built on the west coast except those two and small craft, since the war. There have been, however, the General Engineering ship yards, who have built five, I think, vessels for the Coast Guard. And the two navy yards, of course, the one at Mare Island and the one at Puget Sound, have done some work. Mr. WELCH. I have in mind private shipbuilding. Mr. SMITH. The Todd Co. built two cruisers at Tacoma since the war. Outside of that, there has been no commercial shipbuilding on the west coast. Mr. WELCH, The Government of the United States has made available approximately $150,000,000 for shipbuilding and the shipbuilding interests of this country, not one dollar of which has been spent in the construction of a ship on the Pacific coast. Our shipyards have gone to wrack and ruin. Shipyards, the gentleman will agree, are a part of our national defense, but they do not exist on the west coast. Can you suggest anything to this committee that will revive shipbuilding on the Pacific coast? Mr. SMITH. I would like to say this, however, in the first instance, that I am entirely sympathetic with that point of view, that there should be some private shipbuilding facilities maintained and continued on the west coast, from the standpoint of the national defense. I think it is very important. In the first place, however, you have got you are faced with the problem of the owner, that you cannot stop him from buying a ship where he chooses; and that, of course, is a problem. There is some difficulty-the only handicap at the present time-the essential handicap is transportation. The labor rate is substantially the same; very little, if any, difference. The transportation is high. We figured it out some time ago for a cargo ship and it worked out from 2 to 22 percent higher. I think, as you know, for many, many years the Congress, in appropriating for the building of naval vessels, allowed a differential of 4 percent; and most of those naval vessels built at the old Union Iron Works in San Francisco were built under that differential; that is, that they took that into account, and, if they were not more than 4 percent higher than the bid on the east coast, they got the contract. Mr. SIROVICH. Why should there be that increment in the cost of production over there? Mr. SMITH. Well, it is because most of the materials they use come from the east coast. Mr. SIROVICH. The transportation cost? Mr. SMITH. Steel has to be transported from the east coast. Mr. CULKIN. Can you state, Mr. Smith, whether or not the organization of the International Mercantile Marine has had an unfavorable effect on the construction of ships and the American shipping? And take into consideration, in answering that question, the fact that we did subsidize some foreign ships. Mr. SMITH. Oh, I would say positively that there have not been any unfavorable effects. It has been quite the reverse. They built three of the finest ships in the intercoastal trade, the California, Virginia, and Pennsylvania, and they built the largest ship for the trans-Atlantic service that we have ever built in this service. Mr. CULKIN. As a matter of fact, we did subsidize a Belgian line that carried one steamship which disbursed $2,000,000. Mr. SMITH. I do not know anything about that. Mr. CULKIN. You do not know about that? Mr. SMITH. No. Mr. CULKIN. Well now, do you think your group, the present or the prospective beneficiaries of this subsidy, are thoroughly national in every way? There is no question about that? Mr. SMITH. Yes, sir. Oh, I think there is no question about that. Mr. CULKIN. And they have the view only of the interests of America? Mr. SMITH. That is my profound belief. Mr. CULKIN. There is no divided allegiance in your group? Mr. CULKIN. Well now, take the construction of the wooden ships at the time of the World War; we spent $300,000,000 on them, I understand. Mr. SMITH. Yes, sir. Mr. CULKIN. And is it a fact that that was done at the suggestion of Lloyd George and the English naval group, who wanted us to build wooden ships, so that we would not have anything after the war to compete with them? Mr. SMITH. No; I think not. I think it was more the interest of the people that had lumber to sell. Mr. CULKIN. You think the lumber was a factor? Mr. SMITH. Yes, sir. Mr. CULKIN. You think it was a mistake, of course! Mr. SMITH. I think it was a terrible mistake. Mr. WELCH. If the gentleman from New York please, I did not finish questioning the witness. Mr. CULKIN. I thought you had. The CHAIRMAN. I think one member ought to finish before another starts. Mr. CULKIN. I supposed he was through, Mr. Chairman. The CHAIRMAN. I apologize to Mr. Welch. Mr. CULKIN. I did not intend to interrupt, Mr. Chairman. I do not want to leave that inference. Go ahead. The CHAIRMAN. I am sure you did not. Mr. WELCH. The witness will agree that shipyards are a necessary part of our national defense? Mr. SMITH. Yes, sir; they are just as important a factor in the national defense as our Government navy yards, in my opinion. Mr. WELCH. Would you favor, Mr. Smith, a differential of onehalf of 1 percent in the Government interest charge for loans on vessels constructed on the Pacific coast for the Pacific coast trade? Mr. SMITH. Well, I figured that out the other day; and that would work out to about 5 percent advantage in cost over the lifetime of a ship, if it was amortized for 20 years. It seems to me that is a little high. That is more than is necessary to cover the actual differential, by considerable. Mr. WELCH. How much would you suggest? Mr. SMITH. Around one-fourth of 1 percent, I think, would about cover it, instead of one-half of 1 percent. Mr. WELCH. One-quarter of 1 percent would make it possible, in your estimation, to construct merchant vessels at a profit on the Pacific coast? Mr. SMITH. I do not see any reason why it would not put them in an absolutely competitive basis with any yard on the east coast in the matter of efficiency; of course, the matter of what you can do when you get a contract-but I do not see why they should not be on an equal competing basis. Mr. WELCH. You realize, of course, that the vast amount referred to, of $150,000,000, loaned by the Government of the United States for ship construction has been spent within a radius of two or three hundred miles of this room? Mr. SMITH. Well, it has been spent-of course, it has all been spent in the east-coast yards; but it has been spent in those yards that exist on the west coast. Mr. WELCH. Is there not something that your organization can do to bring about the development of ship construction on the Pacific coast? Mr. SMITH. Well, I have repeatedly discussed it with my group and told them what I have stated to you, that I believe, from the standpoint of national defense, it is important that there should be some shipbuilding facilities maintained on the Pacific coast in private yards. Mr. WELCH. Will you or your organization make a recommendation to this committee that a differential of some degree in the interest rates charged by the Government be established for vessels constructed on the Pacific coast for Pacific-coast trade? Mr. SMITH. I think we would, sir. I think it would be based, however, upon such differential as was necessary to cover differences in cost, and that would have to be analyzed. We would have to analyze the wage rates and the transportation charges. Mr. WELCH. Do they pay a higher wage rate on the Pacific coast than they do on the east coast? Mr. SMITH. At the present time there is practically no difference, since the codes went into effect. I think, as a matter of fact, you would find that the differential now is so small that your west coast yards are practically on a competitive basis. Mr. WELCH. A differential was worked out by the people of the Pacific coast, interested in both ship construction and national defense, to be about one-half of 1 percent. If you and your organization will be good enough to submit your estimate what this differential should be for ships constructed on the Pacific coast, at a reasonable profit to the ship yards and the shipping interests, I feel that it would be very valuable information for this committee. Mr. SMITH. We would be very happy to analyze the situation. and to present a statement to you, sir, as to what it looks like. I simply happened to take one type of ship when the matter came up here last week, and analyzed it. Mr. WELCH. Would you be good enough to confer with the shipbuilding and shipping interests on the Pacific coast with reference to the possible differential? Mr. SMITH. I did before when we developed this 22 percent on the transportation charges; and I have talked it over at length. I have met with several groups on the west coast. I have met with the Chamber of Commerce of San Francisco and with groups all up and down the west coast, and have discussed this at length. I made to them the same statement I made to you this morning. Mr. WELCH. Then, it is clear that you do favor some differential making it possible to construct vessels on the Pacific coast? Mr. SMITH. If there is a differential indicated, and I think there is some. Mr. WELCH. That is agreed. Mr. SMITH. I think there is. It would not be if your labor rates happened to be higher on the east coast than there. That might overcome the transportation differential. But, assuming your labor rate is equal or higher, then, of course, that would have to be allowed to place them on an equality. I would be very glad to go into it, sir, and I will come to see you and go carefully over the figures and see what it looks like. Mr. WELCH. That is all. Mr. CULKIN. Mr. Smith, you said that you thought that the building of these wooden ships was due to some selfish interests. If we had built iron ships at that time or built steel ships-did we have the facilities at that time to build steel ships, or could they have been created as readily as the facilities for building the wooden ships? Mr. SMITH. Yes; they could have been created more quickly. As a matter of fact, the facilities, of course, were multiplied many times over for the construction of the steel ships. Mr. CULKIN. Well, now, just one more question. What would have been our position in the world trade subsequently to the World War if we had built steel ships? Mr. SMITH. If we had built steel ships? Mr. CULKIN. If we had built steel ships instead of wood ships, we would have had a large carrying fleet, would we not, that would have been Mr. SMITH (interposing). We would have had more steel ships. The CHAIRMAN. We had plenty of them, of course. Mr. SMITH. Yes, sir; we had an immense number. Mr. CULKIN. Wood and steel ships? Mr. SMITH. There are no wood ships. They are all gone, years ago. Mr. CULKIN. The ships that were built at that time were mostly of wood? Mr. SMITн. Oh, no; only a small percentage; and all of those ships in our fleet today are the steel ships. Mr. CULKIN. I am talking about the ships at the time of the construction during the World War-after we went into the World War. Mr. SMITH. There were 1,308 steel ships built and 589 wood ships; but those wood ships included everything down to tugs, little fellows. Mr. CULKIN. And the steel included the Henry Ford "arks"! Mr. SMITH. No; they did not include any of those. Those were naval vessels. Mr. CULKIN. Just one more question. Have you facilities in America, yard facilities, for building a 50,000-ton ship now, such a ship as the Berengaria, a ship of that size? Mr. SMITH. Yes; there are. Mr. CULKIN. You have yards that can build such ships? Mr. SMITH. Yes, sir. There are three yards in the United States that could build that ship with very little additional building way facilities. Mr. CULKIN. I saw a rather bitter criticism in one of these magazine articles that came to my desk the other day, in regard to the inability of our present naval architects to design a ship of that type. Is there anything in that? Mr. SMITH. No, sir. They are the equal of any in the world. Mr. SMITH. Yes, sir. Mr. SMITH. Or the Europa? Mr. SMITH. They have designed such a ship. Mr. CULKIN. I mean of that size, that tonnage. Mr. SMITH. Yes, sir; we had a 60,000-ton ship designed, a $30,000,000 ship designed, a superliner, in connection with United States Lines, designed by Theodore Ferris. Mr. CULKIN. She was not built? Mr. SMITH. She was not built. Mr. SIROVICH. What was her tonnage? Mr. SMITH. Around 60,000 tons. Mr. SIROVICH. For what line? Mr. SMITH. That was a part of the program for new construction by Chapman at the time that he took over the United States Lines. The ship was designed, and not built. The CHAIRMAN. Mr. Mansfield has asked me several times to recognize him. Mr. MANSFIELD. Speaking of the cost of assembling material for ship construction on the Pacific coast, steel, I presume, is by far the major item of material used in ship construction, is it not? Mr. SMITH. As far as tonnage is concerned, it is. Mr. MANSFIELD. As far as tonnage is concerned? Mr. SMITH. Yes. Mr. MANSFIELD. And that is produced principally in the Pittsburgh district, perhaps some of it at Erie or Birmingham? Mr. SMITH. Well, it might be produced at any one of the Bethlehem plants, at Lackawanna or Bethlehem, or at the United States Steel Corporation's plants in and around Pittsburgh, or at Gary, Ind., or Birmingham, Ala. Mr. MANSFIELD. And steel at all of the Atlantic coast points has the advantage in rail rates over the Pacific coast! Mr. SMITH. That is right. Mr. MANSFIELD. Now, then, as to the Gulf coast. We have practically no shipbuilding on the Gulf. I live down on the Gulf, and the freight rates from all of these points to New Orleans by water are less than the rail rates to Baltimore, the nearest Atlantic port? Mr. SMITH. That is right. Mr. MANSFIELD. That ought to be an argument for shipbuilding along the Gulf, at New Orleans especially, where they could assemble the materials there, perhaps, cheaper than they could even on the Atlantic seaboard. Mr. SMITH. Well, they have, as you know, very fine ship repairing facilities on the Gulf, at New Orleans, Galveston, and Mobile. |