In the Corsica service, certain passenger classes receive reductions according to the special rates and rate reductions set by the metropolitan railways of France.

In the New York line of the C. G. T., there is a 30-percent reduction in passenger rates to French public servants traveling at State expense and to students traveling under scholarship arrangements. In the C. G. T. lines to Mexico, to Antilles, and Central America, the State has the first refusal of 25 percent of the passenger space. Three weeks' notice is required if the State reserves more than one-half of the passenger space. One-tenth of the cargo space is reserved for the State until 10 days before sailing time. Disabled war veterans receive a 25-percent reduction in passenger fare if they carry a 50- to 75-percent disability; they receive a 50-percent reduction if they carry a 75- to 100-percent disability. Large families traveling together receive a 20-percent reduction in fare for 5 persons; 30-percent reduction for 6 persons; 35-percent reduction for 7 persons, and 50-percent reduction for more than 7 persons.

If vessels are required to have military equipment, such fittings shall be for account of the French Navy and a special indemnity shall be paid the company as a result of all such equipment, provided that the space occupied by such equipment is more than 75 cubic meters. The vessels may also be required to have special bunkers which may be converted into magazines for carrying munitions. This also is for account of the French Navy.

That, Mr. Chairman, is the contract service picture of France. Do you wish to ask questions, or shall I proceed now with the next subject, which is the general credit field?

The CHAIRMAN. Have you anything on the personnel requirements?

Mr. SAUGSTAD. French ships are manned by Frenchmen. That is fixed

Mr. SIROVICH. What are their salaries?

Mr. SAUGSTAD. I do not know; I have not the salary rates. Mr. SIROVICH. Are they trained men that constitute the personnel? Mr. SAUGSTAD. The French personnel situation is included under a system which is called "Inscription Maritime." That is an old organization that has survived the French Nation through both monarchy and republican status. It was organized by the French statesman Colbert in 1663 and the principle involved is that in order to obtain seamen for French warships the French Government gave the privilege to young men who were conscripted for military service to choose going to sea under the same conditions. That system prevails in France today; a man may choose to go to sea as a sailor. He serves for a certain time at certain ratings and at the age of 50 he may retire and from that time on he has certain pensions for his services and he has an absolute monopoly to operate in the French fisheries. No one in France without special authority may be ir the French fisheries except members of this organization.

Does that answer your question on personnel?

Mr. CULKIN. Have you taken into consideration the distinction in the operation cost of French ships over the construction cost? Can you say what amount it will require for America to equal those 405,000,000 francs? Do you get my question. In other words,

putting into the scale the distinction in the cost of operation and the cost of construction, assuming you are familiar with that, can you say what it would cost America to balance up or equal that contribution of 405,000,000 francs?

Mr. SAUGSTAD. I have no knowledge.

Mr. CULKIN. I suppose the French costs are very much less for construction?

Mr. SAUGSTAD. They must be somewhat less.

Mr. CULKIN. And the operation, of course, is less.

Mr. SAUGSTAD. The French shipowners and French statesmen complain bitterly because French ship construction costs are much higher in France than they are in the rest of Europe and, as a consequence, the French Government allows French shipbuilders 15percent protective margin.

Mr. CULKIN. What I am getting at is what America would have to contribute to equal the French contribution.

Mr. SAUGSTAD. I have no technical knowledge on that point. Mr. SIROVICH. From the statement you made before and from the interesting remarks you made, I gather there are two forms of subsidy that France gives to its merchant marine, one of which really is a partnership in which it puts in a certain amount of money to these four different groups and assumes between 80 and 90 percent of the liability and at the same time takes 80 to 90 percent of the profits. Now that being the arrangement which the French Government has entered into with the merchant marine, it is striking proof to me they are partners with the companies who operate those ships; because, after all, that is a partnership arrangement. That is one form of direct contribution in which they participate in the profits.

The second form of indirect subsidy is the subsidy that they gather from the mail delivery; is that right-based upon the statement that you have made?

Mr. SAUGSTAD. I did not mean to leave the impression that the postal payments to French ships was a subsidy. The contractors carry the mail tendered them by the French Government

Mr. SIROVICH. Are they paid just the same for the carrying of that freight as they are for any other freight?

Mr. SAUGSTAD. They are paid at Universal Postal Union rates. Mr. SIROVICH. Then, according to that statement, the French are really in partnership with the operators of the ships, putting in a certain amount of money and assuming a certain part of the liabilities and getting a certain amount of the profits; is that right?

Mr. SAUGSTAD. They are, on two lines particularly, the Far East and the Brazil Lines. They are in partnership indirectly in the C. G. T. by the process of being on the board.

Mr. SIROVICH. They contributed about $10,000,000 to their subsidy last year?

Mr. SAUGSTAD. I know, but the French Government assumes no percentage

Mr. SIROVICH. Does it participate in the profits at all of the C. G. T.?

Mr. SAUGSTAD. No, sir. May I say the French Government loaned the C. G. T. a considerable amount of money during the period of reorganization and it puts itself in the place of a creditor alongside

of the other creditors in the matter of write-off among creditors. It takes no preference in that position, but considers itself in preferred position on one loan already referred to.

Mr. SIROVICH. Then the C. G. T. amortizes its obligations to the Government?

Mr. SAUGSTAD. It does; yes, sir.

Mr. SIROVICH. Over the period of how many years?

Mr. SAUGSTAD. Over a period of 14 years, providing its operating losses do not absorb the 150,000,000 francs which they are allotted each year.

Mr. SIROVICH. So that in 2 of those 4 procedures, the Government is a partner.

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. In the Corsican line and the Far East?

Mr. SAUGSTAD. No, sir; in the South American line and the Far East line.

Mr. SIROVICH. The Government is a direct partner?

Mr. SAUGSTAD. The Government is a direct partner under a joint risk and joint liability arrangement.

Mr. SIROVICH. Now, would you be kind enough to let the committee know if in these two lines, in which the Government is a joint partner with the companies, they have made money or lost money?

Mr. SAUGSTAD. They have lost money, sir.

Mr. SIROVICH. In how many years; have you any figures?

Mr. SAUGSTAD. I think I have.

Mr. SIROVICH. Well, for the last 4 years.

Mr. SAUGSTAD. I can give you the last 2 years without looking for the records.

Mr. SIROVICH. All right; suppose you give us the last 2 years.

Mr. SAUGSTAD. Let us put it this way: The appropriation this year to the Far East Line is 202,000,000 francs, roughly. That represents 80 percent of the loss. The annual reports of the Far East Line this year indicate an operating loss of 252,000,000 francs.

Mr. SIROVICH. In the operation in which the Government selects the owner to run the ship, for example, do they allow them to charge any price they want for their services, or does the Government regulate the salaries of the officials?

Mr. SAUGSTAD. The Government has nothing to do with the salaries of the officials under that circumstance, except

Mr. SIROVICH. So that in the auditing of the books

The CHAIRMAN. Just wait a minute. The witness started to say "except." Let him finish the statement.

Mr. SAUGSTAD. Except through any pressure which may be exercised by the government commissioner who is on the board of each contract line representing the minister of merchant marine.

Mr. SIROVICH. Have you any way of figuring what those men get for operating their ships? Is there any way we could have placed in the record the salaries that the men receive for managing the Far East route and the South American route?

Mr. SAUGSTAD. No, sir.

Mr. SIROVICH. Is there any way of finding that out?

Mr. SAUGSTAD. No way, as far as I know.

Mr. SIROVICH. And the other two companies, the C. G. T. and the Corsican Line: They have received an average payment which they have time to amortize if they have any profits. Now, suppose they do not have?

Mr. SAUGSTAD. The French Government in that condition is in exactly the same position as any other creditor of the line previous to the reorganization

Mr. SIROVICH. In other words, there is no preferential consideration to the Government?

Mr. SAUGSTAD. No, sir. Except on one loan already explained. Mr. SIROVICH. By taking advantage of its preferential position to the detriment of other creditors?

Mr. SAUGSTAD. No, sir.

Mr. SIROVICH. They are all put upon a parity?

Mr. SAUGSTAD. Yes, sir.

The CHAIRMAN. You started to say "previous to the reorganization "; you started to make a remark there. I would like the witness to finish his remark.

Mr. SAUGSTAD. I think I have already answered that.

Mr. HAMLIN. I would like to ask, Mr. Witness, upon general principles, if the mail subsidies which we are paying, which are substantial subsidies as I gather from the President's message, are quite similar to the French subsidies in the line of mail contracts, in the line of mail payments on general principles; not going into detail? The CHAIRMAN. I gather from the witness they are not mail subsidies.

Mr. SAUGSTAD. I do not quite understand your question. I tried to make clear that the contractors in France carry the mail merely as part of their regular business and charge the government for it at Universal Postal Union rates and those rates are fixed further by agreement between the Postal Administration and the Minister of Merchant Marine at the end of each year. So that they may even lower the Universal Postal Union rates if they choose. In case the operation of the line is such that the Government feels it ought to take advantage of lower rates, they can do so.

The CHAIRMAN. But not raise them?

Mr. SAUGSTAD. No, sir.

Mr. HAMLIN. In accordance with the President's suggestions, as I read them here, $27,000,000 a year is really paid as a subsidy in mail carrying; that is, he states here substantially that it would only cost about $3,000,000 to carry the mail for the United States. Mr. SAUGSTAD. Yes, sir.

Mr. HAMLIN. And that $27,000,000, we may say, is really a subsidy.

Mr. SAUGSTAD. Yes, sir.

Mr. HAMLIN. But covered up, we will say.

Mr. SAUGSTAD. Yes, sir.

Mr. HAMLIN. So that his suggestion and yours, perhaps, would be that we have a subsidy which would be paid straight, so that we would know what subsidy we were paying and not be covered up with mail words, and so forth?

Mr. SAUGSTAD. I can answer that by saying that the principle of mail contracts resting on the carriage of the mail is practically done away with all over the world except in 5 or 6 lines, 4 of them British

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and 2 Japanese. The rest are all known broadly as contract services and they rest primarily upon the political necessities of certain countries to keep in touch with their colonial holdings.

Mr. HAMLIN. Just one question more: As I understood you, the carrying of foreign mails is very closely guarded by the French Government; at least, and I do not know but what it is forbidden under penalties, is it?

Mr. SAUGSTAD. No, sir. The ships are under contract to accept any mail tendered the vessel, or the captain of the vessel, by a representative or the French Postal Administration. If the French Postal Administration chooses to carry or to take under contract any foreign mail, they may tender it and the ship must accept it. The CHAIRMAN. And in the meantime they can send the mail by other ships if they want to?

Mr. SAUGSTAD. Certainly.

Mr. SIROVICH. Can you explain for my benefit, and the committee's benefit, what the Universal Postal rate means? You have been referring to it through your discussion.

Mr. SAUGSTAD. The latest information I have on the Universal Postal rates-now may I say that I have not taken this statement out of the Universal Postal Union regulations; I have taken it from the postal laws and regulations of this country, and—————

Mr. SIROVICH. Is there an international agreement between nations of the world as to what they should charge each other? Mr. SAUGSTAD. Yes.

Mr. SIROVICH. For carrying their mail?

Mr. SAUGSTAD. There is, and there is also a universal postal regulation which provides for how much all of them shall pay for seaborne mail.

Mr. SIROVICH. And that is what we call the universal postal rate? Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Sort of an international agreement.

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Of the various nations of the world as to the universal rate they would charge each other in the transportation

of mail?

Mr. SAUGSTAD. Yes, sir. The rates, for instance, that our Post Office Department pays foreign ships for carrying the mails under the Universal Postal Union agreement

Mr. SIROVICH. And that is reciprocal between all nations of the world?

Mr. SAUGSTAD. Yes, sir; as follows: For a distance not exceeding 300 nautical miles, 6.57 cents a pound, or 75 centimes a kilogram, for letters and post cards

Mr. SIROVICH. 6.57 cents for a pound?

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. How much would that mean per letter? Is there any way of determining how many letters make a pound?

Mr. SAUGSTAD. I think, roughly, we figured at one time it took 40, or thereabout.

Mr. SIROVICH. That would be 4 cents a letter?

Mr. SAUGSTAD. I think we figured 40 letters to the pound at the time we established the 80-cent rate to American ships for carrying