The CHAIRMAN. I think Mr. Campbell will say I understood that. Mr. CAMPBELL. I cannot say that is quite correct, Mr. Chairman. The CHAIRMAN. All right. Go ahead, Mr. Lee.

Mr. LEE. The interests of the owners' association here are diversified and so different it would be impossible for them to sensibly agree completely on anything, because each man must, in the owners' association, represent his own ideas and protect his own interests, but I think I can say honestly, a very large number of shipping people are in accord with the bill, with the exception of that one article.

The CHAIRMAN. That is to say, if the Post Office and Commerce Departments will recede in that, it will be acceptable.

Mr. LEE. If they will recede a little on their part, I think the bill will produce a merchant marine.

Senator CLARK. What do you mean by a little, Mr. Lee?

Mr. LEE. Go back to about the way the bill was written originally. In other words, the President of the United States is directed to appoint an authority, and it is reasonable to assume he will select on that authority or commission, whatever you like to call it, men of some integrity and some ability, and it seems to me wiser to leave to them a decision as to whether or not an operator can honestly own a terminal, or whether he must bring his ships into port and turn them over to someone else to do all of the work on them.

Senator CLARK. What portions of section 529 do you take exception to? Do you object to the provision that an operator who is operating foreign-flag ships shall not receive a subsidy?

Mr. LEE. Yes I do.

Senator CLARK. Why should the people of the United States pay taxes to pay money into the treasury of a corporation which is also operating a foreign-flag ship?

Mr. LEE. If the Marine Authority can become convinced that that is for the benefit of the merchant marine, I think it should be allowed. Senator SLARK. Let us leave that for a minute for discussion with the Marine Authority, that is a fact, it may be a matter of discussion. Congress is concerned in passing laws, but will you just explain why you object to the provision that a corporation which is operating ships under foreign registry should receive contributions from the Treasury of the United States, which can only come from taxpayers of the United States?

The CHAIRMAN. Let us have clearly before us what it is we are talking about. This prohibition is against any company which operates foreign-flag vessels competing with any service of the United States.

Senator CLARK. That is correct, and I am now addressing myself particularly to paragraph (a) of the amendment to section 529. Mr. LEE. I think the section describes the very valuable possibility of building a merchant marine.

Senator CLARK. Expand that, please.

Mr. LEE. I can expand it by a direct example of my own experience. I am agent in the United States for the Russian Government; I operate all of the Russian ships that come to the United States, and they operate all of my ships in Russia. I have no representative in Russia.

marine. If I refuse to take that agency, it will fall into the hands of foreign agencies. They will not discontinue to run the ships because I refuse to take the agency.

I operate a line of ships to Leningrad and have an arrangement with them whereby I operate their ships in America and they operate mine in Russia.

The CHAIRMAN. What if you did not have that privilege?

Mr. LEE. You would have to subsidize me more heavily to compete with them, and it would cost the taxpayers more money than under my arrangement.

The CHAIRMAN. If there would not be such an arrangement would America be likely to have any of that back-and-forth trade between here and Russia?

Mr. LEE. None at all.

Senator CLARK. How do you figure that, Mr. Lee; you do not mean to tell the committee that the Russian ships would go back empty?

Mr. LEE. They do not go back empty; they go back with their own cargo, but that is not shipped by Americans; it is bought in America and shipped as the Government of Russia dictates. Senator CLARK. They are American exports?

Mr LEE. They are American exports, but not controlled by the American Government.

Senator CLARK. It is the theory, I understand, of the merchant marine, that we shall have a means of exporting the products of this country abroad, and certainly Russian ships would not go back empty, and if they are filled at American ports and go back with American products, they are performing the function of carrying American exports to foreign countries.

Mr. LEE. Exactly; that is right, and they should be allowed to carry half of their cargo if you have a reciprocal arrangement. I have a 50-50 arrangement whereby I get half of their cargo and they get half of mine. That is a better deal, a better proposition for the United States than anything else you could devise.

The CHAIRMAN. Does that mean on your line you are employing American seamen on the ships of the American line, and at the terminals here, and so forth?

Mr. LEE. Yes; about 85 percent of our total personnel are Americans and we are required to have 67 percent. We have a few_stewards who are not Americans, but even most of my stewards are Americans, and I would say nearly 90 percent of my crew are Americans.

The CHAIRMAN. Does the matter of language enter into that? Mr. LEE. Slightly.

The CHAIRMAN. If you did not have this arrangement with Russia, there would be some foreign flag outfit that was conducting it?

Mr. LEE. Undoubtedly there would be a foreign agent representing them in the United States competing with me in my territory. Senator GUFFEY. Do you know of any similar cases to this one with Russia?

Mr. LEE. I know that as soon as a definite shipping policy is established by the United States that I can make similar arrange

ments to this with a very large number of foreign owners and operators.

Senator CLARK. If you could make this arrangement you have under the present law, why could you not make similar arrangements with anybody else?

Mr. LEE. Because the other people are not willing, they still think they can drive us off of the sea.

Senator CLARK. As a matter of fact, nearly all of the American exports are brought for foreigners with exchange?

Mr. LEE. All of them; yes.

Senator CLARK. The purchaser, then, having the foreign exchange, owns the goods and controls the method by which they shall be shipped; is that not true?

Mr. LEE. As to a large part of it; yes.

Senator CLARK. That is the rule, is it not?

Mr. LEE. I think so; yes, sir.

Senator GUFFEY. Did you hear Mr. Franklin read his report to the committee?

Mr. LEE. Yes, sir.

Senator GUFFEY. Did you hear him read that quotation from the York Tribune for February 27 in which the complaint in Parliament was that one of the conditions they shall stop is the paying of subsidies which are driving the British merchant marine off of the ocean?

Mr. LEE. Yes, sir.

Senator GUFFEY. Is that correct?

Mr. LEE. Yes, sir.

Senator GUFFEY. Do you think we are driving our merchant marine off of the ocean?

Mr. LEE. To a large extent; yes.

Senator GUFFEY. The present act was a success, but still the Government owns 60 percent of the ships, and are passing them on to the operators.

Mr. LEE. I do not know what you mean.

Senator GUFFEY. I mean that we own 60 percent built in this 15 years; still in that time we have not taken back our ships.

Mr. LEE. I do not believe that is a true statement of fact.

Senator GUFFEY. That was stated here, that was what they admitted here, through mortgages and equities in the boats.

Mr. LEE. Certainly the Government has a large mortgage on all of the ships built; that is the way they were built.

Senator GUFFEY. Yes; 85 percent, is it not?

Mr. LEE. Seventy-five percent.

The CHAIRMAN. In that connection, I would like to ask you if the Government does not own about 80 percent of the homes they have loaned money on under the H. O. L. C.?

Mr. LEE. I think they own more than that on some of them. The CHAIRMAN. Just go ahead, Mr. Lee, with your statement. Mr. LEE. Next, the second paragraph of this same article has been objected to, and I think strongly, by the Owners' Association.

They have set forth all of the objections to the rest of 529, and it does not seem proper for me to go over the same ground again. The CHAIRMAN. Your chief objection to this bill is the substitution by the conference committee of the new 529 for the old one?

Mr. LEE. Yes, sir; and just for the sake of the record I would like to point out, this morning it was brought out that the Government had spent approximately 67 million dollars in Government operations.

The CHAIRMAN. That was the figure I gave.

Mr. LEE. If we make it 50 even, I think for the purpose of clarifying, it is wise to point out that was operating losses, whereas the mail pay that is going to total 22 million might have been not only operating losses, but also covers construction loans.

The CHAIRMAN. Let us have that clearly in the record. At the time when we were appropriating $50,000,000 a year to make up for the operating losses

Mr. LEE (interrupting). We were using ships built at a cost of about $3,000,000,000 some years before, so that in that money there was nothing spent for new construction.

The CHAIRMAN. But now we have been spending for several years 221⁄2 million, and that was to cover operating losses and also construction.

Mr. LEE. Construction of new tonnage.

The CHAIRMAN. So that we spent twice as much in those days without construction?

Mr. LEE. Yes, sir; also there has been a statement made here that the foreign operators control the ship conferences. That statement is not true. The majority of all conferences are foreign lines because there are more foreign lines than American, but all conferences must operate by common consent, and the objection of one line is sufficient to stop the conference from functioning.

Wherever there is one American line in a conference, that American line is as much in control as any other line or any other combination of lines. That is the way the conferences operate, and I am familiar with all conferences.

Also there has been a statement made that conferences function to maintain a monopoly. The conferences that I am familiar with, and they are all of those that include northern Europe, are not so constituted. The Shipping Board requires the putting in all conference agreements, of a proviso that we cannot decline membership to any reputable line that wishes to join the conference. The conference agreements themselves provide the means of getting into that conference by any reputable line.

There was also a statement by Senator Clark that the ship that took him to China was operated by a Chinese crew, and I cannot understand how such a ship can be subsidized, for as I understand, the law requires 67 percent American crew.

The CHAIRMAN. I did not quite understand Senator Clark. I think he was speaking about some of those lines running to the Orient having had a Chinese crew.

Mr. LEE. I think an examination of the mail contract will show that all of them require the ship to have American crews up to 67 percent, certainly all contracts I know anything about do.

The statement was made that the pay comes from the taxpayers for the shipper-operators to pay differentials in crews' wages, and that it does not necessarily go to the men. Under the act as amended, that is, Senate bill 3500, it must go to the men, other

wise you do not get it, because the act specifically provides that they shall take into consideration the crews' wages, and if you do not pay the crew those wages, certainly no commission or authority would consider that as being a disbursement.

I think that concludes everything I would like to say.

The CHAIRMAN. Thank you very much, Mr. Lee. Is there any ship operator who wants to be heard?

Mr. Furuseth, how much time do you need for your statement; can you do it in 15 minutes?

Mr. FURUSETH. I think so.

The CHAIRMAN. You know, you testified at length last year, and the thing I would like to have you tell us is whether or not the provision proposed by Senator Gibson in his bill as relating to seamen is satisfactory to you?

Mr. FURUSETH. I think most of them are, but I do not know. I would not be able absolutely to say.

The CHAIRMAN. The committee is fully advised as to your attitude toward the seamen and we respect you for your loyal support of them, but we would like to conclude this hearing as briefly as possible. You may proceed.

STATEMENT OF ANDREW FURUSETH, REPRESENTING THE INTERNATIONAL SEAMEN'S UNION OF AMERICA

Mr. FURUSETH. Mr. Chairman, I think the whole entire business here is on the wrong road, because we are trying to build a commercial merchant marine on the one hand and the most important of that is the personnel.

The proof of that is very simple. The Norwegian shipowners used to buy the old English vessels and operate them and do the upkeep of them with their own crews, with their own men. They could operate them so much cheaper than the English themselves could that they had less insurance to pay and that could only arise from the fact that the men who were on board the vessels had the necessary skill to take care of the vessel, for the upkeep of it, to assist the sailmaker, to assist the rigger, to assist the carpenter, and so forth and so on.

The highest skilled crew is the cheapest of all crews, and there is nothing done in this legislation to develop a skilled body of American seamen. We were on the road toward developing it, and on the road toward obtaining it when in 1921 it was all cut off and the Seamen's Act was destroyed so far as equalization was concerned.

There is nothing, so far as I can find, to hinder the United States from getting as capable men and plenty of them as any nation, because the United States-as a matter of fact, the bulk of the people of the United States are of the same identical breed, the same identical relationship, and the same blood that has governed the sea for the last 3,000 years.

Senator CLARK. Mr. Furuseth, let me ask you how was the Seamen's Act destroyed in 1921?

Mr. FURUSETH. By turning over to the foreign shipowners and foreign nations to determine what kind of a crew they should take