COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE JOHN W. BRICKER, Ohio, Chairman ANDREW W. SCHOEPPEL, Kansas EDWIN C. JOHNSON, Colorado A. S. MIKE MONRONEY, Oklahoma BERTRAM O. WISSMAN, Chief Clerk SUBCOMMITTEE TO STUDY MARITIME SUBSIDY PROGRAM MERCHANT MARINE STUDIES Mr. Potter submitted the following preliminary report of a special subcommittee of the Committee on Interstate and Foreign Commerce to study the maritime subsidy program: REPORT The Special Subcommittee To Study the Maritime Subsidy Program was appointed by the late Senator Tobey on April 2, 1953, pursuant to Senate Resolution 41, 83d Congress, 1st session, to make a study and analysis of construction-differential and operating-differential subsidies in the maritime field, together with other forms of Government aid to the American merchant marine. From the outset your subcommittee was of the opinion that any analysis of the subject of Government aid to shipping must be preceded by comprehensive hearings and studies on the functions and status of the American merchant marine in relation to the national interest and in the light of circumstances existing today and reasonably foreseeable in the near future. Likewise, the subcommittee felt that existing law, as expressed in the Merchant Marine Act, 1936, as amended, and other shipping acts, should be carefully reviewed in all of its aspects, to determine its adequacy today and as an essential preliminary step to the development of an integrated legislative program for the future. In this connection there has been no really complete legislative revision of our national shipping laws by Congress since the development of the 1936 act. Most enactments in this field during the past 18 years have been either of an emergency or a patchwork nature designed to meet specific problems of the moment. And, although several excellent and extensive studies have been conducted in both the executive and legislative branches, the violent economic and political changes, both domestic and international, which have occurred in recent years make such studies inadequate as a basis for current legislative review or revision of the laws. In line with the foregoing considerations, the subcommittee formulated an overall program consisting of three general phases of study. They are: Phase No. 1: The size, composition, and quality of the merchant marine today, including the national defense reserve fleet, and the adoption of a tangible and continuing program for replacements and additions to conform to our overall national requirements. Your subcommittee felt that this was such an essential first step that no long-range conclusions could be reached as to the types and extent of aid which should be extended to merchant shipping until the Government itself presented the merchant shipping requirements for a peacetime mobilization base for the national security and the basic needs for a merchant marine to carry our water-borne commerce in the national interest. Only by the adoption and declaration of such a program can the Congress and the people clearly understand the necessity for and scope of legislation designed to encourage the support of an American merchant marine as an instrument of national policy. Phase No. 2: The effectiveness of existing laws and their administration in the maintenance and development of an adequate and efficient merchant marine. Phase No. 3: The development of such new legislation or recommendations for improvement in administration as will serve to assure the maintenance of a merchant marine deemed to be essential in the national interest. In line with the foregoing basic agenda, the subcommittee chairman addressed a letter April 24, 1953, to the Honorable Sinclair Weeks, Secretary of Commerce, setting forth the subcommittee's goals and requesting that he be prepared to present his views to the subcommittee. The letter, which reads as follows, outlines fully the scope of the work which the subcommittee believes should be made in this important field: UNITED STATES SENATE, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Hon. SINCLAIR WEEKS, Secretary of Commerce, Department of Commerce, Washington 25, D. C. MY DEAR MR. SECRETARY: Pursuant to Senate Resolution 41, January 30, 1953, I have been appointed chairman of a subcommittee of the Interstate and Foreign Commerce Committee to make a study and analysis of constructiondifferential and operating-differential subsidies in the maritime field, together with other forms of Government aid to American shipping. In addition to myself, the other members of the subcommittee are Hon. John M. Butler of Maryland and Hon. Warren G. Magnuson of Washington. In furtherance of its objectives with regard to operating and construction subsidies, the subcommittee will have to give consideration to the basic declarations of maritime policy and all forms of Government participation in merchant ship construction and operation. It is important, therefore, that the subcommittee review the provisions of existing maritime legislation in the light of present conditions and said declarations of policy to determine whether or not such legislation is adequate to the fulfillment of the policy and if not, to determine what changes should be made, with particular regard to the need for Government aid to shipping and the best and most economical methods of providing such aid. In general, the subcommittee will direct its inquiry to the following subjects: 1. The size, composition, and quality of the merchant marine today, including the national defense reserve fleet, and the adoption of a tangible and continuing program for replacements and additions to conform to our overall national requirements. 2. A review of existing maritime legislation providing for Government aid to merchant shipping, including provisions for direct subsidies, tax exemption, tax deferment, loans, and mortgage insurance. In this connection, the subcommittee will review the reports prepared by the Commerce and Treasury Departments at the request of former President Truman relative to tax-deferment and tax-exemption benefits to the maritime industry. 3. The need for the types of aid presently provided, the cost of such aid in relation to the results achieved, and modernization of existing law in accordance with new methods or approaches which might more effectively accomplish the desired purposes. In this connection, I recognize the importance of the highest degree of continuity of established principles and policies in the maritime field, but they must be consistent with existing conditions. Therefore, with the violent economic and political changes, both domestic and international, which have occurred in the 17 years since the enactment of the Merchant Marine Act of 1936, it may well be found that new approaches to the problem of achieving a merchant marine adequate to the national needs must be adopted. 4. Direct Government participation in merchant shipping, including direct overnment ownership and operation, general agency operation, and chartering Government-owned vessels. 5. Clarification of existing law to eliminate hampering ambiguities in the event d to the extent basic changes are not found to be required. The foregoing is a broad outline of the scope of the studies contemplated by e subcommittee to which I hope you will be able to give prompt consideration order to be prepared to present your views to the subcommittee at an early te. At the outset, the subcommittee will wish to discuss these problems with ou or your designated representatives informally in closed session before proeding to the more detailed aspects of the matter. Sincerely yours, CHARLES E. POTTER, Chairman, Special Subcommittee on Maritime Subsidies. In the first session of this Congress the subcommittee held 17 days f hearings in Washington, D. C., during May, June, and July 1953, aking testimony from high officials of the Departments of Defense, Commerce, State, the former Mutual Security Agency, representatives of ship operators, both subsidized and nonsubsidized in all types of ervices, shipbuilders, seagoing and shipyard labor, shippers, bankers, and marine underwriters. These hearings were confined, as nearly as possible, to phase No. 1 above: i. e., The Size and Composition of the Merchant Marine. Primary emphasis was placed upon the testimony of Government witnesses, principally officials of the Departments of Defense and Commerce. Other witnesses testified as to the place and function of the various elements which make up the merchant marine, their present status, and the problems with which they are confronted. In this series of hearings the subcommittee was seeking to get factual background material and determine what our maritime program should be. Statements as to problems were welcomed, but no legislation was under consideration, nor was the subcommittee seeking or expecting to find solutions to the problems at that time. Your subcommittee believed that answers should be deferred until perspective could be had of the whole picture as presented in comprehensive hearings and staff studies. During the adjournment of the first session the subcommittee held 3 full days of hearings in San Francisco, receiving testimony from a large number of witnesses from representatives of the many elements which make up the complex of the merchant marine. These hearings, also on phase No. 1, were concerned with consideration of maritime problems with particular reference to the west coast and the Pacific Ocean area, but also included subjects which could not adequately be covered during the Washington hearings. The subcommittee had also projected a similar 3-day series of hearings in New Orleans in order to round out a full consideration of background maritime information and problems as viewed by those best informed and closest to them. Unfortunately, due to overriding commitments of the subcommittee members, it was necessary to postpone the Gulf Coast hearings. In the opinion of your subcommittee much good could come from such hearings, and the plan to take testimony in the Gulf should still be favorably considered. The hearings on phase No. 1, though not complete in some respects, due to studies not heretofore ready for presentation by the Departments of Defense and Commerce, have been eminently gratifying and it should be possible to conclude this part of the record early in this session. EUROPEAN SHIPPING AND SHIPBUILDING It is fundamental that the great difference between the American standard of living and that of the other maritime nations is the principal reason that the American merchant marine cannot compete with the merchant marines of other nations without some form of Government aid to offset such differences. Accordingly, the subcommittee felt that much valuable insight could be gained into this important aspect of the subsidy program if its inquiry could include a firsthand study of foreign shipping and shipbuilding, principally in Europe where the major sources of foreign maritime competition are. Accordingly, the subcommittee, represented by Mr. Butler of Maryland, and Mr. Drewry, subcommittee counsel, visited shipping and shipbuilding centers in western Europe during late September and early October 1953, where they accumulated much important data and considerable understanding concerning these matters. Mr. Butler's separate informal report to the chairman of the full committee on his findings and conclusions is annexed hereto and made a part hereof. The subject matter of this report will be covered in greater detail in the comprehensive report the subcommittee is preparing for release upon completion of the phase No. 1 hearings. FINDINGS Although the formal subcommittee report will go into much greater detail in the analysis of evidence acquired to date and the conclusions to be drawn therefrom, there follow certain of the more important highlights of the testimony received: 1. Defense requirements. On this point it is well worth quoting from Rear Adm. R. E. Wilson, United States Navy, Deputy Commander and Chief of Staff, Military Sea Transportation Service (pt. 1 of hearings, June 16, 1953, p. 65), as follows: The strategic importance of ocean transportation in a future war supports the concept that the United States-controlled merchant fleet should be of such a composition as to adequately meet the planned requirements of the Department of Defense by providing modern, high-speed ocean transportation with suitable self-loading and unloading facilities and an ability to be utilized in any port as required. The Department of Defense is concerned about the lack of a comprehensive merchant ship construction program which would provide for the orderly replacement of the vast proportion of our merchant fleet which is fast approaching obsolescence. In the past, upon the sudden outbreak of a war, it has been necessary to hastily improvise a shipbuilding program which was not only costly, but resulted in an accumulation of ships so quickly designed and constructed as to be limited, in an unfavorable manner, in their capability to meet modern military needs. It is clearly recognized that the special characteristics of merchant ships which are desired for ultimate military use must of necessity be modified and limited to conform to acceptable requirements for successful commercial enterprise. Within the limits imposed by peacetime commercial utilization, and an acceptable burden on the national economy, it is strongly recommended that the Congress support a phased merchant ship construction program of those ships required (1) to bring the active operating United States merchant fleet possessing acceptable defense characteristics up to the numerical limits required to meet the initial needs of the Department of Defense, and (2) to provide the means for the orderly replacement of existing operating tonnage now rapidly approaching obsolescence. It is further recommended that, either as a part of the program recommended above, or supplementary thereto, the means be provided for the construction and operation of sufficient prototype vessels which can serve as the basis for emergency vesselconstruction programs upon the outbreak of a war. |