Mr. WHITE. That is correct, I think. As a matter of fact, if we had not had relatively low ocean rates during the present period, it is doubtful whether we could have kept as much of the market as we have; because it does not take very much to cause a shift from the consumption of cotton of one growth to the consumption of cotton of another growth; as a matter of fact, a few cents a bale is enough to determine which growth foreign mills will consume.

Now, we have no objections to the main features of this bill. We would like to have an American merchant marine. It has been very, very useful in times past. But there are certain provisions of the bill we do have objections to. Those are to section 701, the main part of the section, not the proviso, insofar as it would place the regulation of rates in the same body that determines the subsidies or has an interest in the ownership of the vessels in any way. I observe you have a provision in there preventing the Maritime Authority or any appointee from having any interest in the vessels or in their operation, and we think that is an excellent provision; but our experience with the Shipping Board has been it concentrates rather more on the ownership features of it, than the service which is to be supplied to the shippers.

The CHAIRMAN. Well the old Shipping Board got to be swamped with administrative detail, and that is why we are trying to keep the functions under this bill quasi-judicial and regulatory.

Mr. WHITE. We feel that anybody which regulates rates should have no interest in the maintenance or operation of vessels; because just inevitably the ownership conflicts with the rate regulation in their administration.

The CHAIRMAN. You want to put them in the Interstate Commerce Commission?

Mr. WHITE. Well, I think probably a separate body, with particu lar knowledge of shipping conditions, is better than the Interstate Commerce Commission.

The CHAIRMAN. It would be right hard to create too many bodies, you know.

Mr. WHITE. Yes; that is quite true. If we had the choice of selecting the Interstate Commerce Commission or a body which is interested in running the vessels, I think we would take the Interstate Commerce Commission."

The CHAIRMAN. These men are supposed to be high-class men, in no way connected with any of the ships. The only determination they make is the differential, and they ought to be just as fair, or capable of being just as fair in regulatory matters as they are on rate differentials.

Mr. WHITE. Do not you think, though, that the pressure would be on them to keep that differential as narrow as possible; because that means providing funds and that pressure would make them try to keep those rates up a little in order to limit that differential?

The CHAIRMAN. It is hoped they would be men above pressure. Mr. WHITE. I was not speaking of pressure in a personal or political sense, but simply from trying to limit expenditures; which, after all, is something we cannot condemn in a Government official.

Our more particular objections, however, are to the provisos, that is, to proviso 1 and proviso 3, as they are in the bill.

The CHAIRMAN. That is what I supposed, because my attention has been drawn to that.

Mr. WHITE. In the latest committee print-I believe it is no. 3we also object to the provisions of section 1006.

The CHAIRMAN. Rebates?

Mr. WHITE. Yes; the deferred rebate provision. Our opinion on this

The CHAIRMAN. In other words, you think that forces them to conference lines, rather than independents?

Mr. WHITE. We know it will place the small shipper at the absolute mercy of the conference line, because the small shipper, shipping a few hundred bales, cannot possibly escape the deferred rebate system. He could not escape from the contract system until the conference lines recognized, in order to keep the shipments moving for him at all, they had to keep down to the other rates. So that there is a question of discrimination between the small shipper and the large shipper in that deferred rebate system. Also, we know perfectly well that it is the best system in the world to drive the tramp vessel entirely out of operation. It cannot do it so far as one or two large shippers are concerned, but there are not more than two or three who can possibly charter vessels.

Now our objection to placing all control in conference lines, which is what we believe would be done, and to the fixation of minimum rates, is based on past history so far as cotton is concerned. You know cotton constitutes the principal export cargo from Gulf and South Atlantic ports and Shipping Board conference operators in the past have done everything in their power to prevent any outsider participating in its carriage. Just after the war, if any independent operator brought a tramp vessel into port, the conference would cut the rate so low he could not fill his steamer and then gradually advance the rates. This was permitted by the Shipping Board primarily because they had an ownership interest in the American merchant marine. They were able to control the situation for a number of years. They would run into tramp competition periodically, but that was simply because there was a certain class of business they did not have any interest in, such as sulphur and other deadweight cargo, and this deadweight cargo would attract tramps and they would fill up with cotton and other attractive cargo and disrupt rates for a time. So the conferences conceived the idea they would take all of the cargo that was attracting tramps at a very cheap rate and put up rates on cotton and other cargo and make them pay the bill.

But this did not work out so well; so, in August 1930, they conceived the idea of inducing all of the cotton shippers to sign a contract to ship all their cotton with conference lines for 1 year, in return for a guaranteed rate for 1 year. Any one refusing to sign was subject to very heavy penalties on cotton he did ship, amounting to as much as 100 percent. The rate named was the going rate at the time and, while not high, it was certainly not cheap. Of course this is the reverse, you might say, of the deferred rebate system, but under a contract in which they agree to give you a low rate in consideration of shipping only on the conference lines.

Most cotton exporters signed these contracts; but, when the conference proposed to raise rates the following year and when firm

offers more than 10 cents below the previous rates were available, shippers refused to sign these contracts and this scheme of eliminating tramp competition failed.

I might say that prior to this time practically every cotton export firm did everything in its power to ship as much of its cotton as it could by American lines. I know one large firm had an absolute rule to ship half of its cotton by American lines, although as you know only about 30 percent of the export commerce and 30 percent of the cotton is carried in American vessels. But after their experience with the way the conference lines tried to hold the rates up, out of line with the world charter market, they abandoned that practice.

Mr. Chairman, I would like to insert in the record at this place a table showing the history of the rates on cotton from 1921 to 1935. The CHAIRMAN. Without objection, that may be incorporated. (The table referred to is as follows:)

TABLE 1.-Rates in cents per hundred pounds high density cotton (November each year)

Tramp, i. e., lines with irregular sailings carrying parcel lots.

Mr. WHITE. As this table will show, the Far East Conference, promoted by the old Shipping Board, succeeded in raising the rates to Kobe from 45 cents, in 1922, to 70 cents in 1927-28. These rates did not decline until 1929, when nonconference lines began berthing occasional steamers at cut rates. The 30-cent rate applicable in 1934 means a saving to the American cotton farmer, under the 70-cent Shipping Board conference rate, of $2 per bale, or $4,000,000 on 2,000,000 bales of cotton exported annually to the Far East.

This table which I have introduced shows also that the Shipping Board conferences were substantially successful in raising rates from the Gulf of Mexico to Europe to 60 cents per hundred pounds in 1926-27. Only the existence of nonconference competition and the refusal of the shippers to be bludgeoned into signing exclusive contracts has brought rates down to the persent level. This table shows that the rate on cotton to Liverpool in 1934-35 is approximately 34 cents, and the same rate applies to Bremen and Havre, compared to the rates of 60 cents which were maintanined in effect by the Shipping Board conferences as long as they could control the situation. The existing rates for 1934-35, however, did raise the rate slightly over the previous year; but, in the face of our decline in exports, this has not benefited the shipping lines.

135956-35- -39

Even the rates prevailing in 1933-34-which is the lowest that they have been, approximately 30 cents to Europe and to Kobe-were substantially upon the prewar level as table 2 will demonstrate. And, Mr. Chairman, I would like to introduce a second table which shows the steamship rates for the year 1913-14 on cotton. The CHAIRMAN. Without objection, it is so ordered. (The table above referred to is as follows:)

TABLE 2.-Steamship rates for year 1913-14, taken from New Orleans Cotton Exchange records (standard compression)

Mr. WHTIE. These rates in the second table are based on standard compression. Now the standard compressed bale of cotton has a density of about 22 pounds, whereas high-density cotton which is now exported has a density of approximately 32 pounds. The highdensity cotton can be stowed approximately 30 percent better.

This history of rates shown by the two tables I have introduced, during the period of the Shipping Board conference control, leaves no doubt in our minds that a prompt advance in rates would be the result of the proposed provisions to which we have objected. Neither the exporters of American cotton, nor the American cotton farmers are in any position to assume any such additional burden and, Mr. Chairman, in this connection I would like to read from recommendation no. 5 of the interdepartmental committee:

The American exporter is interested in the merchant marine to the extent that it enables him to compete with his foreign competitor. In order to sell his products at satisfactory prices he must not be required to pay too high rates. He also seeks to reach a competitive position with exporters from third countries in common markets. * * * In the movement of such cargoes as cotton, lumber, phosphate, coal, and other bulk commodities, the exporter is primarily interested in obtaining low rates because in these instances the speed of delivery and other considerations, important with respect to other commodities, are of no particular advantage.

Now our own experience has been that the Shipping Board conference-line operators are more interested in giving very excellent service, expedited service, required by other commodities, than they are in supplying low-cost, economical transportation which cotton requires. The cotton shippers have had so much experience with the "proper rate-fixing principles" of the conference operators that they have no desire to have their rates returned to their control. True, all of their agreements contain pious protestations of service to export trade, but these do not take the place of low-cost transportation. Furthermore, there is no provision in the law for prescribing any rate-making rule to control the rate-making body in fixing rates; no provision for efficiency or economy of management; no provision recognizing that supply of available transportation and world charter rates should be controlling, and no recognition of the fact that the present situation of the conference line operators in the whole world trade is primarily

the result of the reduction in the amount of cargo available. We feel that the shipping-line operators, like us, would have more to gain from a revival of some of this movement of cotton into export, than through raising the rates on the cotton now moving.

As I say, we have no objection to the granting of subsidies to these lines, if it is needed to keep them in operation; but the rate regulatory sections do not subsidize the American lines. Some 70 percent of our exports are carried by these foreign lines and they would receive 70 percent of the increased rates which would follow the eliminating of nonconference operators. Even on exports of only 6,000,000 bales, a 10-cent increase would cost the southern cotton farmer $3,000,000, of which only 30 percent would go to American lines. If our merchant marine must be subsidized, it should be done directly and not in a fashion which gives most of the benefits to foreign vessels at the expense of American commerce and which is in direct conflict with the attempt to restore cotton prices to pre-war parity.

As you know, under the Agricultural Adjustment Act, the attempt is to restore the purchasing power of cotton to substantially its purchasing power in 1914, or prewar parity. As I have pointed out above, the existing rates on cotton are substantially in line with those prewar rates. If those rates are raised, it simply offsets the attempt of another part of the Administration to restore the cotton prices to prewar parity.

Mr. SIROVICH. Suppose the rates remain the same and a subsidy, through the differential, is given of 30 percent to the American merchant marine that carry that cotton?

Mr. WHITE. As I say, we are for that, if the rate remains the same. The CHAIRMAN. His objection is to the rate making-to the minimum rates.

Mr. WHITE. Yes; solely to the minimum-rate provision, which we feel is for the benefit of foreign conference operators and at the expense of the American farmer. We say to pay your subsidy direct and pay it to the American lines.

Mr. SIROVICH. I mean that formula could be worked out by the regulation group. The general taxpayers of the United States have no objection to the subsidy that the cotton growers are getting. Mr. WHITE. I am not so sure about that.

Mr. SIROVICH. I know it, because I voted for it and helped them and, in the same spirit I voted to help the southern cotton growers, at least the cotton growers ought to come to the help of the American merchant marine.

The CHAIRMAN. This gentleman has not voiced any objection to helping the American merchant marine.

Mr. SIROVICH. I was not here in the beginning of his statement. Mr. WHITE. As I say, what we fear, Dr. Sirovich, is, from our experience with these conference operators and with the Shipping Board, that they are going to try to restore the rates to a very high level which they were successful in obtaining at one time.

Mr. SIROVICH. I think you are dealing with a different group; you are dealing with the "new deal" group at this time, and they will take into consideration our program to develop the American merchant marine and, at the same time, not to harm the cotton grower.

Mr. WHITE. I wish we could believe that was the case; but we feel that any body which is intrusted with the development of the