Mr. HAIGHT. Yes.

The CHAIRMAN. So that we have been going down in respect of the age of our ships.

Mr. HAIGHT. Yes.

Mr. SIROVICH. We stand last in respect of new ships.

Mr. HAIGHT. Because, when we started, by virtue of our World War construction, we had a tremendous surplus of construction, while everybody in Europe had been dropping back in their merchant marine.

Mr. SIROVICH. When the war started we were in such a pitiable plight that our agricultural products rotted in the harvest field; and we had to start the plan of buy a bale of cotton, because we had no American ships in which to transport the products of our farms.

Mr. HAIGHT. And if we are wise, we never again will see the American merchant marine in the state in which it was when the World War began.

Mr. SIROVICH. Thank the Lord for that.

The CHAIRMAN. That is the purpose of this bill.
Mr. HAIGHT. Yes, sir.

(Recess, 1 p. m. until 2:30 p. m.)

The CHAIRMAN. The committee will come to order.
All right, Mr. Haight.

Mr. HAIGHT. Mr. Chairman, I misquoted Mr. Saugstad in my testimony this morning, when I stated that he had testified that world trade had dropped 66 percent in volume and 25 percent in value. I did not mean to say that. Mr. Saugstad called my attention to the fact that his testimony actually was that world trade had dropped 66 percent in value and 25 percent in volume. I am sorry that I just transposed the figures.

My understanding and, I think, the understanding of many people, was that this would be a subsidy bill; and we were all a little surprised to find the regulatory provisions added to it, fixing rates in foreign trade.

I think that it will be useful to consider and I did not do it systematically this morning-the existing law and to compare that with the law which we shall have if this bill passes.

The existing law, of course, is found in the Shipping Act of 1916, the Maritime Act of 1920, and the Intercoastal Act of 1933.

Under the existing law only common carriers are subjected to regulation; and tramp steamers are exempted entirely. Intercoastal shippers are protected from discrimination, carriers are protected from each other, unfair competition is prohibited. Thus, the use of a fighting ship is prohibited and the granting of deferred rebates. The CHAIRMAN. Why should we not have a fighting ship to pro

tect our

Mr. HAIGHT (interposing). I am only saying that under the law as it stands today and as it has stood since 1916, the use of a fighting ship was absolutely forbidden. That was supposed when we passed the law of 1916 not to be a fair method of competition.

The CHAIRMAN. And that is the recommendation of the Department of Commerce.

Mr. HAIGHT. I am only comparing the present law with what the new law will be.

Under the proposed law deferred rebates will be legalized.

The Shipping Board Bureau today has no power of fixing either maximum or minimum rates in foreign commerce. If the bill passes, the provisions of the Shipping Act will remain unrepealed. They are transferred to the Maritime authority. The Authority is given the right to fix maximum and minimum rates in foreign trades, both on business incoming and outgoing.

The tramp ships, which are now exempt, will be included. Deferred rebates will be allowed, but to conference members only; while the granting of deferred rebates would still be criminal for other carriers.

And fighting ships would be allowed by American operators and could be supported by Government money, but it would still be criminal to employ fighting ships if foreign owners undertook to do so.

As I outlined this morning, the legal objections are, as I see them, that the passage of the bill would violate all of our treaties and would be against international law, as it grants the freedom of the seas and grants free access.

I will not enlarge on that at this time. I would like, in the brief which I shall submit, to quote the treaties and to quote the authorities.

The more important legal objection, as I see it, is that, if we pass a law of this kind, we are barred from any right to protest if a foreign nation passes the same kind of statute. But, if there were no treaties at all, if there were no such thing as international law, the principles applicable to the situation-I still should feel that these regulatory powers would be directly opposed to the interests of the American merchant marine.

I assume that the purpose of these powers is to raise rates for the benefit of American operators. Of course the foreign lines, which are members of the conferences, will have the same benefitsto raise the rates and to stop foreign competitors from carrying cargoes at lower rates. But no one country, acting alone, can possibly control the world level of freight rates, which have today been reduced to so low a point because of the surplus of tonnage.

If we raise our freight rates on cargo leaving the United States, say, to South America, while the rates from Europe remain at the present low world level, it simply means that Europe will sell her goods to South America and our farmers and our manufacturers will lose the sale of their goods; and, necessarily, the ships which today are carrying those goods will lose that transportation, since those goods will no longer be transported from America.

That is not a fanciful argument. I have seen it worked out in actual practice.

Not many years ago the Royal Mail Line made a very fine contract with South Africa for the transportation of all their cargo. It looked like a splendid contract for the steamship companies allied with the Royal Mail. Lord Kylsant was very proud of his work. But not long after the making of that contract South Africa wanted to buy a large number of locomotives. They sent the specifications to the various manufacturers in Great Britain, which had in

the past built their locomotives, and they sent one set of specifications to the Baldwin Locomotive Works. The Baldwin Locomotive Works applied to a steamship owner who had ships specifically designed to carry locomotives, fully erected, ready to run, and asked that owner if he could quote a freight rate which would make it possible for the Baldwin Locomotive Works to compete with Great Britain, to South Africa. He said he could. The Baldwin Locomotive Works bid on those locomotives and got the contract, while the Royal Mail stood with a very high freight rate from Great Britain to South Africa, which freight rate the British builders had to include in their cost delivered. The Baldwin Locomotive Works got the contract and Great Britain lost both the manufacture and sale and the transportation. That happened. It is bound to happen, if you raise your freight rate above the normal world levels.

The mere fact that our freight rates will be fixed by the maritime authorities, while exporters in other countries have access to the open freight market, will again enable them to outbid us.

And you will not have forgotten, sir, that in the declaration of policy, which is title I of this bill, on page 2, line 3, it is provided that one of our real purposes is to have a merchant marine owned and operated under the United States flag, by citizens of the United States, and so operated and regulated as to secure to the shipper of American products adequate service and parity of rates to foreign markets.

If, in an effort to help American carriers, we deprive our shippers of that parity, we are going to destroy our export trade and our transportation business to other countries, that, as I suggested this morning, could also fix freight rates different from ours, and, as Mr. Lehlbach pointed out, if they did so, it would block all transportation entirely; and if the other countries fixed their rates to benefit their exporters, not their carriers, then we shall be hopelessly disadvantaged.

Such countries as Brazil and South American countries in general, Russia, Australia they do not have much shipping. They are most anxious to have their goods carried at a low freight rate, so as to compete in foreign countries. They would use our ships and the other foreign ships to get a low freight rate to beat our exporters in the foreign markets. We could not stop them, after we have destroyed the basis on which we can now stop them, and that basis is the treaties barring them from doing everything of that kind, because they must give us free access.

Likewise, deferred rebates would, of course, destroy independent carriers, creating a monopoly for the foreign lines. And, after that was done, the American shippers could not draw from the world pool of tramp tonnage, which today comprises a very large total of the tonnage of the world-tonnage which is employed not on regular line service. It goes anywhere that cargo at the time is movingseasonal crops or to meet special circumstances. Our cotton crop has always been moved on tramp tonnage, or a large part of it. Our grain crop has been moved by tramp tonnage. If you have a million bales of cotton to move in 60 days, liners cannot possibly handle the situation.

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And special emergencies have often arisen in this country which have prompted us to call upon the world pool of tramp tonnage. Thus when President Roosevelt sent our battle fleet around the world, the fuel which those ships had to have was carried along with the fleet in Scandinavian tramp steamers.

The CHAIRMAN. Yes; we had the disgraceful spectacle of having to resort to foreign ships to form a part of that naval trip.

Mr. HAIGHT. Yes; but if we had not been able to draw on that Scandinavian tramp tonnage at that time, we could not have sent our fleet around the world.

Similarly, during the World War we fed Belgium by these foreign tramp steamers; we shipped our exports to the Allies; and later, when we went in the war, we shipped supplies to our own men in foreign tramp tonnage.

The CHAIRMAN. I do not think that is any argument that we ought to help these foreign tramp ships. I think the argument is the other way around, that we ought to build up an American merchant marine to care for this very service.

Mr. HAIGHT. Do we want to disqualify ourselves to call upon that world tramp pool when we need it?

The CHAIRMAN. Yes; by having an adequate supply at home. Mr. HAIGHT. Yes; but we have not that supply and there have been many occasions when we needed these tramp ships very much. You will remember that, after the World War, when we had our big coal strike, New England was nearly paralyzed by that coal strike, and we brought coal to our New England factories at the time when it was desperately needed, from the mines in Wales, in foreign tramp steamers.

The CHAIRMAN. Didn't we bring that coal over in the ships of the Shipping Board, the fleet that it built up during the war?

Mr. HAIGHT. I think you will find most of the cargo came to the New England ports in foreign tramp tonnage.

The CHAIRMAN. If it did, that was a disgrace. The Shipping Board ought to have used the laid-up fleet. But that is not my information. I think that the larger part of that coal was brought in the ships of the Shipping Board fleet.

Mr. HAIGHT. I will verify that and will state it in my brief. The CHAIRMAN. Yes. In the shipping of grain abroad we used the laid-up fleet.

Mr. HAIGHT. We called upon them upon one occasion.

The CHAIRMAN. And we saved the farmers about $600,000,000. Mr. HAIGHT. We called upon the laid-up ships at one time. But I will look up the facts as to the coal brought in during the strike.

To sum the situation up, as I say, the proposed regulations, if applied today, would really nullify the benefit that we are trying to confer upon the merchant marine by the subsidy.

The present low freight rates are certainly due to the world conditions. High rates on paper will not benefit us if, when we apply those rates, our goods stop moving because our competitors get the business.

I submit that the differentials in the cost of operation and the cost of construction should be met openly by the use of subsidies,

which this bill is intended to grant; and that we should not penalize our exporters and we should not bar them from getting the cheapest means of transportation that can be had; that we should put our American exporters

The CHAIRMAN (interposing). Don't you think that the American exporters ought to develop a little patriotism and patronize American ships more than that?

Mr. HAIGHT. I think, sir, that much of our cargo which today is hanging by the eyelids

The CHAIRMAN (interposing). I would like, if I were able to constitutionally, to put a provision in here penalizing them for patronizing foreign ships when they could patronize American ships.

Mr. HAIGHT. If the freight rate on a foreign tramp steamer is low enough to enable the American exporter to sell at a profit abroad, whereas, if, under the conference rate he cannot sell at all except at a loss, who do you think should make good that loss; should it be the Government or should it be the American exporter, by going into bankruptcy?

The CHAIRMAN. I said if he could get equal rates on our own boats. I do not think that they patronize them when they can get equal

rates.

Mr. HAIGHT. I do not think you can ever get on an American line anything like the rate the foreign tramp steamer furnishes. In the tramp steamer you have got a ship which costs a quarter as much to build and which makes 10 knots, not 16 knots, and which can make a profit by running at a rate much lower than the fast ship can possibly operate at. If they furnish transportation at a cheap rate, which enables the American exporter to sell abroad, he cannot be asked to deliberately sell at a loss for the mere purpose of supporting the American Merchant Marine. The cargo just won't move that way.

The one solution that I see for a world-wide condition is a worldwide agreement.

I hope that our subsidy bill will be confined to a subsidy; that we will grant American exporters everything they need to put them on an absolutely competitive equality, under all circumstances, with the foreign shippers with which they have to compete; but that we will not undertake to tell foreign steamship companies what prices they must charge.

Mr. SIROVICH. Did you read this bill through?

Mr. HAIGHT. I think I know this bill pretty thoroughly.

Mr. SIROVICH. There is a third provision in this bill for what we call opening the markets of the world to our exportable products. Mr. HAIGHT. I would not say that I quite understand how that is going to work; but I think I know the provision pretty well. Mr. SIROVICH. I am quite sure that we could work it and meet the foreign competition afforded through the tramp steamers of the world, because, if we are going to give a subsidy to our own merchant marine, to go into the foreign markets, that never have been opened to our American exporters, and the Government is going to defray the losses, why should not we, on the same principle, now, give to the tramp steamers the benefit of a subsidy that will put them on a parity with the tramp steamers of the world?