Senator BUTLER. There is another point concerning the yards with new construction. You may have enough work to carry you over, but yards that do nothing but repair and conversion work are not in that position. They are a very great part of your overall maritime and defense picture. If you put those yards out of business at a time of emergency like this, and have to reactivate them all of a sudden, it would cost the Government many, many more millions of dollars than this program would cost.

Senator MAGNUSON. They had the same sort of program in the 1930's. We ended up spending almost billions of dollars reactivating yards because we found that no matter how much the free world, with all the other tonnage, gives us, the assurance that they will pool in with us, the bulk of the transportation had to be handled by the American merchant marine in time of emergency.

You will want to take a second look at it, and you will want to look at individual applications. I have been sitting for weeks on an appropriation committee and everybody comes in with the same thing, of coming through the back door in reference to what Congress said to the executive. The executive doesn't have the authority of discretion to look at these things. Congress said certain things should go ahead. If they don't want them to go ahead, they should ask for the Congress to repeal the act.

Mr. MURRAY. I think we have made clear that we do not want to interfere with any part of the shipbuilding program.

Senator MAGNUSON. No; but the act says you should do more than that. The act says you should go ahead and get behind and push.

Mr. MURRAY. We expect to push. At the same time we don't want to push in the wrong direction, and we don't want to waste any money at this time. We have a real problem to be sure we are pushing in the right direction, with the amount of funds that are the necessary amount of funds. We don't have any desire or any intention at any time to come to Congress with other than a well-considered program within the 1936 act.

Senator POTTER. Mr. Secretary, wasn't there also a certain amount of frustration caused by the action started by the Comptroller General in regard to the construction subsidy program?

Mr. MURRAY. I am coming to that in about another second; yes, sir. Senator POTTER. Which I assume, if I were in your position, I would wonder myself just what we can do with the Comptroller challenging the discretionary power of the Board.

Senator MAGNUSON. I don't think any one player on the team should get upset because the left end is trying to tackle him occasionally. I think you go right on carrying the ball. I used to do that. Mr. MURRAY. We are going to have a pretty tough time, I think, in any private financing we will get.

Senator POTTER. It is more than the Government; it is the prospective ship buyers. Until that issue is cleared up, I don't think you will find many people who will be interested in a construction subsidy until they know that a Government contract is a Government

contract.

Mr. MURRAY. I think if we could ever get that one settled there is a possibility of a great amount of private funds going into the shipbuilding field for private account. That would be, as I have said to

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you and others, a great day for the shipping industry, if we can arrive at that.

Senator POTTER. We have to settle this problem first, don't we? Mr. MURRAY. I would say so; yes.

Senator BUTLER. Is the administration doing everything it can to get that problem settled?

Mr. MURRAY. Yes, sir.

I will say this, however: The present and future usefulness of the construction subsidy provisions of the Merchant Marine Act of 1936 has been seriously jeopardized by the uncertainty surrounding the vessel sales contracts which, since the war, have been made under title V of the act. These uncertainties in the ship construction picture make extremely difficult, if not impossible, sound business planning by existing and potential purchasers of ships built and sold under title V of the act. I will also say, on the other hand, that the operating subsidy program, based on the principle of achieving parity between costs of operation under the American flag and costs of operation under competing foreign flags, has maintained regular American-flag service with modern, safe vessels on our essential foreign trade routes. Whether the essential trade route concept is sound and should be continued, whether the principle of parity should be carried to its full extent notwithstanding the high level of American wages both at sea and at shore, are problems which we now have under active study, and which, of course, we will report back to this committee at the end of our study.

Senator POTTER. How long do you anticipate your studies will last? Mr. MURRAY. Three or four months.

Senator MAGNUSON. In other words, the principle here as stated by law. Is the study being made to suggest proposed changes in the law?

Mr. MURRAY. We may wish to suggest proposed changes; yes, sir. I don't know.

Senator MAGNUSON. If the study is being made to say amen to the law, there it is.

Mr. MURRAY. The basis on which we have approached this, and we discussed the matter with Senator Potter, is that this is 1953. We have problems in 1953 and situations in 1953 which we did not have in 1936.

We are trying to approach this with as open a mind as possible as to what is necessary to maintain an adequate privately operated merchant marine under conditions that exist in 1953 and as far into the future as you can see.

Senator POTTER. Because we have some serious problems that I know you recognize and are familiar with, that the planning we do now will make the solving of those problems at a later date much easier. I am thinking particularly of this block obsolescence which we are faced with. It takes some long-range planning.

Mr. MURRAY. What we have hoped to do is come up with what it looks as if we need here in 1953. If it would appear that it requires any change in legislation, we could come to the Congress and ask for those changes. If no changes are necessary, we will also acquaint you with that, and then we are in your hands.

The purpose is to review this in the light of the changes in the situation since 1936.

Senator BUTLER. In the meantime, there would be no deviation from the concept laid down by the law of 1936?

Mr. MURRAY. No.

Fourth, with respect to direct Government participation in merchant shipping, Secretary Weeks and I are firm believers in the basic proposition that the Government should rely upon and utilize private American industry and free enterprise to the extent consistent with economic and security objectives. Thus, it seems clear to me that the various proposals which are before the Congress to require the transportation of United States Government cargo and passengers in ships which are privately owned and operated to the extent that this can be done at fair and reasonable American rates and charges, seem to me in principle to be highly desirable.

Senator BUTLER. Sometime back there was a suggestion that we turn over all of our cargoes to foreign bottoms. Of course, you are not in sympathy with that sort of proposal?

Mr. MURRAY. Personally, no.

Senator BUTLER. I think there was some arrangement among the NATO countries that all of our foreign travel and cargo to and from those countries would be carried in their bottoms.

Mr. MURRAY. As you know, the situation at the moment is that 50 percent of the mutual security commodities will go in American bottoms. That is a very involved question, and it involves other departments than the Department of Commerce. It involves our whole foreign aid, international trade concept. Any decision on that, I am sure

Senator BUTLER. We want the Department of Commerce to be on the lookout for that sort of thing.

Senator MAGNUSON. What decision can you make on 50 percent? Mr. MURRAY. It is in the law. When I say, "any decision," I am not talking about any executive decision; "any change," in that, I should say.

Senator MAGNUSON. That was in every foreign aid bill, that 50 percent, but it is now the law. If we want to change that, that is another story.

Mr. MURRAY. As it now stands, it is under active discussion at the moment.

Senator MAGNUSON. That 50 percent was sort of taken out of the

hat.

Mr. MURRAY. As you know, general agency operation of Government-owned ships since the outbreak of hostilities in Korea has been resorted to only when necessary to meet critical shipping shortages which seriously interfere with carrying out Government security and mutual-aid programs. As soon as, and as fast as, private tonnage became available to carry such Government cargoes at reasonable rates, our general agency ships were returned to the Reserve fleet. Senator BUTLER. I don't know how the other members of this subcommittee feel about it, but it seems to me that the constructions of the St. Lawrence seaway would only take the midwestern commerce of the United States and turn it over to foreign bottoms. If that comes into the study, I want to be heard on that.

Senator POTTER. I love you like a brother, but I wouldn't agree with you on that.

Mr. MURRAY. I noticed that Senator Potter took his glasses off when you started on that, Senator.

Senator BUTLER. I think it is a provable item, and certainly a fact, that we can't get as much as 10 percent, maybe not as much as 5 percent of our merchant marine, through a 27-foot channel; if that is not turning our commerce over to foreign vessels, I don't know what it is.

Senator MAGNUSON. I am glad I am on the west coast.

Mr. MURRAY. Similarly, Government ships are chartered for private operation only on the basis of findings, after public hearings, that the ships are to be used on a service required in the public interest and not adequately served, and for which privately owned Americanflag tonnage is not available for charter on reasonable conditions and at reasonable rates.

Fifth. With respect to clarification of ambiguities in the existing law, once fundamental objectives are determined and the basic legislative approach is agreed upon, the difficult problems of interpretation which have been experienced under the statutes as they now stand can be clarified one way or the other through appropriate congressional action. This is a problem of technicalities, not of major substance, at least at this early stage of our study.

May I revert to our fundamental problem: that of the high level of American wages which puts American-flag ocean shipping in foreign commerce at such a disadvantage? One aspect of this problem which should be examined is the need and desirability for some measure of subsidy to American-flag tramp and industrial carriers not committed, as are the subsidized lines, to serving one or more essential trade routes on a regular, scheduled basis, as common carriers. This, in turn, brings up the question whether we should continue to adhere to to the essential-trade-route concept or whether American-flag operators drawing subsidy should be free to ply any and whatever trade routes may from time to time offer the best chances of profit.

Senator MAGNUSON. We have two pieces of legislation before us on that. I suppose they will be sent down for a report from your Department.

Mr. MURRAY. I just think we have no ideas on the subject at this particular time.

Senator MAGNUSON. It has been up here many times.

Mr. MURRAY. They are the various problems that are up that we need to look into. The fact is that I almost hate to mention them because it always makes people nervous. But the fact remains that these are various considerations that need to be studied and looked at right now.

Senator BUTLER. This is off the record.

(Discussion off the record.)

Mr. MURRAY. It brings up the question whether subsidized operators should be free, in unrestricted competition with each other, to flock to whatever trade route has the largest cargo offerings, leaving the berths on the less profitable routes to grow cold or to be taken over by foreign-flag lines. It brings up the question of whether operating subsidy should be paid for the maintenance of a service to carry the foreign commerce of the United States or whether some other standard should be substituted such as the operation, as such, of ships meeting certain minimum standards of age, size, and speed. Thus,

even after we have determined, in consultation with the Department of Defense, the minimum nucleus of American-flag ships which should be kept in operation under present international circumstances, we are still faced with the most far-reaching questions as to the basic philosophy which should underlie the grant and administration of aid in one form or another necessary to equalize the difference between American-flag and foreign-flag costs of operation.

So far, I have touched on the major problems in the operating field. No less important, both from the point of view of defense and the overall health of our national economy, is the maintenance of adequate shipbuilding and ship-repair facilities. The American shipbuilding industry, which, with the exception of ships which are to be documented under the American flag, likewise competes in an international market, is faced with the similar problem of high wage costs which, because of the absence of mass production and its techniques, cannot be translated into competitive lower unit costs.

The necessity for maintaining a reasonable mobilization base for production in the shipbuilding field is, I believe, obvious. Prior to World War I, our Nation had no shipbuilding industry, yards, ways, skilled labor, or management experience. Such an industry was created under the pressure of that war. Despite the vast expenditure then entailed, only a handful of the World War I built vessels were ready in time for war use. Again, just prior to World War II, this country had some ships and some major shipyards in operation. I think it is clear that, unless there is a going industry and management experience in existence at the outbreak of a war, the time required to build and man an industry is greatly prolonged because of the absence of an existing nucleus around which the expansion may take place. Had we not had this nucleus at the beginning of World War II, there is grave doubt whether completely new ships and the many new shipyards could have been built and operated in time. The minimum nucleus of an existing, operating American shipyard industry, at least from the point of view of national defense, is one of the subjects now under study by the joint Maritime-Defense Department working group to which I have referred earlier.

The maintenance of a merchant marine under American flag, and the orderly replacement of American-flag ships as they become overage, are, of course, directly related to the maintenance of the American shipbuilding industry. In the absence of an Americanflag merchant fleet, our American shipyards, with their high cost of labor, would, of course, be at a serious and probably a fatal competitive disadvantage as against the other major shipbuilding centers of the world which can produce ships at only from 50 to 60 percent of the cost of construction in the United States. Thus, the problem of maintaining an adequate operating American-flag fleet cannot be separated from the problem of maintaining an adequate operating American shipbuilding industry. The importance of the shipbuilding industry to national defense is self-evident. During the last war, the percentage of Government expenditure for wartime shipbuilding facilities was exceeded only by the percentage of expenditure devoted to two other industries: ordnance and aircraft manufacture. Back to the operating field, while our survey is by no means complete, very detailed statistics are now being gathered on seafaring wages paid by American-flag operators, both common and contract