activity, the diffusion of that impact throughout the national economy, as well as local economies, cannot be discounted.

In this connection, it seems relevant to emphasize that the latest "Census of Manufactures," published by your Department, shows that the U.S. shipbuilding and ship repair industry contributed more than $3 billion to the Nation's economy during the year 1958. Of this amount, $1.6 billion accounted for the total value of work performed that year; nearly $40 million was spent by the yards for capital improvements; about $670 million was paid in wages to the yards' employees; and more than $710 million represented the purchase of materials and supplies used by the shipyards. Additional benefits in the form of corporate and employees payroll taxes which flow directly into the Federal Treasury would, of course, have to be added to the total.

B. Balance of international payments.-The Secretary of the Treasury, on July 8 last, informed the Congress that the United States "has no time to waste" in substantially reducing or eliminating the balance-of-payments deficit. This serious situation is, in part, due to the expenditure of massive sums of dollars abroad, and it would appear to be almost axiomatic that the expenditure of additional dollars with foreign shipyards will hardly be in the direction of eliminating or reducing the balance-of-payments deficit. A ripple in this respect could multiply and set in motion a tidal wave which could be harmful, in more ways than one, to our national interest.

But

C. Defense strategy.-High operating costs, because of the high standard of living which exists in this country, is a factor which somehow is overlooked in any discussion of initial construction costs for domestic ship operators. operating costs are perhaps even more significant, and, as has already been suggested, the competition resulting from selective ratemaking on the part of the railroads has a bearing on this factor. It is but a single step from foreign procurement to foreign crewing-and from there to sheer conjecture and uncertainty with regard to national security and national survival.

At this point, it might be helpful to quote from the latest appraisal (Apr. 24, 1963) of "Ocean Shipping To Support the Defense of the United States" as prepared by the Deputy Chief of Naval Operations (Logistics) for the Honorable Warren G. Magnuson, the distinguished chairman of the Senate Committee on Commerce:

"Prior to the outbreak of World War II, the part of U.S. shipping that was engaged in the coastal and intercoastal trade was the largest segment of the U.S. merchant marine. At that time, nearly 700 ships took part in the carriage of our deepwater domestic trade. Shortly after our entry into the war, practically all of this shipping, which at that time represented about 60 percent of our total ocean-carrying capability, was put into service, usually transocean, directly supporting the war.

"With the domestic deepwater fleet engaged, worldwide, in supplying the Allied armed forces, the domestic trade which they formerly carried was absorbed by other modes of transportation. The domestic deepwater common carriers have never regained their former status. As of September 30, 1962, only 23 ships were engaged in intercoastal trade and only 2 companies were furnishing common carrier intercoastal service.

"Ships engaged in coastal and intercoastal trade occupy a particularly significant position relative to the emergency use of transportation. Ships in the coastwise trades are the most readily available for emergency usage of any ships in the U.S. merchant fleet. In their normal operations they are always close to U.S. ports, ready immediately to handle such high-priority movements as may be necessary. Of course, to be available for immediate use, these ships must be active and operating commercially at the time they are first needed." It seems only necessary to add that history has proven that foreign shipping in times of crises cannot furnish this measure of reliability. On the contrary, the unreliability of foreign shipping in emergencies should need no recounting at this late date. Even with the NATO alliance foreign-flag vessels continue to serve Cuba, and I believe your Department within the past 2 weeks, issued a listing showing how this trade has increased. Clearly, there are instances in which our national objectives do not coincide with those of our allies.

D. Transportation complex. The previous observations form a good setting for this point which can best be briefly stated in this manner. The entrance of foreign-built ships into the domestic trades will directly and cumulatively affect U.S. shipbuilding, domestic shipping. railroads, and trucking, in that order, with ultimate effects on the national economy as a whole.

It is suggested that the coastwise principle protects only domestic shipyards and domestic shipping. But the principle also has provided a "buffer" for other forms of domestic transportation and supporting industries. Use of foreign-built, foreign-flag, and presumably foreign-crewed, vessels in the domestic trades can only take business away from the railroads and trucks, and open up all sorts of new transportation problems for the Department of Commerce. By inviting new problems-of perhaps even greater magnitude and severity than those which presently exist-the transportation crisis in this country will not be solved, and other national problems will only be accentuated. E. Way of life.-To paraphrase a statement by an unidentified Capitol Hill figure: "If we are now to resort to foreign shipbuilding, we might as well import lower salaried legislators from West Germany, Japan, France, or wherever, to sit in Congress, or the seat of Government, and enact laws to bring about the complete demise of all of U.S. industry." Though that remark was surely made facetiously, there is more than an ounce of truth to the proposition that U.S. industry must and should effectively be preserved and efficiently expanded for selfish national reasons. How else is our way of life-the envy of the balance of the world-to be sustained? How else are new jobs for 35 million more people to be found over the next decade? The Department of Labor has warned that these jobs must be found or created and any reliance on foreign shipbuilding for domestic requirements would only inhibit the Nation's efforts to solve this dilemma.

The Honorable Carl Vinson, the highly respected chairman of the House Committee on Armed Services, in a stirring speech recently on "The Future of American Seapower" before the American Society of Naval Engineers said:

"Mankind is becoming increasingly dependent upon the natural resources of the sea.

"Our ability to utilize and protect these resources will depend upon the decisions we make now.

"It is my considered judgment that seapower and our continuing ability to preserve the freedom of the seas and the availability of its products may well determine the future destiny of this Nation, and perhaps of all mankind.

"The control of the seas is indispensable to our progress and our survival. "The members of this great society have a tremendous responsibility-for the future of this Nation may well rest upon your ability to produce the ships that will maintain the freedom of the seas for generations of Americans yet unborn."

The U.S. shipyard industry-an element of seapower of equal importance with merchant and naval ships-has demonstrated its ability to turn out the world's best ships. In the process, shipyard prices have been coming down in spite of rising labor and material costs.

The roots of higher costs in the United States are deeply imbedded in the economic structure of our country. Our higher standard of living is the cause of higher costs in shipbuilding and other industries. Understandably, we point to this high standard of living with pride. With equal fervor, we contend that the natural corollary of higher costs is no indication whatsoever of ineptitude. The general trend of declining shipyard prices in spite of increasing costs bears out that latter statement.

Additionally, great strides have been made in modernizing U.S. shipyards. More that $250 million has been invested in capital improvements during the last 10 years. These actions represent more than a desire to survive in a highly competitive field of endeavor-they represent an optimism in the future.

It was General Marshall who said during the early difficult days of World War II: "We used to have all the time in the world and no money, now we've got all the money and no time." We want to put time and money-and essential skills to work in the national interest.

With the operators and the naval architects and marine engineers, we are confident the U.S. shipyard industry can design and build ships at minimum costs to service all of the domestic trades. With the enlightened cooperation of maritime and shipyard labor, we believe the outlook for the future could be improved. Through joint and coordinated efforts and even leadership-on the part of Government, labor, shipyard and ship operator, we feel some solid chances for progress can be developed. To this end, a conference of U.S. shipbuilding, labor, and Government officials, under the auspices of the Department of Commerce, might prove timely and beneficial.

We feel you would agree that future opportunities for the shipyards and shipyard workers of the United States should not be jeopardized by any legislation

which would contemplate reliance on foreign shipyards-even as an alternative. With highest personal regards always, I am,

Cordially,

EDWIN M. HOOD, President.

Senator BARTLETT. We also have for the record a statement in opposition submitted by Ray R. Murdock, legislative director of the American Maritime Association.

(The statement follows:)

STATEMENT OF RAY R. MURDOCK, LEGISLATIVE DIRECTOR, AMERICAN MARITIME ASSOCIATION

The American Maritime Association, consisting of 154 American-flag shipping companies, is very much opposed to the bill, S. 2100, and all similar legislation, on the following grounds:

(1) It would constitute a further and permanent breach of the Jones Act (46 U.S.C. 883) which is the only protection the rapidly dwindling coastwise and intercoastal waterborne trades have.

(2) It would, therefore, be deeply injurious to the American-flag merchant marine.

(3) In our opinion, it would provide no substantial benefit to the lumber industry.

S. 2100 is apparently designed to make permanent the Neuberger amendment (Public Law 87-878) enacted October 24, 1963, which authorized the Secretary of Commerce to waive the provisions of the Jones Act cited so as to permit shipment of American lumber from American ports to Puerto Rico in foreignflag ships.

You will recall that this association vigorously opposed the original Neuberger bill to permit waterborne shipment of lumber between American ports on foreignflag vessels. (See testimony of E. N. Altman in pt. I of your hearings in the last session on impact of lumber imports in the U.S. softwood lumber industry, p. 263.) We had little opportunity to oppose the final version of the Neuberger amendment, because it was adopted without hearings in either House.

Experience under the Neuberger amendment

In our opinion, the Neuberger amendment has proved beyond question its own futility, and the futility of any attempt to aid the American lumber industry by canabalizing the American-flag merchant marine. Let me review the history of developments under the Neuberger amendment.

Since the enactment of the amendment, 12 lumber companies have applied to the Secretary of Commerce for waivers. All but one of these companies, Warsaw Lumber & Trading Co., of Georgia, operate in the Pacific Northwest. All of the applications were granted, although resisted by the American Maritime Association, and others. In the testimony before hearing examiners, the applicants expressed great optimism about (1) the amount of lumber that waivers would permit them to sell in Puerto Rico; and (2) their ability to obtain freight rates on foreign ships equal to or below the Canadian rate of $36.

Thus, spokesmen for Dant & Russell planned to sell between 9 and 12 million board feet (p. 507), and stated that a freight rate of $40 per thousand board feet would make shipment unprofitable, and that they would start negotiating for a rate at $36 with the hope of bargaining it downward. Simpson Timber Co. expected to sell 2 million board feet of lumber a month or at least 4 to 5 million board feet a year (p. 513). Oregon Lumber Export Co. expected to sell 6 million board feet a year (p. 509). Yet out of the 12 companies only 5 have actually shipped lumber to Puerto Rico, as follows:

All of the lumber shipped under waivers was shipped at a rate of $40 per thousand board feet, which is $4 above the maximum rate the lumber companies said they would have to or could profitably pay.

No lumber company in any part of the United States other than the Northwest has shipped any lumber whatever to Puerto Rico, presumably because they have been unable to obtain foreign-flag ships at the rate they wanted and expected. The total production of softwoods in the northern part of the United States in 1960 was 1.2 billion board feet.' So that of the total production, the amount shipped to Puerto Rico under the Neurberger amendment, 5.6 million board feet represented 0.46 percent. In 1961, we imported 3.9 billion board feet of softwoods from Canada. So that the shipments of 5.6 million board feet under the Neuberger amendment was only 0.14 percent of our imports from Canada.2

It is therefore uncontradictable that the Neuberger amendment has failed miserably to enable the northwest lumber industry to capture the Puerto Rican market, or to alleviate its so-called depression.

Assuming a conference rate from Northwest ports to Puerto Rico of $56.94 (the rate varies depending on the type of lumber, etc.), the total savings realized by the lumber companies which shipped lumber to Puerto Rico amounted to about $95,000. But even this comparatively insignificant amount of supposed savings is not accurate because, as set forth below, this association arranged to make available on a specially equipped ship for the shipment of lumber from the Northwest to Puerto Rico at $40 per thousand board feet, or less, the rate at which the lumber was actually shipped under the waivers. It would be unreasonable to hope this perpetuation of the Neuberger amendment now under consideration would have other or larger results than have been obtained in the last year. And for this microscopic and dubious benefit to the lumber industry we are sacrificing any hope of recovery of the domestic trades.

Is the lumber industry depressed?

In the past few years we have heard a great deal about the depressed condition of the Northwest lumber industry. It is clear from Government reports that imports of softwoods from Canada have increased greatly and almost steadily since 1947. For example, in 1947 we imported 948.1 million board feet of softwoods from Canada; in 1961 we imported 3.9 billion. It is also true that the production of softwoods in the United States has stayed fairly stable, or has slightly declined, in the past few years. However, we have the word of one of the most ardent and effective supporters of the Northwest lumber industry, Senator Morse, of Oregon, that the Northwest lumber industry is enjoying profits and progress. On September 13, 1963, at page 16067, Senator Morse inserted in the Congressional Record a recent report by Dun & Bradstreet. Among other things, in introducing the report, Senator Morse said:

*

"This report shows that 1962 was the second most prosperous year since 1957 for the domestic lumber industry. *** These [lumber] firms enjoyed a median profit from sales of 3.88 percent, just below the 1959 6-year high of 4 percent * * median profit ratios on both net worth, which were 8.27 percent, and working capital, which were 17.3 percent, showed a considerable margin over 1961. *** These gains and profit were achieved despite the fact that consumption of lumber did not achieve the 1959 record level. Failures among lumber manufacturers reached the lowest point since 1956. ***"

The Senator ventures the opinion that this improvement in the economic situation of the lumber industry has been achieved in part by direct governmental action, but more especially because the lumber interests of the United States and Canada have worked out a mutually beneficial cooperative program. The Senator says:

"***the lumber industry of the two nations can achieve greater prosperity on a mutually beneficial basis through genuine cooperative effort than by any other route."

We congratulate the lumber industry upon its recovery, and upon its efforts to achieve self-help. We wish we could make such an optimistic report on the recovery of the American-flag domestic waterborne trades. But unfortunately, in spite of scattered good signs here and there, the maritime industry continues to decline.

We think the cooperative effort between American and Canadian lumber interests flows from perfectly natural causes. Indeed, many American lumber

1 "The Demand and Price Situation for Forest Products," p. 41. etc., U.S. Department of Agriculture, Forest Service, and Agricultural Stabilization and Conservation Service. September 1962.

2 Footnote 1, supra, p. 42.

3 Fn. 1, supra, p. 42.

companies have extensive operations in Canada, as the testimony before the Maritime hearing examiners reveals. We have recently heard that Georgia Pacific the largest shipper of American lumber to Puerto Rico under the Neuberger amendment, has moved a substantial portion of its productive activity to Canada.

It should be noted that, in this sense, the American lumber companies which are complaining about Canadian competition are really engaged in competing with themselves, that is, their Canadian operations versus their American operations. Nor is this unique. The spokesman for Warsaw Lumber Co., testified that the company has large holdings in Honduras, and that a part of its Honduran production is shipped to Puerto Rico. Perhaps it would be worth while to investigate to what degree American-owned foreign lumber operations are competing with American lumber operations.

We submit that it is impossible to breach the Jones Act without sinister effects. For example, in two instances the vessels utilized, after the granting of the waiver by the Secretary of Commerce, were owned by operators who have actively engaged in carrying cargo to and from Communist China. The Tulane, a Norwegian vessel, is owned by the Wilh-Wilhelmsen Co. of Oslo, Norway, and was booked by the Oregon Lumber Export Co., Seaboard Lumber Co., and the Simpson Timber Co., in March to carry their lumber to Puerto Rico. The Nias, a Dutch vessel, owned by the N. V. Stoomv Maats, Nederland, Amsterdam, was utilized by the Oregon Lumber Export Co. and the Dant & Russell Lumber Co. to ship lumber to Puerto Rico in April, 1963. Both of these steamship companies have been extremely active in carrying cargo to and from Red China.

The American-flag merchant marine has endeavored to cooperate with the lumber industry, but has been rebuffed

The hearings before the hearing examiners revealed that the lumber companies have made little if any effort to find American shipping available to carry their cargo. All of them testified that they had requested brokers to ascertain the availability of liner service. They completely ignored, and continue to ignore, the availability of American tramp ships to carry their products. We do not know the cause of this singular refusal of lumber companies to seek Americanflag service, but we know it has contributed a good deal to the effectiveness of their competitors. In passing, we also wish to point out that the published liner tariff of approximately $56 per thousand board feet now in effect between Northwest ports and Puerto Rico is largely mythical. No cargoes have been offered, no shipping service is available, and no effort has been made by the lumber industry to correct this condition. If the existing conference rate were doubled, or halved, it would have no effect upon the lumber industry because American-flag ships are not sought or used, and for several years have not

been.

Early this year in an effort to serve the best interests of both maritime and lumber industries, the American Maritime Association initiated a series of meetings with representatives of major lumber producers for the purpose of ascertaining whether or not the problems presented by the lumber industry could be successfully resolved without damage to maritime.

Basically, AMA proposed that a specially equipped American ship be introduced into the lumber trade for the purpose of carrying all available lumber cargo from the Pacific Northwest to Puerto Rico, thereafter proceeding to the Atlantic coast as a final place of discharge for lumber cargo bound for that area from the Pacific Northwest.

The softwood lumber trade to Puerto Rico will not in the foreseeable future be sufficient to keep even one ship full of lumber operating in that trade from the Pacific Northwest. Therefore, Puerto Rico must be treated as a way-port and any ship in that trade should have a full cargo of lumber, stopping in Puerto Rico en route to other ports where the balance of the full cargo could be discharged. We point out that there is at present no American-flag service be tween Northwest ports and Puerto Rico, simply because the lumber companies refused to martial their cargo, make no effort to ship in sufficient quantity to make American-flag service feasible, and in other respects completely refused to cooperate with the American maritime industry.

AMA representatives, in behalf of certain member companies, proposed that if the proper type ship, with specialized cargo gear, could be introduced into the lumber trade and kept operating with full cargoes eastbound, many problems could be met.