gross tons, which tonnage is carrying about one-third instead of one-half, of our exports and imports combined, in foreign trade. It seems to me that is the starting point. We have a fleet of that size today and the problem is how we can maintain our present position, which Mr. Saugstad stated so clearly has been built up in a short period of some 20 years.

In establishing this figure of 3,000,000 gross tons, we took into account the figures of our foreign trade during the last 10 years and the probabilities of what it may be in the immediate future. The figures show that the foreign trade of the United States from year to year is about 11 to 14 percent of world foreign trade. The figures also show that the tonnage of American shipping in foreign trade is about 5 to 7 percent of the tonnage of world shipping. Theoretically, therefore, the United States would be entitled to own and operate the same percentage of shipping that its foreign trade represents of world trade or, approximately, 6,000,000 instead of 3,000,000 gross tons.

A careful analysis of the foreign trade of the United States for the past 10 years and its probable volume for the future indicates that its present volume, which is less than half of that in 1929, is a conservative figure to use for the future and, as stated, about one-third of this volume, instead of the greater part as cited in the preamble to the Merchant Marine Acts of 1920 and 1928, is being carried by 3,000,000 tons of American ships. It seems, therefore, that as a starting point in a study of the shipping problem that we must figure on maintaining in foreign trade, as a very conservative figure, at least 3,000,000 gross tons of American shipping.

As a second point, it is recognized the world over that the average life of a ship is about 20 years. Congress must contemplate, therefore, the renewal of 3,000,000 gross tons of shipping once in every 20 years, or on the average 150,000 tons a year, which would be the equivalent of at least 15 ships each of 10,000 gross tons, or a larger number of smaller ships. I cannot see, sir, any possible way of our maintaining our position on the seas without taking that factor directly into

account.

Starting with the above figures, it is next necessary to consider the present status of the 3,000,000 gross tons of shipping now in our foreign trade, particularly in comparison with the shipping of those foreign nations with which we must compete. With the purpose of showing the facts on this subject, the National Council has prepared a booklet entitled "Some Pertinent Facts Concerning the American Merchant Marine", a copy of which, sir, I would like to file as a part of the records of this hearing.

The CHAIRMAN. Without objection, that may be done.

(The paper above referred to will be found as a part of the appendix to this record.)

Mr. SMITH. The pertinent facts have been set forth in this booklet in what I hope is a concise manner, where they are definitely available for quick reference to give the most important facts in connection with our American shipping.

The CHAIRMAN. And containing the source of the information? I notice the authority is given in each case.

Mr. SMITH. Yes, sir.

The CHAIRMAN. As, for instance "from the Bureau of Foreign and Domestic Commerce, Department of Commerce."