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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"?

Mr. BARNs. Yes; so that the question will not be left doubtful as 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.

Senator CLARK. That is what I am trying to find out; are you objecting 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.

We are just entering a period of great prosperity in the shipping business; cargoes are being offered more freely and more people are traveling than at any time in the past.

Steamship companies that have planned a building program will not build until they know what Congress is going to do. It is absolutely necessary to give the shipyards assistance if we do not want them to close down. The Copeland bill is the best bill before Congress now, but I would recommend a few amendments.

The first amendment we would offer, we suggest as to the bill, speaking for at least one-half of the commerce of the United States moving on American ships irrespective of what the State Department might have said.

The CHAIRMAN. What difference does it make whether that is on the front of the bill or not?

Mr. MADDOCK. We have a case pending before the Shipping Board at the present time. We do not want to discuss it much at this time, but in entering any of these foreign conferences, they are mostly foreign dominated, because there are only one or two American steamship lines in it, and they are 75 percent foreign lines.

When you attempt to enter into one of these conferences they will tell you that the trade is there, and unless you can point out to them it is the intent of Congress and the purpose of the shipping act that American commerce should move on American ships up to 50 percent, you have little chance of getting into the conference. That is most helpful to us.

Senator CLARK. What does really make up the eligibility for admission to a conference!

Mr. MADDOCK. Usually it is the discretion of the other members. If the law reads that at least 50 percent of American commerce shall move on American ships, then the Shipping Board is guided by that, or they should be.

Senator CLARK. In the absence of such a law the conference can keep anybody out that they want to.

Mr. MADDOCK. Yes.

You asked if we are losing money, and I must tell you there is no necessity for us losing money at the present time. The rates in that trade when we entered it, June 1, ranged from $8 to $20 a ton, and this conference cut the rate down to $4 a ton to put us out of business.

Senator CLARK. You mean that is the old price factor going into operation to put a competitor out of business?

Mr. MADDOCK. Yes; and if it was not for the Shipping Board's approvel of the conference you could go to court under the Sherman and Clayton Acts and get relief. Because of this conference matter, we are losing money, and we have never applied for a subsidy. As strange as it may seem, we think we can operate in this South African trade without assistance from the Government, and we would like to try it.

Senator CLARK. You mean if the traffic were not restrained in that trade you would be able to operate at a profit to your own stockholders without a United States Government subsidy?

Mr, MADDOCK. We are satisfied on that point.

Senator CLARK. You are prevented from doing that by this conference agreement, which is in contravention of the general terms of the United States antitrust laws, simply because there happens to be an exception that where the Shipping Board approves such violation of the antitrust laws they shall not be liable to prosecution under the law?

Mr. MADDOCK. That is correct.

Senator GUFFEY. If the subsidy was withdrawn from the South African line after July 1, do you think you could compete with them and make money?

Mr. MADDOCK. I must say that the American line has joined with the foreign group, and they admitted they voluntarily cut the rate to $4 a ton, and they said they cannot afford to carry the freight at $4 a ton; they are losing money the same as we are.

Senator CLARK. If they can afford to lose it for a sufficient length of time, they can wear you out and put you out of business?

Mr. MADDOCK. Yes.
The CHAIRMAN. Have you any further amendments?

Mr. Barns. On page 75, in line 12, after the word “registry”, a semicolon, and then add the following:

Upon such finding the authority shall make contracts under this title with respect to the vessels of each citizen of the United States operating vessels on such service route or line.

The CHAIRMAN. Would these two lines you have referred to be in direct competition with each other?

Mr. BARNs. They would be in competition so far as the shipper might ship in preference on one line or the other due to superiority of vessels

Mr. MADDOCK. There would not be such preference, because they do not sail on the same dates.

Senator CLARK. They are equally available as naval auxiliary vessels in time of war?

Mr. MADDOCK. There is not that question of competition raised, because the sailings would not be at the same time, as they are now 2 weeks apart.

The CHAIRMAN. All right; have you further amendments ?

Mr. BARNS. I urgently request the change in line 8 on the first page of the bill, whereby you would restore the provision with reference to at least one-half of the commerce.

That is all we have.
The CHAIRMAN. Thank you very much.

I am going to call Mr. Lee, but first I would like to have Mr. Harry Brown, of the Bureau of Regulations of the Shipping Board, to add a word on these subjects that have been discussed.

STATEMENT OF HARRY S. BROWN, CHIEF, DIVISION OF REGULA

TIONS, UNITED STATES SHIPPING BOARD BUREAU OF THE DEPARTMENT OF COMMERCE

Mr. Brown. Senator, I have listened to the testimony of Mr. Barns and Mr. Maddock, and there are two things really involved, one of which I have no interest in, except as an academic matter, and that is the question of whether or not where there are inore than two lines, more than one line should be subsidized in a given trade.

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