that condition obtain in this country. The first section in this bill section 1, refers to the fact that [reading]:

It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine.

Therefore national defense is a primary purpose of this bill. If you eliminate national defense from this bill, you might as well throw it out the window, because Congress would not be concerned about it at all. In the interest of the national defense, we should construct vessels on the Pacific coast.

M. CAMPBELL. Mr. Congressman, I am thoroughly in sympathy with your views.

Mr. WELCH. I am glad to hear you say that.

- Mr. CAMPBELL. I lived for many years in San Francisco myself, and I know all about that situation out there. If this bill is enacted into law, and particularly if the new Haag plan is substituted for the present plan and it carries through, it undoubtedly will mean the replacement of a very large percentage of the ships now in operation on all of these various essential services. If that comes about, it is going to tax the shipbuilding facilities of the United States to a very high degree; and it would seem entirely reasonable that, in the national interest, Congress should make provision so that these yards on the Pacific coast would have at least their fair share of that work. Mr. WELCH. Congress can do it in this bill.

Mr. CAMPBELL. Yes; Congress can do it in this bill.

Mr. WEARIN. With reference to your construction-loan fund you propose, of course it is evident you favor a program of that type.

Mr. CAMPBELL. I shall have to say this to you, that the Hang proposals for a modification have not yet come before our association officially. We have called a meeting for Monday morning, in which we are going to consider them. In our judgment they have such a high degree of merit that they deserve the most serious consideration. Mr. WEARIN. Maybe I did not make myself clear: I understood from the amended form you have been presenting to the committee, that you advocate a construction-loan fund.

Mr. CAMPBELL. Yes; but the construction-loan fund will operate for coastwise and domestic shipping, in which the Government will be purely a banker.

Mr. WEARIN. For the ship loan?

Mr. CAMPBELL. For coastwise and domestic shipping, in which relationship the Government would be purely that of a banker. If this bill as drawn by the chairman should be enacted, then the construction-loan fund will be used to the extent of lending to the shipowner 60 percent of the so-called "European cost" of the vessel. If, on the other hand, the Haag amendment should be adopted, the construction-loan fund, so far as shipowners are concerned, will not come into operation at all; because the Government will build the vessels and will sell the vessels, after their completion, to the shipowner, for a down payment of 20 percent and the balance of the purchase price spread over 20 years.

Mr. WEARIN. That is in effect furnishing the money for them, of

course.

Mr. CAMPBELL. Oh, yes.

Mr. WEARIN. In one sense of the word, it might be considered a construction-loan fund.

Mr. CAMPBELL. You can term it that way.

Mr. WEARIN. The point I was making was that the President, in his message of March 4, stated Congress should terminate this method of loaning money for shipbuilding.

The CHAIRMAN. That is very true, that that is in the message; but we have given it as careful consideration as we could in framing the bill and I see no way in which to carry on unless there is a loan fund.

Mr. WEARIN. I think the only other way, Mr. Chairman, is that we have a Government-owned and privately operated merchant marine.

The CHAIRMAN. That is true.

Mr. WEARIN. That, to my mind, is the point at issue.

Mr. LEHLBACH. Now, Mr. Campbell, there is nothing in the Haag plan, is there, that would preclude the use of the construction loan fund for defraying part of the expense of building the vessel; that is, it would not require a new appropriation in every instance out of funds in the Treasury not otherwise appropriated, but the construction loan fund is available for at least portion of the construction of the ship under the Haag plan, just as well as under the plan written in the original bill?

The CHAIRMAN. That is my recollection.

Mr. WEARIN. At least it ought to be fixed that way, if it is not. The CHAIRMAN. It is my recollection that is the language.

Mr. CAMPBELL. Yes; but it contemplates to provide for the payment of the vessel out of the construction loan fund, to use the loan fund itself, don't you see.

Mr. WEARIN. That is what I think.

Mr. CAMPBELL. So that device will be used even under the Haag plan, if that is adopted.

Mr. WELCH. Mr. Chairman, I will not interrupt the witness again, but, on completion of Mr. Campbell's testimony, I will ask the indulgence of the committee for the purpose of introducing an amendment with a brief statement.

The CHAIRMAN. That will be agreeable.

Mr. SIROVICH. Mr. Campbell, I did not hear your preliminary statement; I unfortunately was not here. But after listening to my colleague to my right-Mr. Wearin-regarding the construction fund, I would like to advise you, so far as I personally am concerned, in the study I have made and from the records of our hearings, that we have about 13,000,000 tons of ships in our Nation today. If you exclude lake steamers and the tankers, we have about 5,100,000 tons of ships that are used for coastwise, intercoastal, and international trade. And if you are going to judge the merchant marine of the United States for which this bill is now being perfected, on ships that are more than 10 years old and that are really obsolescent and cannot be run economically, 94 percent of all of the tonnage that we have today, of the 5,100,000 tons of shipping, is more than 10 years old and only 6 percent, which amounts to 300,000 tons of shipping, is less than 10 years old, and we are the lowest of any maritime nation in the world. And unless we are going to have some vision and the men who represent the merchant-marine organizations of our country are going to get together and forget a lot of selfishness, we will never

develop a subsidy that will be instrumental in bringing back the merchant marine to the standing it should have.

There is not an organization of merchant-marine men that comes before our committee that has the money to organize a real organization and put up the construction money from themselves. The only way to get the money is either through national ownership, or national ownership and private operation, or through the Haag plan. I have given study to the Haag plan last night and I think that is the finest thing that has ever been given to this Congress, where the construction differential and the operating differential will be instrumental in putting our merchant marine upon a parity with foreign shipping interests. And if you will eliminate the thing that you put inwhich I think is not just-in the section on page 14, which says [reading]:

That such contract shall provide that the operating differential subsidy shall be paid the applicant and shall be an amount per voyage for the operation and maintenance of said service, route, line, vessel, or vessels, based on the amount and the difference in cost of insurance, maintenance repairs, and the wages and subsistence of officers and crews

which is perfectly all right; but when you put in—

and all other items of expense

which simply means shore expense, you are doing an injustice to the very organization you are representing, because the membership of Congress will not be a party to paying exorbitant salaries and overhead that go into the maintenance of shore expenses, because foreignshipping interests have their agencies in our country that pay rental here, and that neutralizes the other, and that leaves it to the rugged individualism of the owners and operators of steamship lines to see where they come in to get the salaries, which is all they are entitled to when we put them on a parity with European construction, so far as the construction differential and operating differential are concerned. Mr. CAMPBELL. Now, Mr. Congressman, I am not in disagreement with what you have said, in substance. I think, however, that what you have said is not in its entirety consistent with what you are trying to do.

Mr. SIROVICH. In what way is it inconsistent?

Mr. CAMPBELL. If you will let me have an opportunity, I will try to point it out to you.

Mr. SIROVICH. Yes.

Mr. CAMPBELL. I do not believe that the shipping people of this country are selfish and subject to that indictment. If there is wrongdoing in the shipping business, or there has been, I do not condone it and I want to see it prevented. I am not going to stand here and advocate unreasonable salaries for anybody in any line of business; nor do I think the shipping industry wants anything of that sort. If you will take the financial reports of the Shipping Board covering a period of years, you will find that the shipping business has not been a profitable business; it has not made any large returns to the owners. There may have been some instances in which unduly large salaries have been taken out, or undue bonuses have been taken out; but that does not characterize the shipping industry. So far as the shipping industry for which I speak is concerned, we want a successful American merchant marine. We would like to have it make fair

profits to the owners, so far as they put their own money into the shipping.

Mr. SIROVICH. You are entitled to that.

Mr. CAMPBELL. Yes. Now that is what we are trying to attain by this legislation and I only stand here in making an effort to try to help you people frame such legislation by conveying to you, as well as I can, some of the knowledge that we have from experience in running the shipping business. I do not say that I have that knowledge as a lawyer, but I am trying to convey to you the combined thought of the shipping industry, so far as it is represented by our association, in a spirit of helpfulness, by trying to help you; that is all. Mr. SIROVICH. And I have been trying to help you on the basis of the construction of new ships, because we only have 300,000 tons of ships.

Mr. CAMPBELL. I know.

Mr. SIROVICH. The rest are obsolete or obsolescent; they are more than 10 years old.

Mr. CAMPBELL. Mr. Congressman, I am not opposing that

The CHAIRMAN. I am afraid if we get into a debate, we will never get through with these hearings.

Mr. SIROVICH. I am not debating; I have just been answering the statement here, so far as construction cost are concerned, when you take a ship that is more than 10 years old, and let us say she has a speed of 13 knots an hour, the fuel consumption of the boat that runs 13 knots an hour, of modern marine construction, is the same for the boat that makes 13 knots as in the old ship that makes 10.

The CHAIRMAN. I think that has been brought out about 10 times, and now let us just get ahead with this, because we will never get through with these hearings, gentlemen, unless we do.

Mr. CAMPBELL. I want to come down to what the Congressman said about this section (c). I did not suggest paragraph (c); that was in the original bill. I suggest certain amendments to it.

Mr. SIROVICH. But you did suggest "and all other items of expense"?

Mr. CAMPBELL. I did; yes, sir.

Mr. SIROVICH. That is what I am talking about.
The CHAIRMAN. We do not have to accept it.

Mr. CAMPBELL. I did suggest it and I am going to justify it. So far as these old ships are concerned, if you enact the Haag amendment, you will have as a result of it, in my judgment-and I do not speak now for any association, but only my personal judgment—a new fleet of modern cargo and combination passenger and cargo ships built to replace the existing ships. There is no question about that. And you are going to sell them, under that plan, to the owner at the European prices we will say the foreign prices. Then, so far as the capital investment is concerned, you will have the American owner on a parity with his foreign competitor. If you enact that bill, you will get new construction; there is no question about that, and you will get rid of all these old ships you are speaking about, and I think the industry will be whole-heartedly for that proposal, but I am not in a position to say so at this moment.

Mr. SIROVICH. That is why I made that statement.

Mr. CAMPBELL. Now you come down to the operation of those ships and the fundamental consideration is that you will put the

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American owner on a parity with foreign owners. It is not sufficient just to give him the ship wherein his capital investment is on a parity with the foreigner's; but you have also the concept in this bill to take care of his operating differential. It is true that many of the items of shore expense are already on a parity with foreign owners who are operating out of American ports, and, where the foreign owners are incurring some of those expenses here in these foreign ports, there is no difference so far as those items are concerned. But there are other items which of necessity enter into the operation of ships. For example, marine superintendence would be a citation, accounting and the like of that.

Mr. SIROVICH. Have not they accounting over there?

Mr. CAMPBELL. Yes; but they pay their clerks and accountants in England and Japan and other places very much lower wages than what we pay our people here.

Now bear in mind that this operating differential is one that is going to be calculated under this bill by the Maritime Authority, and the Maritime Authority should have the scope of authority to permit it to take into consideration all of the items and, after having made a thorough investigation and given thorough consideration, the Maritime Authority and the owner will endeavor to agree upon what should be the differential. But, if they cannot agree, under this bill the Maritime Authority will fix the differential and if the owner is not satisfied with it your bill provides he may have a review in the

courts.

Now cannot you see in that situation that the determination of the differential is never in the hands of the ship owner; it is in the hands of the Government, or it is in the hands of the court. That is perfectly fair; there is no chance on earth under this bill, as I see it, for the ship owner, in connection with the operating subsidy, to get away with unreasonable salaries or unreasonable bonuses or unreasonable expenses on shore; because the differential will be determined by the authority and it will be subject to review by the courts. And you can make up your minds they are going to watch over that very closely. All I say is to give the authority the authority to make the investigation and determination.

Mr. SIROVICH. I think in the operating differential only three factors ought to be considered to put the American merchant marine operator upon a parity with the foreign operator, and these are the three essentials necessary in determining the operating differential: First, the personnel that run the ship from the captain down to the humblest working man and, since there is a difference between the payment of foreign captains down to the humble seaman, we ought to consider that. That is one item to be considered. Second, there is the element of food, sustenance and maintenance of the ship, on which there is a differential between the American and the foreign. And, third, there is the principle of repair, which is different in America than over there.

Now those three factors, in my opinion, should account for the operating differential. And if you are going to take the shore expenses, with their offices you have the same thing over there; you have these men in the offices over in Europe and then they have offices in America, and the people they hire here will neutralize the difference.