MERCHANT MARINE STUDIES

THURSDAY, JUNE 18, 1953

UNITED STATES SENATE,

SPECIAL SUBCOMMITTEE ON MARITIME SUBSIDIES OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The subcommittee met, pursuant to call, in room G-16, Capitol, at 10:10 a. m., Senator Charles E. Potter presiding. Present: Senators Potter and Magnuson.

Also present: Mr. John M. Drewry, special counsel to the subcommittee.

Senator POTTER. The committee will come to order. This is a continuation of the exploratory hearings which we have been conducting for the past several days in an effort to get an overall objective view of where we are, where are going, and how we are going to get there, as it relates to the merchant marine.

Mr. Turman, we are very happy to have you here. I realize how busy you and Mr. Farrell, and others who are presidents of these various steamship companies, are. We are highly gratified that you have taken the time out to give us the benefit of your views on this most important subject. I think many times in the past we have relied upon representatives of industry, and they have all done a good job in representing the industry. I think it is a very healthy situation when the people who are directly connected with the companies themselves give us the benefit of their thinking. We are very pleased that you are here.

Mr. TURMAN. Thank you so much, Senator Potter.

Senator POTTER. I assume you are speaking not only for yourself, but for all the subsidized lines?

Mr. TURMAN. That is right, sir. Shall I identify myself for the record?

Senator POTTER. If you will.

STATEMENT OF SOLON B. TURMAN, PRESIDENT, LYKES BROS. STEAMSHIP CO., INC., NEW ORLEANS, LA.

Mr. TURMAN. I am Solon B. Turman, president of Lykes Bros. Steamship Co., Inc. My appearance is on behalf of the 14 subsidized lines mentioned by Mr. Farrell yesterday, including my own company. As part of my testimony, I will furnish our best estimate of the future attainable size of the privately owned and commercially operated American merchant marine. For purposes of expediting the research of this committee, this projection will cover all segments of the American merchant marine. I shall, however, generally limit my comment and explanations to vessels engaged in the foreign trade of the United States.

PROJECTED FUTURE SIZE OF THE AMERICAN MERCHANT MARINE

Commercial needs are, and must continue to be, the limiting factor in the growth and continued maintenance of a privately owned American merchant marine.

While in the words of the declaration of policy of the 1936 act, such merchant marine shall be "** *capable of serving as a naval and military auxiliary in time of war or national emergency," it must be recognized that it never will be adequate to fulfill the complete mobilization requirements of the Nation. Furthermore, while the justification for Government assistance to the merchant marine may be based in part upon defense considerations, it is not economically sound for the Government to attempt to maintain in operation a greater number of vessels than the commercial demands justify.

The additional vessels needed to meet the military demands in time of war or national emergency, should supplement the commercial fleet. Drawing upon a government-owned standby fleet for this purpose is comparable to, and consistent with, our national policy covering the ready mobilization of other industries for defense requirements as, for example, the standby machine-tool program.

Senator POTTER. Is this an endorsement of the MSTS nucleus fleet?

Mr. TURMAN. Yes, sir, in principle. I think Admiral Wilson made more or less the same remark, that the active fleet would have to be, for economic reasons, more or less limited to the commercial need, and that, naturally, he would have a standby fleet in addition, plus shipbuilding, which we all know in time of overall emergency will have to get into motion.

Mr. DREWRY. By "standby fleet" you mean primarily the so-called national defense reserve fleet?

Mr. TURMAN. I would call it that, sir. I say that for the reason that I think, in my own judgment, and in our judgment, it would be utterly foolish thinking to feel we could maintain in commercial operation a fleet which would meet all of these needs.

There, again, it would be a matter of economy which would have to be taken into consideration.

Mr. DREWRY. It is a fact, it is not, Mr. Turman, that before we got into World War II, the reserve fleet we had at that time, small as it was, and old as it was, was of great value in the early stages for the preparation of the war?

Mr. TURMAN. Unquestionably. I think without those ships, plus the new ships that came into being under the 1936 act, we would have had very little, if anything, to count upon.

The real problem then, is to determine (1) the number and type of privately owned vessels which reasonably may be employed in the peacetime waterborne commerce of the United States on a long-range basis; (2) what should be done with excess vessels which cannot be economically employed on a commercial basis; and (3) the method by which the difference between the commercial and military objectives can be provided.

Senator POTTER. Can I go back, Mr. Turman, and ask you, have you, or have the subsidized-line representatives, testified or made any statement on behalf of the bill introduced by Congressman Allen in the House-I think a companion bill is in the Senate-in essence

requiring the private shipping to get more of the business which is now being handled by MSTS. I don't know whether I have properly identified the bill so you can speak to it.

Mr. TURMAN. I think, in a fashion, Mr. Farrell dealt on the fringes of that yesterday. I didn't attend these other hearings up here. If I may, I will ask Mr. Nemec.

STATEMENT OF FRANK A. NEMEC, VICE PRESIDENT, LYKES BROS. STEAMSHIP CO., INC., AND CHAIRMAN, FINANCE COMMITTEE OF SUBSIDIZED LINES

Mr. NEMEC. He had generally the same testimony as that which he presented here yesterday. He lodged a general objection to untrammeled competition from the MSTS, and in principle endorsed the Allen bill.

Senator POTTER. Thank you. I am sorry to interrupt you.

Mr. TURMAN. I shall limit my testimony to the first of these 3 subjects, leaving the latter 2 for the further consideration of this committee.

Estimated attainable size of the privately owned merchant fleet: Table I, which follows, shows our estimate of the size of a commercially attainable merchant fleet.

Senator POTTER. This is the size of the fleet in existence, or the fleet that we could have?

Mr. TURMAN. It is partially the fleet in existence, with some little variation. If I might depart from my text just a moment, I would like to make one observation. I was very much interested yesterday in the testimony of Admiral Wilson and his answers to some of your questions and remarks with regard to how they arrived at their fleet which they needed actively in being during this period we are in. He explained in great detail that they could target their lifts of cargo, people, and troops, and what not. With that in mind, and taking into account the international situation, the military_requirements, and the exigencies which would arise, they arrived at the fact that the lift was so much and they had to have ships to meet it. I would like to point out that we, who are dealing here with the problem, and looking into the future and trying to come to you and arrive at some definite target as to a fleet, must take many, many factors into consideration.

We may be right in some of the factors; we may be wrong in others of them.

We have to weigh the trends in which trade is going, and above all, the economic situation. So we can be right, we can be wrong, or this estimate here, based on an upheaval tomorrow, would completely upset this. I just wanted to make it plain that we have taken all of these factors into account in arriving at what we come to here, based on the situation and existing situations as we see them.

Senator POTTER. I assume you are using the present world conditions and economic trends today as criteria for projection in the future? Mr. TURMAN. Mainly that. But I think, here again, Mr. Chairman, anybody that is in international trade, or looking at our world situation, you have to also take into account history. You have to take into account what has gone on before, discount the changes, but where a pattern is there, you can't overlook it.

Senator POTTER. Has foreign competition cut in more and more on your trade?

Mr. TURMAN. Very much so.

Senator POTTER. I assume that is a growing problem.

Mr. TURMAN. Yes, a growing problem. A great deal of that will come out as we go along, and I shall welcome your questions.

Senator POTTER. Thank you.

Mr. TURMAN. Commenting briefly on this table, which I will ask the reporter to put in the record

Senator POTTER. Yes, we will put it in the record. (The table referred to is as follows:)

TABLE I.-Projected size of active commercial American merchant marine

NOTES. The above estimate does not include any tramp tonnage for reasons outlined in this report. While our estimate for the reserve fleet is not shown in the table, we believe that about 500 high-class reserve vessels aggregating 5 million deadweight tons should be available for national defense requirements over and above the active fleet as shown, or a total of 2,091 vessels available for commercial and defense purposes. At December 31, 1952, the Maritime Administration-owned reserve fleet consisted of 215 combination passenger-cargo vessels aggregating 1,885,000 gross tons (including troop transports; hospital ships, etc., not reconverted from war service), plus 1,885 freighters (predominantly Liberty type) aggregating 19,049,000 deadweight tons. About 245 of these vessels were in active operation at that date. This reserve fleet also has not been included in the above tabulation.

The estimate of 430 liner-type, dry-cargo freight vessels in foreign trade approximates the present number of this type of subsidized (275) and nonsubsidized (120) vessels in active service, plus 35 Mariner-type ves sels now under construction or recently completed.

We have not included in the projection any tonnage representing specially designed, oceangoing industrial bulk carriers which may be built in future years for operation under the American flag, nor vessels which may be permanently employed in the service of the MSTS or other Government agencies.

The Great Lakes and tanker fleets are included on the basis of estimates made by the Maritime Adminis tration. (See p. 34, American Merchant Marine and the Federal Tax Policy, U. S. Department of Com. merce, Nov. 1, 1952.)

Mr. TURMAN. You asked the question of whether or not this was substantially the fleet in being today, and the answer is substantially yes. I would say here in ocean-going vessels, passenger and combination, the 10 ships in domestic service I understand are in being.

The projection under foreign-liner services, I understand approximately 30 are in being, and the remaining 32 are within the planning or thinking of the Maritime Commission and the industry.

Senator POTTER. In other words, of the 62 that you have here, there are 32 that are actually not in existence, but they are either being built or they are in the planning stage?

Mr. TURMAN. They are under consideration. I think the Maritime Administration, as I understand it, in one of their presentations to the

White House, put that forth. These figures corroborate their thinking, and also our thinking.

Mr. DREWRY. The 32, Mr. Turman, would be in addition to, rather than including any replacements?

Mr. TURMAN. That is correct, as I understand it.

Senator POTTER. The ships that the Moore-McCormack Line have under consideration for construction would not be in addition? That is really a replacement program, isn't it?

Mr. TURMAN. I think in the case of the Moore-McCormack that is a bit different. Those are Government-owned ships which are under charter. We are talking about the private merchant marine, so they wouldn't be included.

The freighters in domestic service are 205. I might comment here that these 205 are actually in being, in service.

Mr. DREWRY. Domestic service?

Mr. TURMAN. In domestic service, of which 165 consist of Liberties, miscellaneous vessels, and 70 Victorys, and/or better vessels.

In the foreign-liner service, these 430 vessels are actually in being and consist of C-type and Victorys, plus the inclusion of the 35 Mariners. We have included them in this figure of 430.

Coming down to tankers, my understanding is they are largely in being or under construction, in active planning. The Great Lakes vessels we have included here simply to show what they are and what it consists of, 400 vessels of various types.

Senator POTTER. And also flatter the chairman.

Mr. TURMAN. If you build the St. Lawrence seaway, Mr. Chairman, we, down on the gulf, are going to have a lot of competition from you.

Senator POTTER. I think that may be so. But I think competition of the kind you get up there will be good for everybody.

Mr. DREWRY. Mr. Turman, in this projection here, is it limited to ships of 1,000 gross tons or over?

Mr. TURMAN. Yes, sir.

Mr. DREWRY. Would it be possible for you to supply for the record a more detailed breakdown of these categories so we can see what ships there are, what operators there are, and what service they are in, and anything else that can give us information in our studies so that we may have a more detailed understanding of the employment of the vessels or projected vessels?

Mr. TURMAN. We would be pleased to do that.

(The information referred to was not submitted at the time the hearings were printed.)

Senator POTTER. Before you continue with your statement, Mr. Turman: Senator Magnuson, we are continuing a study of the merchant-marine problem, which the chairman charged the subcommittee to study. We have had some excellent testimony. Mr. Turman has just started his statement. We are pleased to have you back, with your vast knowledge of the subject.

Senator MAGNUSON. I am sorry I could not be here for the other hearings.

Mr. TURMAN. For reasons outlined in a later portion of this report, few increases may be expected in future years in the category of the liner vessels. It is a general misconception that merely putting more vessels in service will guarantee a greater participation in the