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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?

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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 clarify

LEE ing, 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 2242 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, otherwise 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.



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 thé 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 out of an American port, and what kind of life-saving appliances they were going to permit to go out from an American port with,

Senator CLARK. If I understand you correctly, the United States has a right, by the control of clearance from our ports and entry into our ports, to control the character of crews and the character of live-saving appliances on which American citizens may travel ?

Mr. FURUSETH. That was the essence of the Seamen's Act, in sections 13 and 14, if those sections had been carried out as they were in the first few years, and there would have been absolute equalization of the wage cost, which carried with it an equalization of every cost of operation except that the cost that came from the difference in the cost of building:

Section 13 provided a special kind of crew of American ships applicable to all foreign ships leaving the United States. Section 14 specifically provided that in a proviso, which it was thought there was no way of getting around, but they simply threw it all overboard.

Senator CLARK. That law is still on the statute books? Mr. FURUSETH. It is still on the statute books, but rulings have killed it, and it does not exist so far as practical operation is concerned.

Senator CLARK. I understand your contention to be that while the law was still on the statute books, the law has been emasculated by rulings of the courts?

Mr. FURUSETH. Yes; and if we could get the Seamen's Act restored there would be no need of any operating subsidy because in the report that is made by Mr. Bass in 1918 he proves beyond peradventure of doubt that the Seamen's Act as it then operated was equalizing the wage cost, or the cost of operation in the wage question and the sustenance question, and all of the rest depends upon that, except such differential in cost as exists in the difference in the cost of building.

If a vessel cost a million dollars in an American yard and $600,000 in a British yard, the difference in the insurance and the investment money and wear and tear on the $400,000 necessarily is made up somewhere and somehow, and the vessel going to sea in that condition with a $400,000 handicap has got to earn the depreciation and insurance on that before she gets on an equality with a vessel built at the rate of $600,000.

The CHAIRMAN. And they take that out of the labor out of the seamen ?

Mr. FURUSETH. Well, they have got that out of the seamen, and they are continuing to get more.

Senator CLARK. Let me ask this question. I do not wish to interrupt your statement, but let me ask you if you have seen any provision in either the existing law or the proposed law, either the Copeland bill, the Gibson bill, or the Guffey bill, that provides that the money which is to be paid out of the pockets of the taxpayers of the United States, as the differential for labor, shall actually go to the labor; is there anything set up in any of these bills to insure that the people who work in the construction or operation of ships shall actually get that differential?

Mr. FURUSETH. Not so far as I can find out.

Senator CLARK. Is there anything to keep the shipowner from taking the money and putting it in his pocket?

Mr. FURUSETH. No; there is nothing to keep him from putting it in his pocket; but, on the contrary, bill 3500, on page 12, provides that the Authority could sit down with the shipowners and the shipbuilders to find out how to decrease costs and increase income.

Senator CLARK. As far as labor is concerned, that is kind of like a tiger sitting down with a lady, is it?

Mr. FURUSETH. Rather. What I was going to say, to begin with, prior to the passage of the Seamen's Act, there were different kinds of discussions about subsidies, as there are now, furiously conducted at times, but constantly going on before the public and before congressional committees; and we seamen proposed that the seamen should first be liberated, and the seamen would, as the result of being liberated and made free, equalize the wage cost, and that is the only cost outside of the building cost that needed equalization.

But here is a document called “Some Reasons Why the Seamen's Act Was Passed”, and it contains the appeal of the seamen of the world for freedom.

Second, it deals with the question of construction of the thirteenth amendment when the Supreme Court decided that the laws of the State of Alabama had to go into the wastebasket, because it was denying a Negro his freedom. Bailey v. Alabama is the name of that case, and we used that in the appeal.

Then third in this book is the subject of decay of seamanship in Europe and America.

Mr. Sutherland, who was then Senator from Utah, made that into a Senate document.

Then the next thing we have here is the Supreme Court decision in the case of Pattersoni v. Bark Eudora."

The CHAIRMAN. If you will pardon me for interrupting you, I want to call your attention to the fact I am afraid you have not read S. 3550; and I take some pride in it, because it is in a part of the bill I put in, on page 53, line 12, where appears the following language [reading]:

The amount of the operating differential subsidy shall not exceed the excess of the fair and reasonable cost of insurance, maintenance, repair, wages, and subsistence of officers and crews.

What have you to say to that?

Mr. FURUSETH. I have got this to say: The way to find all of those things out that the Authority has got to find out, what the differences are and they can only get it from the shipowners of America and of England, and of Europe generally—they are to sit down and discuss those questions with them, and I do not see how they are going to get anything out of that.

Senator CLARK. I come back to my question of a few minutes ago. While the act sets up a yardstick in the difference of costs of operation at home and abroad, is there anything in that act that insures that the seaman and ship officers, which are included as well as the enlisted men, get the subsidy the taxpayers of the United States are putting up?

Mr. FURUSETH. No; there is not.

Senator CLARK. Is there anything to prevent the shipowner from getting the subsidy on the basis of the differential in operations at

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