We have now planned for a new ship; we have had them already prepared and have had them out to be bid upon.

Senator GUFFEY. What is the route of your line?

Mr. PALMER. From North Atlantic ports to South and East Africa up as far as Bombassa and Zanzibar.

Senator GUFFEY. How many ships have you?

Mr. PALMER. We have four ships on this route and also four ships chartered, all American-flag vessels, and all of our people are Americans, and all of the stock is American-owned.

The CHAIRMAN. Thank you very much.

Now, there was a gentleman spoke to me that wanted to make a statement. Here he is. Will you please come forward?

STATEMENT OF FRANK V. BARNS, REPRESENTING THE SEA SHIPPING CO., OF NEW YORK

Mr. BARNS. Mr. Chairman and gentlemen, I appear for the Sea Shipping Co., and I speak on behalf of that company. I also have with me Mr. S. J. Maddock.

I have had over 30 years' experience in the practice of maritime law, and have been acting as counsel for the Sea Shipping Co. since the date of its incorporation in 1920.

I shall first, in appearing, voice what the Sea Shipping Co. has talked about many times, and that is the purpose of this bill. I was quite startled, as others, when we read the change from at least onehalf to a substantial portion of the carriage of water-borne export and import commerce of the United States.

The CHAIRMAN. You mean you were startled by the change?

Mr. BARNS. By the change; yes, sir. In view of the things that I want to bring to the attention of this committee, I think that any bill to promote the commerce of the United States and to foster it should take a stand that would be respected by the other countries. I think this country is entitled to carry at least one-half of the water-borne commerce of the United States, and that it should be so incorporated in the bill.

The CHAIRMAN. It looks to me, from what I have heard today, it is not going to carry but about one-eighth of 1 percent.

Mr. BARNS. Perhaps nothing, under this part of the bill.
The CHAIRMAN. I think we had better leave that part of it out.
What else have you?

Mr. BARNS. The company which I represent owns its steamers which it purchased without any governmental aid and which it has operated without any governmental aid.

The CHAIRMAN. Did you buy them from the Government?

Mr. BARNS. We bought those vessels back in 1920 and 1921 from a private ship builder, and we paid the high prices of that time. Those four vessels represent an investment of almost $5,000,000, actually paid for, and as I say, without any governmental aid or loans whatsoever, and in the operation of them we have never had any subsidy.

Those boats suffered, we were not able to find business, and they were a year ago tied up. The company looked around for a trade in which they could engage, and the finally decided to announce a service to South and East Africa.

one American company. The business there was being carried by a conference, including in its members, with one exception, all foreign companies.

We sought admission to that conference and the conference denied admission, and that is a matter that is now the subject of a complaint filed with the Shipping Board Bureau.

Senator CLARK. That conference did what?

Mr. BARNS. The conference denied us admission as a part of the United States of America-South African conference.

The CHAIRMAN. We have not in S. 3500 anything about confer

ences.

Mr. BARNS. It comes in, indirectly. Let me call the committee's attention to the point I want to make.

Senator CLARK. I am interested in this conference business, and would be glad for you to speak on that, as far as I am concerned.

Mr. BARNS. We wanted to get into the conference, which is a conference composed of six foreign lines and one American line, the American line being subsidized.

Senator CLARK. Who makes up the conference?

Mr. BARNS. The conference was formed by the voluntary filing of a conference agreement, which has the approval of, or was approved by, the Shipping Board Bureau.

Senator CLARK. The United States Shipping Board?

Mr. BARNS. Yes; the United States Shipping Board, or the Shipping Board Bureau today. The conference agreement was approved, and the conference group have operated under that conference agreement from that time and are operating under it today.

As I said, we were denied admission to the conference, and claim has been made that it is the intent of Congress to provide aid for one line, rather than for two or more lines.

Senator CLARK. Let me get this straight; this conference was a voluntary organization?

Mr. BARNS. It is a voluntary organization.

Senator CLARK. Composed of six foreign shipping lines and one American shipping line, in this particular case?

Mr. BARNS. That is right.

Senator CLARK. After their agreement is approved by the United States Shipping Board, what is the effect as far as the granting of subsidies is concerned?

Mr. BARNS. The effect of a conference, and how it affects us, goes to this point. Under the Shipping Act of 1916 and the Shipping Act of 1920, which made the provision for the filing of conference agreements and the working under conference agreements, those members of a conference who operate under the agreement are not subject to the Sherman Act and the Clayton Act. They are in a position to go out and contract with the carriers for all of their goods, when an independent operating in that line is not able to enjoy the benefits of those contracts.

Senator CLARK. So that the antitrust laws of the United States are suspended so far as these conference organizations are concerned if approved by the United States Shipping Board?

Mr. BARNS. That is right.

Senator CLARK. And if anybody happens to be outside of that charmed circle, he has not a chance to compete with them, because they are relieved from the obligations of the United States laws against trusts and monopolies, and against illegal agreements in restraint of trade?

Mr. BARNS. That is right.

Senator CLARK. And he is simply going up against a closed combination?

Mr. BARNS. That is right.

Senator CLARK. Also in such a case there is no chance for a new and independent line to get a subsidy?

Mr. BARNS. That is the question I am speaking on today, on behalf of my company.

Senator CLARK. I am talking about the present situation.

Mr. BARNS. The question is as to whether or not under the provisions in S. 3500 we can go out under this new law, if passed, and be sure that we will get the same treatment as the other American line that is in the conference at the present time.

Senator CLARK. This bill is assumed to build up the American merchant marine, and in that connection, let me ask you whether you are familiar with any companies in which a nonconference shipping line has received a subsidy?

Mr. BARNS. I do not know of any case where they have.

Senator CLARK. So, it is a question of the insiders keeping the outsiders out?

Mr. BARNS. Yes; and which I do not think is the right thing to do, when an American operator puts up his own money and operates in American trade, where less than 50 percent of the trade is carried on American bottoms.

Senator CLARK. As I understand, in this particular conference to which you have made reference, six of the members are foreign companies?

Mr. BARNS. That is right.

Senator CLARK. And the one American line which is a member of the conference is a subsidized line?

Mr. BARNS. That is right.

Senator CLARK. Naturally, it is to the interest of all of the members of the conference to keep out competition.

Mr. BARNS. Yes; and we are working against that combination, and at the rates which we are able to fix, which are nonremunerative or compensatory.

The CHAIRMAN. Your criticism of this bill relates to section 535, does it not?

Mr. BARNS. Yes; to section 535.

The CHAIRMAN. And subsection (a)?

Mr. BARNS. Yes; subsection (a) of section 535, on page 74 of S. 3500.

The CHAIRMAN. What are you proposing to us, to strike it out? Mr. BARNS. I am proposing there, that in the twentieth line after the word "service", there be inserted the words "or services." The CHAIRMAN. That is line 20, page 74?

Mr. BARNS. That is right.

The CHAIRMAN. You want to insert after the word "service" the words "or services"?

to whether or not a subsidy can be granted to at least two or more lines, provided that there is an opportunity for American vessels to carry that part of the conference commerce of the United States, which, as I say, this bill should provide at least one-half.

Next we will turn to page 75.

Senator CLARK. Before you pass that point, your objection is not to the system, except that you want to recover the spoils?

Mr. BARNS. I do not understand your question.

Senator CLARK. I say your objection is not to the system but you think you have been unfairly kept out of a portion of the spoils? Mr. BARNES. We have never asked for a subsidy, but we want to be in a position to.

ob

Senator CLARK. That is what I am trying to find out; are you jecting to the subsidy; are you objecting to your competitor having a subsidy, or are you simply insisting you are entitled to a portion of the spoils?

Mr. BARNS. I am insisting that where two American lines are operating in a service that if a subsidy is given to one, it must be given to the other.

Senator CLARK. I will agree with you on that proposition, but the question is whether a subsidy should be given to either one.

Mr. BARNS. The subsidy, in my opinion, should be given to both, providing there is room in that service for two lines; and I know of no reason why one line, although it may be in existence today, should have an inherent interest in that line and feel they can build up one great big line. The other line at the present time is not operating any more ships than we are. I do not think we should be prevented from applying for and getting aid of a subsidy just because the other one now has been getting a subsidy.

Senator CLARK. Are you now operating without a subsidy?
Mr. BARNS. Yes; we are operating without a subsidy.
Senator CLARK. Are you making any money?

Mr. BARNS. Making a loss.

Senator CLARK. And you are still continuing in business?
Mr. BARNS. We are still continuing in business.

Senator CLARK. How long have you been operating?

Mr. BARNS. We have been operating every month since last June. Senator CLARK. How long have you been in operation entirely? Mr. BARNS. In that trade I am referring to, that particular line? Senator CLARK. No; how long have you been operating altogether? Mr. BARNS. These boats were purchased and have been operated since June 1920.

The CHAIRMAN. We have got one line at least where we are going to save them after the first of July.

Mr. BARNS. Prior to that time operation had been in intercoastal trade.

Senator GUFFEY. You have made money in the intercoastal trade? Mr. BARNS. I cannot say we have.

Senator GUFFEY. But you have paid for the ships?

Mr. BARNS. We have paid for the ships, but have never paid any

dividends.

Senator GUFFEY. Now you want to go to South Africa?

Senator CLARK. You have been operating since 1920 without a subsidy?

Mr. BARNS. Yes, sir.

The CHAIRMAN. You did not make any money in intercoastal trade, but you have been making money since June?"

Mr. MADDOCK. No; that is not a true statement. Mr. Chairman, I have prepared a statement that I would like to read, particularly since it has reference to the question Senator Clark has raised.

The CHAIRMAN. Senator Clark, do you want to hear this?
Senator CLARK. Yes; I would be glad to hear it.

Mr. MADDOCK. I would like to state that I consider it immoral for any steamship company to accept financial aid or assistance from the Government unless that aid or assistance is definitely required. It is just as immoral for a steamship company to take the taxpayers' money in the form of Government assistance when that assistance is not required as it would be for a man of means to accept relief from the Government during a depression.

It is likewise immoral for Congress to legislate Government aid or assistance to those who do not require it. That thought should be considered by those who would attempt to safeguard the future speculative profits of the present ocean-mail carriers.

It is presupposed that the enactment of the Jones-White Act was to give necessary assistance to steamship companies, but never to guarantee them huge profits.

It is a sad commentary on the patriotism of American ship operators to charge them with requiring a subsidy to be patriotic. It is important that we have a merchant marine in case of war, but it is also important that we have cotton and wool and many other things. Therefore, there is no more reason for singling out the merchant marine for a subsidy than any other industry, except if and when that necessity is required.

I know this may sound startling coming from a steamship man, but I believe many steamship men share this feeling with me. Others are blinded by greed and have not the foresight to realize that heavy subsidies mean eventually Government operation.

No practical steamship man that has the interest of the United States merchant marine at heart would subscribe to any plan that called for Government operation.

Government operation and heavy subsidies kill the incentive for efficient operation. Unnecessary subsidies are a vicious thing, for if the American steamship operator is subsidized unnecessarily to the disadvantage of the foreign competitive operator, we must expect the foreign operator to plead with his government for a subsidy, and eventually world shipment to be government owned and operated. I believe the interests of the American merchant marine require that Congress should pass a new shipping bill this session.

The CHAIRMAN. You say your opinion is we should pass a bill? Mr. MADDOCK. Yes; definitely.

The CHAIRMAN. Apparently from what you have said, you do not want a ship-subsidy bill?

Mr. MADDOCK. I say "if and when necessary." I believe the bill S. 3500 is a good one. It provides for a subsidy if and when it is required. I am not attempting to oppose any bill or speak for any bill.