distinct interest to the shipbuilder, and with your permission I would like to comment upon them as follows:

Recommendation 4, that the highest standards in proficiency of personnel should be developed and maintained.

That is recommended.

Recommendation 5, that the merchant marine should be operated and maintained so as to protect the interests of the shipper of American products in having adequate service and parity of rates to foreign markets.

That is recommended. And then paragraph 2 of recommendation 6 relates to the construction-loan fund. While, of course, the operator is the one that has to borrow the money to build the ships, it does seem to us, nevertheless, that a continuation of the construction-loan fund is desirable.

This is essentially an operating problem, as to whether a subsidy is or is not needed. Its determination, if needed, presents some complications because of the fact that competing lines are frequently of different nationalities and are in competition in some cases over parallel routes, and in other cases only over a part of prevailing routes. The problem as to the basis of determination of the subsidy would require careful study by the maritime authority in each case. From the standpoint of national defense it seems desirable that appropriations should be made to effectuate the Merchant Marine Naval Reserve Act of 1925 [reading]:

Recommendation 6-4: That the use of the construction-loan fund and insurance fund be continued and that its purpose be broadened to meet emergency needs and extraordinary situations.

The National Council strongly recommends the continuation of the construction loan fund as a means of financing private operators in the building of ships for foreign-trade services. It is believed that a discontinuance of this fund will be diastrous to American shipping in foreign trade and, while it recognizes the desirability of the investment of private capital in the building of ships, it is believed that this will be extremely difficult to obtain at the present time, and that a continuance of the policy of loans from the construction loan fund, as provided by existing law, is essential.

The CHAIRMAN. Do you think that the rate should still be as at present?

Mr. SMITH. I think so. For foreign trade I think it is established at 32 percent, not less than 32 percent.

And then recommendation 6, paragraph 2, relates to the operating subsidy. That is purely an operating problem, but it is similar to the determination of the differential for shipbuilding; and that would present its problems as to many services that would have to be studied. Now, as to whether that is needed or not is wholly a question for the owner, and that is not for us to comment upon [reading]:

Recommendation 7. That for the purpose of administering the above forms of Government aid and in order to coordinate all governmental functions in maritime affairs, it is recommended:

The National Council of American Shipbuilders recognizes that some form of maritime authority must be set up to administer the various problems involved, that they relate both to shipbuilding and to operation, and that the exact form of that body needs to be worked

out with a good deal of care. We are rather of the opinion that it should be an independent body; that the particular problems it can be very easily picked out from various problems involved in shipping; and that it can be assigned definite functions for which it should be solely responsible. As to the method of setting it up, we are not prepared for the moment to make direct recommendations, but I think it should be along the line of appointments by the President and confirmed by the Senate, and should be an independent semijudicial or quasijudicial body.

The CHAIRMAN. Why could not those services also be performed by the Federal maritime authority that is appointed by the President and confirmed by the Senate?

Mr. SMITH. Well, they can; but I think that the administrative and the semijudicial functions-it seems to me that those must be separated. They are of an entirely different character.

The CHAIRMAN. That is true, but these people are granting the subsidies and they are determining the aid that the Government is going to give; and it is not desirable that their accountants, through their examination of the books, the shipbuilders and of the operators, shall know whether there is a possibility of the abuses that have existed in the past, when the funds were really being diverted in many cases to other purposes?

Mr. SMITH. We have not given sufficient study to exactly how that can be set up at present; but we are doing so and we will be glad to make any direct recommendation we can on the subject. For the moment I am not prepared to say how that could best be set up. We recognize the necessity for it, the necessity of covering the particular points that you have just mentioned.

The CHAIRMAN. It is so absolutely necessary that, in my opinion, no bill will ever get through Congress that has not the strongest protection against the abuses of the past.

Mr. SMITH. We agree with that fully.

Mr. MANSFIELD. Mr. Chairman, do you not believe that it would be a hard matter to get a bill through Congress creating any additional administrative authorities or bureaus or boards?

The CHAIRMAN. Well, I do not know about that. It will be necessary to have some agency to do this work. The President certainly asked for it; or, rather, Mr. Eastman asked that there be this water division in the Interstate Commerce Commission. I think that we would rather keep the mercantile marine away from the Interstate Commerce Commission; the further away the better it will be; but that is not a definite opinion. That is merely an expression of the present thought; and it is subject to change, as are all of the opinions that are expressed by members of this committee here. It will certainly be necessary that there be some protection granted. That was the suggestion, as you will recall, Mr. Mansfield, that there be three men on the Interstate Commerce Commission, to be known as the "water- and pipe-line division." There would be no more expense involved in having such a body in the Department of Commerce than in the Interstate Commerce Commission.

Mr. SMITH. The question of naval reserve: We are for it and no comment except the fact that there is an existing law. It seemed to us that there should be some appropriation to carry out that act

of 1915. We think it might be very desirable. I think that is essentially a problem to be worked out by the operators.

Mr. MANSFIELD. Mr. Smith, does not the Navy Department now operate transport ships of their own?

The CHAIRMAN. I think so. Do they?

Mr. SMITH. Yes, sir. They are still operating some transports; at least I am very sure they are.

Mr. MANSFIELD. Those ships are Government owned?

Mr. SMITH. Those ships are Government-owned. And the War Department was likewise operating two or three transports, or it was the last check that was made by our group.

Mr. Chairman, that completes the statement that I had.
The CHAIRMAN. Are there any questions?

Mr. WELCH. Mr. Chairman, in order that there may be no misunderstanding with reference to my statement and the statement of the witness this morning concerning the preferential interest rate in favor of the Pacific coast shipyards, may I make a brief statement? The CHAIRMAN. I would be very glad to have you do so.

Mr. WELCH. I have introduced a bill (H. R. 2904) providing that, notwithstanding the provision of subsection (d) of section 11 of the Merchant Marine Act of June 5, 1920, as amended, the rate of interest for construction loans authorized by such section, made for the purpose of aiding in the construction of vessels on the Pacific coast during any period in which any such vessel is being constructed or is operated exclusively coastwise on the Pacific coast and/or intercoastal, and/or between the United States Pacific coast ports and foreign ports, the rate of interest may be not less than 3 percent per annum; that such lower rate of interest is necessary for the maintenance of an adequate merchant marine and for the national defense; and the person desiring such loan shall contract that such vessel, upon completion, shall be operated exclusively in such trade or between such ports.

Mr. SMITH. That is a quotation from what?

Mr. WELCH. From my bill which is now pending before this committee.

Mr. SMITH. From a bill pending before the committee?

Mr. WELCH. Yes, sir; H. R. 2904.

Mr. SMITH. Yes, sir. I had a copy, too, of that bill.

Mr. WELCH. You have a copy of my bill?

Mr. SMITH. Yes, sir.

Mr. WELCH. I was not aware of that; but it is well for the record, because there is a possibility of a misunderstanding as to the extent we are expecting this committee and the Congress to go to assist in the construction, or providing for the construction of vessels on the Pacific coast.

Mr. SMITH. Yes.

The CHAIRMAN. Are there any other questions?

Mr. MANSFIELD. Mr. Chairman, I would like to be informed on one subject that may have been developed in the other hearings, but not while I was present.

We have heard a good deal about the relative status of our submarines as compared with those of other countries. I have not heard

anything said about the relative status of tankers. Can you tell us what the standing of the United States is in tanker ships?

Mr. SMITH. In the tanker ships; yes, sir. I think I have it, sir, in this. Do you mean the tonnage of tank ships?

Mr. MANSFIELD. Yes, sir; of tank ships; the number of ships and the tonnage. They are all comparatively modern, are they not; the tank ships?

Mr. SMITH. No, sir. Our tankers-there are a few that have been built since 1928, but prior to that time the tankers are fully 15 years old: all those built in the United States.

The tanker at the present time, with the variety of fuels it carries, deteriorates somewhat more rapidly than a cargo ship, and its life is considered to be somewhat less. Just exactly how much—well, I have a statement here as to tankers that will become obsolete in each year, starting in 1934, on a 20-year basis, but not on a shorter life that they are assumed to have. In 1934 it was figured out that there would be 169,000 gross tons, or 7 percent of our total tonnage, which would become obsolete in 1934.

As I have the figures here now, the gross tonnage of tankers of the United States is 2,400,000 gross tons. That is what you might call the "sea-going tankers ", of 2,000 tons or over.

Mr. MANSFIELD. Can you tell us what tankers the other countries have?

Mr. SMITH. Great Britain has 2,440,000 tons; very little more. Mr. MANSFIELD. Practically the same.

Mr. SMITH. Japan has 111,000 tons; France has 240,000 tons; Italy has 309,000 tons; the Netherlands has 313,000 tons; Norway has 1,521,000 tons. I will explain that in a moment. Germany has 121,000 tons and Sweden has 130,000 tons.

Mr. MANSFIELD. All of them are quite small except the United States and Great Britain.

Mr. SMITH. Well, except Norway, which has a million and a half tons, and they are in the chartering trade.

Mr. MANSFIELD. Yes.

Mr. SMITH. They are not used for their own purposes.

Mr. MANSFIELD. That is Norway?

Mr. SMITH. That is Norway; yes, sir.

Mr. MANSFIELD. Now, in the event of war, the tanker would be a very useful ship, would it not?

Mr. SMITH. An extremely important ship; yes, sir.

Mr. MANSFIELD. Yes; I thought so.

Mr. SMITH. A very important ship.

Mr. MANSFIELD. Do any of our ships burn coal now? Not many of them, I judge.

Mr. SMITH. Some of them do. The percentage of coal burners I have not the figures available. I can very easily give them to you. If you would like to have them, I can give them to you. The larger percentage of them are oil burners. All the more recent ones are oil burners.

Mr. MANSFIELD. Are they powered by Diesel engines?

Mr. SMITH. There are comparatively few Diesel engines in ships built in the United States, except for 25 ships for which a special

appropriation was made by Congress sometime ago, of wartime-built ships, to be converted to Diesel drive. There are a few ocean-going ships outside of that. But the percentage of the more recent construction of Diesel-equipped ships is very small in the United States, as compared with that abroad.

The CHAIRMAN. What do you think is the reason for that?
Mr. SMITH. It is a little difficult to explain why it is so.

The CHAIRMAN. When we had the Dieselization program before us representations were made as to the economies, the saving of time, and the quickness of turn around, the increase of cargo space, and various other factors.

Mr. SMITH. I have heard, sir, that the principal reason is the fact that the ships that have been built are of a combination type and are of a type in which other nations have installed to a considerable extent steam-driven machinery. If we had built a large number of cargo ships, I anticipate that we would have had a considerable percentage of them with Diesel drive. That is only conjecture, but it has always seemed to me that that is so. Of world construction something over 50 percent from year to year is Diesel drive, Diesel machinery.

Mr. Mansfield, in answering your question about coal burning and oil burning, I find that we have the figures here for all types of ships. Coal burning, about 735,000 tons; oil burning, about 7,600,000 tons. That is a very large percentage in favor of oil-burning ships.

The Chairman. Are there any further questions, gentlemen?
I thank you very much, Mr. Smith.

STATEMENT OF HON. CLEVELAND A. NEWTON, ST. LOUIS, MO.

The CHAIRMAN. Mr. Newton, do you want to go on now?
Mr. NEWTON. I would like to.

The CHAIRMAN. Very well. We will be glad to hear you.

Mr. NEWTON. Mr. Chairman, my name is Cleveland Newton. I appear before the committee on behalf of the Mississippi Valley Association, an organization comprised of representatives of agriculture, commerce, and industry in 23 States in the valley.

The agricultural, industrial, and commercial groups of our section are interested in an adequate merchant marine and they are especially concerned about dependable ocean service from Gulf ports to foreign ports, which when operated in conjunction with the rail and water service of the valley will enable the products of our land-locked section to compete, in foreign markets, with the products of the rest of the world.

The Mississippi Valley Association, in recent years, has supported an adequate merchant marine. At its convention held in St. Louis last November it adopted the following resolution:

A United States merchant marine is essential to the maintenance and expansion of the foreign commerce of the United States and to our national security. Government aid is necessary for its continuance and growth. We are not concerned with the manner in which the aid is given, but strongly urge that no change in the present form be made, until such time as a satisfactory substitute shall be offered.

Shipping is an industry that requires long-range" planning. The ship lines aided must have such assurance of continuity of aid that essential