ANNEX INFORMAL REPORT OF MR. BUTLER OF SHIPPING AND SHIPBUILDING STUDY IN EUROPE, SEPTEMBER 17-OCTOBER 15, 1953 UNITED STATES SENATE, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Subject: Study of European Shipping and Shipbuilding. Chairman, Senate Interstate and Foreign Commerce Committee, DEAR MR. CHAIRMAN: Pursuant to Senate Resolution 41 and the authorization thereunder, establishing the Special Subcommittee on Maritime Subsidies, I visited western European shipping and shipbuilding centers during September and October 1953. The purpose of this trip was to gain as much firsthand knowledge as possible, in the available time, of the European picture, with special reference to comparative costs of construction and operation and other factors pertinent to the competitive relationship between American and European shipping. At the same time, I took occasion to become familiar with the characteristics of the steamships United States and Independence, 2 of our 3 postwar passenger ships and potential troopcarrying vessels, as well as observations as to the workings of our foreign aid programs in the reconstruction of this important phase of western European economy. In the course of any discussion of Government aid to American shipping, there is invariably much testimony concerning European versus American construction and operating costs and other phases of foreign shipping policy. While it is obviously impossible in a period of a few weeks to hope even to scratch the surface of the complexities of the international maritime situation, we believed that such a trip would provide valuable insight into the basic elements of the problem and serve inestimably as a guide in the appraisal of representations made on the subject to the subcommittee by witnesses. When the trip was originally planned, it had been hoped that Hon. Warren G. Magnuson would be able to participate. Unfortunately, other commitments caused the cancellation of his plans, and the visit was carried out by myself with the assistance of John M. Drewry, subcommittee counsel. We crossed on the steamship United States, of United States Lines Co. (leaving New York on September 17 and arriving at Southampton, England, in the evening of September 22). The return trip was made on the steamship Independence, of the American Export Lines Co. (leaving Naples, Italy, on October 6 and arriving at New York in the afternoon of October 15). During our time abroad we visited England, 10 France, the Netherlands, and Italy. Major shipyards were visited in the Netherlands and Italy, and conferences were had with leading authorities on shipping and shipbuilding in all four countries. A projected visit to British shipyards on the Clyde in Scotland was canceled due to the illness of subcommittee counsel in London. There is attached hereto a brief résumé of the subcommittee trip. GENERAL OBSERVATIONS Generally speaking, I noted throughout our trip that reconstruction and modernization of shipbuilding facilities in western Europe seems to be at a very advanced stage. This seems to be due in part to the direct and indirect effects of Marshall plan aid, and very directly to the heavy volume of shipbuilding orders which have been placed in all yards since the war. Western Europe has enjoyed the patronage of a number of American companies for many important units, especially in the tanker and ore carrier classes. In short, there has been a real shipbuilding boom throughout Europe since 1946. However, with the possible exception of the Netherlands, the countries we visited have reached a leveling off, or even a receding, stage as far as new orders are concerned. Nevertheless, western Europe is in a position to see a continued high level of shipbuilding activity beyond 1956. 1. United Kingdom.-The British are high among the leading shipbuilders of the world, and it was with the greatest regret that we found it necessary to cancel our scheduled visit to several of the Clyde yards in Scotland. It is my understanding, however, that these yards are producing at a very high level and still have a substantial backlog of orders. Due to lack of room for expansion they are handicapped in the adoption of some of the newest techniques relating to prefabrication, and yard layouts which tend to greater efficiency in the flow of materials. On the other hand, subject to the innate restraints of British conservatism, the widest use is being made of the latest developments in shipbuilding technology and varied approaches are being experimented with to overcome space limitations and the necessity for major subcontracting or otherwise having to perform varying amounts of large work away from the ship ways. There are no governmental inhibitions on construction of ships for foreign account in the shipyards of the United Kingdom. In fact, foreign shipbuilding contracts from friendly sources are encouraged. This, plus the traditional high quality of British workmanship, seems to insure a continued substantial shipbuilding activity in Britain, even though costs might be lower elsewhere. 2. France. While I do not understand that shipbuilding has ever been as significant in France as it has in the United Kingdom, it has nevertheless been recognized as a key industry from a national standpoint. In recent times many great ships have been produced in French shipyards. Heavy damage to French shipbuilding facilities during the war and internal unrest following the war are only now beginning to be overcome. Some rather limited major ship construction is being undertaken in recently rehabilitated French yards, and further impetus is being given by the NATO offshore procurement program which will go far to preserve the existence of a shipbuilding industry in this important part of the free world. Unfortunately, it seems that French industry is unduly beset with labor problems unrelated to the work that must be done. The Government is understood to be experimenting with forms of subsidization of shipbuilders irrespective of the nationality of the ship purchaser. 3. The Netherlands.-Your subcommittee had its best opportunity to see European shipbuilding at first hand in the Netherlands, where we were privileged to visit 2 leading shipyards in the Rotterdam area. These were: Wilton-Fijenoord, N. V., Schiedam, Holland, and Rotterdam Dockyard, Rotterdam, Holland. Through the generous hospitality of the executive of these 2 companies during a full day of physical inspection, it was possible to see 2 representative shipyards in operation. Both of these yards had been extensively damaged during the course of the war, from both Allied and enemy sources. For them to continue in production, it was necessary for them to be extensively rehabilitated. With the combination of postwar Allied aid and the demand for new tonnage, they are now in excellent shape and are filled with orders for several years to come. Fortunate in the availability of area for expansion, each has been able to apply benefits of American production experience during World War II and develop many improvements. Internally the Netherlands is still in an austerity economy, although in foreign commerce most competitively active. Consequently, their economy, together with highly efficient shipbuilding facilities, places them in the best competitive position of all European shipbuilders. Let me say, too, that I cannot be too grateful for the high degree of friendly cooperation accorded by all whom we were privileged to meet during our brief visit to the Netherlands. While the competitive spirit was found to be keen, there was also noted a great understanding of our own maritime problems and an appreciation for the necessity behind the different approaches we have traditionally made to them. Like the British, the Dutch invite contracts from foreign sources for shipbuilding ventures in their country. While our study was not comprehensive enough to make comparisons between all yards in one country or yards in the European countries generally, it was noted that, at least in part, the efficiency of the Dutch yards visited was attributable to the coordination of ship repair with shipbuilding activities, and the general integration of all procedures. After a very full day visiting the two shipyards mentioned, we were also privileged to spend some time with port authority representatives who gave us considerable enlightenment on the shipping picture in the area. It was interesting to think upon the close similarity and outstanding differences between their great Rhine traffic and the commerce of our own inland waterways. 4. Italy.-Italy is a natural maritime power with its many harbors and long coastline and in the prewar years this country was possessed of a substantial oceangoing merchant marine. Most of its merchant vessels were destroyed during the war and its shipbuilding potential was either destroyed or substantially damaged. Tonnagewise, it it is my understanding that this country has approximately regained its prewar position-much of it with American war-built vessels, purchased under the Merchant Ship Sales Act of 1946. For complex reasons, however, going back to the early thirties, the Italian shipbuilding industry and, presumably, much of its other industry, has been unable to regain substantial footing. Thus, today, we find Italy with the highest shipbuilding costs in all of western Europe and the most heavily subsidized shipbuilding industry. It was our privilege to visit one of the great Italian shipyards at Monfalcone, near Trieste. It was obvious, even to a layman, that this shipyard bore the potentialities of the highest competitive. efficiency, even though it was at that time dependent solely upon a government-fostered program of tanker construction. Practically no, if any, foreign orders were in Italian shipyards, largely because of excessive shipbuilding costs emanating from unrealistic labor practices in relation to the national economy. COMMENTS 1. Steamships "United States" and "Independence" These vessels were built, together with the steamship Constitution (sister ship of the Independence), as part of an urgently recommended construction program initiated in early 1948, in the face of mounting tensions of the cold war. Three other passenger vessels which had been designed for the American President Lines were commenced under this program, but were taken over by the Navy before completion in the early stages of the Korean war and converted to troop transports. Some time after the construction differential had been determined, contract terms agreed upon, and construction well advanced, a special report of the Comptroller General criticized the contracts, contending that the construction differentials were improperly arrived at, and that excessive allowances were made for defense features. Although the ships were delivered and are in operation the controversies are continuing. Because of the obviously hampering effect on the development of a passenger ship construction program, as well as the fact that these vessels are the most advanced examples of modern American shipbuilding, the subcommittee made a point of traveling aboard the United States and the Independence. I cannot use superlatives too high in commenting on these great ships. Despite its great beauty and comfort as a commercial passenger ship, one has only to inspect the interior of the United States to appreciate the fact that it is, first, an invaluable naval auxiliary and troop carrier and, second, a luxury liner. For instance, I am told this vessels is capable of carrying as many as 10,000 troops and their equipment within 24 hours after being taken over for such purpose. And because of her complete air conditioning, fresh water producing facilities, and extremely long range, it is able to proceed at once to any part of the world. No foreign vessel is capable of comparable performance. The vessel contains many special features, including speed well in excess of commercial needs, and maximum safety, to make her readily adaptable for full conversion in the shortest time to carry many more troops. Similar characteristics are also extensively built into the Independence and Constitution, making these three vessels probably the most valuable single potential military auxiliary units in the American merchant marine. Nevertheless, when one considers the fact that American troops are stationed in 49 foreign countries and all American overseas possessions and territories throughout the free world-even more widely dispersed than at any time during World War II-it seems clear that we are woefully deficient in the possession of fast modern passenger vessels. The warning inherent in the report of the President's Advisory Committee on the Merchant Marine in 1947 should be heeded more than ever. The President's Advisory Committee recommended as follows: Building program.-The estimated mobilization requirements for the National Military Establishment for troop transports together with our great deficiency in passenger-carrying ships for peacetime service, indicate a program of ship construction of about 46 passenger-carrying vessels over the next 4 years, and the inception of a freighter and tanker program. *** It is of the utmost importance that initiation of actual construction be expedited. The ships contemplated will all be of extreme value in a national emergency. They should in each case be subject to approval by the armed services for suitability for mobilization. Not 4, but 7 years have passed since the above recommendation was made but only 6 passenger vessels, including the United States, Independence, and Constitution have been built. Without in any way minimizing the importance of the merchant fleets of allied nations in the event of the need for united effort in another war emergency, it seems obvious to me that our ocean transport needs must be met through the availability of our own tonnage. The current situation in Europe is far from sufficiently well settled to allow for dependable logistic planning based upon the use of foreignflag vessels and in fact it would seem that we must provide a merchant marine adequate for our own world commitments in order to bear our full responsibility in the free world. From the economic standpoint the importance of modern Americanflag passenger vessels on the trade routes of the world is incalculably great in the maintenance of our international prestige and is essential to the carrying out of our international economic policies. The same is, of course, true to an equal or even greater degree in the case of cargo ships providing fast, regular, and dependable services at reasonable rates to exporter and importer alike. In connection with the foregoing observations it was very revealing to me to find a great degree of appreciation of the importance of the merchant marine among people in all walks of life in the western European countries. Moreover, while they clearly sought every advantage in competing with our shipping, they nevertherless felt that the United States must have its own merchant marine, both to protect our commerce and to be available in the event of war. While my trip was made both ways on American vessels, and therefore exact comparisons cannot be made, I wish to report that I believe the service, comfort, and convenience found on the United States and Independence to be unsurpassed. I have often heard unfavorable comments regarding service aboard American passenger vessels, but I cannot believe that there is any validity in them now, if there ever was. The United States Lines and the American Export Lines and the appropriate unions are to be commended for the excellence of their steward departments. 1 |