services can be not only maintained, but further developed as the national interests require.

The best interests of the Middle West require the continued control of United States steamship lines, operating from Gulf ports, by companies which have the support, financial and otherwise, of the territory which they serve.

The Panama Canal tremendously increased the strength of our national defense. The low-cost water service which it provided opened the markets of the West coast to the products of the factories of our eastern seaboard. Likewise, it made the markets of New England and the East coast accessible to the raw materials of the Far West. On the other hand, it made it impossible for the raw materials and the agricultural and manufactured products of the great interior to compete on either seaboard. Our section became land-locked. Our industries ceased to develop and many of them moved away.

This situation was not calculated to make our people marineminded. They had been taxed to build the Panama Canal and they had seen its disastrous effect upon their section. They could not enthuse about being further taxed for subsidies to build a merchant marine which would develop industry and concentrate population around the rim of the country while further depressing the great agricultural interior.

The development of sentiment, in the Mississippi Valley, in recent years, favorable to subsidizing a merchant marine has been due to the effort of Congress to create conditions which would enable that section to use a merchant marine. The improvement of channels in the Mississippi, the Missouri, the Illinois, and the Ohio Rivers is providing low-cost water service for the products of the interior to the Gulf and out to the sea. The prospect of this service is again encouraging the development of industry in the midst of agriculture and it is inspiring hope in the breast of the farmer that his products may again compete in the markets of the world.

The people of our section have come to realize that there is little value in low-cost water service for their products to the seashore unless they have available, from our ports to the foreign markets, modern, dependable, efficient, up-to-date ocean service, and they believe that their interests will be best conserved if that service is conducted under the American flag. They believe that foreign-flag ships will be interested in the commerce of their own countries, and that an efficient American merchant marine will promote American

commerce.

Another act on the part of Congress which promoted Governmentaid sentiment in the Middle West was that provision in the Merchant Marine Act of 1920 which provided that

Preference, in the sale or assignment of vessels for operation on steamship lines shall be given to persons who are citizens of the United States and who have the support, financial and otherwise, of the domestic communities primarily interested in such lines.

This mandate was reaffirmed in the Merchant Marine Act of 1928. We believe that in that provision Congress established a wise precedent. Our people feel that it is bad public policy for an ocean line, operating out of one section, to be owned by persons primarily interested in a competing section. An ocean line operating from one

section will be interested in promoting commerce and industry in that section. From the maintenance of that policy a wholesale competition will result which will produce a superíor service for the entire country.

The policy established by Congress for the disposal of Shipping Board ships has done much to promote marine sentiment in the Middle West, and nothing could do more to create a willingness on the part of the interior to share the burden of Government aid essential to a merchant marine than an extension of that policy to the disposal of Government aid to merchant lines, whether it be in the form of mail pay or direct subsidies. If you would have the interior enthuse about Government aid for the merchant marine, then you must make American-flag ships available for the use of commerce, industry, and agriculture in the hinterland.

We in the interior are becoming more and more convinced that an American Merchant Marine is essential, both for our national defense and for the promotion of our foreign commerce. We are further convinced that if American ships are to compete on the seas with foreign-flag ships we must give them Government aid sufficient to enable them to overcome the handicaps under which they must labor.

We agree with the President in his recent subsidy message. When he referred to the amount of the subsidy he said:

It should cover, first, the difference in the cost of building ships; second, the difference in the cost of operating ships; and, finally, it should take into consideration the liberal subsidies that many foreign governments provide for their shipping.

Unless we meet this problem courageously, frankly, and honestly and give to our merchant lines Government aid sufficient to meet the advantages which their foreign competitors enjoy our merchant fleet will be driven from the seas, our national defense will be impaired, and our foreign commerce will suffer.

Why are we so derelict about sustaining our merchant marine? We have supported all other vehicles of commerce designed for the common good. The records of the War Department show that we have expended $213,203,000 to improve the Great Lakes. We have expended $672,692,000 to improve our seacoast harbors. We expended $598,700,000 to improve our inland rivers. We expended $539,200,000 to build the Panama Canal. We have expended $2,150,000,000 since 1916 for the building of roads and highways. We paid a subsidy on second-class mail last year amounting to $77,757,000, and we paid a subsidy last year upon parcels post amounting to $19,057,000.

The CHAIRMAN. That was about three times the subsidy we were paying for American ships, or more?

Mr. NEWTON. Surely; three times as much as we are asking for foreign commerce.

The Interstate Commerce Commission has valued the land-grant land and other subsidies to the railroads at $914,939,000, and the Land Office records show that the railroads have patented 17,294,736 acres of land-grant lands during the past 20 years.

Mr. CULKIN. What is the value of the land there? Have you got that value?

Mr. NEWTON. The Interstate Commerce Commission, in its valuation of railroad properties, fixed the value of the land sold at $374,400,000, and the value of land on hand at $387,970,000. These figures do not include $149,000,000 other subsidies reported by the Interstate Commerce Commission.

Thus we have subsidized our domestic commerce to the extent of billions of dollars, and now we falter and argue and quibble about granting an annual subsidy of $27,000,000 to sustain a merchant marine for the promotion of our foreign commerce, when we know full well that unless an adequate Federal subsidy is granted our merchant fleet will be destroyed.

Mr. MANSFIELD. Mr. Chairman, may I be permitted a question? The CHAIRMAN. Yes.

Mr. MANSFIELDY In the list of subsidies you omitted one item of $102,000,000 to the newspapers and magazines in the Mail Service. Mr. NEWTON. On the second-class mail, which includes newspapers and magazines, we paid a subsidy last year amounting to $77,757,000; and on the fourth class, or parcel post, we paid a subsidy amounting to $19,057,000.

The CHAIRMAN. Is that over and above the expense of actually carrying them?

Mr. NEWTON. Yes. We gave them that much free, and we were not compelled to do that to meet competition, as in the case of the merchant marine which operates on the seas. We must do one of two things; we must either give Government aid sufficient to overcome the handicaps they meet, or else we must abandon the merchant marine altogether; and we ought to have a real merchant marine in this country.

During the past 20 years we have expended $11,144,878,000 upon our Navy. We are now appropriating $488,133,000 for naval construction and maintenance during the next fiscal year.

I might say that I have been trying to check up to find out how much we paid foreign-flag ships during the World War to haul our soldiers and supplies to Europe.

Mr. CULKIN. To fight for them?

Mr. NEWTON. Yes. It seems that it has not been computed. I have what we paid to Great Britain. We paid to Great Britain something in excess of $109,000,000. And then we paid a tremendous sum to other nations.

A naval fleet, without auxiliary ships to carry its munitions and supplies and to transport soldiers, is helpless. Auxiliary ships are just as essential as battleships. If we are to be secure, we must have swift, modern, up-to-date merchant ships to promote our commerce in times of peace and aid our military and naval forces in times of war. To have such a fleet we must subsidize. That subsidy must be adequate, uniform in character, and equitably and fairly distributed among the lines operating from the various areas and sections of the country.

Theodore Roosevelt sent our fleet around the world. To the uninformed masses that was a marvelous demonstration of our naval strength. Witnesses who stood at Old Point Comfort to welcome the battle fleet home were thrilled at the wonderful display of our naval power. But they grew faint and sick when the fleet had passed and they saw the auxiliary ships bringing up the rear, carrying the

fuel and supplies, and found all of them flying foreign flags. Those who witnessed that spectacle realized then what the rest of the world knew before, that if a European war had broken out while our fleet was in the Orient, those foreign-flag auxiliaries would have been called to their colors and our battleships could not have come home until we built merchant ships to assist them.

Mr. CULKIN. And at the time of the World War it would also have been avoided?

Mr. NEWTON. Yes. Here is another point that appeals to us. When the World War came our merchant fleet, which once carried 75 percent of our foreign commerce, had almost disappeared. Europe knew we were unprepared. If our merchant ships had been adequate to support our Navy and transport our soldiers, Germany would probably never have provoked us to enter the war and the misery and loss of life of that terrible conflict might have been avoided.

When the World War came we rushed in and expended more than $3,000,000,000 building ships in such haste and upon designs so hurriedly drawn that most of them are now of little value as commerce carriers. Three percent interest upon that vast expenditure amounts to more than $90,000,000 annually. If we had given an annual subsidy of one-third of that amount for a reasonable time prior to the war, we would have had an adequate up-to-date merchant marine, our Navy would have had auxiliaries, our Army would have had transports, $3,000,000,000 would have been saved, and we might have avoided the conflict. It seems time that we should begin learning from experience.

The CHAIRMAN. Well, Mr. Newton, I was just trying to get a report, which seems to have been misplaced for the moment, of the select committee which was appointed at the time that you were a Member of Congress. You will recall that the chairman of that subcommittee was the Honorable Wallace H. White, now State Senator from Maine, and other members were Hon. Henry Allen Cooper, former Member of Congress from Wisconsin; Hon. Frederick R. Lehlbach, a Member of Congress at the present time; Hon. Ewin L. Davis, at the present time Chairman of the Federal Trade Commission; Hon. Tom Connally, of Texas, now a Member of the Senate; Hon. William B. Bankhead, at the present time the majority leader of the House; and Mr. Lineberger, of California, I believe. Mr. NEWTON. Yes; former Congressman Lineberger was a member of that subcommittee.

The CHAIRMAN. And that the majority report was written by Hon. Ewin L. Davis, from the State of Tennessee.

You will recall that it was pointed out in that report that the ownership of this merchant marine, of these ships that were built as the result of the expenditure of 32 billion dollars, had in 1 year saved to the farmers of the Middle West and to the cotton people of the South, $650,000,000 by reason of the possession of those ships and the ability to throw them into the commerce of the world at the time, as I recall, of the British coal strike, when the foreign-carrier ships were taken off the seas.

So that it has been demonstrated and shown by congressional report that, in that one year alone, the American merchant marine was worth to the farmers of this country $650,000,000.

I think it was also shown in that report, or, certainly, there was other evidence before that committee, which showed quite clearly that the ownership of an American merchant marine has enabled us to participate in conferences, in conference agreements, and to hold the freight rates down on the carrying of our commerce; and that, if it had not been for the presence of an American merchant marine and our participation in those conferences, we would have had to pay considerably greater freight rates than we did pay for carrying our goods to the markets of the world.

I think it was also shown that we had saved a considerable part of the freight that would otherwise have gone to the other nations of the world. So that up to this time the ownership of that inadequate merchant marine that we had has demonstrated its value to the American people.

Mr. NEWTON. I think that one of the unfortunate things is that our people of the interior in the past have not realized that they were really interested in the merchant marine.

I remember that in 1920, when I was in Congress and the subsidy question came up, I was one of the two in that whole valley that voted in favor of the subsidy. They are beginning to take an interest in the merchant marine. One of our troubles is that the interior has never had enough interest for their members to want to get on the merchant marine committee. The interior had a feeling that it was only to the advantage of the rim of the country, to the towns on the seacoast.

Now, our association has come around to where they have changed their position. We still have people who do not appreciate the importance of a merchant marine. But the development of the inland water lines has had a great influence. And then, the strongest thing that has molded sentiment out in the valley has been the disposition of Congress to have the lines operated from that section owned in that section, so they felt that if the local section was interested in the ships, they would make joint rates; and hence there has been a wholesome growth in interest; and I can say to the committee that we are very hopeful that, with that sentiment started, we may soon see the interior of this country willing to bear its full share of the subsidy, which now seems a paltry sum, necessary to develop our foreign commerce, while we are spending billions of dollars to develop our domestic commerce.

The CHAIRMAN. Don't you think it is an unwise thing, with the present condition of sentiment throughout the world and the present attitude toward the United States, and the present preferences that exist in favor of the other nations, to entrust our goods entirely to the carriers of other nations?

Mr. NEWTON. I have had enough concrete examples from people in whom I have confidence, enough incidents related to me, to realize that on foreign-flag ships they often find it very convenient to promote the trade of their nationals; and I think that if we are to promote our own trade we must have a merchant marine of Americanflag ships, and we should have merchant ships even if we had no

commerce.

We have spent $11,000,000,000-every dollar of which I think was necessary to build up a Navy. You cannot operate that Navy successfully without merchant ships to serve as auxiliaries. We would