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Full text of "Post-war economic policy and planning. Joint hearings before the special committees on post-war economic policy and planning, Congress of the United States, Seventy-eighth Congress, second session, pursuant to S. Res. 102 and H. Res. 408, resolutions creating special committees on post-war economic policy and planning"

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b CjS^^^cjj Ml 


Given By 












H. Res. 408 and H. Res. 60 



SEPTEMBER 25-29; OCTOBER 24-27; NOVEMBER 29-30; 
DECEMBER 1, 1944; AND JANUARY 11, 1945 


Printed for the use of the Special Committee on Post- War 
Economic Policy and Planning 












H. Res. 408 and H. Res. 60 



SEPTEMBER 25-29; OCTOBER 24-27; NOVEMBER 29-30; 
DECEMBER 1, 1914, AND JANUARY 11, 1945 


Printed for the use of the Special Committee on Post-War 
Economic Policy and Planning 

«579 WASHINGTON : 1945 

ERlhtENUEi'fi Of DWUifef^ 

MAY 8 1945 




JERE COOPER, Tennessee 
FRANCIS WALTER, Pennsylvania 
JERRY VOORHIS, California 
THOMAS J. O'BRIEN, Illinois 
JOHN E. FOGARTY, Rhode Island 

COLMER, Mississippi, Chairman 

CHAS. L. GIFFORD, Massachusetts 
B. CARROLL REECE, Tennessee 
RICHARD J. WELCH, California 
CHARLES S. DEWEY, Illinois ^ 

Subcommittee on Foreign Tuade and Shipping 

EUGENE WORLEY, Texas, Chairman 
FRANCIS WALTER, Pennsylvania RICHARD J. WELCH, California 


Marion B. Folsom^ Staff Director 

Vkrgil D. Reed, Consultant He.nry B. Arthur, Consultant 

Gdy C. Gamble, Economic Adviser 

> Replaced in 79th Con^ 
2 Replaced in 79th Con? 

by Jay LeFevre, New York, 
by Sid Simpson, Illinois. 


Statement of — Page 
Land, Vice Admiral Emory S. (U. S. Navy, retired). Chairman, United 

States Maritime Commission 608 

Macauley, Capt. Edward, (U. S. Navy, retired) member 643 

Conway, Capt. Granville, Deputy Administrator, War Shipping Ad- 

minist ration 663 

Radner, William, general counsel, War Shipping Administration 668 

Taylor, Wayne C, Under Secretary, United States Department of 

Commerce 70 1 

South Trimble, Jr., solicitor, Department of Commerce 705 

Lyons, Thomas E., e>«cutive secretary, Foreign-Trade Zones Board. _ 715 
McCoy, H. B., Chief, Division of Industrial Economy, Bureau of For- 
eign and Domestic Commerce 718 

Mack, J. A., Director, Field Service, Bureau of Foreign and Domestic 

Commerce 721 

Schnellbacker, E. E., Chief, Division of Commercial and Economic 

Information, Bureau of F'oreign and Domestic Commerce 726 

Hauser, Philip M., Assistant Director, Bureau of the Census 731 

Ely, J. E., Chief, Foreign Trade Division, Bureau of the Census 733 

I'airchild, I. J., Chief, Division of Trade Standards, Bureau of Stand- 
ards 739 

Burden, W. A. M., Assistant Secretary of Commerce 756 

Stanton, C. I., Deputy Administrator, Civil Aeronautics Administra- 
tion 758 

Smith, Lt. Comdr. Paul, Chief, Aeronautical Chart Branch, Coast and 

Geodetic Survey ^ 761 

Reichelderfer, F. W., Chief, Weather Bureau 763 

Currie, Lauchlin, Deputy Administrator, Foreign Economic Adminis- 
tration 769 

Ryder, Oscar B., Chairman, United States Tariff Commission 815 

Dye, Alexander V., consultant. National Foreign Trade Council 849 

Rosenthal, Morris S., executive vice president. Stein, Hall & Co '875 

Minor, Clark H., president. International General Electric Co., New 

York 906 

Wolf, George W., president. United States Steel Export Co., New 

York 927 

Otterson, John E., American Maritiine Council 941 

Patchin, R. H., vice president, W. R. Grace & Co., New York 959 

Hoover, Calvin B., dean. Graduate School, Duke University, Durham, 

N. C 987 

Patchin, R. H. (continued) 1004 

Roth, Almon E., president, National Federation of American Ship- 
ping, Washington 1009 

Clayton, W. L., Surplus War Property Administrator. 1029 

May, Stacy, chairman, committee on international policj% National 

Planning Association, Washington 1037 

Acheson, Dean, Assistant Secretary of State 1072 

Pierson, Warren Lee, president, Export-Import Bank, Washington 1099 

Smith, H. Gerrish, president, Shipbuilders Council of America 1121 




at p. — 

15 Questions prepared by committee staff and answered by 

Vice Admiral Land and staff 

16 Post-war training for officers and seamen of the merchant 

marine of the United States 

17 Memorandum re H. R. 1585 from Maritime Commission. 

18 Foreign-trade zones as an aid to trade and shipping ^ 

19 The Bureau of Foreign and Domestic Commerce, its 

functions in international trade 

20 Overseas trade functions of the United Kingdom Board 

of Trade 

21 Organization of the United Kingdom Board of Trade for 

overseas trade 

22 Export credits guarantee department of the United King- 


23 Canadian Export Credits Insurance Corporation Act 

24 Foreign Economic Administration 

25 Proposal of National Council of American Importers 

addressed to the National Foreign Trade Convention 

26 A Practical Approach to a World Trade Board, by Otto T. 


27 Helpful Government Regulation Urged if World Adopts 

Controls, by Morris S. Rosenthal 

28 Maritime's Interest in the Air Market, by Almon E. Roth, 

president. National Federation of American Shipping 

29 Statement of Policy on Overseas Aviation, by the National 

Federation of American Shipping 

30, World War I Indebtedness to the Government of the 
United States, July 1, 1944 

31 United States exports (including re-exports) to and imports 

of general merchandise from the Far East, 1926-39 

32 Johnson Act; its relation to the Export-Import Bank 

33 Shipbuilders Council of America for the fiscal year ending 

Mar. 31, 1944 

34 Letter and additional testimony, H. Gerrish Smith, presi- 

dent. Shipbuilders Council of America 


on p. 































House of Representatives, 


THE Special Committee on Post- War 

Economic Policy and Planning, 

Washington, D. C. 

The subcommittee met, pursuant to notice, at 10 a. m,, in room 
1 1304, New House Office Building, Hon, Eugene Worley presiding. 

Present: Representatives Worley (Texas), chairman; Cooper 
(Tennessee) ; and Wolverton (New Jersey). 

Also present : Representative Bland (Virginia) ; M. B. Folsom, staff 
tiirector; H. B. Arthur, consultant; and Guy C. Gamble, economic 

Mr. Worley. The committee will come to order. 

On January 26, 1944, Hon. William Colmer, of Mississippi, pre- 
sented IIonse'Resolution 408 to the House for consideration. During 
the course of his address he very ably pointed out the reasons why 
the Congress should immediately give attention to meeting the chal- 
lenges which the war had brought about. He laid particular stress 
upon finding early answers to the grave problems which would follow 
in the wake of war. 

Mr. Colmer cited a paragraph from an address made by Hon, Sam 
Rayburn, Speaker of the House, as follows : 

We ai-e endowed, by nature and by our capabilities, with everything needful 
for maintaining a high rate of employment in the United States after this war. 
There is no reason under the sun why our people should not enjoy more goods 
and services than they have ever known before. If we can be pro.sperous in war- 
time, we can be prosperous in peacetime. If we can employ our people to forge 
I weapons of war, we can employ them to make the instruments of peace. If our 
national income can be higher than ever in time of war, it can be high in time 
of peace. That is what the people will expect of us — you and me. 

Continuing, Mr. Colmer said: 

Siiecifically, but not to the exclusion of other fields of exploration, this com- 
mittee should seek facts and figures and make recommendations on the following 
vital post-war factors: 

First. Equitable termination of war contracts. 

Second. l)i.sposition of surplus war commodities and Government-owned plants 
in a manner to protect the Government and prevent the fioodiug of domestic 

Third. Insure the continuation of free eiiteri>rise and bring about, so far as 
possible, a cessation of wartime regimentation of the people. 

Fourth. Maintenance of the standard of the American way of life. 

Fifth. New markets, both foreign and domestic, for increased production. 

Sixth. Problems of deniobilizarion and effect on unemployment. 

Seventh. Reemployment of demobilized soldiers and war workers. 

Eighth. Public works — Federal, State, and local — to the extent necessary to 
absorb the slack in employment by private industry. 



Ninth. Careful analyzation of Federal statutes to determine which will re- 
tard and which will aid successful post-war conversion. 

Tenth. Generally to study the problems and make recommendations for the 
reconversion of a highly geared war machine economy to a peacetime basis with 
a minimum of governmental direction. 

The House adopted this resolution unanimously. To date, the 
committee has successfully completed a portion of its task in rec- 
ommending legislation which has been enacted, covering equitable 
termination of contracts, disposition of surplus war commodities, 
and creation of machinery for the orderly process of demobilization. 

The remaining problems are now receiving most careful consider- 
ation by the full committee and appropriate subcommittees thereof. 

This particular subcommittee is concerned with foreign trade and 
shi])ping. The question of our foreign trade and shipping in our post- 
war economy is, undoubtedly, one of the most important which con- 
fronts tliis Nation and the correct solution to the problems involved 
will determine in large measure the degree of amity and good will 
which will exist between the United States and foreign countries. 

A cursory examination of the problem indicates the participation | 
of lunnerous government agencies in formulating our foreign trade jj 
l)olicies. The scope of the activities and interrelationship of these ' 
various departments should be studied and their plans and policies 
carefully reviewed. The effect of these policies upon our domestic 
and international welfare should be evaluated in order to make suit- 
able and proper recommendations to Congress for the enactment or 
repeal of any legislation which might retard or otherwise adversely 
affect the position of this Nation and its relationship with other 
nations of the world. 

In an effort to determine what part our merchant marine will play 
in the forthcoming world-wide trade and commerce, the committee 
has ret^uested Admiral Emory S. Land, Chairman of the United 
States Maritime Commission to appear. The committee is very glad 
to welcome you. Admiral Land. 


Mr. WoRLEY. As I understand. Admiral, you have a prepared state- 
ment that you yould like to read first. 

Admiral Land. Mr. Chairman, I have a number of prepared state- 
ments. I do not know that I want to take up your time to read them, 
because .some of them are what I Avould call academic and historical. 
You were kind enough to outline certain questioiis in a questionnaire 
and we have endeavored, in a very brief space of time, to prepare 
the answers. I would like to submit for the record some of the 
answers that have been prepared rather than read them. However, 
I am at your disposal. 

A specific example is the description of the present Maritime Com- 
mission and Wai- ShipjHng Administration. That is bound to be 
hisloi-iral. It is necessarily long. While we think it might be edu- 
cational, I doubt whether you would want me to read 21 pages of 
descriptive inatter on the Maritime Commission and the War Ship- 
ping Administration. 



Mr. WoRLEY. It is 21 pages long? 

Admiral Land. Yes, sir. 

Mr. WoRLEY. We would like to have it in the record. 

Admiral Land. All right. I would be xevy happ}^ to insert that 
in the record, as it gives an outline of the operations of the Maritime 
Commission and War Shipping Administration, closely paralleling 
the Merchant Marine Act, 1936, as amended, insofar as the Maritime 
Commission is concerned. 

(The matter referred to is as follows:) 

United States MAKiTurE Commission 

Commissioners: Chairman, Vice Admiral Emory S. Land (U. S. Navy, re- 
tired) ; Vice Chairman, Rear Admiral H. L. Vickery, United States Navy; John 
M. Carmody ; Edward Macauley : Thomas M. Woodward. 

Creation and authority. — The United States Maritime Commission was created 
by the Merchant Marine Act, 1936, approved .Tnne 29, 1936 (49 Stat. 1985; 46 
U. S. C. 1111). The act vested in the Commission the functions, powers, and 
duties hereinafter described and, in addition, those of the former United States 
Shipping- Board under the Shipping Act, 1916 (39 Stat. 728; 46 U. S. C. 801-842), 
the I\Iei-chant Marine Act, 1920 (41 Stat. 988; 46 U. S. C. 861), the Merchant 
Marine Art. 1928 (45 Stat. 689; 46 U. S. C. 891-891x). the Intercoastal Shipping 
Act, 19:^3 (47 Stat. 1425; 46 U. S. C. 843-848), and amendments to those acts (as 
modified by the 1936 act), and transferred to it all property owned by the United 
States and theretofore controlled by the Department of Commerce as the successor 
to the powers and functions of the former United States Shipping Board by 
virtue of Executive Order 6166, dated June 10, 1933. The act also dissolved 
the United States Shipping Board Merchant Fleet Corporation and transferred 
all its property to the Commission, its contractual obligations being assumed 
by the United States. The 1936 act, as well as the other acts referred to, has 
been amended in a number of respects. 

Executive Order 9054, dated February 7, 1942, transferred to the War Shipping 
Administration the functions, duties, and powers of the United States Maritime 
Commission with respect to the operation, purchase, charter, insurance, repair, 
maintenance, and requisition of vessels and the issuance of warrants with re- 
spect to them, and assigned to the Administrator such part of the personnel 
of the Maritime Commission, together with such records and public property, 
as he may deem necessary to the full exercise of his functions and duties. 

Purpose. — The policy declared in the Merchant Marine Act, 1936, follows: "It 
is necessary for the national defense and development of its foreign and domestic 
commerce that the United States shall have a merchant marine (a) sufficient 
to carry its domestic water-borne commerce and a substantial portion of the 
water-borne export and import foreign commerce of the United States and to 
provide shipping service on all routes essential for maintaining the flow of such 
domestic and foreign water-borne commerce at all times, (&) capable of .serving 
as a naval and military auxiliary in time of war or national emergency, (c) 
owned and operated under the United States flag by citizens of the United States 
insofar as may be practicable, and (rf) composed of the best-equipped, safest, 
and most suitable types of vessels, constructed in the United States and manned 
with a trained and efficient citizen personnel. It is hereby declared to be the 
policy of the United States to foster the development and encourage the main- 
tenance of such a merchant marine." 

Orgnnizntlon. — The act provides that the Commission shall be composed of 
five members, to be appointed by the President with the advice and consent of 
the Senate, with not more than three of its members from the same political 
■party. The terms of office of the members first appointed are fixed at 2, 3, 4, 5, 
and 6 years, respectively, and thereafter each is appointed for a tei'm of 6 years. 


The duties of the Commission include the investigation and determination of 
the ocean services, routes, and lines from points in the United States to foreign 
markets essential for the development and maintenance of the foreign commerce 
of the United States and the determination of what additions and replacements 
of the American merchant marine are required to create an adequate and well- 


balanced merchant fleet to provide shipping service on all routes essential foi. 
the flow of the foreign commerce of tlie United States and investigation of other' 
maritime problems arising under the act. j 

Ship construction. — Under the 1936 act the Commission adopted, prior to the' 
outbreak of the European war, and has been carrying out the long-range ship- 
construction program of TKX) ships in 10 years. This program was accelerated at 
the outbreak of the European wai', and has been further accelerated in order to 
meet national defense and war requirements for the standard-type vessels de- 
signed in accordance with the requirements and pui-poses of the 1936 act. 

Under emergency and wartime legislation and appropriations, the Commission 
is carrying out a program for the construction of a large number of merchant 
ships and others of special tyiies. Included in this program are cargo vessels| 
of the Liberty, Victory, and Standard C types, tankers, refrigerator vessels, as 
well as various types of military and naval auxiliaries. The long-range program 
under the Merchant Marine Act, 1936, had placed the ship-construction industry!'! 
in the United States on a sound basis, capable of wartime expansion. ( 

The great bulk of the shipyard facilities being utilized in the merchant ship-; 
building program have been constructed under the jurisdiction of and are owncdi 
by the Maritime Commission. These Government-owned plants are operated byi 
private concerns under contract with the Commission. The average number ofl 
workers eujployed in Maritime Commission yards in July 1944, was 595,000. j 

The Connnission's program resulted in the completion of more than 8,000,0!>Oj 
tons, dead weight, of ships in 1942. For the entire year of 1943, the Commission i 
completed approximately 19,000,000 tons. Since January 1. 1942, to September 1,' 
1944, the total dead-weight tonnage built was 38,387,600. The dead-weight ron-: 
nage of the American merchant marine January 1, 1942, was approximately, 
11,000,000. These vessels, with the exception of those acquired by the military i 
branches of the Government, are operated under the jurisdiction of the War! 
Shipping Administration. 

Construction-differential subsidy. — To aid a citizen of the United States ' 
in the construction of a new vessel to be used on a service, route, or line in; 
the foreign commerce of the United States determined to be essential, the Com- ' 
mission is empowered to have the vessel constructed in a shipyard in the United 
States, to pay such construction cost, and to sell the vessel to the applicant fori 
an amount equal to the estimated cost of the construction of the vessel if it I 
were constructed in a foreign shipyard. The difference between the cost of 
constructing the vessel in the United States and the estimated cost of construct-! 
ing the vessel in a foreign shipyard is term»8d a construction-differential subsidy, 
but in no case may such subsidy exceed 50 percent of the cost of the vessel. '. 
Under temporary emergency legislation the Commission is authorized to make 
the determinations of estimated foreign costs on the basis of the conditions 
existing during the period prior to September 3, 1939. 

Aid may be extended to any citizen of the United States in the construction 
of a new vessel to be operated in the foreign or domestic trade (excepting vessels 
engaged solely in the transportation of property on inland rivers and canals 
exclusively) in cases where no construction-differential subsidy is to be allowed. 

If it is found that the national policy declared in the act and the building 
program contemplated by the act cannot be realizM within a reasonable time, 
after approval by the President, the Commission may have new vessels constructed 
and old ones reconditioned. 

Vessels constructed through the aid of subsidies must be oiierated exclusively 
in foreign trade, or on a round-the-world voyage or a round voyage from the west 
coast of the United States to European ports or a round voyage fronj the Atlantic 
coast to the Orient which includes intercoastal ports of the United States, or 
on a voyage in foreign trade where the vessel may stop at an island possession 
or Territory of the United States. Temporary transfer of the vessel to domestic 
trade may be made only with written consent of the Commission, and upon 
the making of certain payments. In an emergency the Commission may, luidei; 
certain conditions, ijermit the temporary transfer of the vessel to the domestic 

Operating-differential .^ithsidii. — The Commission is empowered to grant an 
operating-differential subsidy to aid a citizen of the UiHted States in the opera- 
tion of a vessel to be used in an essential service, route, or line in the foreign 
couimerce of the United States. The operating-differential subsidy, which is 
intended to place the proposed operations of such vessels on a parity with those 
of foreign competitors, is the excess of the cost of items of ojierating exnense 
in which it is foTind the applicant is at a substantial disadvantage in competition 
with foreign vessels over the estimated cost of the same items of expense if 


the vessel were operated under registry of a foreign country whose vessels are 
substantial competitors of the vessels covered by the contract. The operating- 
differential subsidy payments were reduced by mutual agreement during 1941 
and the subsidy program was virtually suspended in May 1942 because of the 
general requisition of merchant vessels owned by citizens of the United States. 

Arqiiixitioii of obsolete vessels.- — The Connnission is authorized to acquire any 
obsolete vessel or vessels not less than 17 years old, which have been owned by 
citizens of th(> United States for at least 3 years prior to the date of such acqui- 
sition, in excliange for credit on the purchase of a new vessel or vessels from the 
Commission or on a new vessel or vessels constructed in a domestic shipyard and 
documented undei' the laws of the United States. The general requisition of 
merchant tonnage has brought about virtual cessation of this activity for the 
duration of the war. 

Construction reserve finids (sec. iill). — The C'ommission administers, under 
regulations issued in conjunction with the Treasury Department, construction 
reserve funds established by American shipowners, who may deposit therein 
proceeds from insurance and indemnities received on account of total loss of 
any vessel, proceeds from the sales of vessels, and earnings from operations of 
vessels for use in the construction or acquisition of new vessels. 

Transfer of ressels to aliens. — The Commission regulates the sales to aliens, 
and the transfer to foreign registry, of vessels owned in w^hole or in part by 
citizens of the United States and documented under tlie laws of the United 

Ship inortfjaue insiinince. — Under authoi'ity conferred by title 11 of the Mer- 
chant r.larine Act of 1936, the Commission may, upon application of a mortgagee, 
insure mortgages on all types of passenger and cai'go vessels, tugs, towboats, 
barges, dredges, and fishing vessels owned by citizens of the United States. 
To he eligible for such insurance, the mortgage must be to secure a new loan or 
advance to aid in the construction, reconstruction, or reconditioning of a craft, 
and tlie amount of the mortgage insured may not exceed 75 percent of the cost 
of sucli new construction, reconstruction, or reconditioning. 

Regulatory powers. — The regulatory powers possessed by the Commission ex- 
tend to all common carriers by water engaged in foreign commerce of the United 
States and to all ijersons carrying on the business of forwarding or furnishing 
wharfage, dock, warehouse, or other terminal facilities in connection with com- 
mon carriers by water. These powers are principally in relation to rates, fares, 
'charge>^, regulations, and practices. The Commission possesses quasi-.iudicial 
au^hority to receive and determine complaints of shippers, passengers, and 
others alleging unreasonableness or unjust discrimination by common carriers 
by water and others subject to its regulatory authority and the method for the 
euforcenment of orders of the Commission, incluiling orders directing the pay- 
ment of money in reparation for violation of statutory provisions, as prescribed 
in tlie shipping acts. An important regulatory power vested in the Comipission 
is the approval, disapproval, or modification of agreements entered into between 
common carriers by water subject to its jurisdiction respecting cooperative 
working arrangements. Tlie Commission's approval of such agreements, com- 
monly referred to as conference agreements, excepts the parties thereto from 
the operation of the Sherman Antiti'ust Act, Wilson Tariff Act, Clayton Act, and 
supplementary acts and amendments dii'ected at monopolies in restraint of trade. 

War Shipping Administration 


Administrator ^ Vice Admiral Emory S. Land 

(United States Navy, retired). 

Deputy Administrator (for construction) Rear Admiral Howard L. Vickery, 

I'nited States Navy. 
Deputy Administrator (for vessel utiliza- Capt. Granville Conway. 

ti^in and planning). 
Deputy Admiinstrator (for labor relations, Capt. Edward Macauley (United 
manning, training, and recruitment) States Navy retired.) 

Creation and authoriti/. — The War Shipping Administration was established 
within the Ofiice for Emergency Management on February 7, 1942, bv Executive 
Order 9054, issued under the First War Powers Act (55 Stat. 838, ch. 593 ; U. S. C. 
title 50 Appendix, sees. 601 et seq.) , and amended by Executive Order 9244. 


The ExtHUtive Order transferred to the Administrator the functions, duties, 
and powers of tlie United States JNIaritime Conmiission with respect to tlie opera- 
tion, purchase, charter, insurance, repair, maintenance, and requisition of ves- 
sels and the issuance of warrants witli respect to them, and assigned to the Ad- 
ministration such part of tlie personnel of the Maritime Commission together 
with sucli records and public property as the Administrator may deem necessary 
to the full exercise of his function and duties. 

Pursuant to this authority all vessels owned by the Commission and all ves- 
sels the ownership of which may be acquired by the Commission were trans- 
ferred to the War Shipping Administration. Vessels under the control of the 
War Shipping Adniinistration constitute a pool to be allocated by the Admin- 
istrator for use by the Army, the Navy, other Federal departments and agencies, 
and the Governments of the United Nations, in compliance with strategic military 

Provisions were made by the order for use of the services and personnel of 
other Government agencies engaged in activities related to the operation of 
shipping, for the employment of necessary personnel, supplies, facilities, and 
services, and, with the approval of the President, for the transfer to the Ad- 
ministration of funds and contract authority available for the use of the Marl- 
time Commission. 

Purpose. — The Administrator, appointed by and responsible to the President, 
is authorized to perform the folhnving functions and duties : 

1. Control the operation, purchase, charter, requisition, and use of all ocean 
ve.ssels under the flag or control of the United States, except combatant vessels 
of the Army, the Navy, and the Coast Guard, fleet auxiliaries of the Navy, trans- 
ports owntd by the Army and the Navy, and vessels engaged in coastwise, inter- 
coastal, and inland transportation under the control of the Director of the Office 
of Defense Transportation. 

2. Allocate vessels under the flag or control of the United States for use by 
the Army, the Navy, other Federal departments and agencies, and the Govern- 
ments of the United Nations. 

3. Provide marine insurance and reinsurance against loss or damage by the 
risks of war as authorized by title II of the Merchant Marine Act, 1936, as 

4. Establish the conditions to be complied with as condition to receiving 
priorities and other advantages as provided in the act of Congress, approved 
July 14, 1941 (55 Stat. 591 ; 4(5 U. S. C, note preceding 1101). 

5. Represent the United States Government in dealing with the British Min- 
istry of War Transport and with similar shipping agencies of nations allied with 
the United States in the prosecution of the war in matters related to the use of 

(!. Maintain current data on the availability of .shipping, in being and under 
construction, and furnish such data on request to the War and the Navy De- 
partments, and other Federal departments and agencies concerned with the 
import or export of war materials and commodities. 

7. Keep the President informed with regard to the progress made, and i^er- 
form such related duties as the President shall from time to time assign or 
deh'gate to him. 

The functions pertaining to the operation of the United States INIaritime 
SsTvice, the merchant marine cadet and cadet officer training program, and 
Federal supervision over State marine and civilian nautical schools were placed 
under the Vv'ar Shipping Administration by Executive Order 9198. of July 11, 
1942. These functions h:id been transferred from the United Slates Maritime 
Coimnission to the Commandant of the United States Coast Guard by Executive 
Order 9083 of February 27, 1942. 

Aciirities. — The Administrator collaborates with existing military, naval, and 
civil departments and agencies of the Government performing functions con- 
nected with wartime overseas transportation to secure the most effective utiliza- 
tion of shipping in the prosecution of the war. With respect to the overseas 
transportation of cargoes essential to the war production effort and civilian 
economy, the Administrator is guided by schedules transmitted to him by the 
Chairman of the War Production Board prescribing the priority of movement 
of such conunodities and materials. 

The Administrator is authorized to issue such directives concerning shipping 
operations as he may deem necessary or appropriate, and his decisions are final 
with respect to the functions and authorities so vested in him. He may exercise 
his powers, authorit.y, and discretion through such officials or agencies and in 
such manner as he may determine. 



The Administrator is authorized to estahlish committees or groups of advisers 
representing two or more departments of the Federal (Jovernmeiit, or agencies 
or missions of the United Nations, and he may appoint representatives to such 
joint missions or l)(^•u•ds dealing witli matters within the scope of the Executive 
order as may l)e established with the governments of the United Nations. 

The Wai' Sliijiping Administration maintains oftiees in the principal ports of 
the United S'.-s ■ ■ -md has designated representatives in other ports of the world 
to expedite the transportation of cargoes and tlie movement of vessels. 


The most important responsibility of the War Shipping Administration in 
the war has been to meet the shipping requirements of the Army and Navy. 
During the course of the last year all demands of our Array and Navy for 
ships have been nu>t to the point that no essential military cargo has been left 
on the piei's lor lack of ships. The second responsibility of the War Shipping 
Administration is to fuLill the commitments which have been made for the lift- 
ing of lend-lease commodities, principally to our allies. The third responsibility 
of tlie War Shipping Administration is to meet the quotas set liy the War Pro- 
duction Board for the importation of raw materials essential to our war 
industries. The fourth responsibility is to meet the goals established by the 
State Department and the Foreign Economic Administration for shipments to 
Latin-American countries. 

In order to carry out these activities it was necessary to strip all nonessen- 
tial shipping services to the bone ; to develop new methods of loading, to care- 
fully scheilule and program the sources of supply to help meet requirements 
with the nunimum use of shipping, to establish offices in the ports, staffed with 
skilled American shipping men, to the capacity of the fleet, and to use 
every effort to augment the inadequate staff in order that shortage of man- 
power may not translate itself into the inefficient operation of ships. 

Procurement of i-cssels. — One of the most urgent initial responsibilities of 
the Administration was to secure complete control and utilization of the mer- 
chant fleet of the United States, both of large and small vessels and as many 
as possible of the .free neutral vessels, in order to keep open the essential lines 
of military transportation of our allies. This was a particularly critical problem 
during 10-i2. In all, approximately 1,500 large vessels, such as freighters 
tankers, and passenger ships, about 2,!^00 small vessels, such as fishing boats, 
tugs, yachts, barsies. etc. were procured. 

The American-flag vessels were requisitioned under section 902 of the Mer- 
chant Marine Act, 1936; the larger vessels were taken in pursuance to the gen- 
eral requisitioning program of April 20. 1942. Certain foreign-flag vessels 
which were "immobilized" in American ports were reqtiisitioned pursuant to 
Public Law 101, Seventy-seventh (^ongress, and some neutral and Allied ton- 
nage was acquired by voluntary charters or purchases made by the Adminis- 
trator. In certain cases, friendly neutral or Allied governments were induced 
to use their own requisiitoning powers to procure for the War Shipping Ad- 
ministration foreign-flag vessels under their control, the owners of which had 
refused voluntarily to make their vessels available to the United Nations pool 
of shipping. The Ship Warrant Act also was used to advantage in this program. 

Adrisonj Board on Juxt Conipen-sation. — The question of valuation of vessels 
procured by the Administrator presented difficult and complicated problems. 
Exhaustive studies were made of judicial, administrative, and other precedents 
relating to tlie subject of valuation, jiart of which was later published by the 
House Merchant I\Iariiie and Fisheries Committee as Committee Document No. 
20. This material tor;ether with other data dealing on valuation of vessels was 
presented by the Administrator to the Advisory Board on Just Compensation, 
in connection with its delilierations under Executive Order No. 93S7. By that 
order the President of the United States on October 15, 1943, appointed the 
Advisory Board made up of three Federal circuit court judges. On December 7, 
1943, this Board reported and established standai-ds in general consistent witli 
the rates and values originally .set by the War Shipping Administration. (See 
No. 20-A. House Committee on the Merchant Marine and Fisheries.) 

Charters covering use of vessels. — Most of the large vessels requisitioned by the 
Administrator were requisitioned for use and not for title and have been operated 
during the emergency on a time or bareboat charter basis. ' Many of the smaller 
vessels have been operated on the same basis. Uniform charters were drafted 
for these purposes. These forms are known as WARSHIPTIME, covering large 


freighters, WARSHIPOILTIME, covering tankers, WARSHIPTIMEFORFLAG, 
covering time charters of foreign-flag fi-eighters, WARSHIPTIMEOILPORFLAG, 
covering time cliarters of foreign-flag tanliers, WARSHIPDEMLSE. providing uni- 
form bareboat cliartei- for freigliters and tanlcers, WARSHIPPASSENGER, pro- 
viih'ng a nniform bareboat charter for passenger vessels, WARSHIPSALVAGE, 
providing uniform barelwat charter for vessels engaged in wrecking and salvage 
service, WARSHIPTOW, providing uniform requisition charter for towboats and 
a general small craft i-equisition charter covering bareboat operation of small 
craft, such as fishing vessels. 

Agency arravgemmts. — The physical operation of vessels by the War Shipping 
Administration is handled through general agents, time chartered agents, and 
berth agents employed by the Administrator. There are separate general agency 
agreements covering large freighters, general agency agreements covering the 
opiM-ation of large tankers, time chartered agency agreements covering the 
op<>ration of time-chartered vessels, berth subagency agreements covering the 
operations of berth subagents, general agency salvage agreements covering the 
operations of wrecking and salvage vessels, and general agency berth service 
agreements covering the operation of tugs and barges. 

^tcvrdorivff, ship repair and terminal services. — Among the major operating 
expenses in connection with vessels of the War Shipping Administration are 
stevedoring, ship repair, and terminal services. Repair services are furnished 
under a master ship repair contract covering the operations of approximately 175 
repair contractors throughout the United States. The master contract was 
developed jointly with the Ai'uiy and Navy in an effort to work out a uniform 
basis for handling ship repairs by all three services with a resulting simplification 
of auditing and administrative supervision. A uniform stevedoring contract, 
adapted to the pecularities of the east. Gulf, and west coasts' stevedoring prac- 
tices, is now in effect with over 250 stevedore companies of the United States. 
Terminal contracts have been standardized for certain areas. 

Seamen. — Seamen employed by the United States on vessels owned by or bare- 
boated to the War Shipping Administration have the same general legal rights as 
exist in commercial operation. This objective was not fully accomplished luitil 
enactment of Public Law 17, Seventy-eighth Congress, effective March 2-1, 1943, 
which preserved for seamen their peacetime rights with respect to social-security 
benefits, compensation for injuries, and other matters. 

The furnishing of adequate and efficient crews to War Shipping Administration 
vessels at the various ports at the time of scheduled sailing is an important activity 
in the operation of the merchant fleet in wartime. This involves advice as to 
labor inventories pertaining to the manning of allied and merchant ships, co- 
operation with the various Government agencies in securing adequate personnel, 
;ind the development and supervision of pools of qualified seamen and officers, a 
program of recruitment of qualified persons, cooperation with representatives of 
allied countries for solution of problems, arul the making of arrangements to meet 
personnel needs on American and allied ships. To keep the ships sailing thei'e 
have b?en developed health and convalescent programs for the seamen, repatria- 
tion of seamen, and activities for the rehabilitation of these men. 


Under the congressional mandate in section 101 of the Merchant Marine Act, 
1930, to develop a merchant marine "manned with a trained and eflicierd citizen 
personnel," the United States Maritime Commission, as authorized by section 
216 of the act, established, in 1938, the United States Merchant Marine Cadet 
Corps and the United States Maritime Service to train American citizens for 
both licensed and unlicensed positions on our merchant vessels. 

The training program wa,s evolved from studies made on the systems in use 
l)y the leading maritime nations of the world and of our own specific manning 
jiroblenis. The result of these studies was incorporated in a report to the 
Congress on January 1, 1939, entitled "United States Maritime Commission 
Report to on Training Merchant Marine Personnel." 

Designed in peacetime as a permanent, long-range program, the exigencies 
of war and tlie resultant i-apid acceleration of the construction of new ships 
have necessitated many changes and a tremendous expansion of training facili- 
ties. The program is divided into three principal : 1, refreslier courses 
for experienced seamen; 2, upgrading courses for advancement in grade; and 3, 
comi)lete courses for new men who have the required experience at sea to become 


By Executive order the training functions are under the jurisdiction of the 
War Shipping Administration for the duration of the war and are exercised 
by its training organization which, under the direction of Capt. Edward Ma- 
cauley, Deputy Administrator, conducts the United States Merchant Marine 
Cadet Corps, the United States Maritime Service, and the Federal supervision 
of the State maritime academies authorized by law. 

The function of the United States Mercliant Marine Cadet Corps to train 
unmarried male citizens of the United States between the ages of llVz and 23 
with a high school or college education, with an average allowance of 1 year 
for each year of college, to become officers in our merchant marine, both in the 
deck and engine departments. 

The United States Maritime Service operates schools for seamen with re- 
quired experience to qualify as officers; .scho(»ls at shipyards and manufacturing 
plants for specialized training in different types of propulsion; school for new 
men entering the industry to qualify for unlicensed positions in the deck, engine, 
and stewards departments ; schools for radio operators, carpenter's mates, cooks, 
and bakers ; assistant purser ; hospital corps men ; signal schools ; barrage 
balloon schools; convoy procedure and communications courses; refresher 
courses upgrading schools for all ratings ; and correspondence courses for men 
at sea. 

There are at present five State maritime academies which are operated by their 
respective States, but which come under Federal supervision by reason of tlie 
fact that they are partially supported with Federal aid. An annual Federal 
grant of $25,000 is made to each of the academies and, in addition, the per 
capita cost of nonresident cadets up to $25,000 for each academy is also paid 
from Federal funds. During the war, each cadet is enrolled in the United 
States Maritime Service which pays compen.sation, while in training, at the rate 
of $G5 per month and furnishes uniforms, textbooks, and subsistence. 

Admiral Land. I would like to submit for the record a reply as to 
the question as to what is meant by "merchant shipping''? Does it 
include inland and coastal shipping as well as overseas? Passenger 
shipping? Oceanic ferry and barge? Supply vessels operated by 
Government departments, and so forth? 

Your question is cle.scriptive and is of some value in connection with 
the investigation, but, if agreeable to you, I would submit that for 
the record. 

Mr. WoRLET. I believe in the interest of keeping the record straight 
that we should insert the questions which have been asked together 
with your answers. 

Admiral Land. Yes, sir. 
Mr. WoRLET. Is all of that in documentary form now? 

Admiral Land. Yes. 

(These questions and answers are marked "Exhibit 15" and are 
found in the appendix, pp. 1160 to 1180.) 

jNIr. WcRLET. Now, suppose. Admiral, if it meets with your approval, 
that we go into various questions. As you know, this committee is very 
hungry for whatever information it can secure as to the operations of 
the merchant marine at the present time, its history, and Avhat plans 
might be in the making for its future existence. So, if it is agreeable 
with you, we will try to get a full and complete picture here simply by 
virtue of questions and answers. 

Admiral Land. I would be very happy to start off by saying that 
there are two vitally important things : One is before the Congress at 
the present time in a bill introduced by Judge Bland on the House side 
and Senator Bailey on the Senate side, which we call our price-freeze 
bill. This not only takes care of the post-war fleet, if and when the bill 
is passed, primarily to avoid the mistakes tliat were made in the last 
war, but establishes national policies, not leaving them in the hands 
of the Commission but in the control of Congress. 


Then there should be added before we get through the proviso that 
such reserve as there may be should be placed in sanctuary. That re- 
striction was on the statute books in regard to our reserve fleet prior to 
the war, and the only way it could be removed was by act of Congress. ; 
It was done when the emergency arose. To my mind that is an excel- j 
lent piece of legislation and should be continued. 

This laid-up fTeet — reserve fleet — should be called a national defense 
reserve and should not hang over the market, should be untouchable 
except by act of Congress. In that way we will encompass a controlled ; 
policy oi' the merchant marine in the United States and will be in a 
])(!siti(;ii lo utilise it as may seem best, dei)eiiding upon conditions. 1 | 
cannot too strongly accentuate tlie importance of tliis legislation and I ; 
trust it may be oliacted before tl>e first of the year. That is in tlic 
hands of the Congress. 

While it is not a perfect piece of legislation, it is the opinion of the 
Maritime Commission that it is the best way to attack and approac-h 
the problem. 

Mr. WoRLET. That is the problem of retaining the merchant marine ? 
Admiral Land, Yes, sir. 

Mr. WoRLEY. Why clo we need a merchant marine, Admiral Land'^ 
Mr. Bland. You mean by retaining the ships ? 

Mr. WoRLEY. By the way, I would like the record to reflect that we 
are honored in having Mr. Bland, chairman of our House Committee 
on the Merchant Marine and Fisheries present with us. 
Mr. Bland. Thank you very much. 

Admiral Land. In answer to your question, Mr. Chairman, there are 
two vital reasons for a merchant marine: One is an auxiliary of 
national defense, or as an auxiliary to the Navy, and the other is to 
carry the proper share of our foreign trade. The foreign trade of the 
United States amounts to about 10 percent. I am not an economist, 
but I have always had the idea that that 10 percent is what men liave 
been looking for to make a fair return, and without that 10 percent, 
no matter where it comes from, you do not have the economic stability 
of the country to which it is entitled. 

Mr. WoRLEY. I understand we can produce at least 10 percent more 
agricultural products and manufactured products than we consume. 
Is that correct? 

Admiral Land. That is, over the year, generally correct. Some- 
times we produce more and sometimes less, but our foreign trade fol- 
lows along that percentage fairly closely. It is our hope and expecta- 
tion that our foreign trade will be increased as a result of this horrible 
war :^nd as a result of what we hope will be a proper and enduring type 
of peace. Specifically, we should be in a position to take our share of 
opciiin<r up the vast areas and populations of China. India, and Africa, 
and expansion in the good-will policy of South America, and so on. 
If the peace of the world is to endure we must have a meeting of the 
minds of the nations of the world, which means an interchange of 

Mr. WoRLEY. Would more of the foreign nations try to develp tliese 
products ? 

Admiral Land. Undoubtedly. All we ask is a fair share, a fair 
opportunity, equalized opportunity to secure i\ fair share of that 


Mr. "WoRLEY. Of whom would we ask that? The other nations? 

Admiral Land. Dependinjr upon the peace terms. As I see it, it 
could be handled by an international sliippin<x conference or inter- 
national trade aofreements, or even by treaties, all of which have been 
tried successfully at times and unsuccessfully at others, but all these 
problems are perfectly capable of a reasonably satisfactory solution 
if you have a reasonabl^'^ intelligent group of people and a meeting of 
minds of that group. 

The other point I wanted to raise in this discussion is that, in my 
opinion, the merchant marine of 19-14:, or 1945, is entitled to some 
greater respect than the merchant marine of 1939. To accom]>lish 
that, without in any way hogging the commerce of the United Nations, 
it is my best judgment that we should do this at the expense of the Axis 
I*owers. 1 see no impossibility in making pastoral nations of those of 
our enemies who have proven that the}' do not know how to keep tlie 

I disagree entirely with the people who say that we are not a mari- 
time nation. I disagree on this basis, that they talk in decades ai\d not 
generations. If you follow the history of the American merchant 
marine from the time our country was born you will find that we, at 
various stages, were a very strong maritime nation, in fact, at times 
the primary maritime nation of the world, so it is a curve of science, 
or as the waves of the sea have been up and down. 

With the coast line we possess, to say we are not a maritime Nation is 
a misnomer; it is meiely whether Ave want to be or not. We have all 
the attributes, all the abilities, all the knowledge, and all the brains 
not only to operate, but to design, build, construct, and man a proper 
merchant marine. I repeat that it is a question of generations and 
not of decades. 

Mr. WoRLEY. May I interrupt you, Admiral ? In those times when 
we have dropped down, what factors have caused us to drop, say, to 
third, fourth, and fifth place as far as other nations are concerned? 

Admiral Land. Primarily Horace Greeley's maxim, "Go west, young 
man." We cannot go west any more. 

Mr. WoRLEY. Why? 

Admiral Land. Because there is no more territory to expand, to 
which we can go. 

Mr. WoRLEY. Are there not any other territories that we can de- 
velop ? 

Admiral Land. We can always develop new territories, as well as 
old territories, by intensive methods or incentive methods, but I think 
the answer, as far as my knowledge goes, is that we went west for 
sevei'al decades if not several generations and, therefore, lost interest 
in keeping our merchant marine in a No. 1 position. But there is 
no reas(m to continue that and it is necessary not to continue it, because 
you cannot go west any more. We can develop the more densely pop- 
ulated areas just as well as those that are not so densely po])ulated. 

A fine example of that is transplanting the industrial New England 
to the South. It is a question of our own talents and abilities to work 
out these economic factors on an incentive basis or a concentric basis 
or a spreading basis. 

Theie is one other j)oint that I would like to draw your attention to 
in connection with this maritime-nation business. If you will go 


back to the history of the Germans, to 1890, I do not think you will 
find much of a German navy; I do not think you will find much of a 
German merchant marine. So I again repeat, it is a question of dec- 
ades which we shoukl omit and the question of generations should 

By the same token, if you go to Japan, in 1853 you never heard 
of Japan having a navy or having a ship of any size, except the 
sampan or junk. By 1890 they were still unknown and questionable, 
and when the Russian-Japanese War came along they commenced to 
come into the picture. Gentlemen, that is only 50 years ago, which 
is a long generation. I see no reason why we should sacrifice the 
American people. There is no reason why the Japanese Nation should 
not be made a pastoral nation. I think it would do them a lot of 

Mr. WoKLEY. I think you might have something there. 

Admiral Land. My main objective is to increase the American mer- 
chant marine from what it was in 1939 to a reasonably proper-sized 
merchant marine, and of a proper type, for 135,000,000 people, and I 
have not the slightest hesitancy of doing it at the expense of the 

Mr. WoRLEY. That is one thing that this committee is trying to find, 
just how much of a merchant marine should we have after the war, and 
for what purposes? 

Admiral Land. The answer to that is, of course, in the lap of the 
gods, both quantitatively and qualitatively. We have our rivers, lakes, 
inland harbors, a large proportion of our shipping operates in those 
channels, and will continue to operate and probably wall be expanded. 
We have our intercoastal trade which is protected, and that will con- 
tinue to operate, and there are those of us who vision increased world 

The thing tliat concerns us and you, primarily, is our ocean-borne 
trade, generally known as foreign commerce. My own belief is that 
it should be expanded so that the over-all capacity figure is between 
15,000.0a0 and 20,000,000 tons as against 11,000,000 in 1939. 

Frankly, I do not want to do this as a piece of window dressing; 
I want to do it as a piece of economics. No. 1, or as national defense, 
No 2, or you can reverse those, depending upon your ideas. They 
are both of equal importance. But I certainly believe that we should 
have a merchant marine reserve as a national defense feature for an 
indefinite period of time, because I am of the opinion that it will be 
the greatest preventive of World War III. 

We have plans to do that very thing under the statutory provisions 
where we can lay up ships, say from 500 to 2,000 shi])s at a cost of 
about $3,000 to $5,000 i^er ship per year. Take 1,000 ships at $5.0a0 
a year, that is $5,000,000, and for 20 years it is $100,000,000. Compare 
that cost to the taxpayers of the United States with the cost in war- 
time somewhere in the neighborhood of $1,700,000,000 to build about 
1,000 Liberty ships. So it is a matter of economics and a matter of 

A large laid-up fleet for the national defense is, to my mind, good 
economy. They are a bit of an eyesore, people do not like it, but 
with the welded ships we are producing here your maintenance cost 
will be extremely small, relatively speaking, even in large quantities, 


and if we lay them up in a satisfactory condition in the beginning, 
they will need very little attention over that time, and to my mind 
it is very cheap. 

In tliat way we take care of onr surplus, which is not disposed of 
in accordance with Bland-Bailey bill. 

Mr. Bland, "uay I ask, is that fifteen or twenty million tons at 
present ? 

Admiral Land. Yes. 

Mr. Bland. As against what figure in 1939? 

Admiral Land. Eleven million. 

Mr. WoRLEY. It would cost from $3,000 to $5,000 a ship? 

Admiral Land. Yes, sir; a ship per year. 

]\Ir. AVoRLEY. You would hold that fleet in reserve? That fleet 
would not engage in commerce ? 

Admiral Land. No, sir. That is what I spoke of putting in sanc- 
tuary and, as they speak of it in India, untouchable, except by law. 
I want them in sanctuary and untouchable by statute, fully realizing 
if an emergency arises, in 2 w^eeks Congress will act so that we can 
make use of them. I do not like to leave it as it was in 1926, when 
they could purchase this, that, and the other one for some emergency, 
such as the coal strike. There would be a drug of ships on the 

Mr, Bland. The use of those ships in that coal emergency was au- 
thorized by Congress in an appropriation bill, was it not? 

Admiral Land. In 1926? 

Mr. Bland. Yes. 

Admiral Land. You have got the best of me. Judge. 

Mr. Bland. I think there was an appropriation act that previded 
the money that ])ut the ships to use, and, as the result, my recollection 
of the report of the committee was that several million dollars were 
saved to the grain people of the West. I have forgotten hoAv many 
million. I think it was $6,000,000. 

Admiral Land. I think that is true, sir. There was no law against 
using the ships. That was an appropriation to repair them and put 
them in operation. They hung over the market, unfortunately, from 
the last war up until the time Congress put them in sanctuary, which 
was 1938 or 1939. It was just bad business. We feeb and certainly the 
Merchant ^Larine Committee and Commerce Committee both, so far 
as I know, were strongly of the opinion tliat that should not happen 

Mr. WoRLEY. After the ships are laid up in sanctuary, Admiral 
Land, hov*- many ships would that leave for foreign trade aiid com- 
merce ? 

Admii'-al Land. L^nfortunately, I cannot answer that question ex- 
cept by asking you one. When is the war going to end? If you tell 
me that. I will tell you how many ships w^e will need in foreign trade. 

Mr. WoRLEY. Ycu have a better idea as to how many ships we have 
now and hov\- many we will probably need on a stand-ljy basis. 

Admiral Land. Let me give- you this bit of information. In 1939 
there were 78,000,000 tons; in December 1943 there were 74,000,000 
tons, of shipping in the world. Since December 1, 1943, there is a sur- 
plusage over what existed in 1939. That surplusage will continue to 

99579—45 — pt. 4- 


be augmented as lonor as the war lasts, and my estimate is it increases 
between tliree-quai'ters and one million tons a month. 

So if I knew Avhen the war was going to be over, I could answer 
that question fairly accurately. By the end of this year we will have 
under the Amei-ican flag, under our control, something in the neigh- 
borliood of 50.000,000 dead-weight tons of shipping. 

Mr. Wi)i!LEY. 50,000,000? 

Admiral Land. Yes, sir; starting out in 1939 with 11,000,000. We 
will be the number one nation in the world in controlling merchant 

Mr. AVoKLEY. Are we going to liave to use that excess, where we do 
not need the sanctuary, for some useful purpose or scrap them? 

Admiral Land. At the present time I am opposed to scrapping 
them. It is my judgment that from 6 months to 3 years after the war 
is over we will have practically complete use for every ship under the 
American flag, for bringing the boys home, rehabilitation, U. N. R. 
U. A. and other requirements. That will give us a chance to determine 
what we want to keep, I trust in private operation and not in Govern- 
ment operation; what our allies desire to purchase if and when this 
bill is })assed ; and what we will have to lay up in permanent sanctuary, 
which I call a merchant-marine naval reserve. 

As I say, that may be anywhere from 1,000 to 2,000 ships. That is 
10.000,000 to 20.000,000 tons of shipping. Those are not firm estimates ; 
they^ are merely the best guesses that we can make under the conditions 
existing today. 

Mr. WoRLEY. Nobody knows today, of course, how many we will 
need in sanctuary, how many we will need in foreign ti'ade, and how 
many we will actually have to scrap. I was wondering if I could get 
your ideas as to what you thought would be the best thing to do under 
the circumstances as you see them now if we have some left over. As 
I say, we are going to have to find either some useful purposes for 
them in foreign trade or sanctuary, or else get rid of them or they will 
be white elephants. 

Admiral Land. You mean that those that are in sanctuary will be 
white elephants? 

Mr. WoRLEY. Not necessarily those in sanctuary. Assuming that 
we agree 1,000 of them should be set aside as a safety measure, that 
is going to leave an excess, since we have more shipping than we ever.^ 
had before, which we will either have to engage in foreign trade or ^ 
sell or scrap. 

Admiral Land. That is right. 

Mr. WoRLEY. Nobody likes to scrap ships, so we will have to develop ! 
('Ur foi'eign trade to use more of them in that maimer or else sell them. 

Admiral Land. That is correct. 

Mr. WoRLEY. How far do you think we should go in developing our 
foreign trade first, assuming it is desirable to develop our foreign 
trade, and then upon what basis do you think these ships should be 
sold to other nations? Should they be sold to competing nations? 

Admiral Land. I do not think that there is any doubt if they are ■ 
sold at all to foreign nations they will have to be sold to competing . 
nations, because the only prospective purchasers are maritime nations. 
By the same token, every maritime nation is a com])eting nation with 


You have raised an interesting point. There is an industry that 
should be devek>ped in this country known as sliip-breaking. Unfor- 
tunately, when the act was passed the merchant marine was from 80 to 
90 percent obsolete. A lot of it is still obsolete. It is the opinion of 
those in the Maritime Commission that we should scrap the older ships, 
which will in turn make a place for everything that has been built 
(during the war, including Libertys, and that there should be set up 
in these United States an industry known as ship-breaking. The Brit- 
ish and Germans are fairly export in that. We never have been. We 
take a ship, run it up to high tide, work on it between tides and do 
what I call a half-baked job. There is an opportunity to set up a 
small industry. 

We are trying to encourage it among those who seem to have an 
interest in it. We have a ship-wrecking yard on the west coast, the 
Gulf coast, and the east coast, so we will encourage the turning in of 
these ancient and obsolete ships as soon as they finish their war job. 

There is a clause in the 1936 act that permits this turn-in. That, to 
my mind, is an excellent method of keeping a reasonably modern 
merchant marine and at the same time doing something for the ship- 
builders. So many people lose sight of the fact that we have a 
shipping industry. They talk about ship operations and forget 
about the shipping industry. The shipping industry is made up of 
three components : The builders, the operators, and personnel. When 
I say the operators, I mean the shore personnel; when I say the per- 
sonnel, I mean the seagoing personnel. They are the three main 
functions of the shipping industry. 

Sight is frequently lost of the shipbuilding industry, and that is 
going to be the hardest hit. As I indicated previously, we can take 
care of our operators for some 6 months to 3 years fairly satisfactorily 
and taper off with some reasonably slow degree of going down-grade, 
but the shi])builder is pretty much out of luck. Of course, they are a 
far bigger industry, from a numerical point of view, running 700,000 
to 800,000 in merchant-ship construction alone, while our sea-going 
personnel and operating personnel is about 170,000. 

Mr. WoKLEY. In that connection, and in relation to your sanctuary 
plan — of course, we do not want any more wars, but assuming we have 
one, sa}', 25 years from now — would those ships be obsolete or obso- 
lescent at that time? Would they be able to cope with the new ships 
that the enemy might manufacture in the meantime? 

Admiral Laxd. Not on a competitive basis, no, sir, but on an operat- 
ing basis ; yes. They are obsolete now. The Liberty ship, we make no 
pretense about it, was obsolete when it was designed. The only reason 
we built the Liberty ship, with its reciprocating engines for propul- 
sion, was because we could not do anything else. There was no other 
pro])ulsion machiner}- in the United States. 

The answer, of course, is they will be obsolete, they will be more so 
than they are now, but they will be operable, and this war has definitely 
proven tliat anything that can float, that can be propelled or even 
towed from place to place has served a most useful purpose. In my 
judgment, it is a great preventer, a backstay. It is quite possible that 
this war would not have come on us if there had been a tremendous 
merchant-marine reserve in this country, because there isn't any ques- 
tion in the minds of most of us that they depended upon the submarine 
menace to win the war, and in 1942 they darned near did it. 


Mr. WoKLEY. Will these Liberty ships and Victory ships make more 
than 10 or 11 knots? 

Admiral Land. The Liberty ships make II14 knots, but the Victory 
ships are fine, up-to-date modern ships and will make 171/2 knots 
with 8,r,00 horsepower turbines and 151/2 knots with the 6,500 horse- 
power turbines. 

The Victory ships are all modern installations, while the Liberty 
shijis are all steam auxiliaries and steam propulsion. 

ISlr. WoiJLEY. Incidentally, what are your present plans for the 
dis[)osal of the Liberty ships? 

Admiral Land. Theoretically, if this bill passes the Congress, we 
should be able to dispose of some of these ships to our allies, so that 
they would get back on what I call the even keel of 1939. Whether 
they buy these ships or not, no one can tell; but that is the idea of 
offering them first to our own citizens and then to the Allies at a set 
price fixed by Congress and under set conditions fixed by Congress, 
so that all hands and the ship's cook get a fair break. 

I do not know what kind of a market there is going to be. 

Mr. WoRLEY. There probably should be a pretty good market, 
should there not, Admiral? 

Admiral Land. I think, on the basis of losses that these countries 
have suffered, there ought to be a first-class market, but I am just too 
old to delve into somebody else's mind to find out what he is going 
to do in 1945. 

Mv. Bland. A recent questionnaire that has been conducted by us 
indicates there will be very little, if any, demand for Liberty ships. 
How mau}^ are there? 

Admiral Land. There are 2,690 Liberty ships under contract and 
about 2,300 have been finished. Quite a number have been lost. A 
number have been allocated to foreign countries, the title remaining 
in the United States, and others have been turned over to the Army 
and Navy. As a snap estimate I would say there would be between 
2,000 and 2.r)00 Liberty ships available in the summer of 1945, if we 
do not curtail our program. If we cut back, that number will be 
reduced, but it is impossible to even guess what that will be, because 
our figures are estimates, primarily those given out by Justice Byrnes, 
the War Production Board, and so on, based on the fall of Germany. 

Germany hasn't fallen. The longer that is delayed the more of these 
ships will be completed. 

I would like to give you very briefly a little lesson in economy on 
this shij) cut-back, and I will be quite brief. A Liberty ship cost about 
$1,600,000— $800,000, material, and $800,000, labor. When you are 
ready to lay the keel of a Liberty ship you will find that throughout 
the yard, anywhere from 400 yards to a" mile at the head of the ways, 
are parts of every section of that ship in the course of assembly. The 
minute that keel is laid, this flow starts down by cranes, runways, and 
locomotives to the ways. So, as a rough estimate, when we lay the 
keel, we have spent about $1,200,000 to $1,300,000 on that ship. 

Now, then, if the keel is laid, the question is. Shall you spend $300,000 
more and have a completed unit that may be worth something, or shall 
you scrap $1,800,000 of construction which you would get scrap steel 
value out of? That is an economic problem that faces the Maritime 
ComnussuMi on any cut-backs. Our policy at the moment is "If the 


keel is laid, then finish the ship," because it seems to be bad economy 
to get scrap value for $1,300,000 for the thing rather than have an 
operable unit at $1,600,000. 

Mr. WoRLEY. In the series of questions that went in the record, there 
are several questions wliich have not been included in your answers. 

Admiral Land. That is correct. 

Mr. WoKLEY. If you do not mind, I will ask you these questions. 
What are the estimated values of the major classes of vessels we now 
have ? 

Admiral Laxd. Of the large ships, the Liberty, of course, is the 
cheapest, about $1,600,000. Then we run up all the way through the 
C-1, C-2, C-3. C-4, P-1, P-2, the various classes of tankers. I be- 
lieve' it is going to be confusing to give j^ou figures on those Mr. 

They are all in tlie Appropriation Committee hearings. I would 
not like to trust to memorv for all of those classes, but the C classes 
run around $2,500,000 to $3,000,000, and the C-4, of course, goes higher 
than any when it is converted. The C— 4 cargo ship converted to 
trooper runs from $4,250,000 to $8,000,000 as a ti'oop ship. 

When you convert a cargo ship to a troop ship, involving all kinds 
of naval conditions, the costs run up remarkably fast and are rather 
meaningless from a merchant marine point of view. 

Mr. WoRLEY. Could you give us now an idea as to the amount of 
money the Government has tied up in the. entire merchant marine? 

Admiral Land. Yes, sir. We have at the present time between 
$12,000,000,000 and $13,000,000,000 in ships. If we carry through our 
]:>rogram as approved nil the vray up, I mean the Joint Chiefs'of Staff, 
War Production Board, Budget, and so forth, it is estimated to have 
cost between $15,000,000,000 and $17,000,000,000 by June S0,_ 1945. 

Mr. WoRLEY. Do I understand that the cost of these ships from 
start to completion, runs about 35 to 40 percent more than in ordinary 

Admiral Land. That is correct. When you get into the smaller 
sizes, wliy, I think that is modest. Tliere is always a difference of 
opinion as to what the war cost is, but the best estimates which we had 
are between 35 and 40 percent. That counts in overtime, increases in 
cost of material, increases in wages, and so on. I think 40 percent is 
a pretty fair figure. 

Mr. WoRLEY. Let us assume after the war we will have $12,000,000,- 
000 tied up in these ships. 

Admiral Land. That is right. 

Mr. WoRLEY. To whom could they be sold and for hoAv much? I 
know that is almost an im]:)ossible question to answer, but your ideas 
on it would be very helpful. 

Admiral Land. We hope our fast ships will be sold to our American 
operators, and. if not sold, will be chartered, again referring to the 
Merchant IMarine Act and referring to the Bland-Bailey bill that is 
under consideration. This bill not only evaluates the standard types, 
long-range ty])es, but also gives an outline for tankers and a definite 
fixation of price for Liberty. That means as a war loss we would 
throw off the 3.5' to 40 jiercent. We would take off all the national 
defense installation, such as degaussing, armor for the gun crews, 
which are all considered as a war expense. 


FalliiK^ bark a«rjiin on the Merchant Marine Act, our operators are 
allowx'd a siihsidv so thev may buy their ships built in this country at 
the same cost as it" thev were buih in the lowest reliable market abroad. 
That sul)si(iy does not go to the operator but to the shipbuilder. That 
is the fundamental thing, the keystone of the arch of the Merchant 
Marine Act of 19;5G. 

Mr. WoitLEY. That is a subsidy to the shipbudder ? 
Admiral Land. That is a subsidy to the shipbuilder. 
Mr. WoiiLKY. Then the operator who buys it from the builder gets 
the advantaire of that low cost? 

Admiral Land. He gets an advantage of that to this extent, that 
he can buy it for the same price abroad and he would patronize his 
own industry, rather than the industry abroad. 

Mr. Bland. In other words, the subsidy has taken care of the extra 
cost of construction in this country, between this comitry and abroad. 
Admiral Land. It puts us on a parity. That is all the Merchant 
Marine Act does, i)uts us on a parity with our foreign competitors. 
As a matter of general interest, there are a lot of alligator tears on 
the oi)erating subsidy which goes to the operator but which, under 
this act, in the period of 10 years enables us to recover 50 percent of 
everytliing that he got over 10 percent. At most, it has only been 
aboilt 8 to 3y2 million dollars a year for the 5 or 6 years that the Mer- 
chant Marine Act was in operation. 

Of tluit $21,000,000, about 80 percent goes to labor; in other words, 
goes to our maritime seamen. 

Mr. WoRLEY. In other words, we are supposed to make money out 
of it. 

A(hnii-al Land. That is right. They did make money. We are just 
getting the trend of it now. We are going to get most of our operating 
subsidy back. I will tell you, all the wails about the operating sub- 
sidy amount to nothing. It is just a drop in the bucket. We are very 
happy to find that out. We have only been finding that out in the 
last year or so. Most of our operating subsidy is coming back, 

Mr. WoRLEY. In that connection, do you suppose we can maintain 
a proper sized merchant marine without a subsidy? 

Adniii-al Land. I do not think so; no, sir. I have heard some very 
bright people say that there should not be an operating subsidy, I 
disagri'e with them at the present time, I would much rather keep 
our standards of living, because I think our merchant marine per- 
sonnel are entitled to it, and then let the economics determine whether 
we get our money back or not, 

Mr. WoRLEv, Could not we avoid a subsidy by developing foreign 

Admiral Land. Tliat is what we are doing now, Mr, Chairman, In 
order to get this paid back, we are going to have to develop foreign 
markets. It looks to me, on the basis of 7 years' experience, that we 
are going to get all the operating subsidy back. As I say, in 7 years 
it only amounts to $2 1.000. 000. Tliat is just a loss of (me major ship. 
Mr. WoRLKY, You say we get 5 percent, or half of their 10 percent 
profit ? 

Admiral Land, No. sir; I said anything over 10 percent would be 
split nO-oO with them. In a good year, why, they would do better 
than that. Of course, the history of shipping has been back and 


forth according to the curve of the signs, according to the waves of 
the day. It is like in Egypt, they had 7 lean years and 7 fat years. 
That is the reason that Congress very wisely put this on a 10-year 

Mr. Worij:y. I was under the impression that over here in this 
country we were able to outproduce, outnianufacture, and outbuild 
any other nation; that we were able to build at the cheapest and most 
efficient rate at any time. 

Admiral Land. In some industries that is true and in some it is not; 
and shipbuilding is one. 

3klr. WoRLEY. What is the difference between the shipbuilding in- 
dustry and, say. the automobile manufacturing industry? 

Admiral Land. Quantity production. 

Mr. WoRLEY. Quantity production? 

Admiral Land. Yes. We forced quantity production on the in- 
dustries in this war, standard design, no changes. The minute that 
any operator is a free agent he is not going to be satisfied with the 
standard ship. There are a dozen things he wants changed in it, due 
to his own idiosyncracies, or due to the line or the service on which 
he works, and so forth. Except in an emergency you haven't got 
quantity production anyhow. An order of 4 ships was considered a 
major order here in 1937, and we have done 3,400 here in 3 years. 

Of course, that involves other things. The shipbuilding industry is 
a highly paid industry, always has been. It is a highly skilled inclus- 
try. We have never been able to compete in the cost of shipbuilding 
since I can remember with the leading shipbuilding and maritime 
nations in the world. It ranges anywhere from 331/3 percent to 50 
percent, sometimes even more than that. That is true even in war- 
time. Our figures on British construction, on ships built over there, 
are anywhere from 30 to 40 percent less in cost. 

INIr. WoRLEY. You mean in Great Britain? 

Admiral Land. I mean in Great Britain. The same thing is true 
to a lesser degree in Canada. Our wage structure is higher than the 
Canadians. Of course, our material costs are about the same, except 
where you fabricate, but don't forget that in a fabricated piece of 
material there is a labor charge, and our standards of living, our 
wages are so much higher than our foreign competitors that our prices 
are higher. 

Mr. WoRLEY. Then the Government has set up a subsidy, primarily 
in order to maintain the high standards of wages and employment. 
Are the other countries subsidizing their shipping? 

Admiral Land. Directly and indirectly there are a good many sub- 
sidies that do not meet the eye in various maritime countries in the 
world. That is a long and controversial question. As to whether 
they do something of this character, the answer is in the affirmative. 
It is impossible to give details, because they vary at various times. 
They all give aids of some kind or another. 

When I say that, I do not mean every maritime country, but the 
majority do. 

Mr. WoREEY. We touched on this question recently, as to who are 
the logical jmrchasers for any excess shipping that we have. 

Admiral Land. After our people have had a chance at it I think 
the Allied Nations should have an opportunity, as I say, under the 


restrictions which I hope will be laid down by the Congress, and after 
that my present recommendation Avonld be to lay the ships up m this 
sanctuary reserve, pending developments. I would at this time be 
opposed to scra])ping. I am not at all sure that you would even get 
any kind of a proper bid. If any scrapping program went into effect 
I would spread it over a number of years awaiting the development 
of the ship-breaking industry, watching the scrap market and be very 
careful in putting it into effect, but at the present time I am opposed to 

Mr. A^ ORLET. If I understand it correctly, when peace comes, we 
will have a given nnmber of ships. 

Admii-al Land. Yes, sir. 

Mr. WoRLEY. And you propose to put a portion of them in 

Admii-nl Land. Yes, sir. 

Mr. WcRLEY. As a safety measure? 

Adniiial Land. Yes. 

Mr. WoRLEY. Another portion you intend to use for our foreign- 
trade shipping? 

Admiral Land. Yes, sir. 

Mr. WoRLEY. What is left you pro])ose to sell, of course, to our own 
I)eople first, and then to our allies? 

A^dmiral Land. Yes, sir. 

Mr. WoRLEY. Under terms set up by Congress ? 

Admiral Land. Yes. 

Mr. WoRLEY. You are opposed to scra})ping any of them at the 
present time? 

Achniral Land. With the exception of these old, obsolete ships, 20- 
year-old sl)ips. The new ships I am opposed to scrapping at any time, 
as far as I can see. 

Mr, WcRLEY. Do you have any idea as to what would be the ap})roxi- 
mate scrap value of the ships that you would not utilize for sanctuary 
or trade ])urposes, assuming that we did not need all of them for the 
sanctuary and the trade purposes? 

Admiral Land. If you scrapped them all at once, you would get 
about $5 or $6 a ton. If you waited for your market, as we did through 
1937 and 1938, you might get as high as $21 a ton. That is steel scrap. 
Of course, there is a small amount of residual value in copper cable, 
zinc, tilings of that kind, but it does not amount to very much in the 
Liberty ship. 

Mr. WoRLEY. The scrap value would not compare to what it would 
cost to build, naturally. 

Admiral Land. It cost about $160 to $220 a ton to build. That is a 
dead-weight ton. The actual steel is about one-third the dead weight. 
Let us say it is about $6 against $200. 

Mr. Bland. Admiral, you have been speaking princi])a]ly about 
carcfo ships; haven't you? 

Admiral Land. Yes, sir. 

Mr. Bland. What would you have to say about passenger ships, and 
jiarticularly as to what effect the use of aviation would have on 
])assenger ships? 

Admiral Land. LTnfortunately, we are not in a very fine position as 
to passenger ships. Our passenger ships have been converted by the 


Army and Navy. The reconversion would be a long and expensive 
job. Man}^ of the ships are old. It is a question as to whether recon- 
vei-sion is justified. We can use certain types that are under con- 
struction now for troop purposes ; they can be converted to passenger 
ships probably more expeditiously and. economically than you could 
convert the older passenger ships. It is a condition that faces us for 
which there is no help. We had to meet the congressional and Presi- 
dential directives as to tonnage in 1942 and 1943, and for this year. 
It may be corrected in whole or in part by reconversion. There may 
be a backlog for some of the passenger companies to go in and build 
l^roper types of ships. We hope that will be true. There is no definite 
indication as to how much of that kind of construction is in the picture 
at the present time. 

There is a very strong drive and a very grave fear on the part of 
all passenger-ship companies with regard to the future of aviation. I 
say a ''drive." The drive is theoretical so far, but the claims of the 
aviation people are that they will get away with most of the passenger 
trade. Those of us in the shipping industry expect that they will 
get away with what we call the cream. The man m a liui-ry will go by 
air, but there will still be passenger trade on the surface of the seas, 
most of us firmly believe, the first tourist travel when people have 
time, holiday travel, and some for the love of the sea. What that will 
be no one can tell, but that there will be some passenger traffic is un- 
doubtedly correct, and that there will be a fine field for a combination 
of surface and air is very definitely in the picture as determined by 
questionnaires, theoretical Gallup polls, and what not, that have been 
circulated in the industry. 

Mr. Bland. They show about a 50-percent loss in traffic, do they not? 

Admiral Land. Yes. 

Mr. Bland. Passenger traffic? 

Admiral Land. Yes; but they also show a marked preference for 
combination travel, one way by air and one way by water. We con- 
cede that the fast business traffic, transoceanic, will probably go by air, 
but that is again a relatively small proportion. Our aviation friends 
are wildly enthusiastic about the number of people that are going to 
travel. As far as Americans are concerned, I concede that as prob- 
able, but not necessarily factual. So far as some of these other nations 
are concerned, I have some very grave doubts about- it. As a matter 
of fact, we are far more travel-minded than the rest of the world 
anyhow. It will be accentuated for a very short space of time, but it 
might be curtailed as taxes mount and jobs fall. It is a gamble. 

Mr. Bland. Admiral, may I ask you this question? In order to 
undertake the aviation business, is it necessary to get from C. A. B. 
a certificate of convenience and necessity? These are not handi- 
capped by reason of present restrictions on them, as are surface car- 

Admiral Land. That is true. The Commission is strongly on 
record, with the strongest backing of the Merchant Marine and Fish- 
eries Committee, that there should be no prohibitions or inhibitions 
to transoceanic operations by steamship lines who desire to enter the 
aviation field. In fact, that has culminated in an amendment pro- 
posed by Judge Bland, to remove those prohibitions and inhibiticms, 
if they "exist. We feel strongly that that should be enacted by the 


Coii^-ess. As far as I am concerned, I wish it were on the statute 
books now, because I think we should have a fair break before the 
C, A. A. and C. A. B. and not be delayed so long as other people 
getting certificates. Then it would be too late for them to get in the 
picture. I think it is a matter of great importance to the American 
merchant marine, and of vital importance to those operators who are 
in the passenger-carrying business. 

Mr. Bland. Recently it was testified before the Merchant Marine 
and Fislieries Committee that within a short while, as the war is 
closed down, half of the planes will be returned or delivered by the 
C. A. B. to ordinary, independent carriers, or to the Pan-American — 
at least the aviation companies — whereas it will be from 6 months to 
2 years before the passenger companies, the steamship companies, 
could hope to reconvert or build ships for passenger service. 

Admiral Land. I think that statement sums the whole matter up in 
a nutshell and I concur definitely in the statement just expressed. 
That is a fact as far as we see the picture. 

Mi-. Woki.ey. You think then the shipping companies will suffer 
a loss ? 

Admiral Land. I certainly do. 

Mr. Eland. Not oidy a loss in the passenger Inisiness but a reduc- 
tion in mail and in high-class freight carriage. 

Admiral Land. That is right. 

INlr. WoRLEY. But will the Nation as a whole benefit as a result of 

Admiral Land. I do not think so, because I think you are crowding 
out the steamsliip companies from a legitimate territory, the people 
who have done all the exphjiatory work, having been in business there 
since the first ship left the shores. So I think the Nation as a whole 
will suffei- more than it benefits by such action. It does not seem to 
me that it Avould be following in step with the democratic principles 
under which we were put into being. 

Mr. WoRLEY. Of course, that question comes up, for example, in the 
manufacture of automobiles. INIany of these companies are engaged 
in carrying out war production, and some of the companies are now 
starting to produce automobiles, but these other companies will have 
to wait. They cannot all start at the same time. If we look at it from 
the standpoint of one company, don't you think we are looking at it 
a little bit narrowly? 

Admiral Land. I see no reason for giving the interloper a 2 years' 
handicap over your long-time customer. 

Mr. Bland. Let me ask you this : The ship operator might not nec- 
essarily have a 2-yenr handicap. If he can get a certicate of con- 
venience and necessity and can get his jilanes delivered to him just like 
the others, is he not starting into that service to that extent along with 
his competitor and not necessarily waiting for the 2 to G years within 
which he can contract for a ship? 

Mr. WoRLEY. We intend to go into that later on a little more thor- 
oughly. Admiral. As I imderstand it, your committee and the Bul- 
winkle conunittee are both studying that question. 

Mr. Bland. I do not know about the Bulwinkle committee. Our 
committee is giving full consideration to it. "We are trying to get action 
as speedily as we can. 


Mr. WoELEY. Thei-e is one question here. Admiral. Wliat general 
plans are there in otlier countries that you know of for acquiring or 
building a merchant marine after the war^ xVre you familiar with 
a 113^? 

Admiral La>'d. I do not think there has been anything definitely an- 
nounced by any other countries. They are all talking about it, they 
are all thinking al)out it. You nuist remember up to very recently most 
of the Allied nations have been countries in exile, with tlieir pe<jple 
primarily domiciled in London. They haven't anything more than 
what I would call conversational plans or blueprints. As to their con- 
sidering these things, yes; but for most of them it is impossible to do 
anything more than talk about it, because they haven't any country 
that they can call their own. I am speaking primarily of Norway, 
Denmark. Holland, Belgium, Greece, which countries are among the 
leading maritime nations of the world outside of U. K. and the U. S. 
There is plenty of thought, plenty of discussion, inside and outside of 
Parliament on the question of the future of the British merchant ma- 
rine, but if there is any well-developed or fonnulated plan, it has not 
been announced, or probably w ill not be. 

Mr. WoKLEY. Getting to another question, the cost of operation of 
our merchant marine. How does it compare with the cost of operation 
of other nations? 

Admiral Land. Our costs are higher, based primarily on wages. 
AVe require American citizenship and other nations do not. 

Mr. WoRLEY. We require a man to be an American citizen before 
he can work on our ships? 

Admiral Land. Before he can serve on a ship ; yes. We have very 
definite requirements in the Merchant Marine Act. At the present 
time not less than 90 percent of the crew must be American citi- 
zens. When we first enacted it there was an allowance on passenger 
ships. To all intents and purposes, a man must be an American citizen 
to serve on an American-flag ship. That does not bother these otlier 
nations. They take them wherever they can get them, and sometimes 
where they are efficient — whether they are or not, I do not know — 
the cheaper they get them the more likely they are to do it. That is 
particularl}^ true in the East India trade, and to some extent the China 
trade. So we have that handicap right away. I do not want to break 
the handicap down, I would rather support it by the operating sub- 
sidy. I think it is a good law. 

j\Ir. Bland. As a matter of fact, in the first act we passed we paid 


Admiral Land. Yes; and then it was built up to 90 on certain pas- 
senger ships. 

Mr. Bland. At the time of the Morro Castle incident, the majority 
of the men, as I recall, were on the 66% and the others were 331/3. 

Mr. WoKEEY. W^e have touched on this question before. How much 
subsidy, direct or indirect, are our carriers receiving as compared to 
that received by other nations? 

Admiral Land. That question is not capable of being answered. 

>Mr. WoREEY. There are too many ways by which the other nations 
subsidize their carriers, so it is impossible to determine it? 

Admiral Land. Yes, sir; and there are things not published in re- 
gard to these other nations. I spent 2 or 3 years of my life to find out 


how iimeh the Norynandie cost, how much the Frenchmen paid for it, 
and I haven't found out yet. 

Mr. WoRLF.Y, And the extent of our subsidy is a matter of record ? 

Admiral Land. Yes. 

Mr. WoRLEY. It is a direct cash subsidy? 

Admiral Land. Yes, sir. 

Mr. WoRLEY. Now, getting over to the training program, there 
is one requiring the training of personnel for the maritime ships, is 
there not ? 

Admiral Land. In my judgment it is a permanent and positive \ 
requirement Avhich, I regret to say, this country never adopted until | 
thi-s act was passed. It has been one of the best things that ever hap- ' 
pened to the American merchant marine. Long after you gentlemen I 
have forgotten about the shipbuilding program, you will, I believe, 
have something to be proud of in the training that you put in the 
United States at Sheepshead Bay and the other training stations in 
the United States. I have no hesitancy in saying it is of permanent 
value. It will go down in history as one of the best things ever done 
for the American merchant marine. The merchant marine grew like 
Topsy for a century. The difficulties inherent in that sort of wild 
growth became very patent, very evident after the last war. It was 
not until after the passage of the Merchant Marine Act that the 
training program was instituted, and I say it will never be canceled. 

Mr. WoRLEY. How many men do you believe are necessary to oper- 
ate the American merchant marine? 

Admiral Land. We had between 30.000 and 40,000 in 1939. I 
would like to see that built up permanently to something like 60,000 
to 70 000, to take care of the type of fleet that I think this country 
should have. We have at the ]u-esent time about 170,000, a dilution 
of 4 or 5 to 1. This will be like other war emergency things. We 
will retreat. As I have indicated, this will go rather slowly as 
compared with some of the manufacturing industries, particularly 
aviation and shipbuilding, so that our reconversion can be done not 
quite so painfully as it done with some of the manufacturing, and I 
trust it will be the survival of the fittest, both in operators and 

Mr. WoRLEY. Mr. Wolverton had a question. 

Mr. WcLVERTON. Admiral Land, I regret exceedingly that I was 
late in arrival on account of my train being late. I realize any state- 
ment you make in reference to American shipping is worth while. I 
regret I did not have the opportunity of hearing your brief statement. 
It may be that the same questions I will ask you have already been 
covered. If such is the case, don't hesitate to say so. . I will then get 
it from the record as taken by our stenographer. 

I am particularly interested in the subject of our American shipping 
having the right to utilize the air as a supplementary part of our for- 
eign commerce. I have no doubt that you have very clearly defined 
ideas on that subject. Is it your opinion that our merchant marine 
could not successfully compete with the merchant marine of foreign 
countries unless it has the right to go into aviation as a part of its 

Admiral Land. I think it will be under a serious handicap. Judge 
Bland expressed my feeling and sentiment better than I could express 
them myself just prior to the time you came in. 


Mr. WoLvERTON. I can say anything Judge Bland says is equally en- 
titled to consideration. 

Admiral Land. I think that there will be a serious handicap if pro- 
hibitions and inhibitions are set up either by statute or by regulations 
against the use of aviation in the American merchant marine trans- 
oceanic commerce as a supplement to their operations, both as to 
passengers and mail and high-class, lightweight freight. 

Mr. WoLVERTON. It has seemed to me that when a merchant line is 
opened and that route is pioneered by the shipping interest, together 
with all the facilities that are necessary for its successful operation, 
that it immediately set up a very worth-while organization that could 
be utilized for air purposes as well as for shipping purposes. Is that 
not true? 

Admiral Land. I think you are quite right, sir. 

Mr. "WoLVERTON. Whereas whatever pioneering is done by aviation 
will require the setting up of new organizations as it goes into new 

Admiral Land. That is right. 

Mr. Blind. May I add something to what you asked a minute ago? 
Are not almost all of the foreign countries, the British and others, 
now amending their charters, or whatever you may term it, so as to 
permit aviation in connection with their steamship business? 

Admiral Land. That is generally understood to be correct, and 
undoubtedly every effort will be made by these countries to do that 
very thing. I might quote something here that I quoted before 
Judge Bland's committee. When Lord Beaverbrook appeard before 
the House of Commons he summed up the British situation very suc- 
cinctly by this statement: 

There is no monoply of operations ; there is a monoply of subsidies in aviation 
in the British Empire. 

Mr. WoLVERTON. Admiral, could you give us a picture of the special 
requirements or restrictions which limit the operations of our ship- 
ping between various countries? 

Admiral Land. Well, only generally, that we have a protected 
coastal trade that is in practice in maritime countries. The other 
restrictions are not of very great importance, generally speaking. 
They are covered by treaties and favored-countries clauses. I could 
not give you that by memory. I could cite one example that obtained 
before the war which shows some of the difficulties. The Fren^ch 
Government passed a resolution, or a regulation, or statute, some- 
thing of that kind or other, which required tliat 50 percent of the 
oil that came into France must come in under the French flag. That 
kind of a restriction obtained, and in various countries of the world 
there are other restrictions, but, generally speaking, it is a fairl}^ 
open, competitive market as far as transoceanic traffic is concerned, 
except, where some specific regulation of that character is promul- 
gated by a government. 

Mr. WoLMSRTON. Are there any conditions arising from the practical 
operation of ships as they go into foreign ports whereby our vessels 
are handicapped? 

Admiral Land. Oh, j^es; there are probably minor charges of var- 
ious kinds that may have some favored-nation clause, port charges, 
toll charges, things of that kind. Usually those are ironed out either 


through conference agreements, by treaties, or by specific meetings 
of the minds between the governments concerned.' Generally speak- 
ing, there are not many of that kind. They do obtain, yes,'just the 
same as we have a warrant system in time of war here, that we can 
put sanctions on somebody that does not play ball. I imagine those 
do obtain. The most serious things of that kind, of course, are canal 
tolls. That is pretty well recognized throughout the world. They 
determine as to where they buy and where they do not buy. 

Mr. WoRLEY. In that connection though, I understand Japan re- 
quired that all of her silk export be carried by Japanese ships. Do 
you think we could, with wisdom, pursue a policy like that, to provide 
that all exports we sell be transported by American ships? 

Admiral Land*. I think that would ultimately result in what I call 
a dog-in-the-manger thing that might reverberate very uneconomically 
and certainly would be one of the prime movers in getting World War 
III on our backs. I would not be for anything as drastic as that. 
I would like to play 50-50 with any of them. If they do it we do it, 
and if they do not do it then we do not do it. I am strongly in favor 
of a policy of equality with these people. 

As you stated, it is quite true that is one of the bases on which the 
Japanese people have built a very strong merchant marine. Every 
ship they built in the last 20 years is a potential combatant ship, with 
gun foundations and possibilities of emplacements, and protection de- 
vices of various kinds, so it can be converted almost overnight to a 
combatant ship. 

Mr. Bland. May I ask in that connection, with the chairman's per- 
mission, if there was not at one time, in one of our tariff acts, a dif- 
ferential in favor of goods that came into this country on American 
ships, and it was never put into effect by the administration because 
of protest of difficulties in connection with it ? 

Admiral Land. I am afraid you will have to ask somebody else. 

Mr. Bland. It seems to me there was a slight differential. I may 
be mistaken. 

Mr. WoLVEKTON. Admiral, some of us on this committee, including 
Mr. AVelch, who is a member of the Committee on Merchant Marine 
and Fisheries, and who unfortunately is precluded from being here 
today, are of the opinion that in order to maintain our national econ- 
omy in the days that are ahead it will require a very substantial for- 
eign trade. Have you in your statement made this morning indicated, 
from the standpoint of the merchant marine, how that foreign trade 
could be built up? 

Admiral Land. Well. 1 would not say that I liave covered the sub- 
ject, but I have suggested the possibility of an increase in our foreign 
trade in China and in India, in Africa, a continuation of our good-will 
policy in South America and general expansion of world trade, which 
seems to me to be not only possible but probable, and that aviation 
itself will introduce new avenues, and new explorations, new friend- 
ships which should be augmented through the interchange of goods. 
I would like to put a string on that statement, that for every seller 
you have got to have a buyer, otherwise you do not have trade, and 
that any inhibitions and prohibitions that are put on international 
trade by a specific country is bound to have repercussions. AVe have 
to go into this with an open mind and not with prejudice, not with 


too much selfishness and too much pocketbook nerve in tlie picture if 
it is to be successful in operation. 

Mr. WoLVERTON. I am not so much concerned about that from our 
standpoint as I am from the standpoint of others. 

Admiral Land. I was speaking for the moment from an inter- 
national point of view, not having any pocketbook interest in any of 
this thing, from what I call an observer's point of view, because, after 
all, I can alwaj^s get coffee and rolls off the Navy when I go back on 
the retired list. I just think we have got to come into that with a 
spirit of generosity, a spirit of understanding, if we are going to work 
out the civilization and peace of the world as we visualize it. There is 
no question in the world but what trade rivalries sometimes become 
military rivalries, and human nature being wliat it is. we should use 
our best endeavors to avoid that without getting all four feet in the 
trough, no matter what nation it is. 

Mr. WcRLEY. How do you propose to arrive at that understanding? 

Admiral Land. I think by international agreement. There is no 
reason in the world wdiy we should not be fairly decent citizens, no 
matter what our age, sex, or condition may be. We have undoubtedly 
reached a lot of agreements already, and we will undoubtedly reach 
more, including some kind of peace agreements. Let us hope we will 
do it slow enough so that they may be permanent. My only fear is 
we may be too precipitous about it. 

Mr. Bland. Does that involve cartels? 

Admiral Land. I would hesitate to discuss that, Judge. I am not a 
competent witness on that. 

Mr. WoRLEY. We do not want to get you out of your jurisdiction. 

Admiral Land. I am one that sits here and philosophizes on these 
things without having very much intelligence or philosophy in his 
system. But I repeat, j^ou can have international agreements. I see 
no reason why that should not apply, and is bound to apply first to cur- 
rency, finances, whatever you choose to call it. If you do not have that, 
then the rest of it goes by the board. You and I may sit down here 
and get an agreement on the cost of ships, or trade, or charter rates, 
but if you do not have stabilization it is not worth the power to blow 
it — you know where. That is the fundamental thing. After that you 
build up on a stabilized exchange, or stabilized currency and then you 
will be certain of your trade agreements. That applies to shipping, 
it applies to aviation as well as on everything else. We have hacl it on 
oils, we have had it on otlier things, and we will have an aviation con- 
ference the 1st of November. We are bound to have this in connection 
with the peace. 

Mr. WoRLEY. Is the Maritime Commission participating in any of 
the conferences, for example, with the State Department, or the De- 
partment of Commerce, in determining the foreign-trade problems? 

Admiral Land. Well, we are represented on any of the committees 
that function here preparatory to matters of this kind, but these are 
local and national and not international so far. 

Mr. WcRLEY. You are not called in on international agreements or 

Admiral Land. Witli one exception. xVs you gentlemen know, and 
as brought out in the answer to the first question here, the War Ship- 
ping Administration is the optional member of the Ministry of War 


u)id Ti-aiisport in the United Kingdom that functions under the com- 
bined Shipping Adjustment Boards, one located in Washington, one 
located in London, and that in turn controls two pools of shipping, or 
one, if you like, one control in London and one control in Washington, 
and we have under our control practically the shipping of the world 
under United Nations flags. That will be extended after the fall of 
Germany to continue until 6 months after the fall of Japan, or some 
such time earlier than that as may be agreed upon by the nations con- 
cerned. Now* that set-up will shortly be implemented by what agree- 
ments may be reached, but it is nothing more nor less than a con- 
tinuation of these pools that we have hacl ever since we came into the 
war. Beyond that I do not think the Maritime Commission or the War 
Shipping Administration have been involved in any international 
things. That, as I say, is nothing more than a continuation of what 
has been in effect 3 or 4 years, some of us feel satisfactorily, because we 
have controlled rather satisfactorily all of the United Nations ships 
in this worldwide struggle. 

Mr. WoRLEY. In short, the existence of the Maritime Commission 
and merchant marine depends upon what our policy will be in the 
future ? 

Admiral Land. That is true. 

Mr. WoRLEY. That policy is not determined by the Maritime Com- 

Admiral Land. No, sir. 

Mr. WoRLEY. Thank you. 

Mr. WoLVEETON. Admiral, what do you find as the most potential 
reason or reasons that enable one country to dominate in the foreign 
trade of another country? For instance, we frequently hear it said 
that in South America and some other countries in the past there was 
a strong German influence, that their mode of doing business was such 
that it appealed to those countries and enabled them to have an ad- 
vantage. The same has equally been said of the British. Do you find 
that other nations, or the businessmen of other nations, are awake to 
situations that they take advantage of or, for some reason or other, 
our business enterprises do not seem to grasp or measure up to? 

Admiral Land. In my judgment, Ave are not a colonizing Nation. 
We do not like to domicile ourselves permanently in these countries. 
Other nations of the world do. I have seen, myself, all the points you 
laised in South America. In one case it is a definite Italian colony, 
in another case it is a British colony, or a German colony. They live 
there, they stay there, they marry there, settle down, build houses, and 
there is their home. We, as a people, generally speaking, have not 
been willing to do that. We go there as businessmen, we stay there a 
short space of time, we get what we can out of it, we try to give as 
nnich and maybe more than we take, but our general attitude is not 
to comingle, to intermarry, to settle down and live in these countries. 
In other words, we are not successful as colonizers, or have not been 
most of our existence. That will probably change. The contrary is 
quite true in Honolulu, for example. We fairly well settled down 
there long before -we took it over. At the present time it is pretty 
faiily Americanized. That was not true in the Philippines, and 
probably would not be true for generations, although some of our 
people live there. 


But it certainly was never true in China, it is not true in India 
and in South America. That, to my mind, is a semiphilosophic 
answer as to why some other countries have been more successful than 
we have in getting a financial toehold on certain segments of countries 
outside of their own national realm. 

Mr. WoLVERTON. Has long-term credit had a part in it? 

Admiral Land. Yes, indeed, and various and sundry trade rela- 
tions, trade agreements, cartels, conference agreements, things of that 
kind have all had part and parcel in it. 

Applying it to the merchant marine, let us take Norway, for ex- 
ample. Norway only has two exports on which, materially, her 
existence depends : lumber and fish. That is not enough to live on, so 
they are dependent on maritime trade for their very existence. That 
is probably true of Norway more than any other country in the world, 
and she is one of the best sea-going countries that ever existed, as 
operators, and so on. 

Relatively speaking, that follows down the line with other countries, 
Denmark is another case. Holland is another case. Of course, the 
United Kingdom is notorious for always being a maritime nation from 
times immemorial. I do not think you can possibly go into an inter- 
national agreement and freeze Norway out and still have a merchant 
marine. One of the answers I heard to that was to take all the Nor- 
wegians and transplant them to the United States. They are good 

Mr. WoLVEETON. What I have in mind is not forgetting the fact 
that this committee was set up as a post-war policy committee. There- 
fore, looking into the future and recognizing the importance of foreign 
trade, I would like someone, if they would, to put in our record their 
thought as to the principles or the policies that should be adopted 
either by Government or by business to build up foreign trade. We 
have had experience in foreign trade that has been advantageous, 
and we have had some that has been very disadvantageous, but the 
sum total is that someone ought to give us a picture of formulated 
recommendations, something that this committee would feel justified 
in pressing as a solution, or a help in building up our future foreign 

Admiral Land. Well, I would not like to set myself up as a compe- 
tent witness to answer that question. You have a National Foreign 
Trade Council in this country made up of some of the best citizens 
of the LTnited States. They meet every year. They do exactly what 
you indicate there. They do not always agree one with the other, 
nor do their recommendations always fall on fertile ground. So it 
is not a question that you or I could settle. 

I would say the best body I know of in the United States to give 
this committee recommendations, at least, would be the National 
Foreign Trade Council of the United States, because on that council 
are certainly some of the best brains we possess. They possess far 
more knowledge of the subject than all the brains of the Maritime 
Commission rolled into one. So I should hesitate to take on that 
chore myself, because I do not think I am comiDetent to do it. 

We have ideas, yes; but the Department of Commerce has better 
ideas, with more experience, more trained personnel, who function 
as a Government agency hand-in-glove with this National Foreign 

99579 — 45 — pt. 4 3 


Trade Council, as does the State Department. In other words, we 
think maj^be you will find that the Department of Commerce and 
the Department of State are fairly tied in with this group of very 
intelligent American citizens who^ in my judgment, could give you 
specific, definite recommendations along the lines you are thinking. 

Mr. WoLVERTON. The suggestions that you made, I have no doubt 
will prove helpful and the committee will take advantage of it. Is 
that council set up by private industry, or do Government officials 
participate in this council ? 

Admiral Land. It is a private organization. The Government 
officials participate. They have their annual meeting the 9th, 10th, 
and 11th of October in New York. 

Mr. WoKLEY. Are you through. Admiral? 

Admiral Land. I am all through. They are meeting here very 
shortly, and to my mind, any such statement as the Congressman just 
made, if it were transmitted to Mr. Thomas, the president of that 
organization, I think they would be very happy to give you gentlemen 
concrete, specific recommendations on this subject, because that is their 
job. I am sure they would be happy to do it when they meet in final 

Mr. WoRLEY. We will endeavor to have them appear before the 

Admiral Land. All right. 

Mr. WoRLEY. Are there any further questions? 

Mr. WoLVERTON. I have one or two more. 

Mr. WoRLEY. All right. 

Mr. WoLVERTON. I have emphasized this because I feel it is one of 
the most important questions that this committee will have to con- 
sider. It would seem to me, from some of the testimony that has 
been given here, that the difference between success and failure in 
maintaining our national commerce may be the amount of foreign 
trade that we are able to have in the post-war period. Mr. Welch, a 
valued member of this committee and also of the committee of which 
Judo-e Bland is chairman, has expressed himself on several occasions 
on that subject, and I think he has impressed all of us with the im- 
portance of it. 

Now, may I change the thought for a moment, noting that we will 
^arry out your suggestion of contacting the National Foreign Trade 

What do you look forward to in the post-war period as to our ship- 
yards ? I am very much concerned about that. I am concerned as to 
what shipyards can convert to other production. I am conscious of the 
fact that the number of employees in those shipyards throughout the 
country are looking with some concern to the future. What do you 
think is the future of the shipbuilding industry ? 

Admiral Land. To answer your question facetiously, Mr. Wolver- 
ton, having been interested in the problem of the sliiplDuilder for 40 
years, I look with alarm on the condition that faces the shipbuilding 
industry of these United States; and if I could just drop out of the 
picture here and not have to face my buddies of 40 years' standing 
and trying to tell them what to do, I would be very happy to do it, be- 
cause i do not know the answer. To answer concretely, let me refer to 
what happened in the last war. The Emergency Fleet Corporation 


and Shipping Board set up 223 yards in these United States, which only 
functioned at full capacity subsequent to the armistice. It lasted to 
about 1920 or 1921, possibly finishing in 1922, but kt us say 1921, 

Those yards were reduced in 1936 to 5 major yards, with 3 or 4 minor 
yards. That is a reduction from 223 to 9. Some of the mistakes that 
were made then we did not recommit. Some we may have. We have 
made enough. We have under our own aegis some 80 yards, 30 to 50 
major and the remainder minor. That is outside of the yards of the 
Army and Navy, who have a good many more, mostly minor. 

For the minor yards I see nothing. For a majority of the major 
yards, I see very little except to close up shop as a war emergency, 
finished business. For some of the best yards, particularly on the 
west coast, there should be room for their existence on this basis: (1) 
Repairs, (2) conversion, and (3) I trust some continuation of ship- 
building, both naval and merchant marine, small in quantity but high 
in quality, in order that the United States of America may maintain a 
nucleus of the shipbuilding industry for all purposes, no matter what 
they may be. 

Just what that quantity and quality will be I havei \ enough brains 
to tell you, but that they will be very seriously reduced in quantity to 
my mind is an axiomatic fact, and the reduction in personnel, which I 
mentioned some half hour ago, between 700,000 and 800,000 in mari- 
time yards, and a grand total including the navy yards and the ship- 
building of somewhere between 1,500,000 and 2,000,000 people will go 
back to the peacetime normalcy of something in the neighborhood of 
a minimum of 10 percent and a maximum of 20 percent of that em- 

You are quite right that you cannot convert a shipyard into a man- 
ufacturing plant by the same process that you can convert other 
plants in these United States to manufacturing plants, but that par- 
ticularly refers to the automobile industry whose conversion prob- 
lem, while difficult, is solvable. It is not true with the shipyards. 
Most of them are of mushroom growth. They build specific ships, one 
type, particularly the Liberty program, and I just do not see that there 
is any existence for the large majority of them. 

I hate to state that, but I think any thinking man that has examined 
the situation will recognize the validity of the statement. 

Mr. WoLVERTON. I might say to you that I have asked similar ques- 
tions of others who have appeared before this committee and their 
answers have not been any more optimistic than yours. I think it is a 
matter of considerable concern, from the standpoint of employment 
in the post-war period. 

I think also it is important from the standpoint that you, in your 
remarks, have indicated, you recognize ; namely, it is important from 
a defense standpoint as well as a commercial standpoint. The ship- 
building industry is one that brings mto its organization more trained 
men than any other industry that I know of in this Nation of ours. 
You just cannot organize or get together that kind of an organization 
overnight, and if there is not some encouragement given to our estab- 
lished yards, it would seem to me that we would be seriously handi- 
capping our future national defense. 

You are well aware of the conditions that existed immediately after 
the last war, just as I am. I have lived in the Delaware River section 


and, therefore, have a personal knowledge of the shipbuilding situa- 
tion. The conditions there after the last war were pathetic. Every 
effort was made to keep those yards organized for a future possible 

I think that is a question that must necessarily be considered along 
with the question of the unemployment that will necessarily arise as 
a result of the closing down of yards such as you have indicated is 
quite likely. 

Admiral Land, I would like to draw a line of cleavage for the com- 
mittee's consideration. We have in the shipbuilding industry what 
we call our old-line yards, which you are no doubt familiar with, 
many of them being on the Delaware and in that vicinity. Many of 
the yards are Government facilities. Government-owned, Government 
constructed, Government paid for, and, therefore, the losses will have 
to be written off as a war cost and the suffering will not be so great. 
Mr. WoLVERTON. Except from the standpoint of labor. 
Admiral Land. I was going to add that. That does not fulfill the 
unemployment question. There is that line of demarcation, and I 
think we will have to consider that in trying to keep the nucleus of a 
shipbuilding industry. 

There is a possible solution and it will require congressional ap- 
proval if it is put into effect; namely, you are going to maintain a 
Navy X, whatever X may be, or Y or Z, and that in turn will sup- 
port certain navy yards. It is my belief that this country will go 
ahead with certain naval construction, very modestly, to be sure, 
to keep up to date. You can do it on the basis of insurance, on the 
basis of a national policy for defense, or for a proper kind of relief 
for unemployment, rather than the familiar expression that is always 
used of raking leaves, or what have you. 

By the same token, you will do the same thing with your merchant 
marine. I would trust that Congress and the Government as a policy 
would permit the construction of certain passenger ships, for exam- 
ple, of which there is a scarcity, so as to maintain this nucleus of 
shipbuilding in those yards that are entitled, by virtue of their abili- 
ties, to exist. In that manner we would then have the skeleton ship- 
building industry which the Government will have to, in part, support, 
as an insurance, as a national defense, and as defense relief for unem- 
ployment, and a proper relief for unemployment should continue for a 
definite period of time, depending upon conditions as they arise. 

Now, that is not the millenium, but it offers some form of partial 
solution to the problem. We are going to keep some sort of ship- 
building industry in this countr}'^, I don't care whether it gets down 
to 5 yards. I think we can support from 10 to 12 yards. And cer- 
tainly with the repairs, the conversion, and some new building which 
must take place, if this is properly distributed throughout the United 
States, I think the American people will have to support it. 

I think we will have to look to Congress for the appropriation to 
support what I call a rational, decent, equitable policy for the ship- 
building industry. 

Mr. WoLVERTON. I am in full accord with the thoughts you have 
expressed as to the importance of the Federal Government continu- 
ing our shipbuilding construction. 


Mr. Bland. After the last war the New Eiifjland Shipbuilding & 
Dry Dock put up one of the largest yards in this country and main- 
tained its organization by building turbines, towers, and doing work 
of that character. 

Mr. WoLvERTON. Now, may I revert to a question which I should 
have asked sooner. What part of our own trade has been carried 
over the past 20 years, we will say, in American bottoms, do you know, 
just generally? 

Admiral Land. It varies from a low of 10 or 12 percent up to a 
high of about 30 percent. Those of us that make a fetish of the 
American merchant marine think we ought to increase it, and we 
set the mark, at least I set the mark at 50 per cent. I should be 
quite happy if we increased that from 30 to 40 percent by a gradual 
process, tlie economics justifying the improvement, but I think the 
mark ought to be theoretically on a 50 percent basis, because that is 
the proper basis. 

I would like to give you some examples of what these Axis Nations 
did prior to the war. I may misquote now in these figures, but if 
my memory serves me right, Italy carried 60 percent of her foreign 
trade under her own flag; Germany 70 percent, and Japan 80 percent. 
I do not consider that either equitable or just, because it is uneco- 
nomical to do it on more than a 50-50 basis. I think we should have 
the 50-50 basis, getting as close to it as the economics of the situa- 
tion would justify. 

Mr. WoRLEY. Did those countries find it economical to give their 
trade the way they did, giving a preference to their own shipping? 

Admiral Land. I suppose thej^^ found it economical in one way or 
another, but the only country that I know very accurately about is 
Japan whose shipbuilding industiy and ship-operating industry are in 
the hands of five or six families, completely tied in with the Gov- 
ernment when they needed support and supported by the Government. 
I cannot answer you as to how much subsidy they got, because that is 
a closed corporation, but they were controlled by the shipping mo- 
nopoly in the Kingdom of Japan and the Government paid the 
freight, as was necessary, and, as far as I know, none of these five or 
six major families ever went into bankruptcy. 

Mr. vVoRLEY. I just wondered if they found it economical and justi- 
fiable, perhaps we could find out how they do it and do it ourselves. 

Mr. WoLVERTON. My question. Admiral, was directed particularly 
to our own trade. 

Admiral Land. I answered you as correctly as I can, and I think 
the figures are pretty accurate. If you go back 10 or 20 years, we 
reached a low of 10 percent and we got to a high of 30 percent. In 
1929 it was about 29 percent. 

Mr. Bland. I think we got as low as 8 percent one time. 

Admiral Land. Yes. Of course, in the gilded days of the clipper 
ship we got up as high as 90 percent, and so I say don't go by decades 
but go by generations. 

Mr. WoLVERTON. Does the quality of the shipping have anything 
to do with that ? You have made reference to the clipper ships. At 
that time the American clipper ships were probably the fastest on the 
oceans of the world, and I am wondering whether that element may 
have been helpful to us in carrying that large percentage of trade 
compared to now. 


Admiral Land. That is entirely correct, and tl^anks to the Con- 
gress and the Merchant Marine Act we are now in a position, as of 
today, where we have this quality of ships. We did not have it in 
1936. We had nothing bnt hand-rae-downs from the last war. Again 
repeating myself, we had from 80 to 90 percent of ships 20 years old. 

Mr. WoLVERTON. There is a matter that came to my attention re- 
cently that you probably could speak authoritatively on, and that is 
with reference to our Liberty ships, the number of knots that they can 
cover in an hour, and that lately — this is the part that I thought might 
be significant — but that lately those cargo ships were being stepped up 
in speed, and I have been told, or have read, that Great Britain was 
getting the majority of those ships built in our American yards. Now, 
whether they were built by us and disposed of under lend-lease or 
whether they are by a British contract, I do not know. Is there any- 
thing to that, that the British are now seeking to have built in our 
yards ships that are faster than those that we constructed so many of 
during the war ? 

Admiral Land. No, sir; and if it were the title remains in the 
United States. In the transfer of ships to foreign commerce under 
the United Nations flags the title remains in the United States. 

Mr. WoL\T2RTON. Dou't they contract for any on their own account? 

Admiral Land. They did before we were in the war, the British con- 
tracted for 60 ships, but they were the first Libertys, 30 in Portland, 
Maine, and 30 in Kichmond, Calif. We also got what I call Liberty 
type ships from Canada which are under British lend-lease and we 
have turned over to the British in accordance with the so-called 
Churchill-Roosevelt agreement something in the neighborhood of 200 
ships, practically all of which are Libertys, and the title remaining 
in the United States, with one exception of a task force of 13 C-l's 
which were used primarily for military purposes and were very satis- 
factory, part of the 200, and the title also remains in the United States. 

Mr. WoLVERTON. Then it is true, is it not, that we are building 
ships now that are faster than those that we built first ? 

Admiral Land. Yes, sir; but those we are building for ourselves, 
as far as I know. 

Mr. WoLVERTON. You do not know that the British have contracted 
for any ? 

Admiral Land. No, sir ; I do not. We are still operating under lend- 
lease and we are operating under the statute passed by Congress. 

Mr. WoLVERTON. You Say the title remains with us? 

Admiral Land. Yes, sir. 

Mr. WoLVERTON. I am not concerned under those conditions, but I 
would be concerned if I saw a competing maritime nation building 
ships of greater speed, looking to them to take the place of our country 
in trade that the clipper ships once took because of their speed. 

Admiral Land. Yes. 

Mr. WoRLEY. Admiral, we want to be considerate of you and your 
time. Would it be convenient for you to come back at 2 o'clock, or 
would you rather complete now ? The staff director had a few questions 
here, and I believe Mr. Wolverton had some additional questions. 

Admiral Land. I have got a War Production Board meeting at 3 
o'clock. Could you turn me loose by that time, so as to attend that 
meeting ? 


Mr. WoRLET. At three o'clock? 

Admiral Land. Yes, sir. 

Mr. WoRLEY. We will turn you loose by that time. Perhaps we can 
finish here now. Mr. Folsom, the committee staff director, has a 
few questions. 

Mr. Folsom. I just have one or two questions. 

You mentioned the desirability of a sanctuary in which you would 
put a number of ships after the war. 

Would not the number of ships you would put in that sanctuary 
determine, to a very large extent, the activity which you would have 
in the shipbuilding industry ? If you have a large number of ships in 
sanctuary then you might soon have a demand for new ships, but if 
you have a small amount in sanctuary then you would have so many 
ships in America that you would not need to build new ones ? 

Admiral Land. I think that is a very vital factor in the number that 
go into a sanctuary. As far as our policy as of today is concerned, we 
would anticipate putting in sanctuary Liberty ships only, but that is 

Mr. FoLSOM. In that case then there would be very little activity in 
the shipbuilding yards for a long time, as far as cargo ships are con- 

Admiral Land. As long as they are untouchable, they would have 
no effect on shipbuilding. 

Mr. Folsom. I mean that class that would be left. 

Admiral Land. The class that will be left, of course, is the fast ships. 
That there will be plenty right away, yes ; and that is the reason I said 
that the shipbuilding picture is not a very happy picture, except on 
the three counts I mentioned, repairs, reconversion, and, I trust some 
passenger ship construction of sufficient magnituTie to tide over the 
best of our major yards. Undoubtedly there will be some ship con- 
struction of small types. God only knows what the citizenry may 
desire. But quantitatively, it will not amoimt to a great deal. 

Mr. Folsom. Another question I had was in regard to the operating 
subsidy. You mentioned the fact that the figures indicated that the 
amount of subsidy in the last 7 years has been very small. You had the 
benefit during that period of the last 2 or 3 years when you were oper- 
ating at full capacity. Looking ahead for the period after the war, 
would you not expect that the situation would change ? 

Admiral Land. That is true up to the time we requisitioned all the 
ships, but don't forget when we requisitioned all the ships all the 
operators in the United States were merely on our pay roll, they are 
our agents, so you cannot figure on any great profits after we requisi- 
tion them, because, unfortunately, we are the major operators. I say 
that with my tongue in my cheek, because we still use the operators to 
actually run the ships, but they are not going to make any major 
amount of profit on that, and of course our operating subsidy ceases. 

Mr. FoLsoM. You are insured against loss? 

Admiral Land. Yes. 

Mr. Folsom. That would not be the case after the war? 

Admiral Land. No, but given an even break on any kind of reason- 
able foreign trade, the operating subsidy is always going to be small, 
as far as we can visualize it. It does not disturb me in the least. There 
are so many crocodile tears shed on this operating subsidy, but it is 


not worth the discussion taking place. It Is a figment of the imagina- 
tion. We will get our bait back, and I think it will continue — I hope 
so. It is perfectly possible, as the chairman said, if you fall down you 
are not going to have any operating subsidy. 

Mr. FoLSOM. Earlier in your statement, you thought it would be a 
good idea to build up our own merchant marine. You have in mind, 
in the case of Germany and Japan, we should leave them the coastwise 
trade and we would take all the rest of it ? 

Admiral Lakd. That is my general idea, that they should have the 
coastwise, river, and harbor trade, and the rest should be divided be- 
tween the United Nations. 

Mr. WbRLEY. What would we do in the case of their ^ilk? 

Admiral Land. We would just be their agent and transport it for 

Mr. WoL\'ERTO]sr. There was a question that came to my mind that 
I meant to ask you, Admiral. Are you familiar with what policy has 
been pursued by Japan that has enabled that country to carry 80 
percent of its foreign trade in its own bottoms ? 

Admiral Land. Yes, sir ; I am definitely familiar with that. 

It is a Government-controlled monopoly, worked between four or 
five or six families, tied right in with the Government, in which the 
Government says, "We want so and so," and these people produce it. 
The Government says, "You do so and so," as in the case of silk, anjd 
silk was exported in Japanese bottoms. 

Mr. WoLVERTON. What policy did they have which would prevent 
American shipping from being a competitor? Was it a Government 
policy or was it just the general conditions that enabled the Japanese 
to operate so much cheaper that they naturally would get it without 
any governmental policy ? 

Admiral Land. You have hit on the meat in the coconut when you 
say "cheaper." That is one advantage over us that they possess right 
away, on their wage schedules. The other is they would make it 
very difficult for you, as an American, to go over and get any return 
cargo. You are getting into details there that I am not in a position 
to answer. 

Mr. Bland, Did not they require that purchases made by them in 
other countries should be sent to them in ships under their flags? 

Admiral Land. Yes. There are plenty things like that that ob- 
tained throughout the world. They are particularly true of Japan. 
You would have difficulty in getting coal, you would have difficulty in 
getting oil, or water, or the cargo was not there, you would have to 
wait, and in the meantime it would be at another pier, someone would 
walk off with it, all kinds of tricks in the trade with which I am not 
familiar, but I know they existed, and they existc particularly in 
that country. They existed for 3'^ears, so it was extremely difficult for 
an American ship and various other ships under foreign flags, as far 
as^that is concerned, to get a suitable cargo out of the country. 

Mr. WoLVERTON. This Nation has been so generous in its good- 
neighbor policy and brotherhood policy that we just did not think 
it was right to do those things, did we? 

Mr. WoHLEY. That is largely a matter of opinion. 

Admiral Land. I do not think we are all a bunch of lily-whites, 
or anything like that, but I think we played the game pretty much 


four-square by lifts and braces, and I think we will continue to 
do that. 

Mr, WoLVERTON. I do not think you will have much respect from 
anybody unless you stand up for your own rights. 

Admiral Land. I agree with that. 

Mr. WoRLEY. Congressman Allen of Louisiana is very interested 
in having a question answered. It has a bearing on the foreign 
shipping. Could you give us any idea as to the amount of commerce 
on this proposed new sea channel from New Orleans to the Gulf of 
Mexico 2 

Admiral Land. I am afraid I could not answer that, no; I haven't 
any idea. Any improvement in depth, course, distance, and so on, 
is bound to be advantageous in carrying goods. This is a new proj- 
ect. It is my understanding there are two or three routes that they 
have not even decided amongst themselves yet, so how could anyone 
make a guess as to what the saving would be or what the advantage 
would be i Frankly, I could not answer the question. We will follow 
that with a good deal of interest. We could probably make snap 
estimates, but I would prefer not to do it, because I think it would 
be entirely well up in the ether some place; it would not be accurate. 

Mr. WoLVERTON. Maybe the Chief of Engineers from the War 
Department made some studies on it. 

Admiral Land. They have made some studies, and the Department 
of Commerce has made some studies. Our investigating body, re- 
search and finance, the people that are interested in it, are watching 
the thing. It is too premature to determine with any degree of eco- 
nomic accuracy what it wilj be. 

Mr. WoRLEY. Are there any further questions? 

If not. Admiral, we thank you very much for your testimony. 

Admiral Land. Thank you very much for your courtesy. 

Mr. WoRLEY. The committee will resume hearings at 2 o'clock. 

(Pursuant to the adjournment for the noon recess, the subcommittee 
reconvened at 2 p. m.) 

Mr. WoRLEY. The committee will come to order. 

The first witness to be heard this afternoon is Captain Macauley, 
of the Maritime Commission. 

Captain, would you state your official capacity? 


Captain Macauley. Well, I am a member of the Maritime Com- 
mission, and also Deputy Administrator of the War Shipping Ad- 
ministration — Deputy Administrator having supervision over re- 
cruitment, training, manning, labor relations, and also the medical 
program. In addition, I am Chairman of the Maritime Emergency 
Board, which acts on bonuses and war risk insurance. 

Mr. AVorley. That keeps j^ou rather busy, does it not. Captain. 

Captain Macauley. It does indeed. 


Mr. WoRLET. If yoii don't mind, there are a few general questions 
I would like to ask you which we overlooked when Admiral Land was 
on the stand this morning. 

First, can you give us some idea of just what the Maritime Com- 
mission is, in your own words? We have in the record a detailed 
statement as to the authority and laws under which it operates, but 
if you could give us some general idea of when it was created and 
why it was created, its present function, and what part you think it 
will play in tlie post-war world, we would like very much to have it. 

Captain Macauley. The Maritime Commission was created by the 
merchant marine law of 1936, and, of course, all the details of that 
law are given in the book or pamphlet stating that law with its revi- 
sions and amendments. 

It may have been given in this morning's hearing — the scope of the 
activities of the Maritime Commission was changed with the war; 
that is, when the War Shipping Administration came into being the 
War Shipping Administration took over the operation of the vessels 
and the manning of the vessels from the Maritime Commission, leav- 
ing the Maritime Commission with the entire building program and 
with certain other duties it was required by law to carry on. 

Then the majority of ships which were operating under private 
ownership were requisitioned by the War Shipping Administration. 
In fact, that was commenced by the Maritime Commission even before 
the War Shipping Administration came into being. Those who were 
the original operators have acted as the agents, or general agents, of 
the War Shipping Administration. So that, in reality, except with 
some of the time-chartered ships, the War Shipping Administration 
is operating all vessels which are owned or have been taken over by 
the War Shipping Administration, not only those under the United 
States flag, but those under the Panamanian and Honduran flags, and 
also some vessels under other foreign flags. 

Mr. WoRLEY. The War Shipping Administration has taken over 
those ships, too ? 

Captain Macauley. Certain of them. You mean the foreign-flag 
vessels ? Certain of them. 

Mr. WoRLEY. Prior to 1936 did we have any Maritime Commission ? 

Captain Macauley, Of course, we had the Shipping Board and the 
old Emergency Fleet Corporation. I haven't sufficient knowledge to 
give you any details on those. 

Mr. WoRLEY. The Maritime Commission, under the 1936 act, was 
created to build a better merchant marine and to pay more attention 
to our foreign trade ? 

Captain Macauley. Exactly ; that is what it was initiated for, be- 
cause, as I understood it, our merchant marine was at a pretty low ebb 
at that time. 

Mr. WoRLET. You have plans, as I understand it, the Commission 
does, to do what the Commission can do to see that that low ebb does 
not come about again. Is that correct? 

Captain Macauley. Absolutely. . 

Mr. Worley. Now, in determining those plans, does your depart- 
ment confer, for example, with the State Department, the Commerce 
Department, and F. E. A., and other Government units that have to 
do with foreign trade? 


Captain Macauley. We have, of course, liaison with all the Govern- 
ment departments, but there is also a Post-war Planning Committee 
appointed by the Commisison which is working separately. There 
are some members of the Commission, two members of the Commission, 
on that, and the members of the subcommittees are taken from both the 
Maritime Commission and War Shipping Administration people. 

Mr. WoRLEY. So far as the policy with respect to our foreign trade 
and shipping goes, the Maritime Commisison does not go into that 

Captain Macauley. Well, they would certainly make recommenda- 

Mr. WoRLEY. They would be interested in it and make recommenda- 
tions ? 

Captain Macauley. Yes, sir. 

Mr. WoRLEY. But it has no authority to determine that policy ? 

Captain Macauley. I would say that, on anything of that kind, they 
would make recommendations to Congress. 

Mr. Worley. Specifically, can you tell us what is the total civilian 
employment in the merchant marine at the present time, and how it 
relates to the past 10 years' employment? 

Captain Macauley. I can ; and I would like to leave those figures 
with you or furnish them later. 

Now, the present total employment is 185,400. That includes 138,- 
700 active seagoing personnel and what we allow as 20 percent shore 
reserve. Those men are between voyages, either resting up or signed 
off and about to sign on. Then included in that total also are the 
15,000 manning Army Transport vessels and 5,000 manning Pana- 
manian- and Honduran-flag vessels, in which we are allowed to employ 

!Mr. Worley. I missed that total figure. What was that? 

Captain Macauley. The total, including those vessels owned or 
operated by the War Shipping Administration, is 185,400, but that 
also includes the Army Transport Service and the Panamanian-flag 
and Honduran-flag vessels, and a shore reserve of about 20 percent. 

iSIr. WoBLEY. How does that compare with your average for, say, 
the past 10 years? 

Captain Macauley. Now, for that we have to assume pretty much, 
Mr. Chairman. In fact, we haven't got the average, but the general 
figures that we have operated on, from our best information, the sta- 
tistical information, are that in 1934 there were approximately 74,000 
deep-sea seamen, licensed and unlicensed, and 1,000 in the Army. 

Now, that is followed, we will say, by 1935, 73,000 and 1,000. Alto- 
gether, in the total, including the shore reserve, 1934, 75.000; 1935, 
74,000; 1936, 75,000; 1937, 75,000; 1938, 65,000; 1939, 70,000; 1940, 
75,000 ; 1941, 75,000 ; in 1942, 75,000 ; and then 125,000 in 1943. 

That is the statistical information. 

Mr. Bland. Does that include the civilians working with ships? 

Captain Macauley. No, Mr. Chairman ; that does not include them. 
Those are only seagoing men, with the 20 percent reserve for replace- 
ments and not on board ship. That has nothing to do with the men 
in the operators' offices or with the longshoremen. Those are the 
seagoing personnel. 


Mr. WoRLEY. Can you give us any information as to how many 
workers will be emjiloyed on the ships you expect to be retained in the 
active service after the war? 

Captain Macaulet. Well, Mr. Chairman, I don't know what we 
expect to retain in the service after the war. 

^Ir. WoRLEY. I don't either. 

Captain Macauley. So I would hesitate to even approach that ques- 
tion, but I think it may be of interest in what we are planning to do 
that, from all we know, even after the war in Europe is ended they 
will require all the tonnage we have to furnish supplies to Europe 
and to furnish war equipment to Asia, and I don't see that we will 
have any reduction until Japan is defeated, and even for some time — 
how long I have no idea — after that. Whether in the post-war period 
we will be operating all of our ships or some of the foreign nations 
will be operating some of the tonnage we have now, I wouldn't be 
able to say. 

Mr. WoRLEY. Nobody knows the answer to that yet ? 

Captain Macauley. Nobody knows; no, sir. 

Mr. WoRLEY. Here is a very general question. How efficient is our 
manpower in operating the United States Merchant Marine ? 

Captain Macauley. That is a thing I could not give you figures on. 
I think it is as efficient as, and from what I have seen and read I think 
it is more efficient than, any other merchant marine, if that in any 
way answers your question. 

Mr. WoRLEY. We generally have better quarters on our ships, better 
pay, better hours? 

Captain Macauley. Better in every way, infinitely better. 

Mr. Worley. Well, we generally have better ships ? 

Captain Macaui^y. We have ; yes. 

Mr. Worley. Here is another question which would probably be 
difficult to answer. Can this efficiency we have been discussing be 
measured in terms of tons per man employed on operations, not only 
at sea, but also turn-around time in port and some recognition of the 
load factor? Is that involved in it? 

Captain Macauley. I think that might be determined, although, of 
course, we have a huge turn-over among the men, and more in peact • 
time than in wartime. To get that man-ton figure would probably 
be difficult. We could probably get it but I don't think it would mean 

Mr. Worley. Why do we have such a big turn-over in the merchant 
marine in peacetime? 

Captain Macauley. Well, only a certain percentage — I don't know 
what percentage — of the men continue to go to sea, to make that their 
livelihood. Then a lot of them have to stay on shore for a while. 

Mr. Worley. You consider that turn-over, their shore duty? Of 
course, they are not on the pay roll except when they are at sea ? 

Captain Macauley. That is what I mean. 

Mr. Bland. They are employed for the voyage? 

Captain Macauley. That is it. 

]Mr. Bland. And signed off at the termination of the voyage? 

Captain Macauley. It isn't continuous employment. They are 
signed on for the voyage and signed off after the voyage, and it is all 
voluntary, even in wartime. 


Mr. WoRLEY. Do 3^ou suppose there will be a large involuntary 
unemplojanent of merchant seamen after the war or is the normal 
turn-over enough to take care of the normal shrinkage in employment ? 

Captain Macauley. Personally, I believe there will be considerable 
unemployment in the merchant marine after the war unless we are 
able to keep operating the large number of ships we will have available. 
Even the most optimistic plans expect to put some of our ships in 
reserve for the Navy. Now, those ships will not be employing crews. 

So, after the post-war emergency period is over, I think we will 
probably have considerable unemployment, but that will depend also 
on the economic conditions on shore. 

INIr. WoRLEY. You wouldn't want to hazard a guess as to about how 
many you think will be unemployed after peace comes, as far as the 
Maritime Commission is concerned? 

Captain Macauley. No, sir ; I couldn't. 

JSIr. WoRLEY. Is the training program required as a permanent 
device, or is that primarily a wartime need ? 

Captain ]SL\cauley. It is required by law, by the Merchant Marine 
Act of 1936, as amended, and we had it in peacetime, but we have had 
to increase it tremendously during wartime, and I think it is most 
important and one of the best things that has been done to build 
up our merchant marine. 

Mr. WoRLEY. You think that we should continue that, regardless 

Captain Macauley. Absolutely ; but not at the size it is now. 
^Ir. WoRLEY. But in order to have a well-trained standing force? 

Captain Macauijey. That is one of the things we are required to do, 
according to the law, and it is most advisable. 

Mr. WoRLEY. About how expensive is that training program ? 

Captain Macauley. Frankly, I will ask Commodore Knight, of the 
Maritime Training Service, to answer that. He is more familiar with 
those figures than I am. He is the Assistant Deputy Administrator in 
charge of the training program. 

Mr. WoRLEY. Can you give us some idea. Commodore, as to the 
average expense to the Government of conducting a training program ? 

Commodore Knight. Mr, Chairman, it depends entirely on just 
how large a program we are going to conduct after the war. We have 
trained up-to-date, since the program was inaugurated, about 125,000 
officers and men. We have not been satisfied that we have given them 
the best training that could have been given them, because we have 
had to do it in a hurry. We would like to retrain all of those men who 
are going to remain in the merchant marine. 

We have an annual program of at least a month refresher course 
for all of those men, and we started that in 1938, before the war. It is 
rather difficult to give any figure as to the cost of the program until we 
know just exactly how much of a fleet we are going to operate and 
how many men are going to stay in it. 

ISIr. WoRLEY. It is hard for us to get much information on these 
questions until we decide how big a fleet we are going to have? 

Commodore Knight. That is true. But let's say, for instance, just 
to hazard a guess, let's say we have a liundred thousand men ii; the 
merchant marine. What we would like to do in the training program 
is to offer training to each one of those men, retraining, for at least a 


month each year, and that is the way we scheduled it before the war. 
In that way we would carry out the mandate of Congress which re- 
quires tJie Maritime Commission to supply the merchant marine with 
trained and efficient citizen personnel. 

We can only train citizens. We don't train foreigners. It will be 
confined principally to a refresher course, especially as we shake down 
and get the number of men who are going to remain in the fleet and a 
certain number of annual replacements. It wouldn't be necessary to 
train those rej^lacements fiist, with the exception of a relatively small 
number of officers through the Cadet Corps and State maritime acade- 
mies, which are both going to longer terms, so that the academies and 
the Cadet Corps expect to have a period of four years in which to train 
an officer. Some of the foreign nations have a longer period. 

So there Avould be a hiatus in there when we wouldn't be turning out 
many men. By the time they got through a 4-year course, there would 
be a need for a'nmnber of them, about 500 a year, we anticipate. 

Mr. WoRLEY. About 500 a year trained as officers ? 

Commodore Knight. Who graduate as new officers. That is what 
we have planned on now. And perhaps 150 a year through the State 
maritime academies. 

Mr. WoRLEY. Can you give us. Commodore, for the benefit of the 
record and the committee's information, a brief outline as to the whole 
training program? 

Commodore Knight. Yes, I could do that. We have a survey pre- 
pared which I would be very glad to submit for the record that de- 
scribes in detail every one of our activities. That would be a little 
long to go through with, but I do have it. 

We have officer training and training for unlicensed positions, up- 
grading within the unlicensed positions and from unlicensed positions 
to licensed officers. 

The officer training is divided between the United States Merchant 
Marine Cadet Cori)s and the five State maritime academies, on the 
one hand, and for men up from the ranks, who have had experience 
at sea, the required experience at sea, which has been reduced during 
the war but will be extended again after the war, a 4-month course for 
those men who have had sea experience to qualify them to sit for 
license as officers. 

Now about two-thirds of all the officers we have made have been 
men up from the ranks and the others have been made from the Cadet 
Corps and the maritime academies. Many of these young men are 
college graduates, many of them have had several years of college, 
all of them must have been high-school graduates, and tJiey have made 
a very wonderful record for themselves. 

We offer the same opportunities, of course, to men who have made a 
profession of the sea and had training at sea and then have gone to 
officers' schools of the United States maritime service or the State 
academies for 4 months' training. 

Then we have certain specialist schools, among them for radio oper- 
ators, which have turned out a couple of thousand radio operators 
who have been very essential in this war. We have had to go from 
one .man on a ship to three. We haven't got them all on yet. The 
Navy is assisting in it, but the Navy needs its men, so we replace those 
very rapidly. 


Then we have another specialist course, which is for purser-pharma- 
cist mates, and that is conducted in connection with the health pro- 
gram. We are combining the two positions on ships today. Every 
ship in modern times really needs somebody to look after the paper 
work and take care of cargo and such as that, something the master 
and first mate used to do and have not had time to do during the war, 
and probably will not be able to do again. 

In order to save money and combine jobs, in that the purser is busy 
when in port and not busy when at sea, we have combined that position 
with that of pharmacist mate, and we give those purser-pharmacist 
mates 6 months' training and they can then go out pretty well quali- 
fied to administer to the health of the men on the ships. That has 
paid off in the results that have been obtained, and I think the opera- 
tors themselves are very much in favor of a continuation of that 

Captain Macauley. I might say, Mr. Chairman, to interrupt, that 
heretofore the cargo vessels had no medical personnel. Usually one 
of the mates was given charge of the medicine chest and he gave such 
doses as he thought advisable for different things. Now we have 
proper medical attention on board ship and will have it on all ships 
just as soon as we get enough men graduated. 

Mr. WoRLEY. In peacetnne, of course, the operators of the ships 
pay for it ? 

Captain Macauley. That is right. 

Mr. WoRLEY. The Government pays no salaries to these men at all? 

Captain Macauley. Not when they are paid by the operators. 

Mr. WoRLEY. They do provide the training ? 

Captain Macauley. Provide the training. 

Conunodore Knight. Then we have other specialist schools, spe- 
cialist schools for cooks, bakers, carpenter mates, electricians, pump 
men, and the various specialist trades that operate on a ship ; and, of 
course, the great bulk of the program is the making of new seamen 
for the deck, engine, and steward's department. Those are the men 
who come in new, and we have had to have large numbers of them 
during the war. Approximately a hundred thousand men have been 
trained for the unlicensed positions, that is, ordinary seaman, wiper, 
oiler, fireman, men in the mess department, and the cooks and second 
cooks in the steward's department. We have included a combination 
of the ratings required aboard ship. 

That is, of course, the principal main training program. In addi- 
tion to that, our program for this year envisages about 30,000 men to 
be upgraded, that is, ordinary seaman to able seaman ; then when they 
have had 14 months at sea to be upgraded to officers ; and then upgrad- 
ings between the officers grades from third mate to second mate, to first 
mate, and first mate to master. And the same relative grades in the 
engine department. We have operated this program on the principle 
of training these men while they are in port so as to take the man off 
the job the minimum length of time and advance them to the higher 

Then, of course, we have the refresher courses for men who have 
been on other jobs but had been seamen originally and wanted to go 
back to sea. So the refresher course has also been part of the pro- 


Mr. WoRLEY. Say John Brown is interested in getting a job with the 
merchant marine. He has had no experience w^hatever. He is quali- 
fied as an able seaman. Where does he go? Does he make applica- 
tion ? 

Commodore Knight, Yes ; he would go to one of our enrolling offices 
and, provided he had the physical qualifications — we examine them 
all for physical qualifications — he would be accepted as an apprentice 
seaman and would be sent to one of three schools we maintain on the 
three different coasts, at Sheepshead Bay, in New York, at St. Peters- 
burg, on the Gulf, and at Avalon, on the California coast. We have 
done that because it is more economical geographically to handle it 
that way. 

Mr. WoRLEY. He wouldn't have to pay any tuition? 

Commodore Knight. No, sir. He gets paid while going through 
the course. 

Mr. WoRLEY. How much? 

Commodore Knight. He gets $50 a month in those ratings. 

Mr. WoRLEY. While he is being trained ? 

Commodore Knight. That is right ; he gets that and his quarters, 
subsistence, and uniform. The time for training an ordinary seaman 
is 3 months ; an oiler, w^ater tender, or fireman is also 3 months. For 
most men in the steward's department it is 6 to 8 weeks, depending 
upon how quickly we need them. 

The course for an officer who has been to sea is 4 months, and those 
men get $126. 

The course for radio operators is 5 months, 21 weeks, reduced from 
32 weeks because we had to have them fast. They get $99 per month 
at the radio school. 

Mr. Bland. Is that necessary in order to get men to help carry on 
this war, furnish seamen? 

Commodore Knight. Absolutely, Judge Bland. It would not have 
been possible, when you recognize that we have trained a hundred 
thousand unlicensed personnel and 25,000 officers; you can readily see 
that we could not have operated the fleet at all without them. Of 
course, the rest of tlie men who have been recruited were men who had 
already had experience at sea and were brought back by recruitment, 
and mainly on account of the war recruitment, to take jobs. The job 
has been done jointly between the recruitment service and the training 

Mr. Bland. Can that be materially reduced after the war? 

Captain Macauley. I would like to answer that question. 

I think. Judge Bland, it would depend entirely upon how many 
sliips are going to be operated under the United States flag and by 
American operators. I think the training program will, in all prob- 
ability, have to be reduced after the war. 

Conunodore Knight. We confidently expect it to be reduced. In 
other words, there won't be many new men getting in the unlicensed 
ratings training. 

Captain Macauley. As far as the recruitment and manning are 
concerned, as soon as the ships are turned back to private ownership 
its activities will be greatly reduced. We will have to do something 
with the recruitment and manning service. That is what the War 
Shipping Administration has taken over. The recruitment and man- 


ning was a wartime measure in order to assist and insure the manning 
of the vessels. 

Mr. WoRLEY. What is the status of these boys who entered the mer- 
chant marine? They were exempt from military service? 

Commodore Knight. As far as the training program is con- 

Mr, WoRLEY. A man had his choice whether to go into the merchant 
marine instead of going in the Army or Navy ? 

Commodore Knight. He could, sir, up until the 1st of April of this 
year, but on the 1st of April the manpower situation got so tense 
and tight we were asked not to take any boys in the merchant marine 
between the ages of 18 and 26, which were the ages the Army and 
Navy wanted. 

Since April we have recruited a great portion of our men below 
the age of 18, and all of the masters we have consulted who operate 
these ships have, so far as I know, testified that these younger boys 
have made very excellent sailors. 

We did that as a manpower problem, because they were not subject 
to induction but did go into the merchant marine. At that time, on 
the 1st of April, about 65 percent of the men in the merchant marine 
were below the age of 26, and they were frozen into the industry. 
In other words, as long as they remained at sea, even though they 
were between the ages of 18 and 26, they were permitted to remain 
at sea. Otherwise, we couldn't have operated the merchant marine. 

Mr. WoRLEY. Did you have any difficulty securing recruits? 

Commodore Knight, No, sir ; I can't say that we ever had any dif- 
ficulty securing recruits except for the few weeks we stopped taking 
the boys between 18 and 26 and until we determined we would take 
them below the age of 18. 

Mr. WoRLEY. How long a period of time do they volunteer for ? 

Commodore Knight. Each one of them signs an agreement to go to. 
sea for a year. 

Captain Macauley. You are speaking of the trainees now ? 

Commodore Knight. The trainees. They sign an agreement when 
they come in to take the training to go to sea for a year. 

Mr. Worley. Mr. Folsom has some questions, I believe. 

Mr, FoLSOM, Our committee has recently issued a report on economic 
problems for the reconversion years. Among others is the question 
of unemployment insurance. It pointed out that the workers now 
under unemployment insurance do not include maritime workers, and 
the committee made this statement : 

There is apt to be a sharp reduction in the number of maritime workers 
needed after the war, and a plan should be developed for bringing those workers 
under the unemployment insurance system. 

I understand they have been working for a number of years trying 
to develop a system for maritime workers. It is a very complicated 
subject, I know. I would like to ask what progress you have made 
and whether you have a definite plan you can submit to the committee 
for bringing these workers under the unemployment insurance system. 

Captain Macauley. Mr. Chairman, I would like to have Mr. Wyck- 
off, who is the Assistant Deputy Administrator in charge of labor 
relations, answer that question and any questions on insurance or 
labor relations. 

99579 — 45— pt. 4 4 


Mr. Wyckoff. Merchant seamen have not been covered by any form 
of unemployment insurance. I think the first bill that was introduced 
was in 1938 or 1939. 

Mr. Bland. Something like that — ^before the Ways and Means Com- 

Mr. Wyckoff. There have been several bills introduced since that 
time. There is one pending now, as Judge Bland says, before the 
House Ways and Means Committee. 

Mr. Bland. As to that jurisdictional question, I would like to make 
a statement. A bill was pending before the Ways and Means Com- 
mittee. When the Ways and Means Committee reported some years 
ago on unemployment, some of their members, Mr. Doughton, Mr. 
Cooper and others, about abandoned their effort to bring in merchant 
seamen and told the Merchant Marine and Fisheries Committee to 
proceed with the subject. 

The bill was introduced and it was considered for some time. Hear- 
ings were held on it, but no action was taken. In fact, several bills 
were introduced, two or three. Finally, in this Congress, I did not 
introduce that bill, but I appointed a subcommittee, of which Mr. 
Jackson, of Washington, was chairman, to consider the question of 
unemployment insurance. He and his colleagues worked out a bill. 
I do not know that it is entirely satisfactory, but they worked out a 
bill which they were ready to introduce and which they submitted to 
the Committee on Merchant Marine and Fisheries. 

When he went over to the Capitol to introduce his bill, Mr. Jackson I 
was confronted with the ruling by the Parliamentarian that this com- 
mittee, Merchant Marine and Fisheries, had no jurisdiction over the 
bill. We had had it for 2 years and all thought we had jurisdiction. 

The matter was taken up with Mr. Raybum, and Mr. Rayburn held 
it would have to go through the Merchant Marine and Fisheries, and 
a bill which was agreed upon by Mr. Jackson and his subcommittee, 
but which was never agreed upon by the Merchant Marine and Fish- 
eries Committee as a whole, was then introduced by him and referred 
to the Ways and Means Committee, where it is now pending. 

I think that is a fair statement, isn't it, Mr. Wyckoff^ 

Mr. Wyckoff. Yes, sir. 

Mr. Bland. Mr. Wyckoff has been very familiar with the proceed- 
ings before the committee and did a considerable amount of work on 
it, and. Mobile I think there are some amendments made in that bill, 
the committee as a whole has never passed on it. Yet it was the 
nearest approach to legislation that has ever been made. 

Mr. FoLSOM. Does that cover seamen on inland waterways ? 

Mr. Wyckoff. No ; the bill covers only merchant seamen, offshore 
seamen ; fishermen are excluded, and seamen who work on the rivers 
and Great Lakes are also excluded. 

Mr. FoLSOM. Is that a contributory system ? 

Mr. Wyckoff. Employers contribute but employees do not. 

Mr. FoLsoM. You assume there probably will not be much unem- 
ployment until 6 months after the Japanese war is finished, but after 
that there will be some unemployment. You people recommend 
strongly, I suppose, that something be done along those lines? 

Mr. Wyckoff. Yes ; we do. 


Mr. Bland. Mr. Wyckoff has been working with the subcommittee 
of the Committee on 'Merchant Marine and Fisheries. In view of a 
letter I received today, I am a little surprised to hear that fishermen 
and men on vessels on inland waters are excluded, because this letter 
says they are included and ought to be excluded. I feel pretty much 
the same way. 

Mr. Wyckoff. That subject was pretty thoroughly discussed by the 
subcommittee. There may have been some change after I last talked 
with them about it. 

The reason for the exclusions was this: Until May 1943 it was 
thought that a State had no jurisdiction over the employment of sea- 
men and that it was something exclusively within admiralty juris- 
diction and hence exclusively within Federal jurisdiction, so that a 
merchant seaman had no rights under any State system. It was sup- 
posed he had no rights under any State unemployment act, even 
though the State act was written in such terms that he would be 
covered by the definition of what employees were covered. 

In May of 1943 the United States Supreme Court handed down a 
decision which made it very plain that a seaman could be covered by 
State unemployment insurance systems if the State statute described 
coverage in such a way as to include him. It was therefore felt by 
the subcommittee that seamen working on lakes and rivers or fish- 
ermen who ordinarily do not fish from State to State, could be more 
conveniently covered by State legislation than under a national system. 

Mr. WoRLEY. None of the benefits under the G. I. bill of rights are 
available to merchant seamen, are they ? 

Mr. Wyckoff. No. 

Mr. FoLSOM. Do you have any plan for giving protection, such as 
in the G. I. bill, to merchant seamen ? 

Mr. Wyckoff. Yes, sir. The Administrator has written a letter 
to Judge Bland outlining a program of that kind. 

Mr. FoLsoM. Something similar to the G. I. bill of rights? 

Mr. Wyckoff. Yes, sir ; something similar. And it also recommends 
making some temporary provision by way of unemployment insurance. 

Mr. FoLSoM. And it gives educational benefits? 

Mr. Wyckoff. Ye^, sir ; it recommends educational benefits to take 
care of these young fellows, the 16- to 18-year-olds whose education 
has been interrupted. 

It also makes provision for hospitalization of merchant seamen 
and their dependents in marine hospitals, to which they already have 
limited right of access ; and also for death and disability benefits and 
loans similar to the loans to veterans. 

Mr. WoRLEY. Your proposed bill is just about as broad as the G. I. 
bill of rights? 

Mr. Wyckoff. No; not as broad. It is modeled on it but is not 
as extensive or comprehensive. What we have done is to make a 
rex^ommendation that is consistent with the volunteer, civilian status 
of seamen, and not to attempt to treat them as if they had been in the 
military service. 

Mr. WoRLEY. They can quit at any time, can they ? 

Mr. Wyckoff. Yes; they can leave the industry at any time. But 
they sign shipping articles by the terms of which they could be 
required to stay at sea for a year. 


Mr. WoRLEY. If that agreement is not enforcible, they can quit at 
any time ? 

Mr, Wyckoff, Not during a voyage. The license or certificate 
could be taken away from them if they quit during a voyage without 
the master's consent; that would constitute desertion. They would 
also forfeit their pay. 

Mr. Bland. My understanding was that there was a staff in the 
Merchant Marine Section of the Maritime Commission that was under- 
taking to write its recommendations in the form of legislation. They 
have not yet been submitted. 

Captain Macauley. It is about ready for submission to the Mer- 
chant Marine and Fisheries Committee. 

Mr. Bland. I was simply making the statement, since we are in 
recess now and I don't know when many of them will be back. 

Mr. Worley. Captain Macauley, I assume this training program 
will continue in peacetimes. Is that correct ? 

Captain Macauley, Well, it will continue on a i-educed progi'am. 

Mr. WoRLEY. I was wondering just what justification there is for 
the Government to train personnel for ships privately operated. It 
seems to me analogous to the Government training of, say, mechanics, 
or somebody who is not particularly skilled in making automobiles 
or shoes, or something of that sort. 

Am I correct in that anal3'sis ? 

Captain Macauley. Not quite, Mr. Chairman. Of course, we have 
helped, the Government has helped, and found it necessary to help, the 
maritime industry, I think, to a much gi-eater degree than shore indus- 
tries, other industries, for instance, on account of the competition 
with foreign nations. 

Now, if we had sufficient men who could go to sea as they used to 
go, and as many of them do now, coming up through the "hawsepipe" 
for their training — that started in the days of sailing ships — but now 
a ship is a very different thing. It is a box of machinery, and it 
requires much more carefully trained men, just as the difference 
between a modern man-of-war and an ancient sailing frigate of the 

Mr. WoRLEY. Why can't the shipping industry offer enough induce- 
ments by itself to get these men and tram them themselves, or sufficient 
inducement so that these men will train themselves for these jobs? 
You say competition ? 

Captain Macauley. I couldn't answer that question, why the indus- 
try does not. 

Mr. WoRLEY. Why can't they make it more attractive for the men? 
We subsidize, we offer a subsidy to a shipbuilder and operator on the 
same basis with foreign countries. In addition to that subsidy, we 
operate a training and personnel program. What other concessions 
does the Government offer ? 

Captain Macauley. None other, except the construction subsidy and 
operating subsidy which has been allowed in the past. 

Mr. WoRLEY. You think all of those are necessary for a successful 
merchant marine? 

Captain Macauley. I wouldn't venture to say so. That would be 
only my personal opinion, because there is a considerable difference 
of opinion as to the question of subsidies throughout the country. 

Mr. WoRLEY. We have had a lot of discussion on that in the past 


year. It all seems to depend on who is subsidized. I was just won- 
dering in my own mind why, with what I thought were advantages, 
we can't compete with other nations without those subsidies. 

Captain Macauley. We get a better class of men, Mr. Chairman, 
by the training service. We are able to examine them and train them 
and give them some discipline, and it has proved itself of great bene- 
fit. For instance, until a short time ago, there was no physical exam- 
ination required for men in the merchant marine, and the War Ship- 
ping Administration put one into effect, with opposition from, we will 
say, one of the unions, anyway. We put it into effect because it was 
required for the health of the men, the health of the troops and pas- 

I'here was a tremendous amount of tubercular and venereal disease, 
we found, that now we are able to keep off the ships, so that the food 
handlers are clean and healthy, and the general health in the mer- 
chant marine much improved. 

In the old merchant marine, the men they got in that came through 
the "hawsepipe," as it was called, and they didn't get much of a 
chance, and living and working conditions were not much, and we got 
pretty poor men, and they didn't have much encouragement to improve 
themselves, either. 

Mr. WoRLEY. Do you know whether other countries follow the same 
policy in a training program ? 

Captain Macauley. Some are. The British have had their school 
ships for a long time ; the north country men — the Scandinavians — 
have had their school ships. I think most all nations have had school 
ships, but they have not, I believe, gone to the extent that we have, and 
we hear a good many complimentary things being said by foreigners, 
and especially the British, who come over here and take a look at our 
some of our programs and see the results of them on the ships we 
send to sea. 

Mr. WoRLEY. No doubt that should make our ships better manned. 
Does it increase our revenue in foreign trade ? 

Captain Macauley. I don't think that the revenue in foreign trade 
would be dependent on that. There are many other conditions that 
would affect that. 

Mr. WoRLEY. I was trying to justify it in my own mind. 

Captain Macauley. It would improve the efficiency of our ships 
and might in the long run lessen the cost of upkeep. 

Mr. FoLSOM. It is a big advantage, too, in improving discipline in 
time of war? 

Captain Macauley. That is true; and discipline on board ship is 
necessary in time of peace, too. 

]Mr. WoLVERTON. What about the returning seamen who will be 
getting out of the Navy after the war? There will be thousands of 
them. In view of that fact and the necessity of giving them employ- 
ment, is it necessary to train others? 

Captain Macauley. We are prepared to adapt our training pro- 
gram to make it just as large or just as small as may be required. 
We have had to do that during the war, because we have had our 
hills and valleys as to the requirements for men all during the war, 
and we have adapted our training program accordingly. 

Mr. Wol\-erton. When was the program originated ? 


Captain Macaulet, In 1938 ; and it was in accordance with amend- 
ment to the Merchant Marine Act of 1936. 

Mr. WoL\'ERTON. Prior to that, such training as was given was under 
State jurisdiction, was it not ? 

Captain Macauley. They had the State training ships. They had 
the assistance of the Federal Government in furnishing ships and had 
the assistance of officers; they were assigned ships. I don't know 
when those vessels for training went out. I have seen them. Then 
we did have the State training vessels which were also Government 
vessels loaned to the State academies for training their candidates 
for officers. 

Mr. WoLVERTON. The State of Pennsylvania conducted such a 
course, and I think Massachusetts did. 

Captain Macauley. They do now for cadets. The old St. Marys, I 
remember her. 

Mr. WoL\^iRTON. They were supported by State appropriations. 

Captain Macauley. And some assistance from the Federal Govern- 
ment, and the ships were loaned by the Federal Government. 

Mr. WoRLEY. After this boy, John Brown, finishes his training 
school, in wartime, of course, he goes right on in. How does he get 
a job? Do you assign him? 

Captain Macauley. He is sent right from the training station to 
the recruitment and manning organization, and they assign him to a 

Mr. Worley. Does this man have to belong to any organization to 
get a job? 

Captain Macauley. No. We neither urge the man to join a union 
nor urge him to stay out of a union. That is left up to him. 

Mr. WoRLEY, Generally, do they join? 

Captain Macauley. Generally, they do. 

Mr. WoRLEY. That is left up to them ? 

Captain Macauley. Yes. That is left up to them. We give them 
information now as to what unions mean, but with no opinion as to 
joining or staying out of a union, and with no instructions as to 
what union to join. 

Mr. WoRLEY. Would you furnish the committee with a copy of 
those instructions ? 

Captain Macauley. I would be glad to send you a copy of the 
pamphlet issued by the War Shipping Administration entitled "How 
to Get Your Bearings," which contains information in regard to the 

Mr. Bland. As a matter of fact, they won't stay on a ship long if 
they don't join a union. 

Mr. Worley. That is what I thought. Do you have any ships that 
are not unionized? 

Captain Macauley. Quite a number of them. On some of the tank- 
ers they don't belong to unions, and they have independent unions 
and independent companies. 

Mr. WoRLEY. In peacetime, I suppose, it is the same procedure. 

Captain Macauley. The same procedure. 

Mr. WoRLEY. After the Government has invested its money in train- 
ing men there is still one more hurdle to get over before this man can 
be utilized ; namely, he must join a union? 

^ On file with the committee. 


Captain Macaulet. No. 

Mr. WoRLEY. I mean in effect. 

Captain Macauley. He is not compelled to join a union. 

I think most of the men feel it is to their advantage to join a union. 

Mr. WoRLEY. Suppose one feels perhaps it is not to his advantage 
to join a union? 

Captain Macauley. Then he can go to sea on a ship that hasn't an 
agreement with one of the unions. 

Mr. W0R1.EY. But ships that do have agreements with unions must 
have all union men ? 

Captain Macauley. That would be in accordance with the provi- 
sions of the collective bargaining agreement between the operators 
and the union. 

Mr. WoRLEY. Do you know any ships operating with nonunion 
crews ? 

Captain Macauley. Yes ; quite a number. 

Mr. WoRLEY. During peacetime? 

Captain Macauley. Yes. In fact, I believe there were more operat- 
ing in peacetime than in wartime. Mr. Wyckoff can tell you more 
about that. 

Mr. Wyckoff. In the tanker trade about 50 percent of the vessels 
are covered by union agreements. In the dry-cargo trade, on the other 
hand, practically all of them are, about 98 percent. 

Mr. WoRLEY. Without arguing for or against, we are trying to se- 
cure information as to when these men are eligible after completing 
their training program. So far as you know, as soon as the program 
is finished, thej^ make a contract with the operating company m peace- 

Captain Macauley. Yes, sir. 

Mr. WoRLEY. The procedure is the same in peacetime as you have 
just described ? 

Captain Macauley. Yes, sir. The collective-bargaining agreements 
have not been abrogated during wartime, 

Mr. Bland. I think the enforcement of contracts with seamen and 
that sort of thing was broken down by the Jones Act many years ago, 
when they stopped the arresting of deserters. 

Mr. WoRLEY. Do you think there will be many States operating 
these training schools after the war; do you have any idea? 

Captain Macauley. I haven't any idea. Commodore Knight might 
answer that. As far as I know, I have heard that the State maritime 
academies will operate just the same. There are five of them now op- 
erating. The States are not operating any unlicensed men schools, and 
I don't believe any of them contemplate operating them after the war. 

Mr. Bland. Commodore Knight can state whether I am correct in 
this. I have a recollection that the Federal Government provides 
$50,000 for each school. 

Commodore Knight. Yes, sir; that is correct, and undertakes to 
furnish them with a school ship belonging to the Government, if it 
is available. Actually there are three of those ships being used now 
by five schools. Three of them are joining up in the use of one larger 
ship ; the other two, Pennsylvania and California, have a ship assigned 
to them. 

There are just five of those schools, California, Maine, Massachu- 
setts, New York, and Pennsylvania. Those of Massachusetts and 


New York, have been in existence many, many years, starting back 
in 1874, or New York did. 

Mr. WoRLET. I am surprised Texas doesn't have a school. We have 
our own Navy down there. 

Commodore Knight. I should like to invite the attention of the 
committee to a report we made to Congress on January 1, 1939, which 
covered the whole development of the training program and compared 
it with what had been done historically in other maritime nations. 
That is available and might throw some light on this subject. We 
spent a year studying training systems of other maritime nations, 
and all of the leading maritime nations do subsidize and provide 
training for their seamen. 

Actually, the Japanese have a G^^-year course, and the Germans 
a Sy^-year course. The British used to start them as apprentice sea- 
men when they were 12 years old and keep them 6 years until they 
became able seamen. 

So all the maritime nations of any size have always had a training 
program ; that is for a hundred years or more. We studied all of those 
and combined it into this report on the basis on which our training : 
program is really set up. 

Mr. WoRLEY. I am sure the committee would like to have a resume 
of this subject. We will be glad to have you submit that. 

(The exhibit was marked "No. 16" and is found in appendix, p. 1181.) 

Mr. Bland, In my Committee on Merchant Marine and Fisheries, 
I would like to have a copy of it, too. 

Commodore Knight. Yes, sir. I am sure you will find you have 
one, but we will be glad to furnish you with another. 

Actually we have always taken the position as to the training of 
merchant seamen that they are engaged in interstate commerce, and 
that it is a Federal question and not a State question. We think that 
seamen have always been the wards of the Federal Government, that 
they have been from time immemorial, and while we do have these 
five State schools, an,d the Federal Government has contributed to 
them over a period of many years, presently $50,000 a year under 
certain circumstances, it still in our opinion is a Federal function, a 
problem of the Federal Government, to furnish proper facilities for 
the training of the merchant marine. 

Mr. WoRiJEY. What would be the expense in carrying on the train- 
ing program you visualize after the war is over ? 

Commodore Knirht. It would be very much less than it is during 
the war, of course, and I don't think you could fix an amount now 
as to the cost. 

Mr. WoRLEY. Could you give us an idea ? 

Commodore Knight. No ; I don't think I could. I don't know how 
many ships are going to operate, how many men are going to be in- 
volved, and it is largely on a unit basis. I think it would be almost 
impossible to arrive at an actual cost, but I will say this, that any 
program that would be economically justified in my opinion, even with 
a fairly large fleet, would certainly be half or less than half as much 
as the })resent cost. 

Mr. WoRLEY. The present cost is approximately what amount ? 

Commodore Knight. For 1945, the appropriation was $65,000,000. 

Mr. WoRLEY. For what year ? 


Commodore Knight. For fiscal 1945, from July of this year to June 
of next year. 

Mr. WoRLEY. Are there any other questions on that subject? 

Mr. F01.SOM. What proportion of that is for seamen and what pro- 
portion for oflicer training;? 

Commodore Kxight. Roughly, about ten million of it is for the 
Cadet Corps and the balance of it is for the training of officers up 
from the ranks, upgrades, and those initially entering the industry^ 
in the deck, engine, and steward's department. The Cadet Corps costs 
are about $10,000,000. That includes the United States Merchant 
Marine Academy and two cadet basic training schools and the whole 
cadet-training system. 

Mr. Wori.p:y. Tliank you very much, Commodore. 

Mr. Bland. The State schools only turn out officers? 

Commodore Kntout. That is right, only turn out officers; and they 
have a total enrollment in the five schools of approximately 1,100 at 
the present time. Pre-war, the total of the five schools was about 
500 altogether. 

Mr. Bi.AND. My recollection is that at the time the bill was passed 
providing $50,000 for each of those State schools, there was a provi- 
sion made in there whereby it would take in students from other States. 

Commodore Knight. That is correct, sir. They were already get- 
ting $25,000 a year, and twenty-five thousand more was appropriated 
to cover the per capita cost to the State for training boys from other 
States, rather than their own State, for which they didn't feel justified 
in using their own State funds. We have provided an extra twenty- 
five thousand. Only two of the schools have made use of that, New 
York and Maine. California, Pennsylvania, and Massachusetts have 
not taken any boys from other States. 

Mr. Bland. They get them only from their own State? 

Commodore Knight. They get them only from their own State, 
and they don't share in the extra twenty-five thousand. 

Mr. Bi-AND. Which are those last three you named ? 

Commodore Knight. The three which do not take boys from other 
States are California, Pennsylvania, and Massachusetts. 

Mr. Bland. I didn't know Maine was in it. 

Commodore Knight. Yes; Maine has a new school. It is an up- 
and-coming place. 

Mr. Bland. Then you have six States? 

Commodore Knight. No; Maine was added, and made five; Cali- 
fornia, New York, Pennsylvania, Massachusetts, and Maine. 

Mr. AVoRLEY. Captain Macauley, has the Maritime Commission, 
taken over all private shipping? 

Captain Macauley. Not all ; very nearly all. 

Mr. WoRLEY. What has been left out ? 

Captain Macauley. I couldn't tell in figiu'es of ships, but there are 
a number of ships that still are under time charter, that are operated 
by the owners or are under time charter to some of the operators. 

Mr. Worley. Are they carrying on commerce now with countries 
not at war, private operation ? 

Captain Macauley. I think mostly in this hemisphere. 

Mr. Worley. South America ? 


Captain Macauley. Yes, sir ; some of the tankers may. Of course, 
they are under our control ; that is, under the War Shipping Admin- 
istration's control. 

Mr. WoRLEY. They are privately operated and if they make any 
profit they get the profit ? 

Captain Macauley. That is right. 

Mr. WoRLEY. Do they hire their own crews ? 

Captain Macauley. They have certain men stand by, certain crews, 
and come to our organization to make up their crews and vacancies 
in their crews. 

Mr. WoRLEY. We took over quite a number of ships from private 
owners ? 

Captain Macauley. Yes, sir. 

Mr. Worley. Did we pay them cash for those ships ? 

Captain Macauley. I would not be competent to go into that, Mr. 
Chairman. That has been a question of considerable discussion ; and 
also as to what the costs were. Those ships requisitioned were taken 
over for use and the title at the present time remains with the War 
Shipping Administration. 

Mr. Bland. Requisitioned for title and requisitioned for use ? 

Captain Macauley. Yes, sir. 

Mr. Bland. Requisition for title involved the question of just 

Mr. WoRLEY. Is there anyone here from your department today 
who would have information on that ? 

Captain Macauley. That would come under operations. It would 
not come in my department, as to the appraisal or the valuation of 

Mr. WoRLEY. Is there anyone here today from operations ? 

Captain Macauley. Not this afternoon ; I don't believe there is. 

Mr. Worley. Are there any additional questions for Captain 
Macauley ? 

If there is any other information we haven't touched on, Captain 

Captain Macauley. We would like to have the privilege of send- 
ing down a considerable amount of information which might be of 
interest to the committee, that is, publications, pamphlets, which we 
have gotten out, that show what we have done and what we are 
attempting to do, and also such statistics and figures as might be 

Mr. Worley. We would be very glad to have them and will appre- 
ciate your sending them. 

Would you like to touch on any of those now ? 

Captain Macauley. I don't believe so, Mr. Chairman. I would not 
have them at my fingertips. 

Mr. Bl^nd. If it is not asking too much, I would ask that dupli- 
cates be sent to me. 

Captain Macauley. Yes, sir. I think you have practically every- 
thing we have gotten out, Judge Bland. 

Mr. Worley. We appreciate your cooperation, and any time you 
have information you think will be of value to this committee in its 
work, we will appreciate having it. 

Captain Macauley. Yes, indeed, sir. And anything that comes to 
mind after this that you want us to get for you, that doesn't come 


down with these papers, we will be very much pleased to go after it, 
because we would like to have on record what we have done, and what 
we have alread}- furnished to the Committee on Merchant Marine 
and Fisheries. 

Mr. WoRLET. There is one question we have overlooked, about the 
types of vessels after this war. Do you anticipate any shortage in 
any given type of vessel, tankers or refrigerators ? 

Captain Macauley. I woudn't be competent to answer that accur- 
ately. That would be a question of opinion. For my personal opin- 
ion, I don't see that there will be a shortage. It depends upon the 
demand. There may be a shortage in fast vessels, but for our com- 
plete program — I can't answer that personally. Admiral Land or 
Admiral Vickery could answer it better than I can. I think our pro- 
gram is adequate. 

Mr. WoRLEY. All right, sir. Thank you very much. 

The committee will stand adjourned until 10 o'clock tomorrow 

(Whereupon, at 3:30 p. m., an adjournment was taken until 10 
a. m., on Tuesday, September 26, 1944). 



House of Representatives, 
Subcommittee on Foreign Trade, 
AND Shipping of the Special Committee on 
Post- War Economic Policy and Planning, 

Washington^ D. C. 
The subcommittee met, pursuant to notice, at 10 a. m., in room 1304, 
New House Office Building, Hon. Eugene Worley, presiding. 

Present: Representatives Worley (Texas) and Wolverton (New 
Jersey) . 

Also present: Representative Bland (Virginia); Marion B, Fol- 
som, staff director; H. B. Arthur, consultant; and Guy C. Gamble, 
economic adviser. 

Mr. Worley. The hearing will come to order. 

Th purpose of the hearing this morning is to resume hearing the 
Maritime Commission with particular emphasis on operation of the 
merchant marine. 

The first witness is Captain Conway. 

Will you state your full name and present position with the Mari- 
time Commission, Captain ? 

Captain Conway. Granville Conway, Deputy Administrator of the 
War Shipping Administration. 


Mr. Worley. Captain Conway, for our information and for the 
record, can you give us a brief statement concerning the operation of 
the merchant marine in peacetime, and then compare that with the 
changes that have come about in wartime ? 

Captain Conway. Of course, in peacetime, Mr. Chairman, the 
steamship companies managed their own affairs, operated their own 
ships, dealt directly with the shipper; and in wartime the Maritime 
Commission, the War Shipping Administration, requisitioned the ves- 
sels and they are operated under the supervision of the War Shipping 
Administration, with the steamship companies serving as agents for 
the War Shipping Administration in direct operation of United States 
controlled vessels. 

We have certain designated areas in which we provide for berth 
services. For instance, if ships were going to the United Kingdom — 
this is exclusive of our military cargoes — we have what we call four 
berth agents in that area. If the ships are operated from north of 



Norfolk, the United States Lines would be the berth agent. If it 
was in Norfolk or Mobile, the Waterman Line would be the berth 

Mr. WoRLET. What do you mean by the berth agent ? 

Captain Conway. They are the ones that operated in that trade in 
peacetime; that was their exclusive operation. For instance, the 
United States Lines, as I say, operated to the United Kingdom, and 
they are what we call the berth operators. They had a subsidized line 
to the United Kingdom. 

Mr. WoKLEY. Would it be helpful, Captain, if we were to take a 
fictitious company, say the John Brown Co., and discuss the John 
Brown Co. with relation to the functions of the Maritime Commission 
in peacetime? 

Captain Conway. You see, you divide it up in two ways, as I 
say. Take the Brown Co.. which was not a subsidized operator. If 
their ship was going to the United Kingdom, the cargo would be 
handled by the United States Lines, if it was loading up north of 

Mr. WoRLEY. You have two categories? 

Captain Conway. That is correct. 

Mr. WoRLEY. One a subsidized line, and the other an unsubsidized 

Captain Conway. Yes, sir, speaking generally. Some unsubsidized 
lines are also berth agents. 

Mr. WoRLEY. Let's take up the unsubsidized line. Let's say the 
Brown Steamship Co. is an unsubsidized line. What jurisdiction does 
the Maritime Commission have over the unsubsidized Brown Steam- 
ship Co.? 

Captain Conway. Well, the unsubsidized companies which did not 
operate liner services, pre-war, are general agents and husbands for the 
ships. The berth agents handle the cargoes. We have what we call 
an Allocations Division in Washington, and we will allocate those 
ships for every individual voyage. We will tell them what ports they 
are to go to for each individual voyage? 

Mr. WoRLEY. That is in peacetime? 

Captain Conway. No; it is wartime. 

Mr. WoRLEY. Let's get it in peacetime, and then see the changes 
that have been made by virtue of the war. 

Captain Conway. In peacetime, if it is an unsubsidized line, they 
are permitted to operate, of course, any place they wish to. 

Mr. WoRLEY. They don't have to apply to the Maritime Commission 
for permission to go anywhere they please? 

Captain Conway. No. If it's peacetime, and they have their own 
ships and pay their own bills, they are permitted to go anywhere they 

Mr. WoRLEY. They can hire anyone they choose ? 

Captain Conway. That is right. 

Mr. WoRLEY. You have provided them with trained personnel upon 
request ? 

Captain Conway. Yes. 

Mr. WoRLEY. That is the only jurisdiction you have over the unsub- 
sidized line in peacetime? 

Captain Conway. The subsidized line, you are talking about, in 
peacetime ? 


Mr. WoRLEY. The unsubsidized line. 

Captain Conway. I was just talking about unsubsidized. That is 
what I described. The subsidized lines, thej^ have to run into those 
areas which the Maritime Commission has set up. 

Mr. WoRLEY. Why does the Maritime Commission set up a desig- 
nated area ? 

Captain Conway. Well, you have to have trade areas ; and they are 
subsidized and they can only operate in those trade areas as a sub- 
sidized line . 

Mr. WoRLEY. Then, when they take a subsidy from the Government, 
they subject themselves to Government regulation? 

Captain Conway. Yes. 

Mr. WoRLEY. Then the Government can tell them to go wherever 
they please? 

Captain Conway. Yes ; within the limitations of the 1936 act. 

Mr. WoRLEY. Wherever it wishes them to go to develop trade; is 
that correct? 

Captain Conway. That is right. 

Mr. WoRLEY. What are the factors in your instructions to them as 
to where to go? 

Captain Conway. Well, those trade areas have all been set up. 

Mr. WoRLEY. By whom? 

Captain Conway. By the Maritime Commission following those set 
up by the old Shipping Board, but modified on a basis of economic 
study and experience. 

Mr, WoRLEY. Why do they set them up ? 

Captain Conway. Because you have to have trade to these different 
areas. I mean we wanted trade to all these different areas, and they 
were set up that way. The Merchant Marine Act of 1936 requires 
that essential trade routes be established by the Commission. 

]\Ir. WoRLEY. That is what I am getting at. What sort of trade ? 
For example, in taking silk from Japan, do we have an area out in 
Japan where, in peacetime, our subsidized fleet would go to obtain 

Captain Conway. No. We had an area, though, to Japan for our 
ships, operated to Japan, even though we only carried a small per- 
centage of the silk. 

Mr. WoRLEY. We would send ships out to Japan with scrap iron 
or cotton? 

Captain Conway. That is right. I mean ships were routed to 
Japan. Cargoes were not controlled ; only routes. 

Mr. Worley. AVho determined that policy? 

Captain Conway. The Maritime Conunission set up the route to 

Mr. WoRLEY. Upon your recommendation ? 

Captain Conway. Upon the recommendation of the Maritime Com- 
mission; yes. 

Mr. Worley. I don't make myself clear. Wliy did you send ships 
out there for scrap iron, or to sell 

Captain Conway. We didn't send them out there for scrap iron. 
Scrap iron was taken there. 

Mr. WoRLEY. I know ! I was assuming that we did. We sent it out 
there in our own bottoms? 

Captain Conway. Yes. 


Mr. WoRLEY. What I am trying to determine is did some other de- 
partment of the Government recommend to the Maritime Commission 
that this be done ? 

Captain Conway. No ; there is no other department of the Govern- 
ment in it. Obviously, we want to have trade routes. If we are going 
to have a merchant marine, we have got to set up trade routes to all 
these different countries. 

Mr. WoRLEY. Take the question of tariffs ; you take those into con- 
sideration in determining what product or commodity will be ex- 
changed between the several countries ; you take all those factors into 
consideration ? 

Captain Conway. Yes; we estimate cargo volume in setting up 
routes — we do not control the volume. 

Mr. WoRLEY. You take into consideration the supply we have, for 
example, of wheat. If we have more than we need, then does the 
Maritime Commission say that we will sell that excess to some coun- 
try in need of it? 

Captain Conway. No ; the Maritime Commission has nothing to do 
with that. 

Mr. WoBLEY. That is what I am trying to determine, the jurisdic- 
tion of the Maritime Commission in relation to our foreign trade. 

You say the Maritime Commission determines these areas of trade 
on its own initiative? 

Captain Conway. Yes. 

Mr. WoRLEY. Well, you say you don't have anything to do with 
sending out, for example, wheat? 

Captain Conway. No ; we don't control the cargo. 

Mr. WoRLEY. That is what I mean, what I am trying to find out. 
Who does control that? 

Captain Conway. The shipper or consignee controls the cargo 

Mr. WoRLEY. You just set up the jurisdictions where they can 
travel ? 

Captain Conway. Yes. Of course, the Maritime Commission has a 
jDrogram by which they try to get the shippers to ship via American 
ships, but we have no control over the cargo moving in those areas 
other than persuasion, 

Mr. WoRLEY. You just set up where they can operate? 

Captain Conway. Yes. 

Mr. Worley. What factors enter into that determination; the size 
of the ships that different operators have, the speed of the ships, or 
the types of ships? 

Captain Conway. First, you have got to set up your trade routes. 
We know we want a trade service to the United Kingdom. We con- 
sider the amount of cargo moving there, the competition, nature of 
cargo, port facilities, and so forth. These really determine the size 
and speed of ships going there. 

Mr. Worley. Competition with our own shipping companies? 

Captain Conway. No; competition with foreign shipping com- 

Mr. Worley. Well, sir, continue. I didn't intend to interrupt you. 

Captain Conway. I wish to state that I have not participated in 
peacetime commission policy formulation. My job in the War Ship- 
ping now is primarily a war job, to take care of the military, see that 


the military is taken care of with all their requirements. But even 
that does have some bearing on post-war. 

We have started out now trying to freeze some of the ships in the 
foreign services. For instance, take South America. We have frozen 
ships in the west coast of South America and the east coast of South 
American trades. We think it is going to save tonnage. We also 
think that it puts the steamship companies back in a position where 
they are really back in business again. We think that it is going to 
cut out a lot of red tape of these various other agencies, having to get 
permits and all such things as that to be able to ship the cargo. 

For instance, just the other day one of the big shippers called up 
this steamship company and wanted to know if they could send a 
certain number of trucks to South America at a given time, and, inas- 
much as these ships were all frozen in the trade, they knew exactly 
what dates they were going to sail. 

He said, "Yes; we can receive those trucks." 

If it had been 6 months ago, when the ships were not frozen in the 
trade, he would have had to say : "I can't tell you." That would have 
meant that the shipper of those trucks would have had to put them in 
storage, they would have been piling up. And then, in turn, you have 
all this permit system and Government controls. 

Now, since we have frozen these ships in this service, we are going 
to release those shipments to South America. Of course our policy 
in this respect must be limited by wartime demands on tonnage. 
Mr. WoRLEY. We have discussed briefly peacetime? 
Captain Conway. Yes, sir. 

Mr. WoRLEY. You had control over subsidized shipping? 
Captain Conway. Yes, sir. 

Mr. WoRLEY. After the advent of the war, what changes took place in 
relation to unsubsidized shipping? 

Captain Conway. We took over all the shipping and put it in a pool. 
No company then could operate on a fixed service. Those ships were 
in a pool. They might come in on this trip and operate to the Army 
in the Pacific. They might come back the next trip and operate to the 
Army in the United Kingdom. They might, on the next trip, operate 
to India. 

Mr. WoRLEY. Getting back. Captain, you took them over, all ship- 

Captain Conway. Yes, sir. 

INIr. WoRLKY. Upon what basis did you take them over? 
Captain Conway. We took them over on a requisition charter, some 
on a time charter and some on a bareboat charter. 

^Ir. WoRLEY. Did Congress enact that, give you that power as a 
wartime measure? 

Captain Conway. Yes, sir, 

Mr. WoRLEY. Did we take title to those ships or did we lease them 
or rent them ^ 

Captain Conway. Some we took title to, and some we took under 
time charter, which is a form of charter hire; some we took under 
bareboat charter hire. 

Mr. Worlp:y. Title — that was outright purchase? 

Captain Conway. Yes, sir. 

Mr. WoRLEY. What was the second one ? 

99579 — 45— pt. 4 5 


Captain Conway, Time charter. 

Mr. WoRLET. What is that? 

Captain Conway. That is where you take the ship and they keep the 
crew on board, pay for the crew, and we pay them hire for the ship 
with the crew and everything on board. They do the repairs and 
all of that. 

Mr. WoRLEY. You just rent it ? 

Captain Conway. Yes, sir. 

Mr. WoRLEY. What is the third ? 

Captain Conway. Bareboat. 

Mr. WoRLEY. What does that mean ? 

Captain Conway. That means, on bareboat, that we pay for the 
crew and we also pay for repairs. 

Mr. Bland. You get nothing but the boat ? 

Captain Conway. That's right. 

Mr. WoRLEY. Under this title, when you bought them outright, how 
many of those did we buy; do you know? 

Captain Conway. To tell you the truth, I am not sure. I think 
Mr. Radner should answer that. 

Mr. WoRi.EY. How many ships in all did we take over — would you 
mind, Mr. Radner? 

Mr. Radner. There were about 1,000 to 1,300 large ships, including 
ships taken for title as well as foreign-fla^ vessels. I assume that this 
committee is interested only in large ships. There were also about 
2,500 small craft, fishing and others not engaged in foreign commerce. 

Mr. WoRLEY. All privately owned ? 

Mr. Radner. All privately owned. Privately owned tonnage has 
been reduced approximately 40 percent. I think they are now down 
to about seven or eight hundred privately owned large ships, the 
difference between the present number of ships and those we orig- 
inally took representing ships taken for title for special military 
purposes or ships that have been sunk while under charter. 

The remainder of the ships are now under charter, and our pre- 
dominant form of charter is the time-charter form. 

Mr. WoRLEY. Thank you, Mr. Radner. 

Do you have any idea how many were taken over under this title 
category ? 

Mr. Radner. I will give you an approximation. About 150, 1 would 
say, were taken for title. 

Mr. WoRLEY. Do you have any idea how many were taken over for 
time charter? 

Mr. Radner. I would say, of the large ships that have been taken 
over, probably a thousand have been for time charter. That was the 
predominant method of operation. 

Mr. Worley. How about bareboat ? 

Mr. Radner. Ships taken under bareboat were principally passen- 
ger ships, ships used for carrying troops, or turned over to the 
Army or Navy for military purposes. All cargo ships and tankers 
were taken on time charter, except where the owners refused to 
operate under time charter or where military requirements necessi- 
tated bareboat. 

Mr. WoRLEY. Under this title requisition method, how did the 
Maritime Commission determine the type of those ships ? Wliat kind 
of ships were they, generally? 


Captain Conway. They were all types of ships, some new ones and 
some old-type ships. 

Mr. WoRLEY. As far as the Government is concerned, which of 
those three methods is the best, the soundest to employ, do you think? 

Captain Conway. I think the time-charter method has proven itself 
as good as any. Of course, when we take a bare boat, as a usual thing 
we allow the general agent to go ahead and operate it anyway. 

Mr. Worley. The time charter seems to be the method commonly 
used here. 

Captain Conway. Yes. 

Mr. Worley. Did you have to resort to the title method when 
you found an owner who didn't want to lease under this time charter? 

Captain Conway. Well, there were very few of those. There were 
a few, and in these cases we took over on. a bare-boat basis — not for 

Mr. Worley. You had the power, though, to take them over any 
way you saw fit? 

Captain Conway. Oh, yes. 

Mr. Worley. Later on you negotiated a deal with the various 
owners ? 

Captain Conway. That's right. 

Mr. Worley. Most of tliem seemed willing to take the time charter, 
of the two ? 

Captain Conway. Yes, sir. 

Mr. Worley. How did you arrive at the value when you bought 
the ships outright? 

Captain Conway, Well, I think Mr. Radner can tell you better on 
that than I can. He is the one who worked on that, that fixing of the 

Mr, Worley. If you don't mind, Mr. Radner, will you come down ? 

Will you identify yourself, please? 

Mr. Radner. William Radner, general counsel. War Shipping 

Mr. Bland. Just on that question, Mr. Chairman, you will find 
many headaches. 

Mr. Worley. I imderstand. 

Mr. Bland. They finally had recourse to a special board appointed 
by the President to fix rules whereby they would measure value. 
That grew out of a controversy with the General Accounting Office. 
They determined value should be as of a certain time under the law, 
and these men fixed rules and regulations whereby just compensation 
Ishould be determined. 

Mr. Radner. Judge Bland has given you an adequate summary as 
Ito this question of valuation. 

' We operated under the Merchant Marine Act of 1936. Section 902 
lof that act is the section which grants permission, upon the declara- 
ition of an unlimited emergency, to the Maritime Commission, now 
the War Shipping Administration, to requisition any ship needed for 
war purposes, either upon a use basis or title basis, and it was under 
that section, for th.e most part, that these requisitions were made. 
There are other statutory authorizations not important enough to 
mention for your purposes. 


Now, that statute, section 902, provides that all the owners should 
receive just compensation, without certain prohibited enhancement 
therein referred to. 

There has been a considerable amount of difficulty in fixing rates 
and values because of differences of opinion as to value — the ship- 
owners taking one view at one extreme, the Comptroller General tak- 
ing a view at the opposite extreme, and the War Shipping Adminis- 
tration taking a view somewhat in the middle. As a result we have 
been criticized by persons occupying both extreme views. 

Now the rates and values determined by us, as we reported to Judge 
Bland's committee in numerous documents which are on file there under 
series 20 — to which this committee may wish to refer — represented a 
very substantial saving, as compared both with what was done in the 
first war and with market conditions in 1941. It is a very involved 
and complicated subject. 

Mr. WoRLEY. You think the Government drove a very good bargain 
on the first 350 ships ? 

Mr. Radner. Yes. We think our administrative practice is fair 
to the owners and also fair to the Government and that we avoided 
the pitfalls and mistakes made in the last war. And we are also able ■ 
to get the runaway 1941 market under control and to eliminate infla- 
tionary practices that prevailed in 1941. 

We think we have attained a fair and equitable result. There may 
be some who disagree with that. 

Mr. Bland. I can say that on the board which determined the rules - 
were three very eminent judges. Judge Learned Hand, Judge Parker, 1 
and Judge Hutcheson. The President finally, to resolve this con- '■ 
troversy, appointed those three judges, senior judges of the second, 
fourth, and fifth circuits, and the advisory board has laid down these 
10 rules for determining just compensation. They have been published 
by the House Committee on the Merchant Marine and Fisheries. 

Mr. WoRLEY. If you have an available copy, will you provide us 
with it? 

Mr. Radner. I will be glad to insert it in the record at this point. 

Advisory Board os Just Compensation, 

Washington, D. C, December 7, 19^3. 

Dear Admiral Land: We are herewith enclosing our reiwrt as the Advisory 
Board on Just Compensation. In it we have set forth in the form of rules the 
standards and principles to be observed, in respect of the valuation of vessels 
requisitioned for title or use by the United States, and in the disposition of matters 
which have arisen and will arise in connection with the granting of insurance 
upon and the voluntary chartering of vessels. 

In arriving at the conclusions the rules embody we have been greatly aided 
by the material contained in Document 20, in the hearings before the Bland 
committee, and by the arguments and briefs filed at the public hearing held on 
November 26 and 27. Because of the full and exhaustive character of these aids 
to our deliberations, our labors have been greatly lightened, the time required 
for them has been shortened, and our confidence in the correctness of the rules 
we have embodied in our report as our best judgment in the premises has been 
greatly enhanced. 

It seems appropriate to comment briefly on the Comptroller General's ruling of 
November 28, 1042. Contrary to the impression existing in many quarters, the 
Comptroller General does not limit compensation in the case of requisitioned 
vessels to values existing on September 8, 1939. That date is used merely as the 
starting point for the determination of values. The necessity of allowing subse- 
quent enhancement that is not directly caused by economic conditions resulting 
from the emergency is specifically recognized by him. This standard does not 


necessarily exclude subsequent enhancement which directly reflects the economic 
changes incident to the improvement in general conditions since 1939'. 

It is obviously impossible to know^ without very extensive inquiry into the facts 
to what extent any enhancement in value was due to that cause, and the order 
which created the Board confined its duties to the establishing of "standards, 
rules, and formulae." On this account we did not undertake to consider how far 
the rules we are submitting would in practice reach different results from the rules 
recommended by the Comptroller General. It is conceivable that in application 
the difference might turn out to be far less than has at times been assumed, and 
that the dispute would appear to be more in the reasoning by which the problems 
were solved tlian in the answers reached. 

We have been greatly impressed not only with the care and consideration which 
the record disclose.^ that both you and the Comptroller General have given to the 
matters involved, but with the moderation and judgment exercised by all con- 
cerned in endeavoring to work out a solution consistent with the interest of 
the United States and the justice of the case. In closing we take this opportunity 
to record our great appreciation of the fact that this has been so. 

"(Signed) Learned Hand. 
(Signed) John J. Parker. 
(Signed) Joseph C. Hutcheson, Jr. 
Admiral Emory S. Land, 

War Shipping Administration, Washington, D. G. 



Pursuant to the order of the President of October 15, 1943, establishing it, 
the board hereby "in accordance with the applicable provisions of the Con- 
stitution and the laws of the United States," establishes "fair and equitable 
standards, rules, and formulas of general applicability for the guidance of the 
War Shipping Administration in determining the just compensation to be paid 
for all vessels requisitioned, purchased, chartered, or insured by the Adminis- 

Rule 1. — Just compensation for vessels requisitioned for title or for use is 
to be determined on the basis of value as of the date of taking, subject to deduc- 
tion on account of enhancement, if any, as hereinafter set out in rule 4, and 
with allowance for any loss on account of delay in payment from the date of 
taking, not exceeding the current commercial rate of interest. Value means 
value on the American market, not on foreign markets. 

Ride 2. — In the case of i-equisition of foreign-flag vessels under Public Law 
101, just compensation should be determined as in the case of domestic vessels. 

Rule 3. — Where market value cannot be determined by sufficient sales, or 
hirings of vessels of like character, made at or about the time of taking, it is 
to be determined by the Administrator from a consideration of cost of construc- 
tion, acquisition cost so far as relevant, improvements, replacement costs, depre- 
ciation, earnings, physical condition, appraisals for insurance or other purposes, 
and any other relevant facts upon which a i-easonable judgment as to value can 
be based. These various matters are to be given such weight by the Adminis- 
trator, as in his opinion they are justly entitled to, in determining the price that 
would probably result from fair negotiations between an owner willing to sell 
and a purcha.ser desiring to buy. 

Rule /f. — From the value at the time of taking, there should be deducted 
any enhancement due. to the Government's need of vessels which has neces- 
sitated the taking, to the previous taking of vessels of similar type, or to a 
prospective taking, reasonably probable, whether such need, taking, or prospect, 
occurred before or after the declaration of the national emergency of May 27, 
1941. Enhancement due to a general rise in prices or earnings, whenever occur- 
ring, should not be deducted. In the application of this rule neither the procla- 
mation of limited emergency of September 8, 1939, nor the facts existing at that 
time, are in themselves of significance. Tlie Board does not determine whether 
any enhancement after May 27, 1941, other than as enumerated above as deduc- 
tible, should be excluded; since the Board is advised that the value of ocean- 
going vessels was higher on May 27. 1941, than at the time of taking, and that 
any enhancement since May 27, 1941, in vessels of other tyiws, not deductible 
under the foregoing, is attributable to a general rise in prices or earnings, and 
should therefore not be deducted. 



Rule 5. — The enhancement clause of section 902 (a) of the Merchant Marine ' 
Act of 1936, has no application to the valuation of chartered vessels for the 
purpose of insurance. 

Rule 6. — The enhancement clause of section 902 (a) has no application to , 
voluntary charters or purchases under Puhlic Law 101. 

Rule 7. — In the event of loss due to a risk assumed by the United States in eon- j 
nection with the use of any vessel where no valuation or other mode of compensa- 
tion has been agreed to, just compensation should be determined on the basis of 
value on the date of such loss. Where a redetermination or readjustment of rates 
or values is effected pursuant to the terms of a charter or other agreement, just 
compensation should be determined as of the date of redetermination. In both 
cases the determination is subject to deduction on account of enhancement, if any, « 
as hereinabove set out in rule 4. i 

Rule 8. — Section 902 (b) of the Merchant Marine Act of 1936 has no application : 
to vessels merely because they have received mail subsidies under the act of 1928. 
The section has application only to vessels which have received a construction- 
differential subsidy inider title V of the Merchant Marine Act of 1936 ; and a mail 
subsidy is not a construction-differential subsidy within tlie meaning of section i 
902 (b) of the act. 

Rule 9. — Valuations agreed upon by the Administrator and owners are binding, 
if not in excess of just compensation determined as above prescribed ; and settle- 
ments should be made on the basis of such valuations with an allowance for any 
actual loss due to the delay in payment from the date when such settlements would 
have been made, if no objections had been raised, not exceeding the current 
commercial rate of interest. 

Rule 10. — Agreements fixing compensation for the title or use of vessels are not 
binding in the valuation of vessels of owners not parties to the agreements. Such 
valuations, however, if freely arrived at, may be considered along with other 
factors as some evidence of value. 

Learned Hand. 

John J. Faekeb. 

Joseph C. Hutcheson, Jr. 

Decembee 7, 1943. 

Those rules confirm substantially the administrative policies and 
practices which had been followed by us before the Board was created. 

Mr. Bland. The great trouble was that in the law there is a provision 
that just compensation might not be enhanced by the cause necessitat- 
ing the taking. 

Mr. WoRLEY. That complicates the case. 

Mr. Bland. Yes, So that where vessels were taken under that par- 
ticular statute there was that obligation which the rulings of these 
three judges were to cover. 

Mr. WoRLEY, Under the time charter, will you state briefly again 
what the time-charter plan is? 

Mr. Radner. You can best compare the time to a bareboat charter 
by comparing the rental of a furnished apartment — 

Mr. WoRLEY. The time charter? 

Mr. Radner. The time charter is comparable to the rental of a fur- 
nished apartment, with maid service. 

Mr. Worley. Fine. I can understand that. 

Mr. Radner. You get the ship and crew and all the fixings. All you 
do is use the ship, load it and unload it. The owner equips it and pro- 
vides manpower to run it. 

Mr. Worley. The maid service ? 

]\Ir. Radner. Yes. 

Mr. Worley. That seems to be the most popular. Is that the most 
advantageous as far as the Government is concerned? 

Mr. Radner. That all depends on the purpose for which it is used. 
Our opinion was that the time charter was the most efficient way of 
running ships, although very complex. You can imagine the diffi- 


culty ill trying to make a contract in Avartime for the use of ships 
with all the services and equipment required. However, we felt that 
this chartering was the metliod of getting maximum efficiency at mini- 
mum cost. It left in private hands control, over such things as wages, 
subsistence, stores and supplies, repairs, insurance, and other miscel- 
laneous costs. 

On a bare-boat charter basis, we take over the ship and all risks of 
operating the ship that go with it. We furnish the crew, maintenance, 
repairs, and everything that goes with it. So we felt, at the outset, 
that we would get better efficiency, better economy in operation, if we 
operated on a time-charter basis. We could also cooperate in that 
way in preserving as far as practicable the peacetime relationships 
between shipowner and labor, suppliers, repairers, insurers, and all the 
other peacetime commercial relationships. 

]\rr. WoiJLEY. Do you control the profits ? 

Mr. Radxkr. Well, the time-charter rate is fixed at so much a dead- 
weight ton a month. The basic rate was $4 per dead-weight ton a 
month in 1942, The charter form has since been changed so as to 
throw certain additional costs on the Government, and the rate has 
been reduced now to about $3,25. I am giving you the freighter rate. 

Mr. AVoRLEY. Do you keep track of the profits? 

Mr. Radner. Yes; we pay the owner a fixed rate. He reports his 
profits, and we use the report as a basis for readjusting the rate from 
time to time. 

There has been one basic rate adjustment since the initial effort, 
based in part on the information furnished in that manner. 

Mr. WoRLEY. In these negotiations you treated all ships, whether 
they were subsidized or unsubsidized, alike ? 

Mr. Radner. Yes, sir; no distinction as far as value is concerned 
except in one respect. Ships built under the Merchant Marine Act 
of 1936 with the aid of a construction-differential subsidy are en- 
cumbered by an option in favor of the Government to buy the ship 
for its actual book value, and those ships, of which I believe there are 
less than 150 out of our 1,500, say, less than 10 percent, those ships 
did get some special treatment on rates and values by reason of the 
fact they were encumbered by the option. 

All other ships, whether subsidized or not, had been purchased by 
the owners without any restriction of that kind, so there was no basis 
for distinction in fixing rates and values on the ground that one 
was subsidized while the other was not. 

Mr. WoRLEY. You say that only about a hundred and fifty ships 
were under subsidy? 

Mr. Radner. a hundred and fifty built with construction-differen- 
tial subsidy under the Merchant Marine Act, 1936. 

Under the Merchant Marine Act you could get an operating subsidy 
for old ships as well as newly constructed ships, but you could get 
a construction subsidy only on ships you built after 1937. 

There had been less than a hundred and fifty ships built and sold 
by the Maritime Commission under the Maritime Act of 1936 prior to 
the outbreak of this war. As to the ships built under the 1936 act, the 
Government paid anywhere from one-third to one-half the cost as a 
subsidy. They were encumbered by an option in favor of the Govern- 
ment under section 802 of the act, whereby they could be acquired 
by the Government at book value. Those are the 10 percent. 



In addition to those ships, there were about 150 ships that had 
received operating subsidies. 

Mr. WoELEY. At the present time we have operating subsidies and 
building subsidies. Is that correct? 

j\Ir. Radner. The law provides for them. At the present time there 
are no operating subsidies because the ships are all run by the Gov- 

Mr. WoKLEY. We have in peacetime ? The law is still on the books? 

Mr. Radner. The law is still on the books; yes. 

Mr. WoRLEY. There were about 1,500 ships in all taken over from 
private enterprise? 

Mr. Eadner. Yes. I am talking of ships over a thousand tons. 

Mr. Worley. Over 1,000? 

Mr. Radner. Over 1,000 tons. 

Mr. WoRLEY. Now, what about the 

Mr. Radner. I should like to add, in order that that 1,500 figure 
may not be too misleading, I should think about 200 of those ships 
represented ships tliat were not under the American flag. They were 
ships under the Panamanian flag, and certain ships under other foreign 
flags that we chartered on a voluntary basis. 

Mr. Worley. Did we take over some Swedish and Danish ships? 

Mr. Radner. We took over some Danish ships. 

Mr. WoRLEY. You include in those all the foreign ships? 

Mr. Radner. Yes. We have estimated our large-vessel fleet, with- 
out adjustment for sinkings and losses and other events, at the peak 
was about 1,300 privately owned. 

Mr. WoRLEY. Did you use the same method of requisition and reim- 
bursement for foreign ships as for our own ? 

Mr. Radner. Those we acquired on a voluntary basis. We did not 
have the power to requisition. 

Mr. Worley. We had the power to freeze those ships over here, 
though, didn't we, when we went to war ? 

Mr. Radner. The law froze only those ships which were immobi- 
lized, when Congress in 1911 passed Public Law 101, under which 
ships immobilized in American waters could be requisitioned. 

Under that act we requisitioned about 15 Danish ships and an assort- 
ment of other ships, Italian and German and French, and what not, 
all told about a hundred. 

Table No. 1. — Vessels requisitioned under Public Laic 101 as of July 31, 1944 












































In addition there were a number of free Panamanian ships owned 
mostly by Americans. 

Mr. Worley. Most of them vrere owned by Americans? 


Mr. Radner. Well, most of the tankers were owned ultimately by 
American companies. They were owned by Panamanian corpora- 
tions, the stock of which was owned in turn by American corpora- 

We had no trouble in cases- where the ultimate beneficial ownership 
was American in working out voluntary arrangements whereby they 
accepted the equivalent of our time charter rate and value program. 

In the case of Panamanian ships owned by foreigners, we had con- 
siderable difficulty at the outset, but finally worketl out arrangements 
with Panama whereby Panama agreed to requisition for us any ship 
which was not voluntarily chartered to us. The owners then w^ere 
faced with the choice of just compensation to be fixed by the Pana- 
manian courts or voluntarily dealing w^ith us by taking our charter. 
In all but one case they dealt with us. 

Mr. WoRLET. They preferred that. 

What plans do you have for the return of those ships after they are 
no longer needed? Wliat do you propose to do with those ships? 

Mr. Radner. Well, Captain Conway is as good a prophet as any- 
body I know. 

Mr. AVoRLEY. Captain Conway. 

Captain Conway. Well, of course, number one, we must take care 
of our military requirements and, as I see the picture, we will freeze 
the ships in the services. We will try to get the companies' own ships 
in their own trades. And, next, we will probably bareboat some ships 
to those private owners. 

Mr. WoRLEY. Yesterday Admiral Land — did you hear his testimony 
yesterday ? 

Captain Coxw^ay. No. 

Mr. WoRLEY. He suggested we set up three categories for our mer- 
chant marine; one, the sanctuary for military and naval ships; two, 
to sell what we can to our own buyers, and give an opportunity after 
that to foreign purchasers ; three, of course, to keep our present fleet ; 
he was opposed to scrapping any of it. 

Are your ideas along the same line ? 

Captain Conway. Yes; but I think that it may be possible even be- 
fore this whole thing is over, if we can take care of our military re- 
quirements after the collapse of Germany, to get more ships back to 

]Mr. WoRLEY. About how many of those fifteen hundred ships do you 
think will return to private operation ? 

Captain Conway. That is a hard thing to say. In the first place, the 
fifteen hundred ships don't exist today, as many of those have been 

Mr. WoRLEY. That is another question I intended to ask you a 
moment ago, Wlio assumes the risk — of course, we do in the title 
purchases, but in the time charter and bareboat proposition ? 

Mr. Radner. In the case of time chartered ships, the United States 
Government has assumed all so-called war risks and private under- 
writers the marine risks. 

Mr. WoRLEY. If they are lost do you use the same determination of 
value as in the title requisition ? 

Mr, Radner. Approximately, There are some minor variations, 
but not many. The ship is under charter to us and we tender the 


owner at the time of the charter a fixed insurance vahie for war risk 
purposes. The owner was free to go into the market and buy marine 
insurance in any amount he wanted, and usually the marine insurance 
exceeded our war risk insurance. 

If a ship was lost we had to determine whether it was a marine risk 
or a war risk, which was a technical legal problem. If it was a marine 
risk, that was settled with the marine insurer. If it was a war risk we 
paid. If undetermined, we advanced a portion of the loss and left it 
to the courts to determine. We have about 50 tied up that way. 

Under the new form of charter, an amended form gotten out in con- 
nection with a rate change, the owner has the privilege of insuring the 
marine risk, but all insurance nuist be covered in the American INIarine 
Syndicate, and tlie valuation figure is fixed, except the owner has the 
right, at his own expense, to carry more. We reimburse him only for 
the premium cost on the fixed valuation. In the case of bare-boat ships, 
we have all the risks, both marine and war, although we reinsure the 
marine risks. 

Mr. WoRLEY. The ships we have manufactured ourselves since the 
war started, how do they differ from these others ? 

Mr. Kadner. The ships we have built are Libertys mostly and 

Mr. WoRLEY. As far as the operation is concerned ? 

Mr, Radner. To contrast them with the other ships the ships we 
built were handled administratively in the same manner as the bare- 
boated ships. We have agents, about 75 general agents for cargo ves- 
sels and 15 or 20 for tankers, and a numljer of miscellaneous agency 
arrangements. Those agents, as general agents, operate those ships for 
the account of the United States, under our direction and control, 
under a general agency agreement. They get a fee for their manage- 
ment services. Expenses are paid by the United States. 

Mr. WoRLEY. Sort of like a cost-plus contract in war industry is the 
way we build the ships ? 

Mr. Radner. "Cost-plus" is an ugly word. I don't like to use it. 

Mr. Worley. I know ; it's been used a lot. We built the ships and 
they operated them, hired the personnel? 

Mr. Radner. That's right. The agents are paid cost. They get 
their overhead cost for management out of fixed fees. Actual com- 
pensation was fixed by us on a fixed-fee basis ; no cost-plus in it at all. 

Mr. Worley. No "plus" in it at all? 

Mr. Radner. No "plus" in it at all. 

Mr. WoLATERTON. The ships under your jurisdiction, do you turn 
them over to other nations? 

Mr. Radner. The only vessels made available by us to other gov- 
ernments are those made available under the Lend-Lease Act. I think 
a full report of that has been made available to Judge Bland's com- 

We have made available approximately 200 ships to Great Britain 
under the Lend-Lease Act. We have made other ships available 
under Lend-Lease to Belgium, Norway, Holland, China, Greece, 
Poland, and Russia. 

In the case of all governments other than Great Britain and 
Russia, the ships we have made available are immediately time 
chartered back by us, because the other governments are not in posi- 


tion to operate these ships at their own expense, or have not been 
up until recently. 

In the case of those 200 ships transferred to Great Britain, they 
are transferred on a bare-boat basis and Great Britain pays all op- 
erating expenses and we get all the dollar revenue. In effect we get 
assistance from Great Britain in bearing part of the operating cost 
of our merchant marine, and Great Britain, in turn, keeps 200 ships 
going and an organization intact that otherwise might disintegrate. 

ISIr. WoLVERTON. Do these other nations actually pay us for the 
use of the ships or is that just a bookkeeping transaction in Lend- 
Lease under which they are given assistance to pay us for the ships? 

Mr. Radxei?. In the case of Great Britain, they pay us for the ships 
the same way they pay us for any other lend-lease articles. 

IVIr. WoLVERTON. How is that? I have never understood. 

Mr. Radner. They obligate themselves to pay the fair use value 
for the use of these ships in the final settlement. 

Mr. WoLVERTox. You say they obligate themselves to do it. How 
is that obligation determined and how is it fulfilled ? 

Mr. Radner. Well, sir, you are getting into questions that are out- 
side of our bailiwick. 

Mr. WoLVERTON. You build the ships ? 

Mr. Radner. We are the agency that provides the ships, at the 
request of the Lend-Lease Administration, now the Federal Economic 

We are told that the Federal Economic Administration keeps a set 
of books and charges Great Britain with these items. We have a 
claim against Great Britain, as against any other Lend-Lease gov- 
ernment, for the reasonable value of the use. 

Mr. WoLVERTOx. You say "a claim" ? 

Mr. Radner. A claim. Whether it will ultimately be liquidated in 
dollars or other concessions of an international nature, I don't know. 

Mr. WoLVERTON. Does that depend on whether Lend-Lease keeps 
up, whether it will be liquidated or not ? 

Mr. Radner. AVliether Lend-Lease keeps up ? 

Mr. WoLVERTON. Yes. 

Mr. Radner. I wouldn't think that is necessary to 

Mr. WoLVERTON. In other words, are we getting cash from any- 

]VIr. Radner. For ships we get no cash except dollar receipts. 

Mr. Worley. All of your transactions are under lend-lease? 

Mr. Radner. All of our transfers to other nations with one minor ex- 
ception. There is a little arrangement with Chile whereby we do 
lend-lease certain ships to them but on a straight commercial rate per 
dead-weight ton a month, and they pay that. 

I am talking now about the Allied Governments. We don't get any 
immediate cash consideration for ships, but, on the other hand, we 
do get 

Mr. Wolverton. Then what obligation do they assume ? 

Mr. Radner. Here is what they do : In the first place, during the 
war, they agree to operate the ships. Great Britain does, at her own 
expense. Great Britain has also agreed to carry such of our cargoes 
as are transported in these ships free of cost to the United States. If 
Gre^it Britain carries cargoes for which she receives dollar revenue, 


those dollar revenues are piiid to the United States. So there is a sub- 
stantial benefit to the United States from that arrangement, apart 
from what we will ultimately get. 

Ultimately, we have this claim against Great Britain for the reason- 
able value of the use of those ships which will be settled by interna- 
tional arrangements with other lend-lease claims. 

JNIr. WoRLET. We retain title to those ships ? 

Mr. Radner. Every one of them. 

Mr. WoL^^RTON. You are more optimistic than I am in saying we 
will get some return in the international field as fulfillment of the 

Mr. WoRLEY. On this subject of the books you keep for what our 
iallies get, is there anything reflected on the books for what we owe 
our allies for food and supplies ? 

Mr. Radner. Of course, lend-lease works two ways. The predomi- 
nant flow is from us to our allies, but there is a reciprocal flow from 
them to us. For instance, substantially all of our disbursements in so- 
called sterling areas, for repairs, stevedoring, and other ship's ex- 
penses in foreign ports, except agency fees, and other minor qualifica- 
tions, but generally speaking, except for agency fees, our disburse- 
ments in sterling areas are paid by Great Britain under reverse lend- 
lease, and the amount of that is of course credited against our claim 
against Great Britain. 

The British also pay any claims against American ships in foreign 
ports, for damage to cargoes, and so forth. 

Mr. WoLVERTON. If the ships are sunk, who bears the loss? 

Mr. Radner. You mean lend-lease ships ? They do. 

Mr. WoLVERTON. You mean they pay us? 

Mr. Radner. It is charged to them. The risk of loss is on Great 

Mr. WoLVERTON. It is added to the bill ? 

Mr. Radner., Added to the account payable. 

Mr. Worley. Even though we retain title, they assume the risk of 

Mr. Radner. They assume the risk of loss. 

Mr. WoRLEY. How many ships have been transferred to our allies? 

Mr. Radner, There are apjn-oximately 200 in the case of the British, 
and I don't have the exact figures in the case of the others, which 
probably would be a round 50. 

Captain Conway. And, I might add, those ships, other than to 
Great Britain, operate under our sole direction, carry our military 
cargoes and others. 

Mr. Worley. Wliat is your opinion as to the disposition of these 
ships after the war ? Will they be returned to us ? 

Mr. Radner. We are clearly entitled to their return. 

Mr. WoRLEY. Do you treat those as a part of your total merchant 
marine fleet? 

Mr. Radner. Yes. 

Mr. Worley. How many ships were left under private ownership ? 

Mr. Radner. Now? 

]\Ir. Worley. Yes; how many were when you took over, when you 
requisitioned the ships you have now, the fifteen hundred? 

Mr. Radner. Take that fifteen hundred and divide it into two 
groups, about three hundred foreign and about twelve hundred Ameri- 


can. I think we had about twelve hundred privately owned ships, and 
it is now down to about eight hundred or less than that. 

Mr. WoRLEY. There are eight hundred ships privately owned now 

Mr. Radxer. I haven't the exact figures. 

Mr. WoRLEY. They are carrying on trade and commerce now? 

Mr. Kadxek. Oh, no. 

Mr. WoRLEY. How many ships were left in private ownership? 

Mr. Radxer. Not any. Every single American-flag ship a thousand 
tons or over, capable of ocean transportation, is under charter to the 
United States. The only exception to that would be some of the ships 
on the Great Lakes. We don't do nuich in the Great Lakes. 

Mr. "WoRLEY. There is no private shipping going on now for private 
enterprise ? 

Mr. Radxer. None at all. 

Mr. WoRr.EY. You direct the flow of all our foreign trade and 
connnerce ? 

Mr. Radxer. Yes. That is Captain Conway's job, to make the 
maxinnnn utilization of that huge fleet of ours in conjunction with 
the British fleet, which is also handled on the s&me basis, and the 
other Allied fleets. These fleets will continue to be so handled not only 
for the duration of the German war but the Japanese war. 

Mr. Blax^d. I am wondering what you are going to do with them 
when the war is over. 

Mr. Radxer. There is no answer to that question. Admiral Land's 
answer yesterday to you is about as good as you can get. 

Mr. Blax'd. Are you going to freeze everything in the hands of the 
present operators? 

Captain Coxw^ay. Judge, we certainly hope to carry at least 50 
percent of our foreign commerce, and I think you might be interested 
to know that even today we are carrying 50 percent of our commerce, 
to South Africa, the Mediterranean, the Middle East, the Persian 
Gulf, India, and the L^nited Kingdom. 

Mr. Bland. I wonder what is going to be the chance of new men 
getting into business, new operators. 

Captain Conway. You mean other than are in the business now ? 

Mr. Bl.vxt). Yes. 

Captain Conway. That is a question that is going to be hard to 
answer, I think. We have now approximately 75 companies in opera- 
tion, and I know the War Shipping Administration and the Maritime 
Commission have decided at the present time we don't require any 
new operators to operate the number of ships that we have. 

Mr. Worley, Along that line, you say we expect to carry 50 per- 
cent of our own traffic. With all the ships we have and all the trained 
personnel, why couldn't we carry a hundred percent ? 

Captain Conway. We could probably carry a hundred percent after 
the war is over if we operated everything that we have. 

Mr. Worley. Why can't we do'that ? 

Captain Coxway. You have other nations that have got to carry 
some cargo, too. 

Mr. Worley. I understand that the Japs carried 80 percent of their 
own and built up a pretty good fleet doing it — not good enough, of 


Captain Conway. Of course, we will have sufficient fleet after the 
war is over to take up all the slack of Japan and Germany combined. 
We are, in addition to carrying this huge military load, carrying 50 
percent of lend-lease and commercial to overseas and, of course, to 
South America we are carrying the major portion of the cargo freight. 

Mr. WoRLEY. You are aiming now at about 50 percent after the war ? 

Captain Conway. We are aiming at not less than 50 percent. 

Mr. WoRLEY. You could make it a hundred percent ? 

Captain Conway. In my opinion, 50 percent is about as high as 
we can get. We certainly want to preach the gospel that we want to 
carry at least 50 percent of the cargoes to and from this country. 

Mr. WoRLEY. I understand we have never carried in all of our 
history more than 50 percent. 

Captain Conway. I wouldn't say in all of our history. \ 

Mr. WoRLEY. The clipper ships carried more ? 

Captain Conway. Yes. 

Mr. WoRLEY. Was that an account of the speed of the clipper ships ? 

Captain Conway. Yes; speed and management and efficiency. We 
carried as high as 90 percent in their heydey. 

Mr. WoRLEY. Didn't other nations get into that thing also? 

Captain Conway. They did eventually. 

Mr. Bland. That was by reason of coal, steam ; a considerable factor. 

Mr. WoRLEY. If we would improve our ships, make them faster, 
more economical, more efficient, we might have more of the traffic ? 

Captain Conway. I think right now we will be in an excellent posi- 
tion to do that. We are going to have the best ships in the world, 
we are going to have well-trained personnel, and we have good, ef- 
ficient steamship operators. 

That is something we did not have after the last war. 

As you know, after the last war the ships were slow, the steamship 
operators were not exj^erienced because they were mostly all new 
operators. We didn't have the trained personnel we do at this time. 
Also the steamship companies this time, I think, will be well financed. 

Mr. WoRLEY. Those factors are important, but the most important 
thing is whether other countries are going to be willing to trade 
with us. Of course, the only way they will trade will be on a mutu- 
ally profitable basis, and if we carry a hundred percent that lessens 
the profits for the other countries. 

Captain Conway. Yes. Of course, we never can hope to carry a 
hundred percent, but I think, if some of the shippers will be kind 
enough to the merchant marine, we can carry at least 50 percent. 

Mr. WoRLEY. Hove do you mean, if the shippers "will be kind 

' Captain Conway. I mean if they will all get together and try to 
ship on American ships, because we are going to have fast ships, 
they are going to be well managed, and certainly we can deliver the 
cargo as efficiently as the foreign lines. 

We have had, I think, a splendid opportunity during this war to 
observe the foreign operations, and I say without question that our 
steamship operations are at least as efficient as those of foreign 
nations. Take what I think is a good key to it, the ships missing 
convoys. We have a committee up in New York which meets every 
■week, and the ships missing convoys have averaged less than 2 per- 


cent. We have been doing as well as the foreign countries, if not 
a little better, on the percent. 

Mr. WoRLEY. Take our friend Brown. He has a bunch of trac- 
tors he wants to sell which he has manufactured. He wants to 
sell them to some foreign country. Does he come to you and ask for 
space aboard one of these ships? Do you clear that? 

Captain Conway. No; the shipper deals directly with the steam- 
ship company. Of course, under these Government regulations, he 
has to get all sorts of permits before he can ship. 

]\Ir. WoRLEY. I mean in peacetime. 

Captain Conway. In peacetime he deals directly with the steam- 
ship company. 

Mr. WoRLEY. He doesn't have to clear anything through the Mari- 
time Commission? 

Captain Conway. No, sir. 

Mr. WoLVERTON. May I ask a question there, Mr. Chairman ? 

]Mr. WoRLEY. Surely. 

Mr. WoLVERTON. What has been the system by which foreign gov- 
ernments have been able to dictate the use of their ships for the 
transportation of things purchased in this country? 

Captain Conway. The foreign governments? 

Mr. WoLVERTON. Yes; foreign purchasers. 

Captain Conway. Well, we have found in some instances, for in- 
stance, Japan, that they did dictate an awful lot to their merchant 
marine as to what they should carry. 

Mr. Radner. I might interject there: You have the difference of 
selling f. o. b. and f . i. o. 

MrT WoRLEY. What is f . i. o. ? 

]Slr. Radner. I mean c. i. f., cost including freight. I should not 
have used f. i. o. 

The trouble with our practice has been that the foreign shipper or 
consignee has in the past been more patriotically alive to the neces- 
sity of supporting his merchant marine than our importer or exporter. 

^Ir. Worley. On that point, isn't it natural for an American pro- 
ducer or shipper to j^refer to ship his stuff under the American flag? 
Don't you think that would be natural ? . 

Mr. Radner. It would seem to be. 

Mr. Worley. Well, why wouldn't it? 

Mr. Radnp:r. Well, for the reason that the buyer wants it shipped 
under his flag. 

Mr. WoLVERTON. Right there, after this war the nations of the 
world will be coming to America for practically everything in the 
way of manufactured goods. Their industries in many instances 
have been destroyed; their economic situation, for one reason and 
another, probably does not permit them immediately, at least, to pro- 
duce for their own wants, and they come to America. We have got 
the goods ; we have got the ships. 

Now, is there any policy that can be recommended by which our 
ships will be used in the post-war period to transport the goods to 
these other countries, or are the purchasers in these other countries 
going to dictate that they will use the ships we have turned over to 
them or chartered to them, or what not? 


Mr. Radner. It stands to reason, when yon are dealing with a man 
on a str-aight business basis and competing for his business — let's say 

if we were selling locomotives to South America 

Mr. WoLVERTON. There won't be much competition in the im- 
mediate post-war period, as I see it, because this is the one country 
that will be able to produce the articles that the}' will need. 

Mr. Radner. I think the wa}' the picture is A'isualized is that in 
the immediate post-war period we are going to have such an enor- 
mous percentage of the total tonnage. We therefore are going to 
be carrying for several j^ears much more than 50 percent, if we keep 
our ships going. The problems of getting a fair share of the trade 
for the first couple of years is not going to be a serious problem. The 
problem is going to arise after that. 

Mr. AVoLVERTON. You mean after we turn over our ships to them? 
Mr. Radner. Or after they build u}). There is an advantage in 
turning ships over to them if you keep them from building up — keep 
some control against excessive production. 

Mr. WoLVERTON. The situation that has always been interesting to 
me is how the foreign purchaser is able to dictate the ships in which 
they will receive their goods. 

We will use Great Britain as an illustration, because it is a great 
maritime nation. "WHien they sell to us and their ship brings it over 
and they are taking something back to a purchaser in Great Britain, 
isn't it a common practice that the purchaser dictates it shall be taken 
in a British bottom? 

Mr. Radner. I think it is a practice, but nowhere near as connnoii 
there as it has been in the Axis countries. We have carried a great 
deal of cargo in American ships to and from Great Britain. For 
instance, a great proportion of Scotch whisky has been transported 
to the United States by American lines. 

I think the British importers and exporters have a pro-British view 
of shipping. Unfortunately, our exporters and importers have not 
had a comparable view. 

Mr. WoLVERTON. Back of that individual desire to promote their 
own shipping is there any government policy involved in the matter, 
or is it a matter entirely up to the purchaser ? 

Mr. Radner. In the case of the Axis countries there probably has 
been government policy involved. I don't think the situation has 
been comparable in the democratic countries. 

Mr. WoRLEY. As to these subsidized ships, they would have control 
over those and they would be more interested in them to get their 
money }>ack to pay for the subsidy. Isn't that correct ? 

Mr. Radner. Yes ; but I don't know of any government policy other 
than the encouragement from the board of trade, equivalent to the 
Department of Commerce, encouragement to importers and exporters 
to use British shipping, and encouragement of banking facilities 
throughout the world, and various incidents of trade which the British 
have mastered so thoroughly and which has given them this advantage 
in international trade. 

I think that is all there has been to it. There has been excellent 

Mr. WoLVERTON. Has there been any consideration given by our 
governmental agencies that have directly to do with shipping to the 


fornnilation of a policy that would utilize to a greater extent Amer- 
ican bottoms in the carrying of American goods ? 

Mr. Radner. I used to be with the Maritime Commission. In 1937, 
when I first went with the Commission, and ever since then, the Mari- 
time Commission has tried very hard to educate the shippers. 

Mr. WoLVERTON. You see, that comes back to the personal situation 
again. You say to encourage them. I am speaking about a gov- 
ernmental policy. 

Is there anything that can be laid down, or has any consideration 
been given to a policy that would make more certain and sure the use 
of American bottoms in the transportation of American goods? 

Mr. Radner. Well, the whole policy of the Merchant Marine Act 
of 1936 was to build up a fast, efficient, economically operated mer- 
chant marine. That has been the fundamental policy. Judge Bland 
has })een pushing that policy in his Committee for 10 or 15 years. 
Mr. WoRLEY. That has to be supplemented by different policies. 
Mr. Radner. Let's not forget that the American merchant marine 
went to the dogs between 1920 and 1935. We had a large fleet, but it 
was slow, old, and antiquated in comparison with the faster ships of 
competing nations. 

Mr. WoRLEY. Jytay I ask there, isn't that one reason they didn't use 
American ships? 

Mr. Radner. That undoubted^ly was an important contributing 

Mr. Worley. Was it a contributing factor or one of the most im- 
portant, in your opinion ? 

Mr. Radner. Oh, I think it was an important contributing factor. 
but I don't think it was any more important than the inertia of Ameri- 
can shippers as far as American shipping was concerned. 
Mr. Bland. And the possibility of retaliation. 

Mr. WoRi.EY. We can agree, can't we, that the average American 
shipper wants to ship on American ships? 

Mr. Radner. No; the average American shipper, up to this war — 
and we hope the war has reversed the trend — has been interested in 
most cases in getting his goods there by the cheapest, fastest, and most 
efficient method. 

Mr. WoRLEY. I know patriotism generally resides in the pocketbook. 
I just wondered if it went all through that, this c. i. f. and f. o. b. that 
enters into the loading of a ship here. 

Mr. Radner. Yes, The fellow who pays the freight usually controls 
the routing. 

Mr. WoREEY. Does the purchaser in the foreign country j)ay the 
freight ordinarily? 

Mr. Radner. In many countries. In Japan it was almost invariable 
that he did. In other words, when they were sellers, they paid the 
freight ; when they were buyers they also paid the freight. The freight 
obligation was assumed so as to give them control of the routing. 
And, of course, you had both (government encouragement and had 
interlocking relationships between great business enterprises and shi^D- 
ping in Japan, 

They did quite an effective job, and Germans and Italians did some- 
thing of the same sort. And then the question of foreign exchange 
entered into it, also. 

99579 — 45— pt. 4 6 


Mr. WoRLEY. How can we change our position over here and make 
it more favorable for shippers to ship in American ships? 

Mr. Hadner. I think Judge Bland has the answer in the Merchant 
Marine Act of 1936, with such improvements as may be found advisable 
after experience. 

The best answer is for us to provide the fastest and most economical 
merchant marine in the world with frequency of sailings. I don't 
think we can run ships cheaper than anybody else, but it must not cost 
more to ship by American vessels, and it has not in recent years except 
in the tramp field. In the tramp field we have never been able to 
comDete with foreigners. 

Mr. WoRLEY. There are not many of those tramps? 

Mr. Kadner. No — ^but there have been a large number in peace- 

Mr. WoRLEY. In order to reduce our cost of shipping, in order to 
maintain the high standards we have maintained in the merchant 
marine, one result will probably be to increase subsidies from the 
Government in order to compete with foreign countries? 

Mr. Radner. Well, the Merchant Marine Act provides for a sub- 
sidy. I doubt very much if, percentagewise, the amount of the sub- 
sidy will increase after this war. It might even decrease, because 
some of the labor costs of foreign nations have gone* up substantially 
during the war, particularly the Chinese. The greater the number of 
ships you operate in foreign trade, of course, the greater your ag- 
gregate subsidy will be, although your unit cost may be less. 

There has been no problem under the Merchant Marine Act of 
American services maintaining rate parity with other foreign serv- 
ices. There has been freight rate parity for years. Under the Mer- 
chant Marine Act of 1936, the ships we did build could maintain 
equal quality service with any foreign line, or even superior quality 

We had only about 150 ships built and sold under the 1936 act. 
I don't know what the figures are — I think I have got them about 
right. We must not exaggerate the size and scope of foreign trade. 
In foreign trade in 1939, which was the last full peace year, we had 
only about 2,000,000 gross tons of freighters in foreign trade, which 
would work out about 3,000,000 deadweight tons, wouldn't it, Cap- 

Captain Conway. Yes. 

Mr. Radner. We had 3,500,000 deadweight tons in the foreign 
trade. Our job is to increase that substantially, possibly to double it. 
In 1939 we were carrying with .that about 25 percent of our commerce. 

Mr. WoRLEY. Your problem is to what? 

Mr. Radner. Our problem is to double that, if it can be done. 

Mr. Worley, You think it can be done by having faster ships, 
better ships, with the same economy of operation, or more economy 
of operation. You think that is the answer, do you ? 

Mr. Radner. Yes. We will have a large number of fast, new 
ships, economical in contrast with the old ones. We also will have 
enough tonnage to increase our participation to 50 percent. We 
have the Merchant Marine Act of 1936 which permits us to subsidize 
these ships in that foreign trade so as to achieve cost equality. There 
is a need for some legislative vehicle to handle the sale of surplus 


shipping. That is a matter now pending before Judge Bland's com- 

Mr. WoRLEY. Do you think it will be advisable for us to require 
that all shipping from here, all exports, be sent by American ships? 
Do you think that would be going too far ? 

Mr. Radner. Anyone interested in the merchant marine exclusively 
would say that was a fine idea, theoretically. Actually, I am afraid 
it won't work. 

Mr. WoRLEY. It would be a unilateral proposition ? 

Mr. Radner. Nations must both import and export. 

Mr. WoLVERTON. Practically the only difference between what Mr. 
Worley is suggesting and what you have suggested is that his is prac- 
tically a hundred percent proposition, and you have said you hoped 
we will be able to do 50 percent of it. 

What do you base that hope on that we will build up our American 
shipping to 50 percent? 

Mr. Radner. I think it is more than hope. If we used the word 
^'hope," that is too cautious a word. I think we can say we are confident 
we can expect to have 50 percent of it. 

Mr. WoLVERTON. Yes. What I would like to know is, What do you 
base that confidence on that is different from what the present situa- 
tion actually is? 

Captain Conway. I think we ought to make it known to all these 
different foreign nations that we intend to carry not less than 50 per- 
cent of our foreign trade. 

Mr. WoLM^RTON. How would you do that? How would you put 
such a policy as that into effect? Would it be statutory, or be by 
encouraging American shippers to utilize American bottoms? 

Captain Conway. I think we have to encourage American shippers 
to use American bottoms. 

Mr. WoL%^RTON. How can you encourage them to do it when it is 
cheaper, as has been pointed out here, for them to ship in other 

Captain Conway. It isn't cheaper. We carry it at the same freight 
rates as the foreign bottoms do. 

Mr. WoRi.EY. The same rates ? 

Captain Conway. Yes. 

IVIr. WoRLEY. Then it is not cheaper? 

Captain Conway. No; no cheaper. 

Mr. WoRLEY. "Wliat other elements come in there to encourage 
American shippers to ship by foreign boats? 

Captain Conway. We have got to preach to him that he must ship 
by Ajnerican shij^s. If he sells a truck for delivery to a foreign 
country and the purchaser insists it come in a foreign bottom, he 
usually abides by that. 

Mr. WoRLEY. Then, no matter what encouragement we try to instill 
in them over here, if the buyer insists on that truck being transported 
by a ship of his own comitry, the producer is going to do that, the 
shipper over here ? 

Captain Conway. Unless we take some means of insisting 

Mr. WoRLEY. What means are you going to take? 

Mr. WoLVERTON. That is the very thing I am interested in. What 
gives you that confidence that our foreign shipping will increase to a 
point of 50 percent ? 


Mr. WoRLEY. Staff Director Folsom, has a question. 

Mr. Folsom. Isn't it true that one reason we have had such a small 
percentage before the war is that, in the first place, we didn't have 
so many ships, didn't have all the routes covered that shippers wanted ; 
also that we didn't give as good service as some foreign lines, and the 
rates were not attractive; and, on the whole, the shippers simply went 
to the foreign lines to get more efficient service, where they could get 
service to all parts of the world ? 

If we are going to expect to get a higher percentage after the war 
it should be based on the fact that we have more ships in operation, 
covering more lines and more routes, and that we have faster ships 
and give as efficient service and as low-cost service as competing lines. 
And, in the final analysis, we have got to depend on that rather than 
dictation from government to shippers that they have to use certain 

Captain Conway. Yes; I think aftei- the war we will have faster 
ships to compete with the foreignei-s. 

Mr, Folsom. We will have a higher percentage of the total than we 
did before the war? 

Captain Conway. Yes; but I think it is extremely important to 
start now to let them know that we expect to carry not less than 50 
percent, so they can take that into consideration in their building 

Mr. WoRLEY. It will depend on the efficiency of the ships? 

Captain Conway. Yes, sir ; on the efficiency of the ships. 

Mr. WoRLEY. I don't think you will ever want to dictate to a shipper 
that he has to use a certain kind of ship. You have to make it to his 
own interest to do that. Isn't that so ? 

Captain Conway. Yes. 

Mr. Bland. And cost of operation enters into it ? 

Captain Conway. Yes, sir ; that is true. 

Mr. WoRLEY. Our subsidy offsets that ; but that is the whole idea, as 
I understand? 

Captain Conway. Yes. sir. 

Mr. WoRLEY. The subsidy is to put our vessels on a parity with the 
others ? 

Captain Conway. Yes, sir. 

Mr. WoRLEY. You say we ought to let other countries know we are 
aiming at 50 percent? 

Captain Conway. Yes. 

Mr. WoRLEY. Just how far would that be the policy ? Do you have 
any authority to set that as the policy? 

Captain Conavay. Of course, our whole policy is that we wish to 
carry, and intend the carry, not less than 50 percent of the cargoes to 
and from this country. 

Mr. WoRi-EY. Whether you do or not will depend on the policy set 
by some other branch of the Government? 

Captain Conway. Yes, sir; and also on whether the shippers are 
going to go along with us. 

Mr. WoLVERTON. That is M^hat I am trying to understand, how you 
can say you are confident it will be 50 percent when that human ele- 
ment comes into it to which you have just referred. 


You are lioping to be al)le to get American shij^pers to use American 
ships, you want to influence them to do it, and yet you say you can't 
compel them to do it ? 

Captain Conway. That is true. 

Mr. WoLVERTON. I don't see where you can build up this confidence 
that you speak of. I think the term that I used of "hope" carries all 
the way through. I can't see the basis of your confidence, and, as a 
member of this connnittee whose obligation it is to report to Congress, 
making suggestions of policy, and so forth, I would like some concrete 
plan to be presented to us that would gain our approval, that would 
justify us in reconmiending to the Congress certain steps to be taken 
in order that this advantage to American ships might be gained. But, 
as long as w^e depend entirely upon the desire or the consent of the 
shipper, why, I don't see how w^e can be any more certain in the future 
than we weie in the past. 

I don't think human nature, so far as the shipper is concerned, who 
is the American producer, will be any different after the war than 
it was before the war; and if the element of cost enters into it, it will 
be just as pronounced after the war as it has been before, probably 
more so. 

I just feel at a loss, if I were called upon today by any Member of 
Congress, if I were asked, "What does your committee suggest that we 
should do?" I would have to admit that I am not in a position to 
make any such recommendation. 

I have been hopeful that, out of the wealth of experience of these 
different governmental agencies that have to do Avith our shipping, 
there would come some concrete suggestions and recommendations that 
we could report to Congress in this important matter. 

Mr. Radner. Mr. Congressman, I think we ought to emphasize that 
the War Shipping Administration, with which we are both associated, 
is interested in the wartime job; the Maritime Commission has the 
post-war job. 

The Maritime Commission has been working for several months, 
through a post-war planning committee, on the development of post- 
war plans. 

Mr. WoLVERTON. That is what we want to hear. 

Mr. Radner. Yes, sir. I think that program that is developing in 
that channel will ultimately, perhaps, form the framework or at least 
background for any recommendations this committee may wish to 
make, and possibly this committee ought to hear from the Maritime 
Commission officials directly connected with that activity, as far as 
post-war planning is concerned. 

Mr. WoLVERTON. That gives me some encouragement, what you have 
just said; and I think, Mr. Chairman, it would be well to have repre- 
sentatives of the Maritime Commission present to give us the result 
of their study. It may be that they have not completed it, it may be 
that they are not ready to make suggestions, but certainly this commit- 
tee cannot afford to take a leap in the dark and make suggestions of its 
own that we do not have the experience to make. 

ISIr. Radner. Although it is out of otir field, I think we ought to ad- 
just our thinking a bit in one respect. I think it is important, but I 
think we have over-emphasized the question of shipper loyalty. 


The situation we will be in after the war will be pretty much the 
same as that of a great, big, chain grocery going into a small town. 

The grocery chain is in position to open up five or six stores with de- 
luxe service and indulge in advertising. It is confident, because of the 
fact it is able to go in there and open on every street corner, if necessary, 
that it will get"50 percent of the local trade. 

The Maritime Commission, when this war is over, is going to be in 
position to do that same thing with ships. It will be no trick at all 
to put enough fast ships in every trade to give more than enough service 
for 50 percent of the trade. 

While we have been concentrating our thinking on the shipper 
relationship, we ought not to overlook the fact that actually interna- 
tional shipping is competition between steamship companies. If you 
get there first with the best ships, the largest number of ships and the 
most frequent sailings, you are going to get the trade, just the same 
way the chain store that invades a locality gets the grocery trade. 

Mr. Bland. Carrying that thought further, haven't you got to dis- 
tribute your trade more among the ports of this country, rather than 
run it through a few particular ports ? 

Captain Conway. That is true. 

Mr. Kadner. I think that the future of the merchant marine has to 
encompass the use of all ports where such use will increase the amount 
of tonnage moving on American ships. In wartime we must disre- 
gard all those considerations in getting maximum use of ships. Cer- 
tain ports have been used for Army and Navy purposes, but the post- 
war program has to encompass utilization of all these ports. 

Mr. Bland. The ports of the country were used largely by foreign 

Mr. Radner. That is right. That takes you, if you develop it, into 
the tramp field, because a lot of our tramp cargoes, like coal, moved 
out of these out-ports, and that is one place where the American 
industry has always been at a disadvantage. There is no solution to 
that problem that anyone has been able to see as yet. 

Mr. WoRLEY. What efforts have been made over here to encourage 
our own buyers to insist that the product be transported in American 

Mr. Radner. I think there has been in the last 10 years a consider- 
able amount of persuasion tried on buyers, with considerable success. 
I don't want anybody to think it hasn't worked. It has worked. 

Mr. WoRLEY. Do you have any figures on that ? 

Mr. Radner. No ; I haven't the figures. 

Mr. Worley. You mentioned some a while ago, about comparison of 
the 1939 year. Was it a million five hundred thousand ? 

Mr. Radner. Gross tons. 

Mr. WoRLEY. You don't have any figure as to how much we were 
carrying before you started this persuasion program and how much 
we were carrying after that ? 

Mr. Radner. No; but I think some of the Maritime Commission 
people can tell you specific instances of large industries that have in- 
creased their patronage of American ships as a result of such 
educational efforts. This was before the war. We made a lot of 
people conscious of the merchant marine by the peacetime efforts of 
Admiral Land and Admiral Vickery to increase consciousness of 
American-flag ships. 


Mr. WoRLEY. The buyer can almost write his own ticket; at least, 
they seem to in foreipi countries? 

Mr. E.ADXER. I think it would depend on whether you have a buyer's 
or seller's market. 

Captain Conway. It does have a big effect, but all of our steamship 
companies have very efficient traftic organizations that are out scouting 
around among all the buyers and the shippers. 

Mr. WoRLEY. You say that has an effect, where the purchaser could 
pretty nearly dictate his own terms. All right, since this nation 
exports more than it imports, wouldn't it stand to reason that, human 
nature being what it is, tlie amount of freight we will carry will not 
be as great as those who import, who buy our exports? Am I too in- 
volved in that? 

Mr. Kadxer. I think the only conclusion you can draw from that is 
we are relatively at a disadvantage with foreign countries. 

Mr. Worley. Because we export more ? 

Mr. Radxer. Because we export more than we import. 

Mr. WoRLEY. In order to increase our shipping, we have to import 
more ? 

Mr. Radx'er. Nothing would help shipping as much as a balance of 
imports and exports, as well as an aggregate increase. 

Sir. Worley. That brings up a question which perhaps the Maritime 
Commission is not competent to testify on 

Mr. Blax^d. There are various organizations in the country, are there 
not, which are trying to bring about that result? For instance, the 
Mississippi Valley Association has been trying to educate the people 
for years on the necessity of shipping under the American flag. 

Mr. Worley. Do you think they are perhaps trying to go along with 
that and make some revisions in the Smoot-Hawley tariff? 

Mr. Radx^er. I think that insofar as the steamship industry is a 
significant factor in tariff policies, which I am afraid it is not, you 
will find the steamship industry has always been for a low tariff. 

Mr. Worley. Ordinarily we are not going to import anything that 
will lower our own standard of living, and neither are other countries. 
One way to increase our foreign commerce and shipping is to import 
as much as we export, so you are right up against a blank wall. 

How do you propose to overcome that. Captain ? 

Captain Conway. I don't know. 

Mr. Worli:y. Do you have any plans on that? 

Mr. Wolm^:rtox^. You have never been able to get the American 
people to travel for pleasure under the American flag to the extent 
that they could, and encouraging them to ship, where it is a business 
transaction, where dollars and cents enter into it from the standpoint 
of profit. I don't see how you can be so optimistic, when we can't even 
get them to do it when they travel for pleasure on foreign ships. 

Mr. Radxer. It is quite the reverse. Wlien we travel for pleasure — 
we Americans have always been suckers for foreign service, French 
cooking, and so forth. 

Mr. Worley. Particularly titles. 

Mr. Radxer. Yes. You don't have to contend with that problem 
when it comes to shipping a locomotive or bale of cotton. 

Mr. Worley. There seems to be a lot of thought that some people 
will be using air transportation instead of shipping. 


Mr. Radner. American steamship companies are very much con- 
cerned about the possibilities of air transportation and the danger of 
their being frozen out of that field. 

I don't want the impression created that American lines couldn't 
hold their own with foreign lines. They have in recent years. 

Mr. WoL-s-ERTON. You have built the Washingt07i, Manhattan, and 
America down in Newport News. 

Mr. Radner. And they are very fine ships. 

Captain Conway. The Manhattan and Washington, I think, were 
among the most successful ships in the North Atlantic service. 

Mr. FoLSOM. The reason we didn't get our share of the trade is that 
we didn't have enough ships? 

Mr. Radner. That is it. 

Mr. WoRLEY. Those ships were just as fast as foreign ships? 

iSIr. Radner. Not the Queen Mary, the superliner ship. 

Mr. WoRLEY. A question which should have been brought out a while 
ago on ownership and transfer, and so forth : What changes in terms 
of employment as between the Govei-nment and private owners have 
been made affecting the pei'sonnel of these ships that were taken over, 
as far as union agreements and compensation ? Can you give us some 
idea on that ? 

Captain Conway. There is practically no change whatsoever. 

Mr. WoRLEY. About the same condition? 

Captain Conway. Yes, sir. 

Mr. WoRLEY. We have made no spex^ial commitments to restore own- 
ership to former private owners of ships that we have taken over, 
have we? 

Captain Conway. Any commitment as to the time they would be 
returned ? 

Mr. WoRLET. Yes. / 

Captain Conway. No. 

Mr. WoRLEY. In the meantime, we continue the same operating 
agreements ? 

Captain Conway. Yes, sir. 

Mr. WoRLEY. Do you propose, or do you know, to release to compet- 
ing companies at the same time? 

Captain Conway. Yes ; we propose when they are returned that it 
will be simultaneously to all of them. 

Mr. WoRLEY. So that one group won't have any preference or pri- 
ority over the other? 

Captain Conavay. That's right; yes, sir. 

]\Ir. WoRLEY. I think we have covered most of these matters. 

After peace is declared and when you come to the problem of dis- 
posing of these ships, just how much work, actual physical work, will 
you have to do on tlie average ship before you consider it fit for com- 
merce? For example, your armored ships, which I understand are 
about 20 percent inefficient now compared with what they should be 
when some gear and other war paraphernalia is off — can you give us 
an idea about that? 

Captain Conway. Your armament and degaussing gear doesn't 
interfere with the carrying of cargo except some little deck cargo, 
which will not be a problem in post-war. It depends on what you 
are using the ship for now. If you have converted it over to a troop 


ship, obviously there will be a tremendous amount of work to be done, 
but an ordinary freight ship, it won't be too much. 

Mr. WoRLEY. You don't anticipate a shortage of any particular 
type of vessels, tankers or refrigerators or cargo ships? 

Captain Conway. No, sir ; except for small reefers, small freighters, 
and passenger ships. 

Air. WoRLEY. Do you have any plans for continuing to assist in 
the construction of new ships? 

Captain Conway. Well, we hope to construct some small ships for 
the Caribbean. That is one area where we haven't built, I don't believe 
sufficient small ships. 

Mr. WoRLEY. Why couldn't we use these big ships? 

Captain Conway. They are too deep a draft, for one thing, and 
too large to go into these small ports. 

Mr. WoRLEY. "Wliat do you call a small ship, less than a thousand 
tons ? 

Captain Conway. No; what I have in mind is something about 
3.500 or 4,000 tons. 

Mr. WoRLEY. We don't have sufficient ships now ? 

Captain Conway. We have lost a lot of those small ones, and 
although we built some small ones for the Army and Navy, we still 
think probably we will need some more of those; and obviously you 
will need some more large passenger ships of the type of the Washing- 
ton, Manhntfan, and America. 

Mr. WoRLEY. Do you intend to build those? 

Captain Conway. We hope to. 

Mr. Bland. You are building refrigerator ships ? 

Captain Conway. Yes; we are building refrigerator ships. Judge, 
now, and converting several of our other type ships to refrigerator 

Mr. WoRLEY. You say you hope to ? 

Captain Conway. We have. 

Mr. WoRLEY. I mean these bigger ships, passenger ships, what will 
it depend on, whether you do or not? 

Captain Conway. I am sui'e we will, depending on getting together 
with the steamship companies so they can see the picture. I think one 
of the problems is this air transport. 

Mr. WoRLEY. They are afraid to build now because they are afraid 
of the air lines? 

Captain Conway. That's right. 

Mr. WoRLEY. Wlien do vou think your plans will have to be formu- 

Captain Conway. As a matter of fact, we are working on plans now. 

Mr. WoRLEY. I mean these new ships. 

Captain Conw^ay. I say they are working on plans now. 

Mr. WoRLEY. In tonnage, how much new construction do you esti- 
mate there will be, or will that depend on this air controversy? 

Captain Conway. For pa&senger ships, you mean? 

Mr. WoRLEY. Yes. 

Captain Conway. I can't give you how much tonnage. We have 
a program there for rehabilitating United States Line ships in the 
North Atlantic and some in tha Pacific. 

Mr. WoRLEY. It is contemplated that the Government will assist? 


Captain Conway. By a construction subsidy ; yes. 

Mr. WoRLEY. Only construction, not operation ? 

Captain Conway. Both, sir. 

Mr. WoRLEY. Well, here is a rather involved question : Do you be- 
lieve that these ships, that is, our merchant marine, if purchased by 
a foreign nation and operated under its own regulations by its own 
personnel, would compete at an advantage or disadvantage with our 
own ships ? 

Captain Conway. Well, I believe if we would sell some of these 
slower-type ships that we have to foreign nations that it will be 
helpful to us. 

Mr. WoRLEY. Do you suppose they will be interested in buying 
these slower ships? 

Captain Conway. I seriously doubt it. 

Mr. WoRLEY. It is kind of hard to make a bargain if they are not 
interested. You doubtless have some reason for not wanting to keep 

Mr. Bland. It seems that nobody is interested in the slower type. 

Mr. WoRLEY. As I understand, you are to give priority on the sale 
of ships to our own people first ? 

Captain Conway. Oh, yes. 

Mr. WoRLEY. However, you don't intend to put our better ships up 
for sale ; you don't contemplate it at present? 

Captain Conway. No, sir. 

Mr. WoRLEY. Has the Maritime Commission adopted any policy 
regarding the time at which they will put on the market the ships 
that will be disposed of ? 

Captain Conway. Not that I know of. I think Judge Bland's bill 
covers that. 

Mr. Bland. Also, Mr. Chairman, there is pending before the com- 
mittee a bill, which I think will receive the recommendation of the 
Maritime Commission, in fact two bills, one introduced sometime ago, 
and we had on that a favorable report and some amendments were 
suggested, and it could not reach the stage of consideration in the 
House because of the recess of Congress. I don't know what we can 
do in the short time between the 14th of November and the 1st of 

Captain Conway. I might say that I visualize that the steamship 
companies who have purchased fast ships on the basis of having 
sufficient tonnage to operate in a normal peacetime operation will 
charter from us a number of these slower type vessels during what 
we all think is going to be a big movement after the war, and that 
when things then do get back to normal, undoubtedly we will lay 
those Liberty ships up. 

Mr. WoRLEY. In your sanctuary ? 

Captain Conway. Yes, sir ; that is the way I picture it. 

Mr. WoRLEY. When we entered this war the ships we had in the 
merchant marine were obsolescent, according to testimony we had, 
hardly fit for any purpose. Don't j'^ou suppose that same condition 
will prevail in 25 or 30 years, if we get in another war, if we lay 
these ships up in sanctuary ; that they will be at best obsolescent ? 


Captain Conway. I would say definitely no. The old ships we 
constructed just after the last war have definitely done a wonderful 
job and many of them are in operation right now. 

Mr. WoRLEY. I am glad to hear that. That is contrary to the other 
information I had received. 

Captain Conway. They are all operating, except those that were 
sunk. A torpedo would sink one of these just as quickly as it would 
the Liberty or C-1. 

IVIr. Worley. There were very few changes or improvements in the 
new ones over the old ones ? 

Captain Conway. No; but their machinery was all in good condi- 
tion and they were all taken out and reconditioned and placed in 
operation. As a matter of fact, the major portion of the ships we 
took from the intercoastal trade were all old-type ships. 

Mr. WoRLEY. Had those ships been to sanctuary ? 

Captain Conway. Some had been in reserve and taken out and put 
in coastwise trade. You take a ship and lay it up and it doesn't get 
the abuse one does in operation. We took all the ships we had in the 
laid-up fleet and put them in operation, and they did a good job. 

Mr. Worley. I am glad to have that information. 

This question of subsidies ; you are pretty well versed in the ques- 
tion of subsidies and its present operation ? 

Captain Conway. I know something about it; not all the details. 

Mr. WoRLEY. Admiral Land testified yesterday that the operating 
subsidy paid by the Government would be paid back within a short 
period of time ; at least, that is my recollection of his testimony. Is 
that your recollection ? 

Mr. FoLsoM. He said they almost broke even. 

Mr. WoRLEY, Can you supply us with information, say, for the 
past 10 years of the yearly amount of the subsidy, plus the amount 
of return the Government got back? 

Captain Conway. No ; I cannot. Mr. Eadner could do that better 
than I could. 

Mr. Radner. We have submitted that to the Congress, but would 
be glad to submit it for the record here. 

IVIr. Worley. Can we have that ? 

Mr. Radner. It covers only the period from 1937, when subsidies 
became effective. It will show the special reserve funds, one-half 
of which will be returned to the Government unless the funds are 
exhausted by future losses. They will be about 60 percent of the 
amomit of the subsidies previously paid. 

Mr. Bland. You mean operating subsidy? 

Mr. Radner. Operating subsidy. 

Mr. Worley. You have figures on the shipbuilding, construction 

Mr. Radner. The Maritime Commission has. We will be glad to 
put them into the record. There is a recapture of profits in excess 
of 10 percent from the shipbuilder under the terms of section 505 (b) 
of the 1936 act. 

INIr. Worley. Can we have the figures on that ? 

Mr. Radner. Yes, sir. 


(The matter referred to is as follows:) 

TABiiE 2. — Data on operating and differential subsidies 


Calendar years 

accrued ^ 




agreements ' 

under long- 
term agree- 
ments < 





$3, 310, 950. 42 
12, 030, 218. 33 
12, 849, 259. 21 
657, 892. 06 

1938 - 


1940 . . - . . .-- 




51, 129, 437. 93 

$1, 524, 943. 19 

$28, 865, 769. 52 

$30, 390, 712. 71 


1 Data obtained partially from statements submitted by operators which have not been audited by the 

2 No subsidy accrued after calendar year 1942. 

3 Represents settlements based on final accountings with the Commission. 

* Recapture accrued through Dec. 31, 1942, only. Excess profits (not exceeding total subsidy) under the 
long-range agreements are not recapturable until at the end of each 10-year period, and then on the 10-year 
average basis. 


Fiscal years 



prime ship 


under sub- 




$2, 260, 350. 52 
43, 970, 556. 49 
37, 196, 141. 46 
50, 406, 273. 58 

1940 - - 





139, 907, 943. 95 

$8, 677, 689. 58 

$3, 128, 577. 61 

$11, 806, 267. 19 

Mr. WoRLEY. Has any subsidy money been paid back to the Gov- 
ernment during this period of Government operation ? 

Mr. Radner, No. The subsidy contracts have all been continued. 
The recapture does not become effective until the termination of a 10- 
year period. There is an accounting at the end of each 10-year period, 
unless the contract ends sooner, in which case the accounting is at the 
end of the contract. 

The contracts were made in 1937 or 1938, so that the 10-year periods 
or the contracts won't expire until 1947 or 1948. At that time there 
will be an accounting and recapture. 

Mr. FoLSOM. This information can be furnished us by years? 

Mr. Radner. Yes ; we can furnish it by years. It has all been com- 
piled, I know. 

Mr. Worley. Admiral Land also testified that our largest subsidies 
were to shipbuilders. 

Captain Conway. Oh, I think that is true. 

Mr. WoRLEY. I suppose the figures you will submit will give us a 
picture of it? 

Mr. Radner. Those are construction subsidies. 

Mr. WoRLEY. Yes : construction subsidies. 


Mr. Radner. I think the point he was making is that the construction 
differential subsidy Avas not to the ship owner ; the subsidy was to the 
shipyard, ahhough in legal form to the owner, because what we were 
doing was bringing American shipbuilding costs down to foreign 

Mr. WoRLEY. The shipyard benefited ? 

Mr, Radner. Yes. We have a law vvhich prohibits American oper- 
ators from buying ships abroad and operating them in our coastwise 
trade. Otherwise he could go out and buy them cheaper than he could 
through the Maritime Commission. 

Mr. WoRLEY. We have a law which prevents American ship owners 
buying foreign ships ? 

Mr. Radner. And operating them in our coastwise trade. 

Mr. WoRLEY. We could also have a law which would prevent his 
buying commodities in other countries and carrying them in anything 
but American ships? 

Mr. Radner. Well, you have your tariff. 

Mr. WoRLEY. And that is the law; that is what it amounts to, in 
effect ? 

Mr. R\DNFJ{. That's right. 

Mr. WoRLEY. Now, to sum up, just what do we get for our subsidy 
money ? 

Mr. Radner. We can put that all in the memorandum. 

Mr. WoRLEY. Can you elaborate, just briefly? 

Mr. Radner. Yes. I would like to have the record show I have no 
formal connection, no present connection, with the subsidy program. 
That is a Maritime Commission function. 

The subsidy contracts provide that the shipowner, in consideration 
of having his operating costs equalized with foreign competitors — that 
is what the subsidy does — will run his subsidized ships in a specified 
trade route, with a certain minimum number of sailings per annum. 

Mr. FoLSOM. It is the operating subsidy you are talking about? 

Mr. Radner. Yes; operating subsidy. He agrees also to limit sal- 
aries to $25,000 a year, and generally to observe regulations and re- 
strictions imposed by the Merchant Marine Act, 1936. He loses his 
freedom of action, can't get out of his trade route, can't reduce the 
number of sailings without the permission of the Government, can't 
reduce the ports of call without the permission of the Government. He 
is pretty well regulated. All he gets is equalization of costs with those 
of his unregulated foreign competitors. 

Mr. Worley, You made a statement a while ago that shipping was 
not a Government agency. I have forgotten your exact words, but 
the impression was that the shippers themselves had nothing to do 
with the Government; that they were an enterprising group them- 
selves, dependent on their own initiative. 

Mr. Radner. That is the shippers ? 

Mr. WoRLEY. I mean ship operators. I was a little confused in 
the statement. I couldn't quite reconcile it with the fact that it 
seems that all shipping, no matter what the country, is subsidized to 
some extent by its own country, and therefore subject to those trade 
areas you set up. In a sense they are not free agents, as I see it. 

Mr. Radner. You are talking about foreign shipping ? 

Mr. WoRLEY. No ; I am talking about our own compared to foreign 


Mr. Radner. That part of our own shipping which is subsidized 
is in the foreign trade only and does not include tankers, which don't 
get any subsidy. That part of it has lost its freedom of action, is 
more or less under Government regulation and control, but has its 
costs equalized to foreign levels. It is still entirely private and inde- 
pendent. I should say it is roughly comparable to the status of the 
railroads in the interior. On the other hand their foreign competitors 
are usually free from such restrictions. 

Mr. WoRLEY. Their course is pretty well charted ? 

Mr. Radner. Yes. We put these ships on a track and they run 
to a certain destination. They have to run at certain intervals and 
maintain certain practices. We don't regulate the rates. The reg- 
ulation isn't quite as severe as it is in the railroads. 

Mr. Bland. That is the operating differential ; not the construction 
subsidy ? 

Mr. Radner. Exactly. There is no more reason to say shipping 
isn't private enterprise than to say the railroads are not private enter- 
prise because they are closely regulated. They are still a private 

When you get to the construction subsidy, anyone who wants to 
build a ship and agrees to comply with the act and run it on an 
essential foreign trade route can get a vessel constructed with a sub- 
sidy. His agreement is to run it on that trade route. There is no 
recapture from him, no regulation of his salaries. 

Mr. Bland. He enters into a contract with the shipbuilder, and 
that shipbuilder gets the difference between the amount that would 
be paid in a comparative shipyard ? 

Mr. Radner. In a comparative foreign shipyard. It is really a 
subsidy to the American shipbuilder. 

Mr. Bland. But you get your ship under the American flag and it 
must use — is it now a 100 percent American seamen? 

Mr. Radner. It is at least 90 percent. It was graduated. [See sec- 
tion 302 of the 1936 act.] 

Mr. Bland. Yes, it was staggered; so it is probably a hundred 

Mr. WoRLEY. In the most optimistic light, what do you suppose 
would be the effect on our foreign trade and shipping if all subsidies 
were discontinued? 

Mr. Radner. On our shipping? 

Mr. WoRLEY. Yes. 

Mr. Radner. If subsidies were discontinued, I don't think any 
major American company would continue in the foreign trade. 

Mr. Worley. They don't have enough initiative and enterprise to 
compete, standing alone, with other companies ? 

Mr. Radner. Well, it is not initiative and enterprise. It is a case 
of how big a handicap they can absorb, with all the initiative and 
enterprise they have. You can't compete against a fellow who has 
half of your costs. Initiative and enterprise are not American 
monopolies and do not offset the foreign cost advantage. 

Mr. Worley. What handicaps do we have that the other nations 
don't have? 

Mr. Radner. Costs. 

Mr. Worley. Cheap labor? 


Mr. Radner, It is the one question of cost — cost of operation and 
cost of construction. Assuming the American owner is as efficient 
as the most efficient foreigner, when you put those two fellows in the 
same race and give one of them half the costs 

Mr. WoRLET. I would say he wasn't just as efficient; I would say 
he was far more efficient. 

Mr. Radner. The American far more efficient? 

Mr. WoRLEY. Yes. 

Mr. Radner. I suppose we all feel that way. 

Mr. WoRLEY. Maybe I am wrong, but I like to feel that way. 

Mr. Radner. Foreigners are pretty good ship operators. 

Mr. Bland. Isn't it a fact the ships would go to foreign flags and 
we would have no shipping? 

Mr. Radner. Correct. If we had no subsidy program, the only 
shipping you would have under the American flag would have to be 
with foreign crews. That may not follow in certain trades. I am 
not saying between the United States and Canada 

Mr. Bland. Wouldn't there enter into that the right to requisition 
them in time of war? 

Mr. Radner. Yes ; from the point of view of national defense 

Mr. Worley. I am not discussing that phase of it. I understand 
we are going to have to maintain that, in accordance with the bill 
Judge Bland is steering through Congress; we are going to have to 
have that for national defense. But we are more concerned with 
the economical operation of this. We are going to have, as you know, 
approximately three hundred billions of dollars of debt somebody has 
to pay. 

(The memoranda are marked "Exhibit No. 17" and are found in the appendix 
on p. 1183. ) 

Mr. Radner. I think we ought to file with the committee records 
the economic survey the Commission made in 1937. 

You will find in there a pretty good summary of benefits to Ameri- 
jcan economy and foreign trade, particularly, of the subsidy. 

Mr. Worley. Such as good will? 

Mr. Radner. Such as good will; the idea of trade following the 
flag, as applied to American-flag shipping. 

I think there is no question in the minds of any of the people 
operating ships that a large American merchant marine will have 
a stimulating effect on American commerce; ships owned and op- 
erated and manned by Americans interested in American trade and 
trying to build up American trade. 

One of the big jobs of the steamship companies' traffic depart- 
ments is to devise ways and means of filling up space and getting 
cargoes, imports and exports ; and over the years the ultimate inter- 
weaving into that the relationship of banking, which the British have 
done very effectively. All of those things are important in building 
up international trade. 

Captain Conw^ay. I think our foreign trade would fall off if we 
didn't have an American merchant marine. You could have that 
truck you are talking about built in an American factory, and if we 
didn't have the shipping they could easily increase the price of ship- 
ping it to the extent it could not be manufactured and sold in a foreign 


Mr. FoLSOM. If we can't build ships in competition with the world, 
why should we subsidize that particular industry, except for the ship- 
building nucleus we have to keep for the national defense? 

Captain Conway, Isn't that about what we did prior to World War 
I, and because we didn't have any shipbuilding industry we didn't 
complete a single ship that carried foreign cargo during the war ? 

Mr. FoLsoM. I assume we will keep the shipyards we have now, a 
nucleus, for national defense. 

Captain Conway. The wa}^ to keep them there is to keep them 
building ships. 

Mr. Bland. Have an organization. 

Captain Conavay. Sure. If we hadn't had an organization built 
up with the Bland bill, the Merchant Marine Act of 1936, with an 
industry under way 

Mr. FoLSOM. A number of shipyards expanded very quickly. 

Captain Conway. We had the nucleus there. 

Mr. FoLsoM. I assume you are going to have a nucleus again. 

Captain Conway. We had a program of 50 ships a year. 

Mr. Radnek. Suppose we doubled it, that is a very small production 
compared to what we have today, but probably adequate to keep the 
yards going on a so-called nucleus basis. 

Mr. FoLSOM. What does that amount to in dollars? 

Mr. Radnek. I don't know. If each ship carried a million-dollar 
consti'uction subsidy, and half the ships were subsidized, that will be 
$50,000,000 a year. 

Mr. Bland. I may say that we have a standard in this country by 
reason of the existence of certain jobs which have been maintained 
through subsidy. There were organizations which were filtered out to 
other yards and formed the basis of organizations themselves in the 
other yards. I know in the Newport News Shipbuilding & Drydock 
Co. people went to Wilmington and elsewhere and formed a nucleus to 
build up those jobs so necessary for our production. 

Mr. FoLSOM. You now feel, based on the operation of the last 7 
years, that you can get by without very much of an operating subsidy. 
Do you have any idea that some day in this country we might buiid 
ships at as low a cost as in other countries ? 

Mr. Radner. I don't want to agree that the operating subsidy will 
not be substantial. I think it might be quite substantial. It is true 
if you have anything like the condition we had in the last 7 years, 
it will all be recaptured but we can't count on that. 

Mr. FoLSOM. Do you think it is likel}'' we can ever build ships in this 
country at foreign costs ? 

Mr. Radner. Build ships at foreign costs? Not until we have 

Mr. FoLSOM. You can make a lot of other things in this country at 
lower cost with higher wages. 

Mr. Radner. I think that was discussed in that economic survey. 
Shipbuilding does not lend itself to the same degree of mechanization 
and mass production as automobiles. We are turning out one or two 
thousand ships a year, and that is considered remarkable, but we 
probably turn out that many automobiles in a single day. You can't 
get the economies, even in this enormous wartime production that is 
comparable with peacetime mass production. There is not a sufficient 


demand. The Government yards operated by Henry Kaiser alone 
probably could keep the whole world supplied with ships forever. 

Mr. WoRLEY. There are just some things this country can make 
cheaper than other countries, and other things that other countries 
can make cheaper. 

Mr. FoLSOM. I am looking at it from the point of the national 
economy as a whole. 

Mr. Radner. I would say that from the standpoint of the national 
economj^, the preservation of shipbuilding by subsidies is far more 
desirable than the preservation of other industries by tariff protection. 
For the industries getting tariff protection, the protection is concealed ; 
in the case of shipyards it is open. That should not change the ultimate 
factual and the policy considerations, but it may make it 

Mr. "WoRLEY. A tariff is first cousin to a subsidy ? 

Mr. Radner. That is all it is; a tariff is a subsidy paid by the con- 
sumers directly. A government subsidy is paid by the consumers 
ultimately as taxes, but in the first instance is paid by the Government 
and passed on to the consumers in the tax bill. I think there are a lot 
of things on which we could save money if we were to cut out tariffs. 
I think we could save more money there than if we cut out subsidies to 

Mr. WoRLEY. This is an academic question — what do you suppose 
would happen if Congress were to repeal all trade restrictions and 
barriers, including subsidies of all types? 
■ Mr, Radner. Oh, I think we would go through chaos for a while. 

Mr. WoRLEY. Then what do you think would happen ? 

Mr. Radner. My own honest opinion on that is we would have 
a terrific decline in our standards of living because I don't think we 
make enough gadgets cheaper than anybody else, like automobiles, to 
keep the whole country going. Just imagine what would happen to 
the farmer. 

Mr. Bland. The history of shipbuilding, Mr. Folsom, shows that 
we had even practically lost the art of building battleships, so that in 
the days of President Cleveland, when we got out plans for the old 
Texas, we had to buy them abroad. 

Mr. WoRLEY. There is one other question — the question of restric- 
tions on our shipping in foreign countries. Do we enjoy the same 
privileges in ports of the world that all other ships do. 

Captain Conway. I would say, generally, yes. 

Mr. WoRLEY. There is no discrimination — no penalties? 

Captain Conway. No, sir. 

Mr. Radner. There are some isolated cases like New Zealand, where 
they have lower charges for British ships. 

Mr. WoRLEY. Don't they in all British colonies; Australia, for 

Mr. Radner. No. That was peculiar to New Zealand. Australia 
has a tax on stores consumed while in territorial waters which does 
not apply to British vessels. 

Mr. Bland. You had light dues when in a certain distance of a 
lighthouse ? 

Mr. Radner. Yes. Lots of those things that are discriminatory 
we probably don't know about. 

99579 — 45— pt. 4- 


Mr. WoRLEY. Do we discriminate against any sliips that visit our 
ports ? 

Mr. Kadner. No, sir. 

Mr. WoRLEY. They all receive the same treatment ? 

Mr. Kadner. That's right. 

Mr. Worley. Do you gentlemen have any information which you 
think would be helpful to this committee in its task that we might have 
overlooked and may have failed to ask for ? 

Mr. Radner. No ; I can't think of any at this time. 

Mr. Worley. If we overlooked any, it was purely unintentional. 
We tried to ask all of them. 

If you will provide us with that material requested 

Mr. Radner. We will see that the record contains all the material, 
together with other material we have submitted elsewhere, that we 
think might be helpful. 

Mr. Worley. And at any time during this investigation, if you run 
across any information you think Avould be helpful to the committee, 
we would appreciate it if you would supply it. 

Mr. Radner. Yes, sir. 

Mr. Bland. I might say that the committee report which was filed 
by the Committee on the Merchant Marine and Fisheries in 1935 as 
the basis for the 1936 act showed the conditions then existing in the • 
merchant marine. 

Mr. Radner. That is right. There was a series of reports around; 
that time, all of them very valuable, and some of the testimony around 
the reports was very valuable, like Al Haag's testimony. 

Mr. Worley. On behalf of the committee, I would like to thank you 
gentlemen and express our deep appreciation for the information you 
have given us. 

The committee will adjourn at this time until 10 o'clock tomorrow 



House of Representatives, 
Subcommittee on Foreign Trade and 
Shipping of tiie Special Committee on Post-War 

Economic Policy and Planning, 

Washington, D. C. 

The subcommittee met, pursuant to adjournment, at 10 a. m., in 
room 1304, New House Office Building, Hon. Eugene Worley presiding. 

Present : Representative Worley (Texas) . 

Also present : M. B. Folsom, staff director, H. B, Arthur', consultant ; 
and V. D. Reed, consultant. 

Mr. Worley. The committee will come to order. 

The Subcommittee on Foreign Trade and Shipping resumes hear- 
ings this morning with the Commerce Department. The committee 
hopes through the examination of a series of witnesses from that 
Department to determine just what part the Department, together 
with its various subdivisions, plays in our foreign trade, and, inso- 
far as is necessary to cover it, our sliipping. 

It is very pleasant to have with us this morning the Under Secretary 
of tlie Department of Commerce, Mr. Wayne C. Taylor. 

As I understand, Mr. Taylor, you have a general statement to make ; 
and then you will ask the heads of the various departments under 
you to give the committee a brief resume of the functions of their 
particular subdivisions of your department. 

If you will state your name and position for the record, we will be 
glad to hear you. 


Mr. Taylor. Mr. Chairman, my name is Wayne C. Taylor, Under 
Secretary of Commerce. 

Mr. Worley. For the benefit of the record and the information of 
the committee, Mr. Taylor, can you give us some background as to 
just what the Department of Commerce does and what part it plays 
in our domestic and foreign commerce, with particular reference to 
its participation in foreign matters. 

Mr. Taylor, In general, Mr. Chairman, the work of the Depart- 
ment of Commerce is divided between what you might call the tech- 
nical service aspects, such as tlie Weather 'Bureau, the Coast and 



Geodetic Survey, C. A. A., which are generally grouped togethery 
and the economic and development aspects. 

In order to present a picture perhaps more clearly to the committee, 
we felt that we would save the teclmical group for this afternoon. 
As they have very direct service in foreign trade and so naturally 
fall together, we are asking Mr. Burden and the heads of those three 
bureaus to be here this afternoon. 

This morning we have what you might describe as the Secretary's 
office, which has over-all supervision over all of the bureaus. There 
are certain special functions which are not assigned to bureaus, such 
as the Foreign Trade Zones Board. 

Mr. WoRLEY. May I interrupt? When was the Department of 
Commerce created and established by law? 

Mr. Taylor. Mr, Trimble, you have that. 

Mr. Trimble. 1903. 

Mr. Taylor. There are certain questions having to do with dates 
and legal functions that I thought Mr. Trimble could answer directly. 

Mr. WoRLEY. Was it created by an act of Congress ? 

Mr. Trimble. Yes, sir. 

Mr. WoRLEY. What was the purpose for creating the Department 
of Labor? 

Mr. Taylor. Historically, as you probably know, it was the De- 
partment of Commerce and Labor, and there was a regrouping of 
functions at that time — no, the Department of Labor was split off 
after that, wasn't it ? 

Mr. Trimble. Originally the Department of Commerce and Labor 
was created in 1903 and consisted of a number of bureaus, and the 
Labor Division was separated in 1913 when the Department of Labor 
was created, and the Division of Labor was transferred to the newly 
created Department of Labor. 

Mr. WoRLEY. Why was this particular Department of Commerce 
created ? What was it created to do ? 

Mr. Taylor. To promote the foreign and domestic commerce of the 
United States. There has always been in the history of the Depart- 
ment of Commerce a group of service functions which, frankly, might 
have been assigned almost anywhere, but for convenience of admin- 
istration they were grouped together in one department, and the 
development and promotional aspects are related to them. 

Mr. WoRLEY. Is your department concerned with the policy-making 
provisions with respect to our foreign trade and commerce? 

Mr. Taylor. Yes; it is. That is in the original act. Naturally, the 
Department of Commerce does not do that alone. It consults, par- 
ticularly on the foreign phases, with the Department of State, the 
Department of the Treasury, and so on ; and on domestic phases 

Mr. WoRLEY. Would you mind enumerating for the record the other 
departments with which you confer in arriving at policies? 

Mr. Taylor. The Department of State, the Department of the 
Treasury, and naturally during this period, with the War and Navy 
Departments. In fact, during the course of the entire history of the 
Department, it consults with them to acquaint them with facts re- 
garding security aspects. Then the Department of Agriculture — in 
fact, it would be pretty hard to indicate any department or agency 
we do not consult with. 


Mr. WoRLEY. Does your department have the final word in any 
policies ? 

Mr. Taylor. I don't think so, when you get out of the technical 
field. For example, the Bureau of Standards has what you might 
call the final word; the Patent Office has the final word; but that is 
always subject to certain limitations. 

Mr. WoRLEY. By another agency ? 

Mr. Taylor. Well, either by another agency or by Congress or the 

Mr. WoRLEY. Pardon the interruption. You may continue, sir. 

Mr. Taylor. Certain of these bureaus naturally have very specific 
functions of their own which are laid down by Congress which give 
them a major element of independence. The C. A. A., for example, 
operates under very specific law : the Census Bureau operates under 
very specific law ; the Bureau of Standards, and the Patent Office, So, 
whereas the Secretary of Commerce, as such, works with them very 
closel}^ on policj^ and operations, there are certain things that the Sec- 
retary of Commerce cannot do, even if he wanted to, on account of 
limitations which have been laid clown. 

Mr. WoRLEY. By your organic act? 

Mr. Tayt.or. All the acts which created the specific bureaus. 

Mr. WoRLEY. Do all of those matters clear through the Secretary's 
office ? Is it the duty of the Secretary to confer with the heads of the 
other departments before the policy is finally determined? 

Mr. Taylor. Yes, 

Mr. WoRLEY. You may proceed. 

IMr. Taylor. I will deal first with the Foreign-Trade Zones Board 
of which Mr. Lyons is Executive Secretary. This Board was also 
set up by a specific act of Congress, the Celler Act, which is concerned 
with the development of foreign trade zones. 

Mr. Lyons, the Executive Secretary of that Board, and Mr, Trimble, 
who is the solicitor and alternate on the Board, will be very glad to 
discuss any points of interest to the committee on that activity. 

In addition to that we have the Inland Waterways Corporation 
which, while it is itself a domestic operator, naturally has a great deal 
of its traffic originating outside of this country. I will be glad to 
answer any questions about the Inland Waterways Corporation. 

The Bureau of Foreign and Domestic Commerce is the major service 
agency of the Department dealing with specific problems and back- 
ground information material and over-all policy. 

Dr. Amos Taylor won't be able to be with us this morning for per- 
sonal reasons. 

Mr. WoRLEY. I understand he lost his boy in action yesterday. 

Mr. Ta^tt.or. Yes. The rest of us will more or less pinch hit for 

On the over-all picture, I have given you a prepared statement 
which, I think, will serve for your record. The same thing is true 
for the other bureaus. 

There are cei-tain specific aspects of the work and we have the ap- 
propriate men present. There is Mr. Schnellbacher, Chief of the 
Division of Commercial and Economic Information. In normal 
times, and also now, that is one of the busiest units we have. 

Mr. WoRLEY. Which one is that? , 


Mr. Taylor. That is the division of which the foreign trader, and 
all potential foreign traders, ask any specific question about anything 
that might come into his head. It is one of the more important 
units so far as direct service to the business community and some of 
the other departments. 

Mr. Joseph Mack, the Director of the Field Service is also here. He 
will discuss the work of the Field Service itself and its contacts with 
the businessmen in the local communities, because we feel that that is 
one of most important things we do. If the Government loses con- 
tact with the problems of the individual businessman in his community 
both he and the Government are operating more or less in a vacuum. 

On the question of individual industries, individual commodities, 
in the foreign field, Mr. McCoy is here. He is Chief of the Division of 
Industrial Economy. 

One more important over-all function of the Bureau has to do with 
the field of the international balance of payments and everything 
that grows out of that. Dr. Maffrey. who is head of that division, is 
out of town today, but I will be very glad to try to cover any questions 
you have on that. It is a field I have been familiar with for some 

The Bureau of Standards has one very specific function in the foreign 
field which is that of trade standards, international trade standards. 
Mr. Fairchild, who is the Chief of that Division, will discuss any 

As far as the Bureau of the Census is concerned, Mr. Ely, who is the 
Cliief of the Foreign Trade Section, is here, and also Dr. Hauser, who 
is the assistant Director of the Bureau. 

In 1941, 1 believe it was, we consolidated the statistical work in the 
Foreign Trade field as far as the gathering of statistics is concerned, in 
the Bureau of the Census. Prior to that time it was in the Bureau of 
Foreign and Domestic Commerce, but as the Bureau developed we 
found it was better to consolidate, and then do the interpreting, if any, 
in the Bureau of Foreign and Domestic Commerce, but the actual 
gathering of statistics is in the Bureau of the Census. 

So far as the general setting of the picture and what the problems 
are, I feel that the report of your committee was so good on that — I 
would like to have written it myself 

Mr. WoRLEY. Be sure you get that in the record, Mr. Keporter. The 
committee appreciates the compliment. 

Do you have someone here from the Civil Aeronautics Administra- 

Mr. Taylor. No ; that is on the afternoon schedule. We have three 
other Bureaus, with Mr. Burden, who is the Assistant Secretary, in 
charge of those three Bureaus, and we felt it was better to take them 
all together. 

Naturally, the part of civil aviation and communications in the trade 
of the future is one of the most important things that the country has 
to consider, and the relationships of the various types of shipping, of 
which aviation naturally is one, I don't think can be segregated. 

Mr. WoRLEY. Then those are the ones we are supposed to hear this 
morning ? 

I hope we can follow that schedule, but occasionally 

Mr. Taylor. It is just a suggestion. Any way you would like to 
vary from it is agreeable to us. 


Mr. WoRLEY, Is there any additional information you would like 
to present as to the general tunctions of your office ? 

Mr. Taylor. No. I think that anything you would like to have 
specifically that isn't in the exhibits I have already given you, we can 
furnish you. 

Mr. WoRLEY. I intend to put these exhibits in the record at appro- 
priate points. 

Mr. Taylor. As far as the acts and amendments to the acts, I 
thought that Mr. Trimble, who is available here, could answer those 
details much better than I can, or introduce into the record anything 
you would like to have. 

Mr. WoRLEY. All right. The Chair will proceed with your first 

Mr. Taylor. Would you like to have Mr. Trimble discuss the legal 
background and creation of the Department of Commerce? 

Mr. WoRLEY. I think that would be a good idea. 

Mr. Trimble. Mr. Chairman, we have had quite a complicated 
existence, and I thought maybe, after you finish with the bureaus, you 
would want to know how the bureaus developed and the changes that 
were made, and that I could give this in memorandum form and save 
both time and effort by handling it in that way. However, any ques- 
tions you would like to ask at this time, I will try to answer them for 

Mr. WoRLEY. We are trying to correlate the various functions of 
various Government departments. We are trying to get a picture of 
the whole, of what looks like a jigsaw puzzle to start with, to deter- 
mine exactly who, in what departments, determine our foreign trade 
policy. We have to make recommendations to Congress for new 
legislation, if necessary, or to repeal existing legislation, if necessary, 
to promote our foreign trade and commerce. 

In order to do that, we thought it would be advisable to get some 
idea of the historical background of various departments and to find 
out exactly what their jurisdiction was. 

If you can give us just an outline of why the Department of Com- 
merce was created originally, just what it has done, and how its power 
has been enlarged in relation to foreign trade, I think it would be very 
interesting and very helpful to the committee. 

Mr. Trimble. I would be very glad to briefly outline it. The De- 
partment was created in 1903 and its principal purpose was to pro- 
mote and develop the foreign and domestic commerce of the United 

There were a number of bureaus transferred to the Department at 
that time, Bureau of Lighthouses, Steamboat Inspection Service, Nav- 
igation, Standards, Coast and Geodetic Survey, Statistics, Census 
Office, Fisheries, Foreign Commerce, and Corporations. 

Since its creation there have been a number of bureaus added to 
the Department and others transferred to other departments, some of 
which have been consolidated with branches in those departments. 

Today the Department consists of the Secretary and Under Secre- 
tary and an Assistant Secretary and some eight bureaus. In addi- 
tion to that, the Secretary is also the Loan Administrator and has 
supervision over R. F. C. and its related financial lending institutions. 

The Bureaus in the Department today are the Bureau of Foreign 
and Domestic Commerce, the Census Bureau, the Patent Office, the 


Bureau of Standards, the Weather Bureau, the Civil Aeronautics 
Administration, the Coast and Geodetic Survey, and the Inland 
Waterways Corporation. 

Some of those Bureaus' principal functions are technical, such as 
the Bureau of Standards. Some are research and development. 
Others, like the Bureau of Foreign and Domestic Commerce and the 
Census Bureau are principally statistical organizations. 

There are also certain functions of those Bureaus that promote and 
develop commerce. 

Then we have the Patent Office which is concerned with the issuance 
of patents. The Civil Aeronautics Administration is both a develop- 
ment agency and a technical agency. They maintain aids to naviga- 
tion, supervise the building of airports, and various other functions; 
in connection with civil aviation. 

The Inland Waterwaj^s Corporation is a successor of the old Inland 
Waterways System operated by the War Department. Congress in- 
corporated it and, in 1939, the functions were transferred from the 
Secretary of War to the Secretary of Commerce, and the Secretary of 
Commerce is now the head of that Corporation. 

The Department, as I previously mentioned, had other Bureaus 
which were transferred to other agencies, such as the Bureau of Light- 
houses, which was transferred to the Coast Guard in 1939, the Bureau 
of Mines, which was transferred to the Interior Department in 1934, 
and, more recently, the Bureau of Marine Inspection and Navigation, 
which was temporarily transferred for the war period to the Coast 
Guard, and the Bureau of Fisheries, which was transferred to the 
Interior Department in 1939. 

I might say, in addition to some of the functions I have outlined, 
that, since 1940, the De])artment has had supervision over the National 
Inventors Council, a Council formed by the Secretary of Commerce 
at the direction of the President to review suggestions and inventions 
of private individuals that had some relation to the war effort. 

Mr. WoRLEY. You are the Solicitor for the Department ? 

Mr. Trimble. Yes, sir. 

Mr. WoRLEY. Wliat are your duties principally? 

Mr. Trimble, Well, I have general supervision of the legal work 
of the Department and, in addition to that, I serve on a number of 
boards and commissions. I am chairman of the Committee of 
Alternates of the Foreign-Trade Zones Board. Mr. Lyons, the 
executive secretary, will cover that sliortly. 

I also serve as Acting Secretary, in the absence of the Secretary, 
the Under Secretary, and the Assistant Secretary, and perform such 
other duties as are assigned to me. 

Mr. WoRLEY. Well, that gives us a good idea of the background. 

Do you have any further information you think would be of value 
to the committee ? 

Mr. Trimble. I might say, in this connection, that the Secretary 
and the Under Secretary and the other officials of the Department have 
received very valuable aid from the committee of which Mr. Folsom 
is a member, the Business Advisory Council of the Department. We 
have been very fortunate in having that group to advise us on various 
and sundry matters. 


'i till 


Mr, FoLSOM. I liave just been looking over this summary report 
you have given us of the functions of the Department, especially with 
reference to all the publications you have put out and all the studies 
you have made. It is remarkable how much work you have done. 

There is a question in my mind as to whether you get a wide distribu- 
tion of all these to the concerns all over the country, especially the 
small concerns, that might be in foreign trade, whether you have 
adequate facilities to disseminate this information to small concerns 
that might be interested. 

Mr. Taylor. The answer to that is "No," but I think I would rather 
have Mr. Schnellbacher tell you some of the details of that, and also 
have that brought out during Mr. Mack's testimony. 

The publications, the three major ones, have a comparatively large 
circulation of their own. One of their chief values is the fact that 
those articles are reprinted many, many times by other organizations. 
That is one of the basic plans under which we operate, so that the 
secondary distribution, let us say, is probably considerably greater 
than the primary distribution. 

Mr. FoLSOM. i had in mind special studies you have made in various 
foreign fields, and also on special commodities. 

Mr. Taylor. During the war period a great deal of that work has 
been going on but the distribution has been curtailed for security 

In any plans for the future, we believe that is one of the most im- 
portant things the Department can do, particularly in connection with 
smaller concerns. Practically no small concerns can afford to have 
their own, let's say, field service, nor can they afford to have their own 
research division. The function of making available to any firm in 
this country the basic information that has been gathered by the 
Department, not only from other concerns and industries in this 
country, but what is going on in the rest of the world, we believe to be 
one of the Department's most important functions. 

We have been very impressed by the experience of the Department 
of Agriculture in that field, and our thoughts run along very similar 
lines. The field offices, make available individuals in strategic sec- 
tions of the country to whom the businessman can go and obtain an 
over-all view, not only of his particular industry, but all over the 
world, plus specific application of techniques, and so on. We think 
it is one of the most valuable things than any Government agency can 

That is in no sense to be interpreted as telling them how to do it, 
but as making available to them all of the information. 

I think, if the committee could devote considerable inquiry into 
consolidating that type of information so that it is always up to date 
and always as complete as possible, it would be extremely useful. 

Mr. WoRLEY. What prevents your doing that now? 

Mr. Taylor. I would say the war period more than anything else. 
For example, the Office of Strategic Services is gathering extremely 
valuable information. Eventually we will get that information. The 
same thing with the Army and Navy and various other agencies which 
are out in the field. 

The permanent organizations of, let's say, our Government in 
foreign fi.elds, should obviously be consolidated, so that not only is 



duplication eliminated in the foreign field itself but duplication is 
eliminated when information comes into Washington and flows out 
to the business communities and to the country as a whole. 

Mr. WoRLEY. About how much money is appropriated for your 
Department ? 

Mr. Taylor. I am going to have to ask Mr. Trimble. It is my recol- 
lection it is about $75,000,000, isn't it? 

The reason I am hesitating about that question is because the largest 
end of the appropriation is in the field of civil aeronautics, which is 
a very specialized field, and that depends on what the airport program 
is, and so on. 

For the promotional and service ends of the Department, which 
are concentrated in the Bureau of Foreign and Domestic Commerce, 
the appropriation during recent years has been extremely low. That 
has been supplemented by allocations from other emergency organiza- 

Mr. WoRLEY. The primary function of your Department is to en- 
courage and promote all sorts of commerce, domestic and foreign ? 

Mr. Taylor. Yes. 

Mr. WoRLEY. If, after you have made a study and made a recom- 
mendation, and another department is not willing to follow your 
suggestion or recommendation, then what is the story? Somebody 
else can veto your recommendation? 

Mr. Taylor. With the operating agencies during this period, obvi- 
ously that is the situation. We don't consider this as a normal period, 

Mr. WoRLEY. I mean in a normal period, in peacetime. 

Mr. FoLsoM. In normal times you work mostly with individual con- 
cerns, don't you, encouraging and helping them ? 

Mr. Taylor. Either with individual concerns or with trade asso- 
ciations, or groups of concerns. Of course, in the foreign field, that, 
again is different, because the pattern is constantly changing, and my 
own feeling is that during the war period we are evolving a pattern 
which indicates what the organization of the future should be. 

Mr. WoRLEY. What are some of those post-war problems with which 
you think your Department will be faced ? 

Mr. Taylor. Would you like me to talk about the organization, the 
service aspects of it, or the policy aspects ? 

Mr, WoRLEY. The policy, I believe. In your opinion — from your 
information — give us your best guess as to what position this Nation 
will occupy as soon as peace comes. 

Mr. Taylor. Well, obviously, this country is the most important 
industrial Nation in the world. There isn't any second. Therefore, 
the importance of what happens in this country in its relation to the 
other countries is primary. 

All of the information that has been developed, for example, say 
from 1920 to 1940, indicates that when conditions became uncertain 
in this country that was reflected everywhere else in the world, the 
chief reason being that we were the chief purchaser of certain types of 
materials. So when we stopped purchasing them, the results were felt 
in every corner of the world. 

Mr. WoRLEY. Do you suppose we will stop purchasing them after 
this war? 

Mr. Taylor. I don't see how that will be possible. i 


Mr. WoRLEY. Why did we stop purchasing before the war ? 

Mr. Taylor. I think we had a depression. 

Mr. WoRLEY. Can you tell us what caused the depression ? 

Mr. Taylor. Well, there were, naturally, a number of causes. 

Mr. WoRLEY. Seriously, we had a depression. We came along and 
we solved the depression temporarily. 

Wliat problems will exist after the war which didn't exist before, 
which caused this depression, and what steps does the Department of 
Commerce propose to take to offset or prevent our stepping in the 
same hole again? 

Mr. Taylor. I am going to answer your first question first. 

]Mr. WoRLEY. That is a rather broad question. 

Mr. Taylor. Eather. I think I can give you a very simple answer 
to our fundamental trouble following 1918, which was that we didn't 
realize the importance of our relationship with the rest of the world 
and, as a result of that, we didn't assume — I am hesitating between 
the word "responsibility" and the word "leadership" — which that posi- 
tion necessitated. 

Mr. WoRLEY. Which position ? Our position in the world ? 

Mr. Taylor. Our position as the leading industrial country, the lead- 
ing actual and potential producer. 

Mr. WoRLEY. Now, what responsibility rested on us? 

Mr. Tayi.or. The responsibility, I would say,- would be that of ac- 
tivelv participating in anything in the economic and political field 
which is of world importance. 

Mr. WoRLEY. Whether there was any inducement, and profit incen- 
tive or not ? 

Mr. Taylor. Obviously, there would have to be profit incentives, 
and so on, but the fact is that we segi'egated certain factors which 
related to the international field from each other and backed away 
from certain ones, and then went rather spottily into others. 

Mr. WoRLEY. Would you like to be more specific on this ? 

Mr. Taylor. Without getting into the political side 

Mr. WoRLEY. Political or economic, we would be glad to have any 

Mr. Taylor. There is one phase which I think was brought out very 
carefully and conclusively in a study which was recently published 
by the Department, which was United States in the World Economy 
from 1919 to 1939, which ti'eats rather specifically with some of the 
things happened. 

We, for example, changed our position from that of being a debtor 
nation to a creditor nation. 

Mr. WoRLEY. On that point, all the rest of the nations owed us 
money. Couldn't pay ; they were not in position to pay. You think 
we made a failure at that point in failing to do what? Failing to dis- 
charge that responsibility-? 

Mv. .Taylor. Partly a responsibility and partly an opportunity. I 
would consider it more in the light of an opportunity at that period. 

Mr. WoRLEY. What should we have done at that time? 

Mr. Taylor. One of the things we didn't do was relate our lending 
policy to trade itself. You are probably very familiar with some of 
the things we did in the lending field, and there was practically no 
relationship of the credits which were extended to the effect on indus- 
try in a particular country. 


Mr. WoRLEY. We are goinf^ to be faced with the same situation after 
this war. We are going to be a creditor nation. 

What specific proposal or general proposal do yon have that would 
help us avoid doing what we did at the end of the last war? If you 
can give us any specific suggestions we would like to have them very 

Mr. Taylor. Well, obviously, in order to have an intelligent, over- 
all policy, you have to have over-all information. One of the things 
that has been constantly brought out all during the period which 
existed back in 1919 to 1939, and it has been brought out in all tha 
conversations that have developed recently, such as U. N. R. R, A. 
meetings, the Bretton Woods Conference, and so on, is that we must 
have over-all information about the economy of other countries. And 
it has to be over-all information on which all countries agi'ee. If it 
is not comparable, it is just like matching elephants and chickens. 
You see, there are so many systems. 

I would say that is the most important single thing. 

Mr. WoRLEY^ To secure the information? 

Mr. Taylor. To secure the information and have it standardized to 
the extent possible. 

Mr. WoRLEY. We have that available ? 

Mr. Taylor. We do not. 

Mr. WoRLEY. Do you propose to have that available ? 

Mr. Taylor. We will not have that available unless very specific* 
steps are taken by this and other governments to have that information 
collected and made available. 

Mr. WoRLEY. By an international conference of some kind? 

Mr. Taylor. And the continuity, because the continuity is the im- 
portant thing. You can meet at a particular conference, which I have 
done a number of times, and you will bring in some information that 
is pretty good. 

Mr. WoRLEY. We can't get information any other way ? 

Mr. Taylor. Not continuously. There is no way in the world by 
which any of the mechanisms that are being discussed can be success- 
fully operated without information. 

Mr. WoRLEY. Let's assume that we have all the necessary informa- 
tion. Tlien what steps would you suggest be taken ? 

Mr. Tayi>or. Depending upon the policies which have been deter- 
mined by this and other governments, I think from that will grow 
the type of permanent organization that our country has to have in 
the field. 

Mr. WoRLEY. Of course, that will depend on the policy of 

Mr. Taylor. As I say, depending on that. But there are certain 
fundamentals in any organization, regardless of what the pattern is, 
which it seems to me are absolutely obvious. 

Mr. WoRLEY. What policy do you suggest -Avould be desirable for us? 

Mr. Taylor. I would rather talk ai30ut the organization and then 
get in the policy a little bit later. 

For example, in connection with our work with some of the Latin- 
American countries with which I happen to be rather familiar, it is 
quite apparent that those countries are going to develop far more 
ra] )i(lly than they did, say, in the previous century. They have learned 
certain skills; they have seen, for example, what some of our airplanes 
can do. 


There is a general agreement, which has been expressed a number 
of times — the two most recent ones being at the Rio Conference and 
the recent meeting of the Inter- American Development Commission 
at New York— that you have to have a general development of the 
life of any particular country. 

Mr. WoRLEY. Is that our responsibility, to try to develop the lives— — 

Mr. Taylor. I think it is their responsibility and our opportunity 
to work with that movement. If the movement is as strong as every- 
body indicates it is, and, after all, our own history is the thing they 
are all completely conscious of 

Mr. WoRLEY. Specifically, do we want to encourage those countries 
to change their standard of living in order to find a market for our 

Mr. Taylor. It is going to change in character constantly, just as 
the industrial character of our country changed completely during a 
60-year period. 

Mr. AA ORLEY. Suppose those nations don't want to be awakened? 

Mr. Taylor. I think that is entirely up to them, but if they do w^ant 
to develop, I think it is to our advantage to assist them in every way 

i\Ir. "VVoRLEY. Financially? 

^Ir. Taylor. Partly financially; principally from the standpoint of 
working with them on the development of the principal thing they 
want to develop. 

Mr. WoRLEY. You don't think a subsidy will be necessary? 

Mr. Taylor. No, I do not ; not in any way. Of course, in the case 
of most of the countries in this hemisphere, as a result t)f sales of 
strategic materials they have made to us during this period, they 
are in better financial condition than they have been at any time in 
their history. That, if backed up by policy, directed in the lines in 
which they themselves have indicated they w^ish it directed, is going 
to be used to develop transportation, power, et cetera, and a certain 
amount of industry. Tliey are a little slower in their industrial ideas 
tlian they are in transportation facilities and power development. 

Mr. WoRLEY. We have been buying from them during the war, and 
after the war we want to sell to them ? 

Mr. Taylor. And also, as a result of the war, we have not been able 
to furnish them with the things that they want. Tliat has been thor- 
oughly understood, not only by the governments of those countries, 
but in our discussions with them. 

That is a vision of probabilities, let's say, and possibilities, but there 
has been a very definite spread of knowledge and understanding of 
what those countries want to do. 

I think you will find the same thing practically everywhere else in 
the world. China, for example, has a series of ideas vehich it washes 
to develop. Those ideas are not in terms of money nearly as much 
as they are in terms of facilities and technical assistance as to how to 
do things. 

Mr. WoRLEY. That is the policy that you think should be followed 
after this war that was not followed after the last war? 

Jkfr. Taylor. That's right. 

Mr. Worley. Do you think tliat will be a partial answer to the 
problem? Is that the immediate problem that you see in your 
Department ? 


Mr. Taylor. Yes. 

Mr. WoRLEY. The development of these fields, foreign fields? 

Mr. Taylor. And that gets into all phases. One of the subjects 
you are discussing is shipping. I don't think you can differentiate 
various kinds of shipping. Every time we have tried to do that we 
have gotten into considerable trouble — I mean in our domestic history. 

Mr. WoELEY. It is all commerce. 

Mr. Taylor. It is all commerce and it is all transportation. 

Mr. WoRLEY. You can't have commerce without transportation. 

Mr. Taylor. No. 

Mr. WoRLEY. What other problems are there that we faced after 
the last war that you think we will face after this one, so far as your 
field is concerned ? 

Mr. Taylor. Well, the problems that we faced after the last war 
were, frankly, so minor in character compared to the ones we are 
going to face after this war that I have a very strong feeling that our 
approach has to be infinitely more positive and infinitely more 

Mr. WoRLEY. Then we will meet new problems after this war that 
we didn't encounter after the last war? 

Mr. Taylor. Yes. 

Mr. WoRLEY. Can you give us some idea what those are ? 

Mr. Taylor. Well, for example, the destruction in industrial plania 
in Europe after the last war was very localized. All you have to do 
is to read some of the reports in the papers to realize how widespread 
it is now. Portugal, Switzerland, and Sweden are the only places I 
can think of quickly in that entire European area, including the 
British Isles, that have not been affected; and that destruction also 
goes far into Russia as you know. Out in the Far East there has been 
very, very widespread destruction, and I assinne it will be greatei 
before the war is finished. 

So that will leave the world in the position of a major portion of 
its existing industrial plants having been either disrupted, destroyed, 
or generally made ineffective. So the pressure on the industrial 
plants of the United States, until there is a sorting out, reconstruc- 
tion, et cetera, is going to be infinitely greater than it was after the 
last war. 

Mr. WoRLEY, It seems to me that will have two results: one, we 
will be in better position to produce than other countries where indus- 
try was destroyed. 

Mr. Taylor. There is certainly going to be a demand for our 

Mr. WoRLEY. Secondly, we can sell them machinery to replace 
that destroyed. Do you have any idea what your policy will be 
on that? 

I^r. Taylor. I think that the areas in which our industrial machin- 
ery will be preferred will vary. That sounds like a rather vague 
answer, but I don't see how it can be any other way. 

For instance, take the north of Italy, which is a very highly indus- 
trialized area. We don't know what has happened to that, but we 
do know that that industrial equipment was built up over a period of ] 
<> flrreat number of years, from very mixed sources. Some of those 
sources were German, some French, some Swiss, and so on. 


Until you find out what the pieces are that you can put together 
and look at it from a very long range point of view, it would be silly 
to rush over a lot of parts for something that was going to be just 
a temporary thing because there is a permanent relationship between 
industries and trade areas. That, of course, has been largely destroyed 
during this period, but I don't see how you can say today whether 
it will be a good thing to have this country reequip northern Italy. 
In fact, my own opinion would be that wouldn't be a very smart thing 
to do because it is an unnatural relationship. 

Mr. WoRLEY. This Nation has always encouraged the sale to foreign 
countries of industrial machinery, hasn't it? 

Mr. Taylor. To a large extent. 

Mr. WoRLEY. Even though that industrial machinery competes with 
our products over here? 

Mr. Taylor. In the long run it usually has not worked that way. 
That goes back to those periods when you keep one country doing 
one part'icular thing. That just doesn't stand up. 

Mr. WoRLEY. It is local conditions and economics which determine 

Mr. Taylor. I think our own history is the finest example of why 
that is so. 

Mr. Worley. Are there any additional problems that you know of 
we will meet after this war which we didn't meet after the last war? 

Mr. Taylor. Well, of course, the other thing that your committee 
is specifically dealing with is shipping. Obviously that is an entirely 
different problem than we had after the last war, both as to the char- 
acter of the ships, the destruction of other fleets, and what you do with 
them, and so forth. Personally, 1 think that has to be approached 
quite differently, too. 

One interesting thing about the utilization of the shipping is that, 
if trade is as active as we believe that it can be, we may find that there 
isn't a surplus of shipping at all. 

Mr. Worley. That will depend on what? 

Mr. Taylor. It will depend on the amount of goods to be carried. 

INIr. Worley. You mean from here, one way ? 

iVIr. Taylor. No ; I am talking about the world shipping situation. 
Just going one way, of course, doesn't 

Mr. Worley. How much of our own exports do you think we will 
carry after the war? 

Mr. Taylor. I think that is a question of national policy which 
hasn't any direct relationship to the amount of exports themselves. 

Mr. Worley. How much of our own traffic do you think we should 
carry in our own ships ? 

INIr. Taylor. I haven't any opinion on that. 

Mr. Worley. Is your department concerned with that question? 

Mr. Taylor. No; not directly, because that is a question of national 
policy which is a very specialized thing. 

Mr. Worley. Other than in encouragement of coinmerce do you 

Mr. Taylor. The main thing is that it should be carried. 

Mr. Worley. In our own ships? 

ISIr. Tayi.or. No; the main thing is that it should be carried. 

Mr. Worley. I see your point. 

Do you make any recommendations or try to encourage our own 
shippers over here to use American ships ? 


Mr. Taylor. Yes, we do in general, but I don't think we do that, or 
should do that, as positively as, let's say, an agency which is specifi- 
cally charged with that duty. 

Mr. WoRLEY. What agency is specifically charged with that, the 
Maritime Commission? 

Mr. Taylor. The Maritime Commission. 
Mr. WoRLEY. You say you haA^e done it to some extent? 
Mr. Taylor, Oh, yes". 
Mr. Worley. Have you had much luck? 
Mr. Taylor. It usually depends on the price. 
Mr. Worley. The price of what? 
Mr. Taylor. Of the shipping. 
Mr. Worley. What determines that? 
Mr. Taylor. Competitive rates. 

Mr. Worley. I understand we have tried to keep our ships, by sub- 
sidy, on a parity with other countries. 

Mr. Taylor. I would say that is the only way you could do it, if that 
is a positive decision in policy, or, putting it another way, if you don't 
wish to compete on rates for policy reasons. I am not questioning those 
policies in any way, because I think they are extremely important, but 
the whole matter of shipping payments, and so on, is a very important 
item in the balance of payments, you see, just like any other export or 
import. If you want to force exports, you do certain things; and if 
you want to subsidize, or do the opposite for imports, you do certain 

Mr. Worley. Your Department, then, thinks it is desirable but not 
essential, that our own shippers use our ships? 

Mr. Taylor. I would like to make myself very clear on that. I 
think that there are other policies, such as the national defense, and 

so on, wdiich are overriding, so that 

Mr. Worley. It is more important to have a merchant marine for 
national defense than it is for commerce? Did I state that correctly? 
Mr. Taylor. Yes. 

Mr. Worley. Then' your Department does not intend to lend any 
particular emphasis to using American shipping after the war if we 
can get commerce without it? 

Mr. Taylor. Well, we will naturally carry out whatever the policy 
of the United States is. That is our job. 

Ivlr. Worley, You participate in creating that policy, don't you? 
You make recommendations ? 

Mr. Taylor. To some extent ; yes. At one time or another the De- 
pa rtment was quite active in that field, but at the present time it is not. 
Mr, FoLSOM, Just one question. One of the most important func- 
tions of the Department in the field of foreign trade is to furnish in- 
formation and statistics to exporters and importers. That naturally 
has been curtailed during the war. 

If you are going to perform an adequate service after the war, you 
will have to build up that service, expand it rapidly. Is your appro- 
priation sufficient for that, or will you have to have a larger appro- 
priation to do that ? '^ 

Mr. Taylor. I think we obviously are going to have to have an in- 
crease in the appropriation because whereas quite a bit of that will 
fall on the Department of State, and so on, to find out what has hap- 
pened in these co^uitries when it comes to filing that and getting it 


into shape very quickly so that it can be made available to our Gov- 
ernment and to the foreign trade community, you have to have addi- 
tional personnel in order to be able to fill in those gaps and be able to 
present a complete and over-all picture. 

Mr. FoLSOM. I had in mind particularly service to people in the 
country who are interested. 

Mr. Taylor. Well, ^xe are running into that already. Take a great 
many of the veterans who are already getting back out of the service, 
many obviously have an interest in foreign trade. We are already 
handicapped by the physical number of people we have in field offices 
to take care of them. We want to do as complete a job as we possibly 
can, and each one of those interviews takes anywhere from 1 to 2 hours, 
and then they come back. 

Mr. Mack, 1 believe, will be able to give you some pretty good indi- 
cations of that problem. 

]Mr. WoKLEY. You don't know of any additional problems we will 
meet after the war that you can anticipate? 

Mr. Taylor. I probably do, but I think I have taken up enough, 

Mr. WoRLEY. No, no : that is our job, to find out these things. What 
other problems do j'ou have that you know of ? 

Mr. Taylor. Frankly, Mr. Chairman, I would prefer to have you 
discuss some of these specific things with the other representatives 
here, and if anything does occur to you 

Mr. WoRLEY. In the meantime you can think up these additional 

Mr. Taylor. I don't have any trouble thinking them up. 

Mr. Worley. All right, we will proceed with your next. 

Mr. Taylor. Would you like to have Mr. Lyons give you the very 
specific problem of the foreign-trade zones, because I think that is an 
important way in which we can stimulate foreign trade? 

]\Ir. WoRLEY. All right, Mr. Lyons. 


Mr. Lyons. Mr. Chairman, I am appearing here in a dual capacity 
today, both in connection with this Foreign-Trade Zones Board and 
also to discuss the shipping activities of the Bureau of Foreign and 
Domestic Connnerce. I will be as brief as possible, because the Under 
Seci-etary has gone into the subject very extensively. 

I will take the Bureau of Foreign and Domestic Commerce first. 
The authority for both the Department and the Bureau to deal with 
shipping matters is contained in the organic act creating the Depart- 
ment. The Bureau's interest is twofold : (1) aid to shippers, and (2) 
shipping economics. 

With reference to aid to shippers, the Bureau supplies shipping 
schedules to foreign countries, both of American vessels and foreign 
vessels. Data on packing for export is most important. For years we 
have been considered the worst offenders in the world when it comes 
to export packing. Following the last war, many of our commodities 
arrived in foreign markets unusable and unsalable. Since that time. 

99579 — 45 — pt. 4 8 


the Department has prepared and distributed a number of important 
studies, pointing out to American exporters how they should pack 
their merchandise for shipment to foreign countries. 

Modern Ship Stowage — that is a handbook we finished just prior to 
our entrance into the war. It is a very detailed work and has saved 
much valuable cargo space. I brought a copy with me for the record. 
I think it is something well worth while for the committee to have to 
indicate the work of the Bureau, 

The Maritime Commission is placing a copy of Modern Ship Stow- 
age on every ship it operates. About 2,500 copies have been purchased 
for that purpose. Mr. Folsom inquired about the circulation of some 
of the Department's publications, and I might say that there have been 
15,000 copies of the book sold. 

Research into shipping and shipbuilding subsidies abroad will be 
necessary when this war is over. The basic subsidy information em- 
ployed in drafting the Merchant Marine Act of 1936 was collected 
through the foreign offices of the State Department and published 
by the Bureau in 1932. 

The Bureau also collected data on shipbuilding in foreign coun- 
tries for the use of the Federal Government and the shipbuilding 

The Bureau has conducted a number of studies on ocean-trade 
routes, and will conduct other studies, probably in connection with 
the Maritime Commission to determine the commodity flow in world 

With that brief summary I will leave the Bureau and discuss the 
matter of foreign-trade zones which we touched on briefly yesterday. 
The Foreign-Trade Zones Act was enacted to facilitate the move- 
ment of two classes of trade — transshipments and import goods 
coming into the United States. 

Under our tarifi^ laws, when foreign merchandise arrives at a port 
of entry of the United States, some disposition must be made of it 
within 48 hours or the Collector of Customs will take charge of it. 

Disposal of foreign merchandise may be as follows: It may be 
entered for consumption, where it loses its identity as foreign mer- 
chandise and becomes a part of our domestic commerce; or it may be 
entered for warehousing, under which a bond for double the amount 
of the duty is posted, and where it may remain for 3 years. After 
that time the goods must be exported or the duty paid and brought 
into the United States. 

The Customs regulations consist of something like 900 pages of 
detailed requirements with which importers must comply in bringing 
foreign merchandise into the United States. In many instances 
importers employ the services of customs brokers who, for a fee, 
varying with the service performed, will aid merchants bringing 
goods into this country. These customs brokers perform a valuable 
service and perform an essential service in connection with our im- 
port trade. 

The whole theory of the foreign-trade zone is to simplify the 
processes of importing. The zone may be regarded as a stockaded 
area in our ports of entry where foreign merchandise may be brought 


without customs formalities although it is under customs surveillance. 

Foreign goods may be stored indefinitely without the expense of 
customs bond and, subject to certain manipulations with domestic 
merchandise, and then may be reexported. Such goods may be 
brought into the United States by the payment of customs duties. 

What the New York zone has accomplished may be illustrated by 
the handling of tungsten ore, a very valuable commodity used in 
connection with the manufacture of tool steel and lamp filament. 
Tungsten ore formerly moved from China to Germany and England, 
where it was refined and then shipped to the United States. 

War demands necessitated the bringing of tungsten ore directly 
to this country and the Maritime Commission diverted a ship from 
Manila to the port of Saigon, French Indochina, where it picked 
up 6,000 tons of tungsten and brought it to the New York trade zone. 
Later the ore was refined and processed in the zone and brought into 
the country upon the payment of proper duties. 

That is merely an illustration of what the zone has done in aiding 
the war effort. If that shipment had to wait for formalities to 
determine where it could be taken, we might still be looking for it. 

No doubt that type of zone operation will be continued after the 
war is over and carried on in other foreign trade zones. This is an 
indication of what these zones can do to attract essential raw ma- 
terials to the United States for stock piling. 

Plans now call for the establishment of foreign trade zones in New 
Orleans and San Francisco. These zones must be established by 
corporations, public or private as the legislation authorizing these 
areas is merely permissive. The Federal Government is concerned 
both with the establishment of these zones and their supervision after 
they are established. We feel that they will perform a real service 
in the promoting of foreign trade and shipping when peace has been 

Mr. WoRLEY. You will be available for questions later, will you, 
Mr. Lyons ? 

Mr. Lyons. Yes, sir ; I will be right here. I have a memorandum 
which I will file with the committee. 

Mr. WoRLEY. All right ; it will be inserted in the record. 

(The memorandum has been market "Exhibit No. 18" and will be 
found in the appendix on p. 1185.) 

Mr. WoELEY. I understood we would get an outline of the functions 
of each subdivision. 

Mr. Taylor. I think Mr. McCoy, who is Chief of the Division of 
Industrial Economy, will start off for the Bureau of Foreign and 
Domestic Commerce. Before Mr. McCoy describes one phase of the 
functions of the Bureau of Foreign and Domestic Commerce, I should 
like to submit, Mr. Chairman, a prepared statement giving a brief 
outline of the origin, organization, functions, and activities of the 
Bureau of Foreign and Domestic Commerce with respect to foreign 
trade and shipping. 

(This material has been market Exhibit No. 19 and is found in 
the appendix on p. 1186.) 

Mr. WoRLEY. Mr. McCoy. 



Mr. McCoy. Mr. Chairman, since you have a formal statement out- 
lining in general terms its functions, I shall speak principally of one 
or two phases of the work of the Bureau of Foreign and Domestic 
Commerce in connection with foreign trade. 

As set forth in its organic laws, the promotion of foreign commerce 
is one of the basic functions of the Bureau of Foreign and Domestic 
Commerce. The Bui'eau is, and has been since its creation, a prin- 
cipal agency of Government collecting and disseminating infoi'mation 
on international trade and economic conditions throughout the world. 
It is a recognized source of information in this field for Govermnent 
and business. The Bureau's resources and facilities in the interna- 
tional economic field have been designed to supply the Department and 
other Government agencies with essential information as a basis for 
the formulation of foreign commercial policy, and to provide business 
with the necessary facts on and assistance in developing markets 
abroad for exports and finding and promoting markets at home for 

The sharp economic shifts in foreign countries and the drastic dis- 
location of international trade resulting from the war, together with 
the consequent readjustments that must be made, are so extensive and 
basic in character as to result in substantial })c»st-war changes in the 
industrial and commercial structure of many countries, which will 
affect the character and volume of post-war international trade and 
produce many permanent readjustments in ti'ade relations between 
the United States and foreign countries. It is highly necessary that 
these wartime changes in world production and trade, the shifts that 
have occurred and will continue between pro<^liicing and consuming 
countries with respect to goods moving in international commerce, 
and other war-born developments, which are now fully emerging, 
should be measured and analyzed for the vital needs of Government 
in policy making, and for the equally important needs of business in 
meeting current problems in foreign trade and planning for the future. 

The magnitude of this task is obvious in view of the fact that the 
collection of commercial and economic information from all foreign 
countries was displaced by purely wartime reporting after 1939. 
Purely wartime information does not meet the immediate needs of 
either Government or business during the later stages of the war 
period or the subsequent period of readjustment, transitional and 
post-war periods, and is useful only as a supplement to basic surveys 
that must be made for current requii-ements in connection with foreign 
trade problems of the moment and future planning. 

Furthermore, and most important, one of the largest tasks will 
involve the acquisition, analysis, and dissemination of current eco- 
nomic and commercial information on liberated and enemy countries, 
with respect to which the Bureau's informational resources must be 
completely reconstructed. For these areas, reliable current data have 
not been available during the war. The incidence of total war, enemy 
occupation, ])lunder, and sabotage, and the devastation of military 
opeiations will have completely changed or destroyed the industrial 


and trafle structure of these areas. In a large measure, the war has 
out-dated a large portion of the Bureau's informational resources on 
foreign trade that was built up during 20 years preceding the war. 

Mr. WoRi.Ev. You may proceed, Mr. McCoy. 

Mr. McCoy. As has been mentioned before, the or'ganic law of the 
Department and the Bureau, as a part of the Department, sets up the 
Bureau as an agency for foreign trade promotion. That is one of its 
basic functions, and it has been since its creation one of the principal 
agencies of Government collecting and distributing information on 
international trade and economic conditions throughout the w^orld. 
The Bureau is the recognized source in Government for information 
of that sort. 

The Bureau's resources in that particular field and its facilities have 
been designed so as to provide itself and other Government agencies 
with essential information, first, as a basis to provide the Department 
with facts upon which to determine commercial policy, and, second, 
and probably equally as important, to provide business with necessary 
facts to enable it to find markets abroad and to develop markets at 
home for imports. 

The general responsibility of the Bureau is for the development, 
analysis, and distribution of economic and commercial information 
from all foreign countries. The Bureau determines the needs of busi- 
ness for foreign market information; for information on industrial 
and commodity developments abroad, trends in international trade; 
information on foreign business firms; tariff and customs regulations; 
foreign laws affecting trading with and doing business in foreign 
countries; taxes, aiid other economic and commercial information per- 
taining to foreign areas. 

Mr. WoRLEY. Cartels'? 

Mr. McCoy. Every aspect of commercial information which contrib- 
utes to a knowledge and understanding of our foreign trade and eco- 
nomic relations, both export and import, with foreign countries. 

The Bureau is in constant touch with the hundreds of businesses, 
and business groups, through the various industry divisions in the Bu- 
reau, which maintain direct touch with exporters and importers, both 
in Washington and through the commercial agents in the field offices 
of the Department, who are intimately acquainted with the average 
business concern engaged in foreign trade and are thus able to deter- 
mine exactly what is the most useful information in connection with 
foreign trade. 

Mr. WoRLEY. You say you have information about these other coun- 
tries. Wcmld you repeat that ? 

Mr. McCoy. It is the collection, analysis, and distribution of foreign, 
economic information that pertains generally to all economic develop- 
ments in foreign countries. 

Mr. WoRLEY. That information would not be sufficient for the pur- 
poses we were discussiug, Mr. Taylor? 

Mr. JNIcCoY. It is a question of the degree to which it is to be done. 

Mr. Taylor. Both degree and the time factor. 

Mr. McCoy. Under Reorganization Plan No. 2 the functions of the 
Department of Commerce with respect to the foreign services were 
transferred to the Department of State. However, the transfer of 
that function in no way involved any transfer of functions as far as 
the Bui-eau itself is concerned in the promotion of foreign trade. 


Under arrangements made in accordance with law, the Secretary 
of Commerce advises the Secretary of State with respect to commer- 
cial and economic information desired from foreign countries. The 
Foreign Services of the Department of State have instructions for 
reporting to the' Department of- State with reference to foreign trade 
matters. Information is furnished to other departments participat- 
ing to the extent that we are sure that such requests as go abroad in- 
corporate the needs of other agencies, and that there is no duplication 
in making similar requests by other agencies which want specialized 
information which may be obtained upon a general inquiry? That 
coordination is done now in the Department of State itself. As a 
matter of fact, many inquiries that now go abroad from the Depart- 
ment of Commerce are general inquiries in collaboration with either 
the Department of Agriculture, the Department of Labor, or other 
agencies which may have a specific interest in the particular subject 
to be covered. 

This commercial and economic information gathered by the Bureau 
is issued in a form readily available to exporters, importers, banks, 
shipping companies, and all other interested and concerned with for- 
eign trade, and it is, of course, broad in scope and rather specific in 
character, so that it meets, we think, practically all the needs of Gov- 
ernment and business. 

It is quite evident now that the type of service which the Bureau 
was able to offer business and Government before the war will not be 
adequate after the war. Due to the considerable changes in economic, 
industrial, and commodity developments abroad as a result of the war, 
the type of reporting and analysis required to meet post-war needs 
will be different. 

With the international informational resources at the command of 
the Bureau, Bureau officials, including, of course, the Secretary of 
Commerce and Under Secretary of Commerce, are provided with the 
necessary background to participate in policy formation. In addi- 
tion to representation for the Department in policy matters by the 
Secretary and Under Secretary, at the Cabinet level, the Director of 
the Bureau, for example, represents the Department on the present 
Executive Committee for Foreign Economic Policy. There are other 
officials of the Bureau, industry and regional specialists who are mem- 
bers of interagency committees and groups which are concerned with 
the formulation of policy and make recommendations to higher 

We are much concerned that the services of the Bureau shall be 
readjusted to meet post-war needs. There have been and will be fur- 
ther economic shifts in foreign countries, and basic shifts in inter- 
national trade resulting from the war which, with the readjustments 
now being made, are so extensive and basic in character that un- 
doubtedly they will affect the trade relations of the United States 
with foreign countries, and, obviously between foi'eign countries. 
It is highly necessary that we have an accurate picture of those 
changes, both of those that have occurred during the war and the 
implications of those changes as the world emerges from the war. 
They should be measured in terms of the needs of those countries, the 
extent to which the United States might participate in economic 
developments and trade relationships with those countries, and, most 
of all, the kind of information that American business, both impor- 



ters and exporters and others concerned with foreign trade, can use 
for future planning. 

This task is rather large. The magnitude is obvious in view of the 
fact that the collection of such information from all foreign coun- 
tries was largely discontinued in 1939 at the outbreak of the war in 
Europe. Although we were not in the war at that time, the duties 
of the consular offices throughout the world were devoted to purely 
wartime activities. The economic and trade information that has 
been collected from allied and neutral areas throughout the world 
during this time for purely war use is not adapted to use for post- 
war planning. 

We need more general information and we need more specific in- 
formation on international developments in certain industries and 
commodities. Wartime data are useful, of course, as a supplement 
to basic surveys we are now making in connection with the current 
requirements for future planning. 

Furthermore and most important, one of the largest tasks will in- 
volve the acquisition, analysis, and dissemination of current economic 
and commercial information on liberated areas. Obviously, in coun- 
tries that have been devastated by war or have been occupied by 
the Axis, in which there has been sabotage and destruction due to 
military operations, there will be considerable changes made in the 
industrial and commercial structures of those areas which will, of 
course, influence the future development in those coutries to a large 

To a large degree, the absence of any information from Axis coun- 
tries or Axis-occupied countries, and the devotion of the Foreign 
Service, which is our investigative agency abroad, to other matters, 
places our information, at least a great deal of it, out of date. By 
arrangements currently made with the Department of State and other 
agencies, a broad program for the resumption of commercial and 
economic reporting is now in process and some of it is actually in 

The next important phase, after the collection and analysis and 
putting into form of foreign commercial and economic information 
for use by both Government and business, is its distribution, which 
I believe Mr. Schnellbacher, in charge of the publications phase of 
our work, could describe better than I can. 

Mr. WoRLEY. Thank you very much. 

jNIr. Taylor. I will change the order a little bit and have Mr. 
Mack, the director of the field service, describe his functions first, 
and then Mr. Schnellbacher. 

Mr. WoRLEY. All right, Mr. Mack. 


IMr. Mack. The Department of Commerce, recognizing the need 
for providing facilities to business at points where businessmen will 
be able to use the vast array of facts and figures gathered by the De- 
partment, maintains offices at 26 business centers throughout the 
United States. These offices are miniature bureaus of Foreign and 


Domestic Commerce. The information compiled and gathered by the 
Bureau from various sources, both private and governmental, is made 
available to businessmen and other Government agencies through 
these 2(1 othces. 

These offices have the primary responsibility of representing the 
Department of Commerce throughout the United States with special 
reference to informational services and facilities of the Bureau of 
Foreign and Domestic Commerce and the Bureau of the Census, both 
of which are the business promotion agencies of the Department of 

The offices provide a coordinated, decentralized medium through 
which businessmen can get information they want at a point where 
they can use it. They carry on no regulatory functions whatsoever, 
but are purely service organizations serving both business and Govern- 
ment; serving business by disseminating the information that is 
gathered, serving Government by gathering the information the De- 
partment needs in the formulation of its general policies. 

The activities of these offices cover the broad field of commerce and 
industry, both foreign and domestic, although my particular interest 
today is very largely in the foreign trade field which, I believe, is the 
primary interest of the committee. 

The activities of the field offices have for a number of years been 
largely devoted to our foreign -trade functions, under our statutory 
responsibility. The work we do in the field is to provide the informa- 
tion to the business public which will enable the businessman to de- 
termine on his own responsibility, first, whether he should go into the 
export or import business at all ; secondly, having determined whether 
he should go in or stay out, we then seek to provide all tlie information 
he will need to carry on a successful business. 

That involves furnishing information which shows the })Osition we 
formerly occupied in those markets, developing new markets for an 
expanding production, providing services of the greatest help to the 
exporter during the reconversion period, pointing out the competitive 
conditions he wdll meet in a specific market, what the tariff rates are, 
wdiat the exchange restrictions are, what the import quotas are, who 
the distributors are, whether he needs an agent or wants to operate 
w^ith an importer or distributor. We provide him the names of poten- 
tial distributors and agents, and, in addition, we supply special in- 
formation on the particular individual or firm with which he wants 
to deal. 

We perform this service with the cooperation of tlie various divi- 
sions of the Bureau which, in turn, have the support of the American 
Foreigii Service in gathering the information, and it is one of our 
most important responsibilities. 

We recognize that businessmen have no other means of getting a 
large part of this information, that private sources do not provide it. 
We operate under a well integrated system; the material is gathered 
by the Foreign Service, analj^zed by the Bureau of Foreign and Do- 
mestic Commerce and put into the hands of the businessman through 
the field service. This is an activity in which we have had more than 
thirty years experience. 

Mr. WoKLEY. Do you notice any increase in the number of clients 
you have? 


Mr. Mack. Yes ; we do. We notice a definite increase, for two rea- 
sons : First, a number of businessmen are considering^ for the first 
time entering into foreign trade. They have heard a lot about oppor- 
tunities in foreign trade. They know their productive capacity has 
been increased here, and they want to analyze their opportunities for 
the sale of goods in foreign countries. 

In addition to that, we have the old-time exporter who has been 
out of a particular market for some time and wants to get back in that 
market. Through these various coordinated activities we carry on, 
we seek to provide the businessman with all the information he feels 
he needs to make a decision as to what action he will take in a partic- 
ular area or in a particular field. By reason of the yeai-s of experi- 
ence we have had in this field, we are able to advise foreign traders on 
methods of doing business, the labor problems he will be confronted 
with, 'in case he wants to operate a branch plant, and things of that 

When the war broke out, the controls that were exercised in foreign 
countries remained in effect. In addition to that we added our own 
controls, export control, exchange control, consignee control, and three 
or four other controls. Those were superimposed on the controls 
previously in effect in other countries. The controls we exercised here 
had a profound influence, not only on the volume of business we did, 
but the direction geographically that our foreign trade took, with the 
result that our field offices became the field representatives throughout 
the United States of the Foreign Economic Administration for the 
dissemination of information pertaining to export control. We still 
carry on that activity, and will continue to provide this essential infor- 
mation to businessmen until export control is removed. And as our 
own control;^ are relaxed, the controls exercised abroad are going to 
become relatively of greater importance. 

At the present time foreign duties, or other restrictions are relatively 
unimportant. They want the goods, are ready to pay for them, they 
have the exchange. In the post-war period, we will find foreign con- 
trols again -exercising a greater influence not only on the direction but 
on the volume of our trade. 

The field offices are also the official representatives throughout the 
United States of the Department of State. The information gathered 
abroad is made available to business through our field offices. In addi- 
ticn to that, we furnish to the Department of State information it may 
need in the solution of trade problems in which it is involved. 

In connection with my duties as Director of the Field Service, I, of 
course, have to get around to our offices rather frequently. Just last 
April I was out on the west coast, and I noticed a remarkable interest 
out there in foreign trade. Practically every city I visited either had 
formed new committees or reestablished old committes whose primary 
fufuction it is to look into the possibiilties of foreign trade, and the 
possibilities of developing markets for the products of a particular 
area. For instance, in San Diego, Los Angeles, San Francisco, Port- 
land, Seattle, they all had very active committees. We find the same 
thing in Memphis, Atlanta, El Paso, Pittsburgh and the State of Con- 
necticut has a committee aiow working very actively trjdng to develop 
markets for Connecticut products. 

Our field offices work closely with these groups, providing the infor- 
mation they will require in determining just what the opportunities 


are. And, after tliey determine that, then we are prepared to deal 
with individual businessmen in giving them the information they 

Mr. WoRLEY. It seems to me that is a very complete service. 

Mr. Mack. We have had a lot of experience in it, and we feel that, 
through this experience, we are able to tell the businessman specifically 
the conditions he will meet in a foreign market, and provide him with 
a means of actually getting in touch with people with whom he will do 

Mr. WoRLET. Do you take any steps to acquaint business people with 
the information and services you offer, or do you wait until they come 
to you ? 

Mr. Mack. That is a practical question, and I am glad you brought 
it up. A few years ago it had been determined tentatively to disband 
the field service on the theory that due to restrictions on trade the 
offices were not able to perform their functions. The House Appro- 
priations Committee sent investigators out into about a dozen of our 
offices to find out what we were doing, why we were doing it and how 
we were doing it. 

They came back with a definite recommendation that there was a 
real need for the Department to take appropriate steps to advise more 
businessmen as to the facilities and information we have. 

We recognize that in the past we have fallen down in our merchan- 
dising job. We have the material, but haven't been merchandising it 
properly, and that is one of the defects we are seeking to overcome 
right now. We are working very closely with trade associations and 
chambers of commerce throughout the United States. In addition 
to those 26 field offices, we have cooperative arrangements with 36 
chambers of commerce throughout the United States, and through 
them attempt, as far as possible, to let the business public in their 
particular communities know what we do, how we do it, and what 
we have available. 

Mr. WoRLEY. Do foreign countries offer a service as good as this? 

Mr. Mack. I don't think any of them go into it the way we do. 
Ours is a trade promotion, trade preservation organization. That is 
our primary function. As I mentioned before, we perform no regu- 
latory function ; it is trade promotion and trade protection. 

Mr. Taylor. I would not agree with Mr. Mack's statement about 
other countries. I think other countries have goife into this more 
completely than we have. 

Mr. WoRLEY. They have gone into it more completely? 

Mr. Mack. From the domestic side of it ? 

Mr. Taylor. A combination of both. 

Mr. Mack. Perhaps I misunderstood. As far as having people in 
foreign countries lookins; after the interests of their particular na- 
tionals, no doubt some foreign countries do perform greater services 
than we do, but as far as making information and practical" assistance 
available to business people in the particular country, I think we 
perform a valuable service. 

Mr. WoRLEY. I didn't get the distinction. You say other countries 
have gone more thoroughly than we have into helping persons de- 
velop foreign trade? 

Mr. Taylor. Yes. 


Mr. WoRLEY. I don't see how you can get this more complete mi- 

Mr. Taylor. It is really the over-all picture. From the standpoint 
of making available information convenient to the American busi- 
nessman, I think we do about as well as anybody, but 

Mr. WoRLEY. Where do we fall down ? 

Mr. Taylor. The over-all picture, I think, we do fall down on that. 

jNIr. WoRLEY. What don't we do that other nations do ? 

Mr. Taylor. I would have to refer you to a great deal of history 
which, I think, would take quite a period. 

jNIr. FoLSOM. You mean there is much closer coordination in other 
countries between exporters and government? 

Mr. Taylor. That "is right. 

There is one other point Mr. JNIack stressed I would also like to 
'emphasize, and that is the difference between a domestic customer and a 
foreign customer. A domestic customer, if you know that his individ- 
ual credit is good, that is about all you need to worry about. But when 
the customer is in another country, it is not only the individual credit 
of that customer but conditions in that country which may definitely 
interfere with that customer being able to pay you. He may pay into 
a pool but that doesn't mean that you, as an individual shipper, will 
receive payment. 

Mr. Worley. Is there any other information you wish to give us, Mr. 

Mr. Mack. That about concludes my presentation. 

Mr. FoLSOM. Mr. Mack just said he found considerable interest in 
various cities as to exports. Did you find any interest in buying more 
abroad ? 

Mr. Mack. No ; I didn't, quite frankly, and I think that is something 
that businessmen trying to promote exports should take into considera- 
tion. I think there is a very definite need for study on the part of 
business itself as to the interrelationship of exports and imports. 

In the past, as you gentlemen know, we have always been interested 
in exports, and many businessmen have been interested only in export- 
ing, but I believe, if they are going to arrive at sound policies of their 
own, they must also look into the entire subject of the relationships 
between exports and imports and the ability to obtain dollars. 

Mr. WoRLEY. For the goods, after they have sold them. Do you 
provide any service for importers ? 

Mr. Mack. Yes. I am sorry I didn't cover that. We provide the 
same service for importers that we do for exporters ; the names of 
suppliers in the foreign countries, sources of supply, basic information 
on the development of a particular industry that produces raw or 
semimanufactured goods needed in the industrial field or consumers 
goods required in this market. 

Mr. Worley. How many more are interested in export information 
than in import information? 

Mr. Mack. Importing, as you know, is largely centralized in some 
of the port cities, such as New York, San Francisco, Philadelphia, 
Boston, Houston, and New Orleans; whereas from the export an,gle 
you get it all over, whether it is Dallas, Kansas City, or Memphis. We 
have relatively very little interest in importing in those cities. 


Mr. WoRLEY. Do you think we should develop more interest in 

Mr. Mack. I think we should develop more interest in a study of 
and better understanding of the particular problems we are going to 
face and the important relationship between exports and imports. 

Mr. WoRLEY. Who do you think should do that ? 

Mr. Mack. I think w^e should do it. 

Mr. WoRLEY. The Department of Commerce? 

Mr. Mack. Yes; I think we have the facilities for doing it. For 
instance, ever since the reciprocal agreements came into existence, we 
have, through our offices, furnished information to trade associations 
and individual businessmen as to what was in the agreements, when 
hearings were to be held, the methods of presentation, and anything 
businessmen might need in connection with the reciprocal trade agree- 
ments program. 

Mr. WoRLEY. You intend to develop information on that more fully,^ 
instead of stressing the importance of exports? 

Mr. Mack. Yes ; I think that is important. 

Mr. WoRLEY. Thank you very much. 

Mr. Taylor. Mr. Schnellbacher. 

Mr. WoRLEY. All right, Mr. Schnellbacher. 


Mr. Schnellbacher. I would like to commit a little lese majeste 
in presenting some of the items here which are not in conflict with pre-* 
vious speakers but, perhaps, develop a little of the philosophy of the 

The Bureau of Foreign and Dimmest ic Commerce has been reorgan- 
ized a number of times in recent years which I think is as wholesome 
as it is bad, because the organization is pretty much in a state now of 
standing on the outside of itself looking in at itself almost from day 
to day. 

In discussing the need for more information, I think the point is 
that the Bureau should be so organized as to be expandable rather 
than expanded ; thus, we are able to select from the mass of problems 
the specific problems that are most important to deal with. And once 
having reached a determination on that problem not to let that become 
a vested interest in the Bureau but see it in its relative numerical 
importance and then direct attention again to some other problem 
which comes over the horizon and becomes the most important at the 

Mr. Worley. I am sorry, but I don't follow you. 

Mr. Schnellbacher. The reason for the statement is tliat the Bureau 
of Foreign and Domestic Commerce probably has information on 
every subject that has to do with the field of foreign trade but in varying 

Now, I think our principal concern is at all times to know what are 
the problems to which greater direction and greater study should be 
given until that problem has been thoroughly met and dealt with, and 
then direct attention to another problem, in other words, when we 


get into a particular area, we should retract when we finish that job 
i and move into another area that demands consideration. 

Mr. WoRLET. What do you mean ? 

Mr. ScHNELLBACHER. I think the Bureau has to be at all times a 
dynamic organization. 

Mr. WoRLEY. I agree with you that it should be a dynamic organ- 
ization, but commercial intelligence is concerned with what phase of 
foreign trade? 

Mr. ScHNELLBACHER. The immediate consideration of the Division 
of Commercial and Economic Information is to maintain a comprehen- 
sive file on everybody in the world who is engaged in international 
trade. That job grew out of World War I when the blacklist was 
discontinued at the end of the last war and there were turned over to 
the Bureau the files left from the War Trade Board. 

Mr. WoRLEY. It was your Department that certified the blacklist 
that we recognize down in South American and other countries? 

Mr. ScHNELLBACHER. The present blacklist is operated under the 
direction of the Secretary of State, by proclamation of the President. 

Mr. WoRLEY. Do you supply information ? 

Mr. ScHNELLBACHER. We are a contributing agency to that work. 
More important for the purpose of this hearing, we maintain a classi- 
fied list of business organizations all over the world so that a man who 
doesn't know where he can go to buy goods or sell goods can get the 
names of people from us. 

Mr. WoRLEY. You work, then, with Mr. Mack? 

Mr. ScHNELLBACHER. And very closely with our Industrial Division, 
which coordinates with us when it is about to go out and get market 
information on specific commodities. We supplement that informa- 
tion with the names of the people in that business, the potential cus- 
tomers for the goods made in the United States, and the sources of 
supply of raw materials needed in this production operation. 

iVlr. WoRLEY. Maybe I am wrong, but isn't there a good measure of 
duplication between your function and that of Mr. Mack, the field 
service ? 

Mr. ScHNELLBACHER. Nonc whatever. We only concern ourselves 
with the specific names. Mr. McCoy's Division goes out and gets 
market information. The Division of International Economy gathers 
the economic information relating to foreign markets. All we do in 
commercial intelligence, then, is list the names of the people actually 
engaged in that business and maintain trade-directory reports on those 

Mr. WoRLEY. As to their financial ability ? 

Mr. ScHNELLBACHER. We dou't go fully into their credit status. We 
simply try to have a report, which we call a sales-information report 
or special report, which tells that this man is logically a fellow you 
would want to consider as a potential business connection in your 
specific field. 

]\Ir. WoRLEY. Do you know whether other countries have the same 
service ? 

Mr. ScHNELLBACHER. Yes ; very definitely, sir. I think, with rela- 
tion to the question raised before, the difference is this : that we are 
inclined in our country to gather factual information and turn it 
over to the businessman for his determination as to the application 
of the information, whereas in most all the foreign countries the 



government stays right with the job from the time they gather it until 
the time they tell the businessman how to use it. i 

We are not a "must export or die" nation in our philosophy of 
trade activities. For example, our firms that trade abroad are not | 
engaged in espionage and all forms of economic penetration such as* 
were the German firms in the hemisphere-security program. 

If that would be the comparison, we fell very far short of what 
Germany did in promoting the sale of German goods in foreign mar- , 
kets. We stop almost with the gathering of factual information,; 
interpreting it, evaluating it, and making it available to the American' 
businessmen for them to decide how they are going to apply it. 

Our principal medium for keeping foreign traders advised is the; 
Foreign Commerce Weekly. This is the mouthpiece of people in 
the Bureau of Foreign and Domestic Commerce for the purpose of 
bringing out late information and things which the various specialists! 
regard as important to be brought to the attention of business. < 

It has several feature articles in each issue, but the most important! 
thing is that it is the textbook of the practical businessman who is. 
concerned with any change that might occur in any foreign country 
in relation to finance, tariffs, exchange problems, shipping, anything 
which might affect his foreign business. 

In addition, we have already resumed a service we had prior to the 
war, but we have rebuilt it on a much better basis. We have an 
airgram service now from all the countries from which it is possible 
to get current economic information. That is staggered four times ^ 
a month in such a way that we have a montlily airgram on every 
country from which it is possible to get current economic information. 
It is airgramed so that we get it in print within 9 days after it has left' 
the country from which it was sent by the Foreign Service officer. 

So that Foreign Commerce Weekly is the mouthpiece of the Amer- 
ican Foreign Service throughout the world. It is their vehicle for 
getting information from any place in the world directly to the Amer- \ 
ican businessman. »| 

Mr. WoRLET. You say your Department publishes that ? i 

Mr. ScHNEixBACHER. Yes, our Department publishes that. It is a 
weekly publication. 

Mr. WoRLEY. How many subscribers do you have ? 

Mr. ScHNELLBACHER. At the present time, about 6,000. ■ 

Mr. WoRLEY. Do you charge them anything ? 

Mr. ScHNELLBACHER. Yes. The subscription price in the United 
States is $4.50 a year, and our foreign subscription in normal times 
at $7.90 is very substantial. It is restricted during the war. 

The use in Government of this publication is almost as great as by 
business, because the Department of State makes no effort to dissemi- 
nate much of this material because of the fact that the Department of 
Commerce does put it together and makes it available to other Gov- 
ernment agencies. It is really a vehicle of the Department of State to 
that extent. We assume the responsibility of getting that type of 
information around to the other Government agencies. 

Just an item here in connection with trying to deal with a current 
problem. We have just come out with some factors in the post-war 
export trade with the British Empire. To answer the question, Mr. 
Folsom asked before, this job has been very widely broadcast in 


the press and in the trade papers, and the demand for this publica- 
tion is ah'eady quite substantial. 

Mr. WoRLEY. You have another demand for it. May I have a copy? 

Mr. ScHisixLBACHER. Yes, sir [handing]. We have processed many 
other types of studies. We are bringing out the statistical reports just 
as fast as they are released from security. 

The Bureau of Census gathers and disseminates the statistical infor- 
mation and we do the studies through which the statistics are put 
to specific use by business. They are put together in this type of 
release: "United States Trade With Other American Republics for 
1942." They are again approached in this sort of study: "United 
States Trade with Uruguay," and so on down the line. 

Then they are approached again from a commodity standpoint as 
in a pulp and paper report which was gotten together for a 3- or 4-year 
period in order to give an indication of the trend. Again, that is 
purely statistical and leaves the businessman or the industry to pro- 
ceed in working out their determinations. 

"Foreign Trade After the War" w^as an effort on the part of 
the bureau to project into the post-war era, and is based on the assump- 
tion that, if you have a high level of production in your domestic 
economy, what would be your foreign trade correlative? Your ex- 
ports would be so much, and your imports should be so much to fit into 
this post-war picture of a high level of economy in this country. That 
report has provoked a tremendous lot of discussion in this country 
and abroad. 

You are probably already familiar with the United States in World 
Economy. This book was reprinted by the British and 5,000 copies 
distributed at their expense throughout the empire. 

In Domestic Commerce, which is our domestic publication, we are 
beginning to mention from time to time information that is of interest 
to importers. 

It is a curious thing, but our dealers in imported goods — I should 
say that once goods are imported they become part of the domestic 
market picture — do not always regard themselves as being in the 
foreign trade. 

Mr. WoRLEY. Are those publications regularly published? 

Mr. ScHNELLB-ACHER. This is a monthly publication. It costs a dol- 
lar a year. It started about a year ago with about 1,500 subscribers, 
and the current issue is going to press with 12,500 paid circulation. 
AVe can't promote it. 

Mr. WoRLEY, You don't carry any advertising? 

Mr. ScHNELLBACHER. No, sir. 

Our third publication is again not quite pointed at foreign trade, 
but I think I should mention it — Survey of Current Business. It is 
important in the foreign-trade picture because it gives about the 
most comprehensive information in our whole national economy — 
income and production and all the industry statistics. 

Next, to deal witli the day-to-day problems of the man in business 
who needs information and guidance in business, this is the type of 
publication we use for that purpose : Guides for the New and Pros- 
pective Foreign Trader. 

Believing that the philosophy in the United States is for the Gov- 
ernment to provide factual information and permit the businessman 


to arrive at his own determinations, we try to tell him what are the 
thinojs he ought to have in his mind in determining whether he is 
going into foreign trade at all. We work out a type of special analysis 
for him to follow through, and we seek to furnish him with published 
material which he can use in arriving at his determination of the extent 
to which he m ill engage in foreign trade. 

Mr. WoRLEY, Do you ever have calls for information you can't 
provide ? 

Mr. ScHNEiXBACHER. Very rarely, sir. We always have some infor- 
mation on a business subject. One of the functions of our organiza- 
tion in the Bureau is to point out the gaps in current information 
to the specialists in the organization, who can be studying and pro- 
ducing information for that particular problem. 

We have an inquiry reference service organization which is much 
in the nature of a business library. Its techniques are highly de- 
veloped in our field offices. We are constantly receiving requests for 
which we are not always able to supply adequate information, and 
those are tossed back to the consultants and analysts for their deter- 
mination as to what might be done. 

Mr. WoRLEY. Are those publications self-sustaining, or are they in 
the red or black? 

Mr. ScHNELLBACHER. Tliesc three printed periodicals are practically 
self-sustaining at the present time. For this type of publication, U. S. 
in World Economy, we have to buy 1,000 copies from the Superin- 
tendent of Documents in order to get it printed. We only have two or 
three of these a year on something we think is important enough. 

Mr. WoRLEY. Special subjects? 

Mr. ScHNELLBACHER. And then they are put on sale in the Super- 
intendent of Documents' office, and in almost every instance our publi- 
cations sell more copies out of the Superintendent of Documents' 
office than the original cost to us, but we don't get the money. It 
goes into miscellaneous receipts of the Treasury, and there is no way 
for us to say that this publication is self-sustaining. 

Mr. WcRLEY. But the money comes back anyway? 

Mr. ScHNELLBACHER. The money comes back into the Government. 

Mr. WoRLEY. I wondered if you had suHicient demand to make 
these self-sustaining, if they were not, and what stei>s could be taken 
to promote them ? 

Mr. ScHNELLBACHER. Under wartime regulations of O. W. I., we 
have not been able to promote any publication since Pearl Harbor. 
This magazine here [Domestic Commerce] was recommended highly 
by O. W. I. as a means of getting rid of about 173 types of smaller 
processed publications. This went on a printed basis as entirely a 
new magazine, in May of 1943, with, as I say, a little over 1,500 sub- 
scribers. We have 10,000 subscribers and about 2,500 over-the-counter 
sales made by the Superintendent of Documents, and no promotion 
has gone into this publication at all because we are not allowed to 
promote it. 

Mr. WoRLEY. Could you provide the committee with copies of each 

Mr. ScHNELLBACHER. I brouglit thcsc down. 

Mr. WoRLEY. Is there any other information ? 

Mr. Shcnellbacher. Not tKat I know of. 


Mr. WoRLEY. Thank you very much. The committee will resume 
hearings at 2 o'clock. 

(Pursuant to the adjournment for the noon recess, the subcommit- 
tee reconvened at 2 p. m.) 

Mr. WoRLEY. The committee will be in order. 

We would like to again recognize the Under Secretary of Commerce, 
Mr. Taylor. 

If you will, Mr. Taylor, proceed with your other witnesses and give 
us a complete idea or complete picture of the operation of the rest of 
your Department. 

Mr. Taylor. I think I would like to start with the Bureau of the 
Census, particularly its foreign-trade activities. 

Dr. Hauser, Assistant Director of the Bureau, is present; also, Dr. 
Ely, who is directly in charge of the foreign-trade aspects of it. 

Mr. WoRLEY. Would you state your name, please? 

Mr. Hauser. Philip M. Hauser, Assistant Director of the Bureau 
of the Census. 

Mr. WoRLEY. You may proceed. 


Mr. Hauser. Mr. Chairman, the Bureau of the Census, as the Under 
Secretary pointed out this morning, is one of the bureaus of the 
Department that is entirely a service bureau. 

It has no regulatory or enforcement functions at all to perform. 

The primary purpose of its existence is to collect, compile, and make 
available to agencies of Government, private business, and industry^^ 
statistics which we hope, and which we believe from the standpoint of 
the record, are useful for determination of policy and the conduct of 
programs, both in private industry and business and in Government. 

The Bureau's program in relation to foreign trade might be gen- 
erally described as having two fundamental parts : First, that part 
of the statistical output which is indirectly related to the field of 
foreign trade, and, second, that which is directly so related. 

I should like to take just a moment briefly to outline the former, 
and then to have Dr. Ely, who is in charge of the Foreign Trade 
Division, outline the foreign-trade statistics, the import and export 

Now, with respect to the former, it is perfectly clear that the for- 
eign trade of the United States can be fully understood only in the 
light of the total volume of production and distribution of goods and 
services in our total economy. 
. The Bureau of the Census, along with other agencies of the Gov- 
ernment, is responsible for the procfuction of a large mass of statistics 
I relating to our production, to our distribution, and to our human and 
I material resources which are involved in these endeavors. 
I Those statistics are of fundamental importance in providing a back- 
I ground against which our foreign trade, as such, may be better under- 
stood and appreciated — the role of foreign trade in our economy. 
The specific fields which, perhaps, have the most direct relationship to 
foreign trade are, first, statistics of industrial production which are 

99579 — 45 — pt. 4 9 


provided for through bench-mark Censuses of Manufactures on the 
one hand, and current industrial statistics on the other; the bench- 
mark Censuses of Business which provides us with the fundamental 
facts about distribution, and the bench-mark Censuses of Agriculture 
which provide us with the basic information on agrictultural com- 
modities. Not unimportant by any means, also, are the fundamental 
statistics relating to the population, the people of this country, and , 
the labor forces. 

It might be of interest to outline how these statistics are indirectly 
related to foreign trade. First, it is well to point out that in this 
morning's testimony it was stated there is an increasing interest on 
the part of the American business community in export trade. Now, 
that is not altogether an historical accident. The population statistics 
have made it clear for some time that the rate of population increase 
in this country has been rapidly decreasing. With that decrease there 
has been necessarily a decrease in what we might think of as domestic 
national market expansion. 

It is rather striking to realize that the difference in the decimal 
increase in population of this country between 1920 and 1930, when 
we increased by some 17,000,000 people, and that of 1930 to 1940, when 
we increased by approximately 8,000,000 people 

Mr. WoRLEY. We went from 17,000,000 to 8,000,000 ? 

Mr. Hauser. That is right ; in those two decades. 

Mr. WoRLEY. Do you go into reasons for those declines ? 

Mr. Hauser. That is possible, if you are interested, Mr. Chairman. 

Mr. Worley. I mean, does your Department go into reasons for those 

Mr. Hauser. Yes ; we deal with the explanation and interpretation 
of the basic data as well as the presentation of them. The difference 
in those rates of increase alone represents the population equal to 
that of the entire State of Illinois, which might have been an addi- 
tional part of our domestic market, but which we do not have as a 
result of that decline in the rate of population growth. 

I mention that as simply illustrative of how these other types of 
statistics are definitely part of the picture and must be reckoned with 
in any analysis of the foreign-trade situation. The foreign market 
is one part of the total market with which we are all concerned. 

So much for those indirect statistics. If the committee is interested, 
in further detail, it can be provided. Tliey are quite voluminous, 
and, of course, occupy a considerable part of the energies of the Bureau 
of the Census. 

With respect to the direct function, our direct part in foreign trade, 
the Bureau of the Census occupies an entirely unique position as 
entirely a special service agency. As the Under Secretary and other, 
members of the Department have pointed out, tlie Bureau of Foreign 
and Domestic Commerce in the Department is essentially a service 
agency to the business community. In one sense, the Bureau of the 
Census is a service agency to the Department of Commerce and to 
the Bureau of Foreign and Domestic Commerce in the compilation 
of foreign-trade statistics. 

We collect and compile the trade data on import and export sta- 
tistics, which then become marketed, so to speak, by the Bureau of 
Foreign and Domestic Commerce, and packaged in such form that 



they can have the utmost usefulness to the business community. Tlie 
Bureau of Foreign and Domestic Commerce and other agencies of the 
Department do the interpreting and analytical work for the business 

A description of what that enterprise is can be given rather briefly 
iby Dr. Ely. who is chief of our Foreign Trade Division. 

Mr. Taylor. There is one very interesting point that Dr. Hauser 
touched on, which is, that in the earlier stages of our development, 
actually we imported our customers. 

Mr. WoRLEY. We imported what? 

Mr. Taylor. We imported our customers in the form of human 

Mr. WoRLEY. Say that again. 

Mr. Taylor. An individual is a consumer, you see, whether he is a 
consumer in China or a consumer in the United States, but, as a result 
of the innnigration policy which governed all the earlier years of our 
development, actually we were importing customers. 

INIr. WoRLEY. Yes ; I see your point, sir. 


Mr. Ely. I would assume the committee is familiar with the import 
and export statistics which were published both for the use of the 
Government and the public prior to the war. 

Mr. Worley. Don't make any assumption that we are familiar with 

]Mr. Ely. I will mention two major sources of information prior 
to the war. There was the annual volume on Commerce and Naviga- 
tion, some thousand pages of import and export statistics arranged 
in almost every possible order, broken down by commodities and by 
customs districts through which it was shipped, as Avell as information 
on trade with our noncontiguous territories, and information on 
clearances and entrances of vessels. 

Mr. WoRLEY. Was that gotten out by your department? 

Mr. Ely. That is right. I only have a copy of the 1939 edition. 
The 1940 is out of print, and the 1941 will come out of the Printing 
Office pretty soon, I expect. 

Mr. WoRLEY. Do you publish tliat annually? 

Mr. Ely. Yes; generally about a j^ear after the end of the year 

Mr. Worley. 1941 isn't available yet? 

Mr. Ely. No; that has just been released by the secuijity authorities. 

On December 7, 1941, the}^ suspended the publication of all import 
and export statistics, including those for the month of October 1911. 
Some were released. Just a few months ago the security authorities 
allowed us to complete publication of 1941. They have since allowed 
publication of other material. I will get into that later on. 

Then, our principal monthly publication was the Monthly Summary 
of Foreign Commerce of the United States, which contained informa- 
tion on foreign trade and commerce not in as great detail as the annual 


Then, in addition to that, there were hundreds of mimeographed 
releases turned out through which, say, 15 or 20 people got information 
on specific commodities or a specific trade area. , 

During the war period, what happened was that all publications 
were suspended and we went over into a war basis, preparing the mate- 
rial for the war agencies. The Lend-Lease Administration made us 
their agents to compile information on lend-lease exports, and these 
figures have proved to be one of the best over-all records of lend-lease 
activity. They are the ones that appear on the 90-day President's 
report to Congress on Lend-Lease Operations. 

It is obvious that statistics published very much more promptly 
would be better for a service of that sort, because they are compiled 
immediately rather than several months late as accounting records 
tend to. We also show the commodities that go out of the country and 
the countries to which they went. 

Mr. WoRLEY. That is your function ? You keep track of lend-lease 
exports ? 

Mr. Ely. Of lend-lease exports for the Foreign Economic Adminis- 
tration and its predecessor, the Lend-Lease Administration. The 
figures are compiled in such manner that they can be added to the 
other exports to get the complete over-all picture of our export trade. 

Mr. WoRLEY. How often do you make those ; every year ? 

Mr. Ely. Those are compiled every month. In fact, we prepared 
special 5-day reports for the Lend-Lease Administration. They are 
not in as much detail, but the monthly reports are quite complete, show 
complete commodity data and detail as to each country. In addition 
to that, for the Foreign Economic Administration, we prepare spe- 
cial tabulations by the countries that rex][uisitioned the lend-lease mate- 
rial and by where it was shipped and what vessel it went on. That 
is for their own internal use in the F. E. A. That material never would 
be published. 

Mr. WoRLEY. You keep records of what we owe other countries under 
the lend-lease ? 

Mr. Ely. You mean what they have requisitioned and we haven't 
yet sent them ? 

Mr. WoRLEY. No; what we might owe them under reverse lend-lease. 

Mr. Ely. Under reverse lend-lease — that is on the import side. We 
are not yet doing it in a systematic manner. Those goods that come in 
under reverse lend-lease and reach this country, we are going to keep 
records on the import side. 

Mr. WoRLEY. Who does that now ? 

Mr. Ely. There has not been much coming into the country under 
those circiunstances. Most of the reverse lend-lease has been given 
to our forces abroad and it won't be very hard to go back and pick up 
what has already come into the country and prepare records of it. 

That, incidentally, has been recommended by a clearing house that 
was set up under Executive order in the Foreign Economic Adminis- 
tration. It set up a clearing house to coordinate all international 

Mr. WoRLEY. Who did you say had the jurisdiction of that now? 

Mr. Ely. F. E. A., the Foreign Economic Administration. They 
are now proposing to make a number of recommendations that I was 
going to come to in a moment. 


In addition to preparing this material for the Lend-Lease Adminis- 
tration, or, rather, the Foreign Economic Administration, we have 
also continuously been preparing information on licensed exports for 
the use of O. E. W., at the time, and now F. E. A. That was their only 
method of obtaining information on exports under license, which was 
obviously necessary for their own administrative purposes. 

At the same time we have tabulated for the War Production Board 
information on scarce commodities; and for the War Shipping Ad- 
ministration we have been preparing information on the shipping 
iweight of the commodities imported and exported. 

This extra work done for war agencies since the war has meant a 
considerable expansion of our own techniques. We have had to add 
to our information the shipping weight of commodities for the War 
Shipping Administration and other agencies, have had to prepare tab- 
ulations identifying by which vessel the goods left the country or 
entered the country. We have had to compile tabulations showing 
export methods of transportation. In particular, we have been pre- 
paring for war agencies tabulations of imports and exports by air. 
Those we expect to be very valuable when they can be released. They 
cannot be released at the present time. 

Mr. WoRLF.Y. For security reasons ? 

Mr. Ely. For security reasons, yes ; all the import and export figiu-es 
cannot be released. 

This clearing house that I mentioned, in addition to recommending 
that we keep track of imports under the reciprocal-trade progi'am 
in order that you might be able to see how much of the imports were 
under that program, is in the process of making other recommenda- 
tions in regard to keeping track of lend-lease goods returned to us 
after the war. So far there have been none. 

It is also recommended that we keep track of U. N. R. R. A. exports 
generally so that those figures may be used principally by other agen- 
cies, although the general public may be interested in having separate 
tabulations of shipments or relief under the U. N. R. R. A. program. 

It is also recommended that we keep track of imports by Govern- 
ment agencies. There has been a vast increase in exports during the 
war. The Government has made the exports by lend-lease. In the 
case of imports it has been necessary to limit them very strictly on 
account of space, and in some cases the Government agencies have been 
doing the purchasing abroad. 

The release of figures has been restricted during the war period, 
but we are in the process of releasing information to the public, because 
the security authorities have agreed to the release of information on 
a delayed basis. We cannot release any information on strategic or 
critical commodities. We cannot release any figures on trade with 
South America that is more recent than 12 months; cannot release 
any figures on trade with Canada and Mexico that is more recent than 
6 months. We can only show the total exports of a'ny commodities 
12 months after the export. 

As a result of that activity, we are in the midst of turning out these 
censored reports, and it is much more difficult to handle. You can't 
turn out your regular reports ; they have to be censored first. 

I can leave here a number that have come out so far, excluding in-^ 
formation that still cannot be released by the security authorities. 

Mr. WoRLEY, We are interested in those reports. 



Mr. Ely. These are being distributed to the public on a sales basis 
and also given to depository libraries on a peacetime basis, and they 
are distributed to other agencies of the Government, say, the Depart- 
ment of Agriculture, who wants to relay those figures to the public in 
connection with its own work. 

Mr, WoRLEY. How many members of the public would be interested 
in that? 

Mr. Ely. I think we are selling 100 or 200 copies of that at the pres- 
ent time. It is rather difficult to get a high sale on something that is 
12 months old in the way of figures. 

There has been a public demand to get even that, and that does not 
represent the complete distribution of the figures, because the Bureau 
of Foreign and Domestic Commerce, as well as other Government 
agencies, send it out together with their own interpretation of what 
has happened. 

One of the things that has happened as a result of the war is a con- 
siderable increase in export commodity categories. Prior to the war 
export tables showed some 1,400 commodities. As a result of the 
need for greater detail on exports, the number of commodities have 
been increased from 1,400 to 3,600, and it has meant a considerable 
change in our whole procedure in order to get better accuracy. When 
you haA^e a total of only twelve or fourteen hundred categories you can 
afford to be much less accurate than when you are keeping track of 
lend-lease material by size of tank and size of shell. 

It has been necessary for us to compile a rather voluminous dic- 
tionary so the shipper is able to find what his commodity is in terms 
of our own definition before he makes a shipment out of the country, j 
so that we can be sure our figures are as accurate as need be for the | 
export agencies, Lend-Lease Administration, and so forth. 

I think that covers our picture. We are anxious to get the informa- 
tion out so that industry can be aware of the problems with which they 
are faced and can determine what to do. 

Mr. WoRLEY. Do other countries offer the same service or similar j 
service ? i 

Mr. Ely. In general, their published statistics are not as detailed as 
United States statistics in terms of commodity classification. That 
was true to some extent prior to the war and, I suspect, will be more 
true after th^ war. You never know in the published statistics of 
other nations whether the statistics compiled for the Government itself 
were in more detail. 

From my own use of the German statistics I have always felt that 
they must have had more detailed statistics for their own use. Their 
published statistics were very general; they hid more than they 

Mr. Worley. Is the information you compiled available to anyone ? 

Mr. Ely. In peacetime it is. The only restriction is that it does 
not reveal the activity of one business enterprise or one entitj^, a domes- 
tic corporation. 

Mr. WoRLEY. But people who are interested can secure it ? 

Mr. Ely. That is right. That is the reason for having to declare 
it confidential, because if you publish it here in the United States it 
would be available outside the United States. 

Mr. WoRLEY. But, in peacetime it is available to anyone upon re- 
quest ? 


Mr. Ely. It is unrestricted; as free as water or air, supposedly. 

Mr. WoRLEY. We get the same information from otlier countries? 

Mr. Ely. What is published. 

Mr. Taylor. That goes back to the point I was making this morn- 
ing, ]Mr. Chairman. It is not in any way uniform and, in order to be 
abte to establish any basis on which any international discussions 
could take place, you have to have comparability of information, and 
it has to be complete. m 1 1 

Mr. WoRLEY. We give them most of the information available, but 
it is a one-way road ? 

IMr. Taylor. It varies with the country. 

Mr. WoRLEY. Generally ? 

iSlr. Taylor. Well, the other countries have not gone as far as we 
have in the development of over-all statistics. For instance, one of 
the things we ran into in IT. N. R. R. A. — you will remember the for- 
mula was worked out as 1 percent of the national income — we have 
spent a large part of our time since then showing other countries how 
they can get national-income statistics. These did not exist and, in 
cases where they did exist, they were not comparable. 

Mr. Worley. We might have done too much bragging about that 

Mr. Hauser. Mr. Chairman, it may be proper to point out, too, that 
this Government is in rather a peculiar relationship as far as the 
release of detailed import and export statistics is concerned. If we 
make our statistics very general, without sufficient commodity detail, 
the individual businessman who is interested in either the import or 
the export trade does not have the necessary information with which 
most advantageously to operate his own business. 

With respect to some of the foreign countries, detailed information 
may not necessarily be made available to their businessmen,* because 
the export or import business is directly controlled either through 
the operation of cartels or by Government control. The American 
businessman is forced in many instances to compete with what is, in 
essence, a Government monopoly in other countries. 

If we try to protect him, on the one hand, by not revealing details 
on exports and imports, we may, on the other hand, hurt him by not 
giving him enough information to compete. The complete picture 
is one of the individual American businessman operating in world 
markets in competition with cartels or control by foreign governments. 

I think the statistical problem is merely part of a much broader 

Mr. Worley. Do you have any additional information ? 

Mr. Ely. No, sir. 

Mr. Worley. Thank you very much. 

]Mr. Ely. I can leave these exhibits of peacetime and wartime pub- 
lications. There are a lot of copies of them. 

]Mr. Worley. Thank you very much. 

Do you have any additional comment on the operation of the Bu- 
reau of the Census? 

Mr. Taylor. No ; not at this time. 

Mr. Worley. A statement presented by Mr. Ely will be inserted in 
the record at this point. 


(The statement referred to is as follows :) 

Functions and Responsibilities of the Foreign Trade Division, 
Bureau of the Census 

Under title 15 of the United States Code, sections 173 through 177, and title 
46, sections 92 and 95; tlie Department of Commerce is responsible for the 
collections, classification, tabulation, and publication of statistics on imports 
and exports of the United States and trade between continental United States 
and its Territories and possessions. 

In recent years the work of compiling foreign-trade statistics has been con- 
siderably expanded to provide additional information required by war agencies : 

Since the inception of the lend-lease program, the Foreign Economic Ad- 
ministration has been supplied with special current tabulations on lend- 
lease exports. These tabulations are the official record of such exports ; 
and show the amounts of each commodity exported by requisitioning country, • 
lend-lease requisition number, vessels on which the shipments were made, 
country of ultimate destination, etc. 

The War Production Board is supplied with import and export information 
necessary for its operations in allocating scarce materials and manufactured 

The Foreign Economic Administration obtains detailed information on 
shipments under export license. Most of the increase in commodity detail , 
shown in export statistics since the beginning of the war (an increase of | 
from 1,400 to 3,500 in the number of separate commodity classifications) | 
was instituted at the request of the Foreign Economic administration and I 
is predecessor agencies. 

The War Shipping Administration and other war agencies are provided 
with information on the shipping weight of exports and imports and the 
quantities, values, and shipping weight of individual commodities carried 
on vessels which were lost as a result of submarine warfare or other enemy 
action. These tabulations, in addition, provide special information on the 
lend-lease cargo lost. 

This expanded program for providing information on United States foreign 
trade results in a much clearer picture of the movement of exports and imports 
than was available prior to the war and clarifies many problems of Govern- 
ment, business, and industry both in war and peace. 

Until recently no information on the foreign trade of the United States had 
been released to the public since the beginning of the war except the grand 
total value of imports and exports. Within recent months the security authori- 
have allowed the release to the public of selected import and export statistics on 
a 6 and 12 months' delayed basis. These statistics do not divulge any iuforma^ 
tion on imports or exports of strategic, critical, or military items. 

Every effort is being made to provide business and industry with as much 
information on United States foreign trade as may be released without giving 
aid and comfort to the enemy. With the end of the war in Europe, it is hoped 
that much of the information on foreign trade which has been compiled primarily 
for the use of war agencies during the war period can be released to business 
and industry for use In planning their post-war export and import activity. 
Because of the vast improvement which has been made in export and import 
statistics during the war period. It is anticipated that this information when 
released will be far more valuable to the public than the information whicli 
was provided before the war. 

The foreign trade statistics program must continue to have as one of its 
principle functions the providing of information on imports and exports which 
will be most useful to other Government agencies engaged in international 
operations. Under instructions from the President, a Clearing Oflice for Foreign 
Transactions and Reports has been created in the Foreign Economic Adminis- 
tration to coordinate the records on international transactions which are 
compiled in various Government agencies. An important function of this 
clearing ofiice is to Integrate import and export statistics with informaton com- 
piled by other agencies. For example, considerable attention is being given by 
the Clearing Office at the present time of the problem of making certain that 
statistics on imports provide adequate information on Imports by United States 


Government agencies and on imports under the lend-lease reciprocal-aid program, 
and that export statistics provide information on all types of exports, including 
those sponsored by United States Government agencies. 

The foreign trade statistics program of the Bureau of the Census will continue 
in the post-war i)eriod, as it has during the war period, to emphasize the 
importance of providing prompt, accurate, and sufficiently detailed statistics on 
foreign ti'ade for use both by Government and business. 

Mr. WoKLEY. Your next witness, Mr. Taylor ? 

Mr. Taylor. Dr. Fairchild, of the Bureau of Standards. 

Mr. WoRLET. You maj^ proceed. 



Mr. Fairchild. I want to tell you, Mr. Cliairman, about the work we 
are doing on export trade, with just a word of background. 

Mr. WoRLET. Would you like the statement to go in the record ? 

Mr. Fairchiu). Yes, sir. That is a prepared statement. 

Mr. WoRLET. All right. Insert in the record the statement of Dr. 

(The statement referred to, together with a supplemental statement 
later filed by Mr. Fairchild, is as follows :) 

Commercial Standards For Foreign Trade 

Statement, September 27, 1944, by I. J. Fairchild, Chief, Division of Trade 
Standards, National Bureau of Standards, to the Subcommittee on Foreign 
Trade and Shipping, of the House Special Committee on Post-war Economic 
Policy and Planning 

standards for export trade 

For a number of years prior to World War II the Germans were actively 
promoting the use of Gennan standards, especially in Latin America, and subsidiz- 
ing, up to 65 percent of production costs, the exportation of German products. 
England, too, through its Government, was taking over up to 90 percent of the 
unpaid balance of exijort contracts and actively promoting the purchase of goods 
according to British standards. 

At the same time, some misguided exporters in this country were delivering used 
and scratched plate glass, short pieces of wire, and otherwise dumping into Latin 
America products unacceptable in this country, largely through misrepresentation 
or incomplete descriptions. 

Beginning with the fiscal year 1940, on approval of the Bureau of the Budget, 
Congress appropriated small amounts to the National Bureau of Standards and 
to the Bureau of Foreign and Domestic Commerce to aid industry in the 
establishment of standards as a basis for exports and the translations thereof, 
particularly into Spanish and Portuguese. Allotments for this work have been 
continued in the subsequent appropriation acts. 

The objectives as applied to standards for exports are essentially the same as in 
the establishment of commercial standards for use in the domestic market. We 
have been working quietly with industries asking our aid in bringing some order 
out of tlie confusion and in improving confidence in the product at the point of 
sale, not with the idea of making products uniform, nor to give up any design 
differences, nor to surrender any selling points, trade names, trade brands, or 
any other individual advantages, but rather to find some common ground or plat- 
form on which exporters can stand together to improve public understanding and 
acceptance of the product, to promote fair competition, to broaden markets and to 
minimize the need for testing on behalf of the purchaser by encouraging the 
exporter to guarantee voluntarily i>roper sizing, testing, grading, rating, or other 
criteria of the product, generally hidden, according to the standard. 

By means of the voluntary identifications or labels guaranteeing conformity to 
the standard, the foreign purcliaser, whether large or small, can distinguish be- 


tween high quality goods rated or graded aceorduig to standards, aud those sold 
merely on the basis of price or offered for barter. 

It is believed that with modern mass-production methods, systematic inspec- 
tion, and technical control of raw materials and processes, our country now sur- 
passes foreign competition in the ability to produce uniform grades and types of 
the highest quality of machine-made goods. However, speaking broadly, we have 
not used standards with voluntary inspection prior to shipment, and voluntary 
certification as to grade in order to clinch the recognition of and reputation for 
quality as a sound foundation for the expansion of a more permanent and 
profitable export trade. Buyers, both domestic and foreign, are eagerly search- 
ing for assurance as to quality, and sellers are even more eagerly looking for) 
means to promote sales, to expand, and to hold their markets. 

The procedure is very similar to that for the establishment of commercial 
standards for domestic trade. On specific request by the exporters, conferences 
are held, standards developed and adjusted, and following acceptance in writing by 
a satisfactory majority, these standards are published and promulgated in English 
by the National Bureau of Standards. In the course of development, the Bureau 
of Foreign and Domestic Commerce investigates the usefulness of proposed 
standards from the standpoint of practical trade promotion, and obtains opinions 
and suggestions from well-informed foreign buyers, in order that the standards 
may have the maximum value as a means of increasing the prestige and sale of 
American commodities abroad. 

Approved standards are then translated into Spanish, Portuguese, or other 
approprate languages according to the market opportunities, and after checking 
with experienced exporters, the translations are published in these languages by 
the Burefu of Foreign and Domestic Commerce. They are circulated through the 
Department of State to the American Foreign Service ofl3cers for trade-promotion 
purposes, and to libraries. Government departments, and other offices in foreign 
countries, where they will be available for reference. 

Fifteen such standards as a basis for exports have been established and pub- 
lished in English, 11 of which have been translated and distributed in Spanish, 
and 8 in Portuguese. A number of others are in the process of development or 


There is a similar urgent need for standards to facilitate imports and to bring 
. about better understanding between seller and buyer as to the types, grades, and 
characteristics of imported goods. During the war large sums have been expended 
for the importation of raw materials, such as manganese ore, caranauba wax, 
fats, oils, and cinchona bark, which were not suitable for the intended purpose. 
We hfive the approval of the Department of State and the Foreign Economic 
Administration to undertake the voluntary, cooperative establishment of stand- 
ards for imports. 


(By I. J. Fairchild, September 27, 1944) 

"Diesel and Fuel-Oil Engines (Exiwrt Classifications), Commercial Standard 
CS102E-42." is a good example of a voluntary standard worked out cooperatively 
between industry and Government. This standard covers nomenclature and 
definitions, standard sea-level ratings under specified conditions, altitude derat- 
ings, minimum standard equipment, engine and accessory data, a uniform guaranty 
label, and the manvifacturers' joint recommendations as to other necessary or 
desirable equipment. 

It interferes in no way with individual differences in design or selling points, 
nor does it hamper future improvements, as it is based on the principle that each 
manufj^cturer will retain his freedom of action as to design, and will, of course, 
continue his individual trade name and/or trade brand to signify his respon- 
sibility to the buyer for over-all performance and all of the other aspects of the 
sale outside and beyond the scope of the standard. 

As a result of numerous checks in Latin America through both private and 
governmental channels, the industry is enthusiastic over the prospects of improv- 
ing and expanding exports of Diesel and fuel-oil engines with the aid of this 



There are listed below the commercial standards already established as a basis 
for export trade. It will be noted by the absence of the "E" in the identification 
number that a majority of these are the identical standard used in domestic trade. 


Titles, English edition 

Translation and dls- 

















Diamond core drill fittings 

Staple vitreous china plumbing fixtures 

Interchangeable ground glass joints 

Douglas fir plywood (revision in process) 

Oak flooring 

Hardwood dimension lumber 

Liquid hypochlorite disinfectant, deodorant and germicide 

Pine oil disinfectant 

Phenolic disinfectant (emulsifying type) 

Phenolic disinfectant (soluble type) 

Houshold insecticide (liquid spray type) 

Sanitary cast iron enameled ware 

Crawler mounted, revolving power shovels, lifting cranes, dragline, 
and clamshell excavators (export classifications). 

Portable electric drills (exclusive of high frequency) -.. 

Diesel and fuel-oil engines (export classifications) 






Mr. WoRLET. You may proceed. 

Mr. Fairciiild. Prior to the war, the Germans were promoting the 
purchase of goods according to their own standards. They had men 
on the ground in Latin America, and they were subsidizing their ex- 
ports to the extent of 65 percent of their own normal cost of pro- 

Mr. WoRLEY. Who was doing that ? 

Mr. Fairchild. The Germans. And the British were taking over, 
according to the information we have, 90 percent of the unpaid bal- 
ance of export contracts, particularly exports into Latin America. 
The British also have had men on the ground actively promoting pur- 
chase according to British standards. 

Here are two volumes put out in Spanish by the British in 1942. 
The first is British Industrial Practices, which is a sort of composite 
handbook, mechanical, electrical, metallurgical, and textiles. It con- 
tains tables to convert English systems into the metric and other prac- 
tices used in Latin America. 

Mr. WoRLEY. Is that a Government publication ? 

Mr. Fairchild. This is put out by the British Standards Institu- 
tion cooperatively with the Government. 

This one is a composite catalog of British products offered for ex- 
port from Britain. Both of these volumes are very well done. 

Mr. Worlet. Where are they circulated ? 

Mr. Fairchild. In Latin America, published in the Spanish lan- 

Mr. WoRLEY. Are they made available to anyone, sir ? 

Mr. Fairchild. Down there ; yes. They are rather scarce here. 

Mr. Worley. Do you have any idea how many copies are in circu- 
lation ? 

Mr. Fairchild. We don't have any records, but I understand they 
have been pretty liberal with them. 

Mr. WoRLEY. Why do they send those documents down there ? 

Mr. Fairchild. That is to promote understanding between the tech- 
nical people and purchasers as to what is available from Britain and 
the terms that they apply to their goods. 


In the fiscal year 1940 Congress gave the Bureau of Standards a very 
small amount, $13,000, 1 think, to be exact, and an even smaller amount 
to the Bureau of Foreign and Domestic Commerce, to assist our in- 
dustries in developing commercial standards and translating them into 
Spanish and Portuguese. Those allotments have been continued in 
subsequent years. 

JNIr. WoRLEY. That is $13,000 you say ? 

Mr. Fairchild. Yes, sir. 

Mr. WoRLEY. Is that enough for you to do the job well ? 

Mr. Fairchild. Not Avell ; no, sir. The preparation of these stand- 
ards is essentially the same as for our commercial standards for do- 
mestic business. We cooperate with the industries to bring some order 
out of the confusion of terminology and methods of testing and rating, 
with no idea of standardizing the final product. 

In other words, we are not trying to level off competition; we are 
trying to stimulate competition, and the standards must never go so 
far as to cover the item rigidly or completely. 

Mr. WoRLEY. What sort of item; any manufactured products? 

Mr. Faikciiild. All items within the bailiwick of the Department 
of Commerce. That means other than foods, drugs, cosmetics, and 
farm products. 

The purpose is to improve the standing of the products by encourag- 
ing the exporter to guarantee voluntarily proper size, grading, rating, 
or other criteria of the product, generally hidden. 

Mr. WoRLEY. We do that for the producer of this commodity, the 
manufacturer ? 

Mr. Fairchild. We work with our exporters to establish standards 
and the Bureau of Foreign and Domestic Commerce translates them. 
The manufacturers, through their own channels, and the Government 
through the Department of State distribute the standards in Latin 
America. The exporters conform to these commercial standards reg- 
ularly without request from the buyer. 

Mr. WoRLEY. This pencil here, for example, I don't know who makes 
this, but some people in Latin America are interested in buying pen- 
cils. In the functioning of your Department do you test that pencil, 
examine it as to the type of lead in it, and make that information 
available to them? 

Mr. Fairchild. Normally no. Broadly speaking we do not test for 
the public. We do testing for Government agencies or testing in the 
way of research to obtain data on the commodity as a whole that would 
be incorporated into such a standard, but we do not encourage testing 
in our Bureau for the public. There are too many private laboratories 
and inspection agencies that make their living, their bread and but- 
ter, that way. 

Mr. WoRLEY. I misunderstood you. I thought you said you tested 
a given commodity so that the purchaser would know what he was 
buying, a purchaser in another country. 

Mr. Fairchild. No, sir. We have been requested by Latin America 
buyers to do that over a long period of years, but it is not a thing we 
like to do because it takes work out of the hands of testing laboratories 
and inspection agencies, such as Robert W. Hunt Co., for example. 

Mr. Taylor. I think if you would explain what an industrial stand- 
ard is, that it would be helpful. 


Mr, Fairciiild. I think, Mr. Chairman, as an example, I will turn 
in this supplemental statement as part of the record. 

"Diesel Engines (CS102E-42)" provides a good example of how 
these commercial standards operate. We worked with the industry 
in conferences to develop the type of criteria that they wanted in the 

Tliis pamphlet — we have it in English and Spanish — covers ma- 
rine, stationary, portable, Diesel, and fuel-oil engines. It sets up 
nomenclature, definitions, methods of rating, methods of testing, the 
engineering data to be furnished with the engine, the parts that are 
considered minimum equipment, and also a list of recommended spare 
parts with which the buyer should equip himself. 

This is made a matter of record as a government document follow- 
ing written acceptances from the exporters that they will make it their 
standard of practice. 

Mr. WoRLEY. All the people who manufacture marine engines say 
that they will try to make the standards you recommend the standard 
type of marine engines? 

Mr. Fairchild. They say they will rate them according to those 

This is the type of label which they have adopted for application 
to the engines when shipped. [Exhibiting label.] Some companies 
are also applyiiig it on lend-lease engines, although that is not neces- 

In the supplemental statement there is also a list of the 15 standards 
established to date, 11 of which have been translated into the Spanish 
and 8 into the Portuguese. 

Even the translations are difficult matters because Spanish is not 
a standardized language, neither is the Portuguese, and it is difficult 
to find words which will convey the proper meaning to the various 

In the course of development of these standards the Bureau of 
Foreign and Domestic Commerce investigates the usefulness of the 
proposed standards to foreign buj^ers and obtains comment through 
official channels, American Foreign Service officers. Comment is also 
obtained by our manufacturers through their own private representa- 
tives. When those reports are received the standards are then ad- 

I want to make it very clear that these are standards which we offer 
to them already developed and the goods are labeled or rated accord- 
ing to those standards as a means of assuring the quality or the ratings 
as being above what might be offered on a purely price basis. No 
attempt is being made to discourage at all the sale of goods according 
to price. We sell lots of house dresses, for example, in Latin America 
on a price basis. They may not be of the highest degree of color 
fastness or breaking strength. As long as we can get that business 
on a price basis, of course, we want to continue, but we want to enable 
the foreign buyer also to distinguish between goods which conform 
to quality standards and those which do not, because we believe it is 
going to' be impractical to meet postwar competition, particularly 
European competition, on a price basis. 

We do believe that with modern mass-production methods and our 
ability to make fine measurements and interchangeable parts, that 


our country now surpasses the world in its ability to produce uniform 
grades and types of the highest quality of machine-made goods. Ours 
IS an effort to get credit for delivering that high quality, high per- 

In connection with Diesel engines, for example, and some of the 
heavier machinery, we now produce precision bearings up to 20 inches 
in diameter — an example of one of the things we have done in this; 
country not paralleled anywhere in the world. 

Mr. WoRLEY. In that connection, do other countries maintain a. 
Bureau of Standards? 

Mr. Fairchild. They have been very active in standards work, Ger 
many and England and France too, pre-war, and a number of suchi 
organizations are being set up in Latin-American countries, but they 
of course, have a long, uphill pull to draft standards for most of their' 
purchases. It is going to take them a long time to cover any fair' 
percentage of the whole market. 

After consulting with the Department of State and the P'oreign 
Economic Administration, we have in mind also, sometime in the post- 
war period, establishing standards as a basis for imports. As a nation 
we have been importing something like 200 different raw materials,, 
many of which, after the expenditure of large sums, have reached this ; 
country only to be entirely unsuitable for the purpose. We have had 
a lot of trouble with quartz and fats and oils, chinchona bark, and man- 
ganese ore, largely because buyers and sellers did not understand one ■ 
another as to what was to be delivered, that is, the general character- 
istics of the item. 

It is not that we want to set up any barrier to imports, not that at 
all. We want to know what sort of products are going to be received 
so they will be allocated into channels where they will be useful. 

I might leave another example of these publications. Here for ex- 
ample, is one, "Crawler mounted, revolving power shovels, lifting 
cranes, dragline and clamshell excavators (export classifications) 

This industry has very recently formed an association known as the 
Power Shovel and Crane Manufacturers Export Standards Associa- 
tion, and a revision is under preparation to include in this standard 
the small rubber-mounted shovels and cranes. 

Mr. WoRLEY. Do you send these pamphlets out to those countries ? 
Mr. Fairchild. We purchase rather a small number, 500 or 1,000, 
something like that, and the industry itself pays for large quantities 
and puts them in the hands of prospective buyers and their own agents 
in South America. 

Here is one on "Sanitary cast-iron enameled ware, CS77-40," of 
which the industry purchased over 75,000 copies. A good many of 
those were for domestic use, however. Copies were also forwarded to 
the Department of State to be put into the hands of governments, 
libraries, railroads, and large buyers in South America. 
Mr. WoRLET. The manufacturing concerns do that themselves ? 
Mr. Fairchild. They do that themselves ; yes, sir. 
I think that is all I have to say unless you have some questions. 
Mr. WoRLEY. Do you have anything to do with standards of ship 
construction ? 


Mr. Fairchild. No, sir. I think our laboratories might do some 
testing work to determine permissible stresses of new structures, and 
that sort of thing, but my division does nothing of that sort. 

Mr. Arthur. I have one question with respect to those labels which 
have been prepared for certain products. 

How broadly are they used and how many commodities are they 
available for at the present time ? 

Mr. Fairchild. You are speaking now of exports only ? 

Mr. Arthur. Exports — the trade mark which says that it conforms 
to a high American standard. 

Mr. Fairchild. There are relatively few of them. We have those 
15 standards established now for that purpose and we are encouraging 
those industries to identify every article exported with that label ; not 
to wait for the customers to request it but hand it to them voluntarily. 

Mr. Arthur. Those are 15 items in our total export trade. How 
much of a field does that represent? One-half of 1 percent? 

Mr. Fairchild. It is probably less than that, although we have 
deliberately tried to pick out important items, Diesel engines, shovels 
and cranes, sanitary ware, disinfectants. We have a number of others 
under preparation, but this work has gone rather slowly during the 
war, naturally. 

Mr. Arthur. There are other countries which have developed and 
promoted standards for their important exports, like Danish butter, 
which has a definite label attached, "Improved Danish Butter for Ex- 
port." That is a well-recognized brand name and it covers a substan- 
tial part of the total Danish exports, as I understand it. 

Is there any program contemplated for the United States comparable 
to that? 

New Zealand has another, I believe? 

Mr. Fairchild. I believe you will find in the Department of Agri- 
culture they are doing something similar. In the Department of 
Commerce we are not exercising that control. In Persia, too, they 
have set definite minimums of the quality of Persian rugs that can 
be exported from the country. That is governmental regulation. 

We have not attempted to set up any arbitrary standards. In fact 
we haven't any authority. The work in the Bureau of Standards is 
almost wholly voluntary. 

Mr. Arthur. The most widely known label is that containing a 
statement saying "Made in America" on goods ; and that doesn't mean 
anything with respect to quality, does it? 

Mr. Fairchild. Not at all. 

Mr. Taylor. There must be some relationship between the 15 and 
the 3,600 commodity classification. That 3,600 classification does not 
cover the individual manufacturers at all. That means there might 
be a hundred manufacturers producing and exporting a particular 
thing that would come in the 3,600 articles. 

Mr. WoRLEY. Do you think your Department should expand its 
functions ? 

Mr. Fairchild. I think there is real need for this sort of work, to 
inspire confidence at the point of sale where it is most needed, that is, 
where the goods change hands. 

Mr. WoRLEY. That is one way to stimulate exports. If they have 
confidence in the product they are more likely to buy it. 


Mr. Fairchild. That is not only our idea but it has been checked 
by much experience. General Electric, Westinghouse, and a number 
of others have checked through their own representatives in South 
America and are all enthusiastic about the possibilities of such action. 
In fact, our information indicates that the Latins are much more 
inclined to watch labels on things than people in this country. 

Mr. Arthur. Is that true of all large companies, that they would be 
in favor of the development of standards, or do they want to promote 
their own brands ? 

Mr. Fairchild. Naturally they want to promote their own brands, 
but this is a platform below brands. There is no idea of eliminating 
brands. We want them to take the responsibility for a number of 
things beyond the scope of the standards. 

Over and above that you have the general reputation of the com- 
pany, the number of distributing points, the likelihood of being in 
business in another 5 years, the stocks of spare parts available and 
services that they render. Even the commodity itself is never covered 
completely in the standard. There is always room for improvement 
in design and selling points, and that sort of thing. We are not 
encom'aging complete standardization of the products. 

Mr. Arthur. From the talks you have had with businessmen in 
your efforts to develop the standards, would you say that you would 
have the hearty support of businessmen or would there be considerable 
opposition on the ground that it threatens to deal 

Mr. Fairchild. We haven't run into any opposition, even in the 
case of the large steel companies. 

Mr. WoRLET. You think we are considerably behind other countries 
in promoting export trade? 

Mr. Fairchild. Very much behind other countries; yes, sir. 

Mr. WoRLEY. Do you think that is primarily the Government's 
fault, or primarily the producers' fault, or the manufacturers'? 

Mr. Fairchild. Collectively, I think. It is hard to pin it down. 

Mr. WoRLEY. Private enterprise has made numerous efforts, hasn't 

Mr. Fairchild. They have, within the last year or so, had one man 
down in Soutli America employed through the American Standards 
Association (funds provided by the Office of Inter- American Affairs). 
One man can't do much in all those countries. 

Mr. WoRLEY. During the last couple of years the}' haven't made 
much effort? 

Mr. Fairchild. That is right. 

Mr. WoRLEY. Why? 

Mr. Fairchild. They haven't been able to export products. 

Mr. WoRLEY. In peacetime why shouldn't a big company here man- 
ufacturing automobiles want to develop markets sufficiently in for- 
eign countries to send somebody over there to take all the steps you 
are taking? 

Mr. Fairchild. Well, a number of them have, but I think, speaking 
broadly, that our American manufacturers have been interested mostly 
in the domestic market. It runs such a high percentage of the total, 
something on the order of 97 percent, perhaps, and they have sought 
a foreign market only in those periods when the domestic markets 
fell off. 


]VIi'. AVoRLEY. We had testimony before the full committee several 
months ago from the automobile industry and it seemed that they 
couldn't wait until they could get into foreign markets. Of course, 
they were looking for the saturation point over here first, and then 
at that time to get into the foreign market. The testimony seems to 
indicate they had relied pretty heavily on foreign markets before the 
war and wanted to go back and develop them more. 

We have had diflicidty with witnesses who seemed to be interested 
in developing foreign markets in that they did not give us any specific 
steps as to how they planned to develop those markets. In view of 
your statements, they perhaps rely on somebody else, or just the 
natural demand from those countries. 

We are apt to have a lot of competition, aren't we, in building up 
markets in those foreign countries ? 

Mr. Fairchild. We are going to have more, I believe; yes, sir. 

Mr. WoRLEY. We have always had pretty stiff competition. 

Mr. Fairchild. Yes, sir. 

Air. WoRLEY. You think we will have even keener competition? 

Mr. Fairchild. I believe so. 

Mr. WoRLEY. Then it is not only up to the Government but to pri- 
vate enterprise itself, primarily, to try to develop the markets with 
Government assistance. 

Mr. Fairchild. Of course, as was said earlier this morning, in a 
number of other countries business people and the government work 
much closer together than they have done in this country and are 
better integrated, and that is what I believe we n^ed here, to have 
better cooperation between Government and business. 

JNIr. WoRLEY. How can we do that ? What steps can be taken ? 

Mr. Fairchild. Of course, my end of it is standards. I think I 
should stick to that. 

Mr. WoRLET. Can you give us an idea how you can get better co- 
ordination and cooperation between business and Government? 

Mr. Fairchild. We have had plenty of cooperation when we ap- 
proach them on the level of these descriptions and ratings, methods 
of testing ; never anything but the finest cooperation. We just haven't 
had enough people to do the work; that is all. 

Mr. WoRLEY. You mean in your department ? 

Mr. Fairchild. Yes, sir. 

Mr. WoRLEY. Do you have any suggestions or comments or infor- 
mation, Mr. Taylor? 

Mr. Taylor. No. This field of industrial standards is a very useful 
field, but a rather specialized one. 

Going back into our history, there were only certain companies 
that felt that the export market was an important market for them. 
Automobile companies are now in the forefront of that group. Vari- 
ous other companies, when the domestic market dried up, would say, 
"Let's sell that abroad." And in many cases where quality was not 
the most important thing it was a place where you could get rid of 
something you didn't want. Of course, a great many of the foreign 
buyers were quite familiar with that and it didn't help our reputation 
as a trading nation, as other countries approached it quite differently. 
They felt it was important to them that there should be standards 
of performance over a long period, if they were going to make per- 

99579 — 45— pt. 4 10 


manent customers; and, frankly, all of our manufacturers didn't see 
it that way. 

Mr. WoRLEY. We just never have been very interested in develop- 
ing foreign trade ? 

Mr. Taylor. That depends again on the individual company and 
the individual product. 

Mr. WoRLEY. The over-all picture indicates we never have been very 
interested in developing foreign trade. 

Mr. FoLSOM. That is very spotty, isn't it? 

Mr. Taylor. Very spotty. Take the Singer Sewing Machine Co. 
There isn't any place in the world you can go and find any native who 
hasn't heard of the Singer sewing machine. 

They very consciously developed that. They developed means for 
payment and means for servicing, and so on. Some of our other 
companies did the same thing. They pronounce it in all sorts of dif- 
ferent ways, but it is always the Singer Sewing Machine Co. 

Mr. WoRLEY. The only way to develop our foreign markets is for 
the producer to find at least an equally profitable market as he finds 
at home ? 

Mr. Taylor. And you also have to meet the requirements of the oth- 
er market, which very often are considerably different from those of 
our own. 

Mr. WoRLEY. I am trying to find just why we haven't paid any 
more attention than we have to foreign trade. 

Mr. Taylor. Well, we were very busy developing our own country 
and, during that development there were certain export products which 
paid for a major portion of the development. Up to, if you want to 
call it, the turn of the century, we were principally exporters of raw 

Mr. FoLSOM. The question of prices and also duties enter into that? 

Mr. Taylor. Not so much during that period. 

Mr. FoLSOM. I mean in recent years. 

Mr. Taylor. In recent years that has had quite a bit to do with it, 
and our own policies did not conform, but even so it was possible to 
develop certain types of things. 

Mr. WoRLEY. The development period, what period was that? 

Mr. Taylor. Of course, I don't think it is over yet. 

Mr. WoRLEY. I know. 

Mr. Taylor. Roughly, industrialization and so on was from 1848 or 
1850 up to the present time, with big emphasis after our Civil War 
and going through the First World War. Of course, the First World 
War gave it a shove, and this war is going to give it a bigger one. 

Mr. FoLSOM. How much do you think this lag in foreign trade has 
been due to lack of coordination between Government and business? 

I have in mind the Board of Trade in England. If we had a little 
better coordination of policy 

Mr. Taylor. I think it is extremely important. 

Mr. FoLsoM. You are taking a step in that direction. Do you have 
anything in mind by which you can bring about that coordination ? 

Mr. Taylor. For one thing this country has never had an over-all 
foreign-trade policy. I am inclined to think that is possible, but up 
to the present time it has not appeared. 

It is not only the question of sections of the country competing with 
each other in trying to formulate that policy, which they do very ac- 


tively, as you know, but j^ou have certain segments of industry itself — 
well, one industry will have a very definite interest in a particular type 
of over-all polic}^ of our foreign trade, while another industry will 
have exactly the opposite. 

Until you have a method by which the policy for the country as a 
whole can be first determined and then administered, I think we are 
going to be at a material disadvantage in doing business in compari- 
son with other countries. 

Mr. WoELEY. We are just fighting among ourselves. 

Mr. Taylor. And doing everything we can to see that only one seg- 
ment is looked at at one time. 

Mr. WoRLEY. That is not a very wise policy. 

Mr. Taylor. I don't see how you ever can get the answer as long as 
you look at onlj^ one segment at a time. You may get an answer that 
is good for the man sitting there, that suits him perfectly, but a fellow 
over on the other side of the room hears about it and you are cutting 
his heart out. 

Mr. WoRLEY. Who is the most guilty in that; Congress? 

Mr. Taylor. No, I don't think so. I think all segments of the coun- 
try tried in whatever way was possible to see that we only looked at 
one segment at a time. That is very understandable. Congress itself 
isn't organized so that it can» deal with the subject as a whole. The 
various agencies, various segments of the country report to too many 
different committees. 

Mr. WoRLEY. In order to avoid that very thing, this committee was 
created to work at the over-all picture. 

Mr. Taylor. Yes, sir; but this is supposedly a temporary commit- 

Mr. WoRLEY. Yes. 

Mr. Taylor. I think that would be one of the greatest things — 
whether it is this particular committee or another continuing commit- 
tee — if there was one place in both Houses of Congress to look at the 
whole picture, otherwise we are bound to make very fundamental mis- 
takes. We are probably going to make them anyhow, but at least it 
won't be because we haven't looked at the factors .all together. 

Mr. WoELEY. That is why Congress created this committee, and the 
Senate created the corresponding committee, to look at it broadly. 
That is laying the basis for this question. With the apparent lack of 
interest we have displayed in developing foreign markets and the rea- 
sonably good way we have fared during our history, I was wondering 
what is the necessity, which would be better, to eliminate these pro- 
posed artificial lifts here and subsidies there, protecting against for- 
eign enterprise, whether to leave them out, or just live within ourselves 
and be a buying nation instead of an exporting nation. I am having 
difficulty in making myself clear here, Mr. Taylor. I will try to ask it 
this way : What would happen if we were to devote all of our attention, 
all our productive capacity, to supplying our domestic markets and 
forget about our foreign markets; what result do you see? 

Mr. Taylor. Well, I think you could see two results: One, that we 
would have to produce a great many substitutes in the form of raw 
materials, for example. You know what our experience has been 
during the war. 

Mr. Worley. Synthetic rubber, for example ; we would have to man- 
ufacture that? 


Mr. Taylor. For a period of time you might have considerable ex- 
pense in doing that. That is certainly the hard way to do it. 

The other result would be that naturally the only market we could 
talk about in the form of producing things for would be our own mar- 
ket, because if you don't create the means of payment by the exchange 
of goods and services, or a complete loan program, eventually trade 
dries up and it dries up very fast, be it money, marbles, or chalk which 
you have to do business with; and that can be expressed in a great 
many different ways. 

If we want to limit our market potentiality, to say nothing about 
what is good for the rest of the world and how greatly that would 
retard the development of the rest of the world, if we decide to do that, 
we can do it, but we have to be very sure what we are doing. 

Mr. FoLSOM. It would be much more difficult to maintam a high level 
of employment, thouph, wouldn't it? 

Mr. Taylor. That is right. You can think of all sorts of things 
you could do, produce synthetic products, substitutes, et cetera. I 
think it would have a very marked effect on our standard of living 
while we were going through that period, and you couldn't tell what 
you would come out with. It would mean practically complete control 
over every phase of our economic life. 

Mr. WoRLEY. Then we must have foreign trade in order to maintain 
our standard of living ? 

Mr. Taylor. If we follow in any approximate way the liberal prin- 
ciples we advocate 

Mr. Worley. We can't have prosperity and a high standard of liv- 
ing without foreign trade. 

Mr. Taylor. That is right. 

Mr. Worley. Why can't we develop our foreign trade more and 
have a higher standard of living ? 

Mr. Taylor. We can, but, like a great many other desirable things 
in life you can't have that development without actively working at it. 

Take the military situation. During the twenties and early thirties 
we could express ourselves very violently about a number of subjects, 
but until we had the Army and the Navy and the armed forces to make 
our statements good, it was so much — I don't say so much idle chatter, 
because obviously when the time came we did have to live up to it — 
but certainly in the foreign-trade field you can't have foreign trade 
without actively organizing for it ; and the Government's part in that, 
in my opinion, will change very materially as a result of the develop- 
ments of the war period. It will be far more active from the stand- 
point of servicing and coordinating — not actively engaging in it, but 
it is a question of servicing, coordinating, and making it possible for 
the citizens of another country as well as the citizens of this country 
to be able to go to some one place which is very authoritative and say : 
"What is the policy of the United States about this ?" Everybody will 
know it. 

When you get into the situation of a country which wishes to develop, 
they can come to us — as many of them have during this period — and 
say : "What is your opinion of our possibilities here, and how can we 
develop them most advantageously?" 

If you do it from that standpoint, rather than trying to sell them 
some rather inferior products once, then you establish a permanent 


In addition to that, you have this question of the ownership of par- 
ticular properties. We have found ah'eady that joint ownership is 
extremely desirable. Take some of our South American developments, 
for instance, you get infinitely better results if you and a resident of 
the other country go into partnership together, rather than, as many 
countries did in tlie past, saying : "No ; we won't touch it unless we con- 
trol it." That isn't any good any more. 

Mr. FoLSOM. That has not always been successful. For many com- 
panies which tried it, it didn't work. 

Mr. Tatlor. That is true. That is also again a part of the past. 
The market, in my opinion, is very definitely the other way at the 
time. It is toward joint enterprises. 

Mr. Arthur. What are the outstanding examples of some of those 
joint enterprises now in operation? 

]Mr. Taylor. You have a number of them in the utility field, trans- 
portation, and so on. At the present time, in the industrial field we 
have a whole series of them, largely in South America. I don't know 
that the companies themselves — it isn't a trade secret or anything 
like that. 

Mr. Arthur. What industrial lines are they ? 

Mr. Taylor. They vary — agricultural machinery, canning, textiles, 
paper, raj^on, various types of chemicals, certain oil properties, bag 
plants. I could go through quite a list, but in my opinion it is a very 
definite trend and a very desirable one. 

Mr. Worley. Joint ownership ; we own part and the foreign country 
owns part ? 

Mr. Taylor. It isn't that the foreign country is interested in that 
approach as opposed to some of the previous ones, so much as it is they 
wish to be guaranteed the latest American technical, let's say, know- 
how. If you develop along those lines, whether that is expressed in the 
form of a management contract for a particular period or whether in 
joint stock ownership, and so on, that is the most important thing, 
because American industrial technique is something that other coun- 
tries are very, very interested in. Just selling them a machine and say, 
"There it is, boys," that isn't quite good enough. 

Mr. Worley. If our Govermiient owned, as a government a half 
interest in those— — 

Mr. Taylor. No ; this isn't as a government ; it is private enterprise. 

Mr. Worley. And they are private individuals at the other end and 
not the government ? 

Mr. Taylor. That is right. 

Now, there are certain governmental operations as a result of the 
war, but those, I think, are strictly war developments. Some South 
American countries had these development corporations. The Export- 
Import Bank has financed certain of the things that those development 
corporations do, but the Export-Import Bank does not own any stock 
in the development corporations. 

Mr. Worley. Does that come under your jurisdiction, the Export- 
, Import Bank ? 

Mr. Taylor. It used to. It does not now. 

Mr. Worley. Who has jurisdiction of that? 

Mr. Taylor. The Foreign Economic Administration. 

Mr. Worley. That will probably revert to you after the war? 

Mr. Taylor. I don't know. 


Mr. WoRLEY. You had it prior to F. E. A. taking it over? 

Mr. Taylor. Well, there is quite a history to the export-import 
banks. i 

Mr. WoRLEY. I believe you have another witness, Mr. Taylor. 

Mr. Taylor. That is all with this particular group. The other group 
deals particularly with aviation, and the Coast and Geodetic Survey, 
navigation, and so on. Mr. Burden is here and he will act as 

Mr. Worley. You haven't thought up any more of those post-war 
problems ? 

Mr. Taylor. I think I have talked on some of them. | 

Mr. Arthur. Mr. Tajdor, I want to ask you about our balance of 1 
international payments, or, rather, about our balance sheet's position 
on international account. 

Do you have, offhand, an idea as to whether this country is a debtor 
or a creditor nation, if we cross off the books all of the debts owed us 
by foreign governments as war debts from the last war and lend-lease 
obligations during this war? 

We have, as you have mentioned, balances in this country which we, 
in fact, owe to foreign countries. There have been foreign accumula- 
tions ; there have been considerable investments by foreigners with us. 
There has been some liquidation of debts through the process of the 

Does that reduce us to a position where we are less a creditor nation 
than before the war, and about where do we stand in that respect? 

Mr. Taylor. If you exclude a good many of the things that have 
taken place during the war period, I think that we would be far less 
a creditor nation, let's say, than we were in 1929. There isn't any ques- 
tion about that, because this process has been going on all during that 
period. It was very accentuated during the period of the thirties, 
and then it moved back and forth. 

One of the things that accentuated it was the flight of other curren- 
cies. So, at the present time we are acting as the banker or safe- 
deposit vault, or whatever you want to call it, of a great deal of money 
that came out of Europe and other parts of the world and came here 
before the war. 

That was particularly true when we were having all these currency 
difficulties, some of which were expressions of fear about the war, some 
of which were frankly speculative movements. 

Some of that money has been used in connection with the war for war 
purchases. A .great deal of it has not been and is still here. 

Now, if you want to express that, let's say, current liability as part 
of the position, as I think it should b(?, our position has been materially 
changed, but until you get into lend-lease — how it will work out — and 
until you discuss, as you did in your report, governmental debts — I 
mean the last war's governmental debts — and various of these other 
blocked accounts which are still in existence, I don't think you will get 
the complete picture. 

Mr. Arthur. Do you have people in the Department who could send 
us a letter giving a summary of the figures of our own account, any 
balance sheet position as a creditor? 

Mr. Taylor. Yes, I can. We do that ; have done that regularly up 
to the start of hostilities. We can indicate to you the latest figures 
that we can release. I think you will find that the figure of the total 
foreign holdings in this country has been somewhat exaggerated. 


I think I heard somebody — I don't know whether it was here or up 
in New York— talking about $21,000,000,000, but it isn't that high. 
Including these very quick liabilities — we call the quick liabilities 
somewhere around six or seven — I can't keep those figures very well in 
my head 

Mr. Arthur. In this compilation I believe it would be useful to the 
committee to have segregated those accounts due the United States 
which are subject to redetermination after the war, plus other govern- 
mental receivables such as obligations due the Export-Import Bank, 
and then the balance of the debts due us. 

On the other side of the account, if we can have some kind of break- 
down to indicate the short-term or current items, as distinguished 
from the long-term capital invested here, I think it would be very 
helpful in giving us the picture. 

Mr. Taylor. There are certain things we are not going to be able to 
give you, but I think we can give you a perfectly' satisfactory over-all 

Mr. WoRLEY. Generally, do we encourage the foreign investments 
in this country ? 

Mr. Taylor. Strangely enough, we don't express ourselves on that at 
all. It is one of the most curious things. 

In the early part of our development, obviously we did, because that 
was the way we got the capital with which we developed our railroads 
and various other things, but during recent years I fail to see that we 
have expressed ourselves on that subject at all; whether rightly or 
wrongly, we didn't express ourselves. 

Recently, of course, during the war period, we have frozen various 
funds, and so on, and so on, but prior to that time we didn't have an 
investment policy either for foreign investments in this country or for 
our own investments in other countries. 

Mr. WoRLEY. Is there any law in this country now which would 
prevent any foreigner from investing money in this country? 

Mr. Taylor. No; except the current Treasury regulations or other 
emergency things, and special cases. 

Mr. WoRLEY. In peacetime ? 

Mr. Taylor. In peacetime; no, A man has to qualify, as far as his 
physical presence goes 

Mr. WoRLEY. He has to be here ? 

Mr. Taylor. That is, as far as his physical presence is necessary to 
do certain things. We have a limitation, with which you are familiar, 
on that, in the immigration policy. 

The normal practice was, let's say in Paris, that anybody could go 
into either a French bank or a branch of an American brokerage house, 
and say : Buy me 500 shares or 5,000,000 shares — if he could — of any 
corporation listed on the New York Stock Exchange. There were no 
restrictions of any kind, and, of course, that was one of the methods 
by which capital did come out of the other countries. 

I think we in Government became curious about some of those things 
in the late 1930's, because there was such a flight of capital this way, 
but we as a country were not very curious about it. 

Mr. WoRLEY. Did other countries, as a general rule, encourage or 
discourage our investments there? 

Mr. Tayt.or. It depends upon the state of development of a par- 
ticular country. 


Mr. WoRLEY. Most of tliem are i^retty well along in development, | 
aren't they ? I 

Mr. Taylor. Oh, no. ... I 

Mr. WoRLEY. As far as their age, their industrial development. | 

Mr. Taylor. I wouldn't think so. i 

Mr. WoRLEY. I don't mean they are as far along, perhaps, as we. 
You can't say generally then that they are interested or disinterested ] 
in our investing money in their countries? I 

Mr. Taylor. I think most of them at the present time I 

Mr. WoRLEY. In peacetime. ! 

Mr. Taylor. Well, in peacetime a great many of them have not ex- j 
pressed themselves very definitely on that subject." That varies from, ,i 
let's say, year to year, or from government to government. Usually :| 
they have a far more positive approach to that subject. ■[ 

Mr. WoRLEY. We have had sort of a negative approach, negative; 
policy, since we haven't put up barriers — insurmountable barriers? 

Mr. Taylor. We did put up barriers to a great many things, but 
with reference to the purchase of stock in an American company — 
not a bit ! 

Whether that is a good thing, whether it is a bad thing, I think 
should be discussed from the standpoint of national policy. 

Mr. WoRLEY. Will you go into that question ? Does your Depart- 
ment concern itself with that subject? 

Mr. Taylor. We are prepared to discuss it. 

Mr. WoRLEY. You will make recommendations to other departments ; 
in reference to post-war considerations? 

Mr. Taylor. Yes. 

Mr. WoRLEY. You wouldn't want to give any suggestion? 

Mr. Taylor. No ; because that particular phase of it is such a small 
segment of over-all broad policy. If we should decide that our trade 
policy should be an extremely liberal one, then we would also want 
to be extremely liberal in connection with the flow of investments 
back and forth, because they go together. 

If, because of reasons which develop in other countries, we have 
to switch that position to adapt it to the positions of other countries 
in the world, then this other segment would have to fit in with it. 

A liberal commercial policy does involve a great freedom of invest- 
ment and funds flowing from one place to another. It does assume . 
certain things which have not always been true ; but in terms of the ) 
perfect world, that is it. 

Mr. Arthur. Mr. Taylor, your Department has groups, committees, , 
and others working on post-war problems that are likely to arise. 

I think this committee would benefit greatly by having presented 
to it such conclusions and policy recommendations as those commit- 
tees can give us, even though they are merely progress reports. I 
would like to make a request for such information as you develop the 
program, in order to help us in our work. 

Mr. Taylor. I think you will have to get that from the Depart- 
ment of State, Mr. Arthur. Tlie chairmanship of the Economic i; 
Policy Committee is there, and all the other committees flow from it.jj 
There is no hesitation on my part to do it, but I think that is the |: 
proper place to ask for it. ; 


Mr. Arthur. The committee structure stems from the Department 
of State, and you are not undertaking any work on your own initia- 
tive in that field ? 

Mr. Taylor. That is right. 

^Ir. FoLsoM. When Admiral Land was here Monday he spoke very 
higlily of the Foreign Trade Council and the work they were doing 
in the export and import field. Is there any tie-up between that For- 
eign Trade Council and the Department of Commerce ? 

INIr. Taylor. The Foreign Trade Council works with all the Gov- 
ernment departments. In fact, I was talking with a mutual friend 
of ours the other day who was part of that group and pointing my 
remarks very much along the lines I was talking about here, that 
there are too many places a businessman or representatives of busi- 
ness organizations have to go. 

Mr. WoELEY. You say "have to go," or can go ? 

Mr. Taylor. Well, it is a little of both. Very humanly, right at 
the present time, Washington and the world being very complicated, 
there are 10 or a dozen shells that the pea might be under, and the 
representative of a business organization has to be watching those 
12 shells. 

I think that is quite unfortunate, both from the standpoint of the 
business community and from the standpoint of our national policy. 
You ought not to have to go to that many places. 

Shipping, naturally, is an extremely important phase of the work 
of the Foreign Trade Council, so they work very closely with the 
War Shipping Administration and the Maritime Commission. Then 
there will be another group interested in another phase of it. Then 
they will talk with us. 

We may not tell an individual the same thing that somebody in 
another agency which is also working with the Foreign Trade Council 
might, and it is terribly difficult for the American businessman, and 
it is also extremely difficult for the foreigner who wishes to do busi- 
ness with us, whether it is the representative of a foreign government 
or of a foreign firm who wishes to do business with us. He has to 
spend entirely too much time covering the water front. 

Mr. WoRLEY. Are there any additional questions? 

On behalf of the committee and counsel, we would like to express 
our deep appreciation for the information you have given us and 
the cooperation. 

May I ask if, in the course of your future work, you find any infor- 
mation you think will be of value to this committee in its work, that 
you will send it to us? We will appreciate it. 

Mr. Taylor. I will indeed. 

^Ir. WoRLEY. Thank you. 

Mr. Taylor. It has been a great privilege to be here. 

To complete the record of this morning, these are the figures of the 
department's appropriations for 1945. These do not represent the 
other agencies I mentioned. Foreign trade — the appropriation of the 
entire Bureau of Foreign and Domestic Commerce that year, of which, 
roughly, half might be called foreign trade — was $1,905,000, which is 
pretty low. 

Mr. Worley. Thank you. 

Do you have the other figures there? 


Mr. Taylor. Yes. 

Mr. WoRLEY. Will you put them in the record. 

Mr. Taylor. Yes, sir. 

(The statement referred to is as follows:) 

Appropriations for the Department of Commerce for the fiscal year ending 

June SO, l9Jf5 

Office of the Secretary, including National Inventors' Council $1,354,000 

Bureau of the Census 12,915,000 

Civil Aeronautics Administration (including Civil Aeronautics 

Board) 35, 877, 000 

Coast and Geodetic Survey 5,025,000 

Bureau of Foreign and Domestic CouMnerce 1, 905; 000 

Patent Office 5, 002,000 

National Bureau of Standards 2,924,000 

Weather Bureau 12, 700, 000 

Total 78, 322, 000 

Mr. WoRLEY. Will you give your name, please. 


Mr. Burden. My name is William Burden, Assistant Secretary of 
Commerce, Commerce Building, Washington. 

I have general responsibility for three bureaus of the department: 
The Civil Aeronautics Administration, which is concerned with the 
technical aspects of aviation; the Coast and Geodetic Survey, which is 
connected with charting our coasts, making geodetic surveys through- 
out the country, and the making of aeronautical charts; and the 
Weather Bureau, which, as you know, is responsible for providing 
weather information for industry and the country as a whole. 

The heads of those bureaus are here; Mr. Stanton, for the Civil 
Aeronautics Administration ; Dr. Reichelderf er, for the Weather Bu- 
reau; and Commander Smith, representing the Coast and Geodetic 
Survey. They can give you the specific activities of those bureaus 
insofar as they relate to foreign trade and shipping, which I under- 
stand are the things you are particularly interested in at this hearing. 

I might say, in general, however, that the activities of these bureaus 
have a less close relationship to foreign trade than the activities of 
bureaus that Mr. Taylor was discussing with you. Their activities 
are more in the nature of providing technical services for American 
companies operating abroad, and even in that field to a someAvhat 
limited degree. In the field of aviation, the matter of giving route 
certificates to our foreign air lines is a responsibility of the Civil 
Aeronautics Board, which is in the framework of the Department of j 
Commerce but reports directly to Congress. 

Mr. WoRLEY. Is there any conflict between the Civil Aeronautics 
Administration and the Civil Aeronautics Board ? 


Mr. BuRDEx, No. We have U\o entirely separate functions. The 
Civil Aeronautics Board is the agency which has the responsibility 
for giving air-line route certificates and setting air-mail rates ; estab- 
lishing safety regulations and other such economic and judicial mat- 
ters. The Civil Aeronautics Administration is the agency for the 
enforcing of those regulations. We give the examinations to meet 
the requirements they have set, and we see that the manufacturers 
meet the requirements set b}' C. A. B. 

The Civil Aeronautics Administration also operates the radio 
ranges which constitute the radio facilities for all our air lines in this 
<:ountr3^ That activity constitutes the bulk of its work as far as 
personnel and appropriations are concerned. 

We also provide certain high-powered radio facilities for foreign 
air-line services, which do impinge on foreign trade in an indirect 

During the war, C. A. A. has transported a number of the domestic 
radio ranges abroad at the request of the air forces, and they are 
now being used by the Army and the Navy. In some cases our per- 
sonnel are operating those ranges for the Army and Navy. 

I think the most interesting field in which C. A. A. does impinge on 
foreign trade is the encouragement of American exports abroad 
through providing technical information on American aeronautical 
practices to the civil aviation agencies of other governments. We 
found in a rather interesting way the degree to which that practice 
could be effective and, I think, the degree to which we had been 
derelict in the past in work in that field, when we began the de-Ger- 
manization program, so-called, of the air lines in South America. 
That was a program I happened to have direction of in the R. F. C. 
before I came with the Department of Commerce. 

As you know, in that area the German Government had, in the 
early thirties, provided aircraft at relatively low first cost and on some 
very easy payment terms to air lines in Latin America. They 
provided technical assistance in the form of German technicians to 
assist Latin Americans in building up their internal air-line industry, 
and also provided training for Latin-American nationals in Germany 
in some cases at the expense of the Latin-American government and in 
others at the expense of the German Government. 

As a result, they had built up their transport position in Latin 
America to the point that some 10,000 route-miles of air lines were 
operating with German equipment, in most cases, under very heavy 
German influence. 

When we saw the war was coming on, it became clear that this 
activity was a threat to our national security and the security of the 
Americas, and we undertook its liquidation in partnership with 
Latin-American governments. 

In so doing we found it necessary to provide means for financing 
the sale of aircraft to Latin-American countries on a reasonable pay- 
ment basis. 

American aircraft manufacturers, none of whom were financially 
very strong before the war, as you remember, had been requiring 50 
percent down and the remainder before shipment, which were pretty 
stiff terms for a small, struggling air line. 


Through the R. F. C, we were able to provide credit facilities on 
a 5-year 1-percent basis. All of those loans are being paid off and, so 
far as I know, will be paid off in full. 

We also provided technical assistance in the form of American 
technicians who went down to assist Latin America in operating their 
newly acquired United States equipment. 

Mr. WoRLET. What comes within your jurisdiction, the Latin- 
American countries or all countries ? 

Mr. Burden. Insofar as the American Government has given techni- 
cal assistance abroad, it has been given by the C. A. A. We have also 
operated programs in American flight schools with funds provided 
by the State Department whereby six or seven hundred Latin-Ameri- 
can students have come up here and have been trained as pilots and 
mechanics. We have a civil aviation mission operating in Brazil at 
the request of the Brazilian Government, which is helping Brazilian 
aviation schools to use American methods. Also they are writing 
Iheir civil regulations in line with our own, which are generally recog- 
nized as the world's standard. 

We are considering a similar program in. cooperation with the 

We think the result of this type of program, and the training in aero- 
nautical matters, will be to provide a better market for our aero- 
nautical exports. 

Mr. WoRLEY. Do you mind if we begin with your first witness? 

You will be available ? 

Mr. Burden. I will be available most of the time ; yes. 

I think Mr. Stanton, the Deputy Administrator, might start, if that 
is agreeable with you. 


Mr. WoRLEY. Will you state your name and position, Mr. Stanton? 

Mr. Stanton. Charles I. Stanton, Deputy Administrator of Civil 
Aeronautics Administration. 

Mr. WoRLEY. Can you give us some idea as to the part you play in 
relation to foreign trade and commerce and shipping? 

Mr. Stanton. Yes, sir. 

The interest of the Civil Aeronautics Administration in the field of 
foreign commerce is based on the provision of section 301 of the Civil 
Aeronautics Act of 1938, reading in part as follows : 

The Administrator is empowered and directed to encourage and foster the 
development of civil aeronautics and air commerce in the United States and 

The act also provides that the Administrator shall enforce the safety 
regulations of the Civil Aeronautics Board. 

Accordingly, the Civil Aeronautics Administration is concerned 
with the development of foreign markets for American aeronautical 
products — aircraft engines and accessories. I believe it is generally ac- 
cepted that American-made civil aircraft are unequaled by those made 
in any other country. It is reasonable that this should be so, because 
the United States offers a greater market for producers of civil aircraft 
than does any other country at this time. It should be logical that 


.purchasers in other countries should look to American production to 
fill their civil aircraft needs — particularly in the immediate post-war 
period and probably thereafter until such time as the number of air- 
craft used in any particular country might bring about the production 
in that country of equally satisfactory aircraft. 

As one of the phases in the develoj^ment of cooperation between the 
American republics, for which annual appropriations have been made 
for the last several j^ears, the Civil Aeronautics Administration has 
been engaged in the training of pilots and technicians from the Cen- 
tral and South American republics. 

Mr. WoRLEY. How do we train those? Do they pay anything for 
that training ? 

Mr. Stanton. It was connected with the war and the building up 
of Western Hemisphere solidarity. 

Mr. WoRLEY. Do you consider that as a war measure rather than 
for peacetime ? 

Mr. Stanton. I think certain portions of it might well go on in 
peacetime, as a matter of promoting our trade interests, but it was 
started as a matter of promoting solidarity in the war that was loom- 
ing at the time the work was started. 

^Ir. WoRLEY. I see. You may proceed. 

Mr. Stanton. Extensions of this sort of activity have been under- 
taken in a modest way by sending specialists to several Latin- Ameri- 
can countries to assist in the establishment of flying schools, training 
methods, and standardization of governmental procedure with respect 
to the safety control of civil aeronautics. These missions have been 
undertaken only upon specific request of the countries involved. It 
is obvious that this type of activity should indirectly, but favorably, 
affect the demand for American aeronautical products. 

The Civil Aeronautics Administration is, of course, vitally inter- 
ested in, though not primarily responsible for, the extension of Ameri- 
can commercial air routes to all the principal countries of the world. 
The relation of the establishment of such commercial air lines to for- 
eign trade opportunities is quite obvious. In connection with such 
foreign air-transportation routes, the Civil Aeronautics Adminstra- 
tion has the primary responsibility for ascertaining that the air navi- 
gation and air terminal facilities available for the use of Amercan 
air carrier aircraft are sufficient and satisfactory so as to enable our 
air carrier operations to meet the safety regulations of the Civil Aero- 
nautics Board. It also has the primary responsibility to see that 
the type of aircraft and equipment used, the competence of the crews, 
and the operational procedures adopted meet the safety regulations. 

Accordingly, the Civil Aeronautics Administration must maintain 
inspection offices in foreign countries, which we expect to increase in 
number, in order to carry out these responsibilities. 

Mr. WoRLEY. Which responsibilities? 

Mr. Stanton. The responsibilities of seeing that the navigational 
facilities, terminal facilities, methods and procedure of operation, the 
condition of xVmerican aircraft, competence and experience of crews, 
meets the requirements, the safety regulations, of the Civil Aeronautics 

Mr. WoRLEY. Those will be our own ships? 

Mr. Stanton. Those will be American aircraft ; yes. 


Mr. WoRLEY. Your Department is concerned primarily with train- 
ing and safety features of air travel ? 

Mr, Stanton. Yes, sir. 

Mr. WoRLEY. By private flyers and commercial lines? 

]Mr. Stanton. Yes, sir. 

Mr. WoRLEY. You exercise jurisdiction over all commercial air lines? 

Mr. Stanton. Yes, sir. Domestic air lines and, of course, the safety 
features of American-flag air lines operating into foreign countries. 

Mr. WoRLEY. Does that include all American lines operating into 
foreign countries? 

Mr. Stanton. Yes, sir. 

Mr. WoRi.EY. Do you propose to expand your own facilities domes- 
tically after the war, with the increased use of airplanes? 

Mr^ Stanton. Definitely. 

Mr. WcRLEY. I was going to ask this question of j'ou : Do you sup- 
pose that plane manufacturers themselves will try to encourage or 
initiate any program along the safety factors that j'^our Department is 
doing now, to encourage them to use more airplanes? 

Mr. Stanton. No. They, in my opinion, will not do anything in 
the way of planning the establishment of air-navigation facilities or 
emergency landing fields or additional weather service. 

They will, of course, constantly strive to make their aircraft more 
safe and more reliable and simpler to fly. 

We, of course, assist in that, help to encourage them to do that, but' 
their particular part of the job of safety is making their aircraft bet-.' 
ter and more reliable and simpler. Our job is to provide the facilities 
to help people fly safely and not get lost. I 

Mr. WcRLEY. Just like the automobiles made a desire for good roads? ! 

Mr. Stanton. Yes, sir. , 

Mr. WoRLEY. They will encoiu^age in every way they can the safety \ 
factors to make the planes safer and will encourage the Government to 
provide all the facilities it will provide in order to get increased air 
travel ? 

Mr. Stanton. That is right. 

Mr. WoRLEY. You have no jurisdiction avS to the granting of cer- 
tificates of convenience and necessity ? 

Mr. Stanton. No, sir. The determination of whether or not the 
operation of a certain route, let's say, to a foreign country — and that is 
true domestically — is in the interest of public convenience and neces- 
sity or in the interest of national defense, is a function of the Civil 
Aeronautics Board. 

Mr. WoRLEY. You look after the safety primarily of these air lines? 

Mr. Stanton. Yes, sir. When the Board issues a certificate of con- 
venience and neceasity, we go into action by making a suiwey of the 
routes they propose to fly, the equipment they propose to fly it with, 
the type of operation and the type of maintenance, the type of crews, 
and then we issue an operating certificate, if the operation will meet 
the safety requirements. That is true both in the foreign field and the 
domestic field. I 

Mr. Arthur. I have one question. With respect to the safety reg- 
ulations it seems to me that is clearly a governmental f miction. With 
respect to training, I would like to ask you whether the enthusiasm that 
is now prevalent with respect to the development of the air transport 


sind the whole aviation industry is not sufficient to stimulate and lead 
to the development of proper training facilities, proper schools, and 
jroper encouragement of improvement in aviation, without govern- 
nental participation? 

Mr. Stanton. Well, sir; the thing that I mentioned was the train- 
ing of people from Latin-American countries. It w as connected with 
the de-Germanization program that Mr. Burden spoke to you about. 
The training was done under contract with existing commercial schools 
in the United States, both the flying schools and the mechanical train- 
ing schools and the technical colleges that gave aeronautical courses, 
engineering courses. 

The trend is, very certainly, to make training in all phases of 
aeronautics a very active line of business for the next several years. 

At what stage it may be desirable for the foreign countries or for 
their citizens, to pay their own full cost of training, I do not know. 
That is a function of the State Department, to determine what policy 
we should follow in trying to bind the Western Hemisphere closely 

Mr. Arthur. Then you do not contemplate that your Administra- 
tion will go into the work of training schools and training programs? 

^Mr. Stanton. We only do that as a service agency to the State De- 
partment, in carrying out those policies. 

Mr. Arthur. Notliing is indicated in the line of your conducting 
such training programs as a part of the retraining of veterans, dis- 
charged soldiers, and so forth? 

Mr. Stanton. Well, sir; that hasn't, so far as I know, been de- 
termined as a matter of policy yet. I should imagine if that becomes 
policy that our agency may be called upon to manage that. 

Mr. Worley. Thank you very much. Mr. Stanton. 

Mr. Lyons. Mr. Chairman, Mr. Burden had to leave. I would like 
to introduce the two other speakers here so you will know the whole 
set-up of the Department and they will have produced their papers 
for the record. 

Commander Smith, of the Coast and Geodetic Survey. 

Mr. WoRLFA-. Commander Smith, you have to do with the Coast and 
Geodetic Survey ? 

Commander Smith. Yes, sir. I am representing Admiral Colbert, 
the Director of the Coast and Geodetic Survey. 

Mr. WoRLEY. Whom do you propose to start with? 

Mr. Lyons. Go ahead. Commander Smith. 

Commander Smith. As Mr, Burden has said, the Coast and Geodetic 
Survey's interest in foreign trade and shipping is largely one of a 
service agency. 

The Director has prepared a brief outline of the functions, which 
I may follow and turn over to the committee as a part of the record, 
if that is agreeable. 

Mr. WoRLEY. We will be glad to have it. 

It may be inserted in the record at this point. 

(The statement referred to is as follows:) 

Coast and Gbxjdetio Subvey 

1. Duties, functions, and interest in foreign trade and shipping, 
(a) To supply basic geophysical data for commercial and Federal use. 
(ft) To supply United States aviators with aeronautical charts for commercial 
and private use. 


(c) To supply all tide and current predictions to the merchant marine and 
the Navy. 

(d) To supply the merchant iC'-rine and the Navy with charts and rp\ id 
nautical information of coastal w aers of the United States and possespv- 3; 
includes basic surveys for nautical charts and other purposes. ^ 

2. The relations of the Coast and Geodetic Survey with other agencies regs" ' i 
the above. 

(a) Civil Aeronautics Administration: Cooperates with C. A. A. in spe ' 
tions and requirements for aeronautical charts for commercial and private fly 

(b) Navy Department: Supplies the Navy with all nautical charts and publi- 
cations of United States territory, with aeronautical charts of United States and 
special war charts; with tide and current predictions of major world ports and 
waterways ; and other basic surveying and mapping data. 

(c) War Department, Army Air Forces : Produces majority of the aeronautical 
charts used by Army Air Forces. Corps of Engineers : Cooperates with the Chief 
of Engineers in war-map production and provides basic surveys in accordance 
with their requirements. 

(d) Miscellaneous Federal agencies: Assists Government, State, and com- 
mercial agencies in miscellaneous surveying and mapping matters. 

(e) Exchanges with the principal foreign nations the data I'eferred to above. 
The aims and objectives of the Coast and Geodetic Survey (pre-war, war, and 

post-war) can be summarized in a brief statement: to produce adequate surveys, 
maps, and charts for commercial, military, and private needs. Pre-war objectives 
and responsibilities were to supply all shipping with nautical charts of domestic 
waters, and aeronautical charts to aviators. 

The Coast and Geodetic Survey has carried a large part of the war load 
of map and chart production in this war. The greatest load has been in aero- 
nautical and nautical charts required by military operations, and as the Survey 
is primarily a service organization it seems to me that its major responsibility 
is to keep well informed on developments in foreign as well as domestic trade 
and commerce in order that its responsibilities will be met. 

Post-war objective is to continue to supply nautical and aeronautical charts 
to the merchant marine and aviation in the development of foreign trade by 
sea and air. 

Mr. WoRLEY. You may proceed, Commander Smith. 

Commander Smith. I will mention only those functions of the 
Coast and Geodetic Survey that apply to foreign trade and shipping. 
They include basic geophysical data for commercial and Federal use, 
primarily in that sense our magnetic studies for compass declination 
for both surface ships and aircraft. 

We supply United States aviators with aeronautical charts for both 
commercial and private use. We supply all tide and current data for 
use by the merchant marine and the Navy; that is, of all ports in the 
United States and many foreign. 

We also supply the merchant marine and the Navy with charts and 
related nautical information of coastal waters of the United States and 
our territorial possessions. This also includes such basic surveys as 
we need to make to produce those charts. 

As to the relations of the Coast and Geodetic Survey with the 
Civil Aeronautics Administration, we cooperate with them in estab- 
lishing the specifications for the minimum requirements for aeronau- 
tical charts, both for commercial and private fliers. 

Our biggest load during the war has been the supplying of a large 
part of the aeronautical charts for our Army Air Force pilots. That 
includes a wide variety of charts which runs into the thousands, most 
of which during the past 2 years have been in the restricted category. 

Mr. AVoRLEY. As I understand, you have a brief here of your func- 
tions ? 

Commander Smith. Yes, sir. 

Mr. WoKLET. We have inserted that in the record, and there are one 
or two questions I would like to ask. 


Commander Smith. Yes, sir. 
))Mr. WoRLEY. Do you propose to ret lin all those services after the 
v^f'M-'? Will it be necessary? 

Commander Smith. There has been a very large expansion of the 

•nautical chart production during the war, as well as the nautical 

■A production. It is likely that, if our foreign trade and shipping 

v'^'^gresses, there will be a considerably increased demand for such 

charts over the demand that was experienced immediately prior to the 

war, which was, of course, very low. 

Mr. WoRLEY. Your Department provides weather information i' 
our ships, no matter where they might be going ; you broadcast inf or 
mation ? 

Commander Smith. No, sir; that comes under the Navy Depart- 
ment, not the Department of Commerce. 

Mr. WoRLEY. In peacetime does that come under the Navy Depart- 
ment ? 

Commander Smith. Yes, sir; that comes under the Navy Depart- 
/nent. ' 

Mr. WoRLEY. Merchant ships do? 

Commander Smith. Yes, sir. That is a general broadcast service 
that is put over naval stations. 

Mr. AVoRLEY. Do you have any additional information you think 
we would want ? 

Commander Smith. No. sir. I would simply like to say that our 
aims and objectives for the pre-war period, and the war period, and 
the post-war era, have been and continue to be primarily to supply 
safe and accurate charts for the merchant marine as well as the mili- 
tary services of the country. 

Mr. WoRLEY. Apparently you have done an execellent job in that 

Comander S:mtth. Well, we like to think that we have. 

Mr. WoRLEY. I am sui'e you have. 

Thank you very much. 

Mr. Lyons. Mr. Reichelderfer, you may proceed. 

IVIr. Reichelderfer. All right, sir. 

Mr. WoRLEY. You are the Chief of the Weather Bureau? 

Mr. Reicheiderfer. Yes, sir. 

Mr. WoRLEY. Do you have a prepared statement ? 

Mr. Reichelderfer. I do. 

]\Ir. Worley. Could we insert that in the record, and then you give 
us the major points of it ? • 

Mv. Reichelderfer. Yes, sir. 

Mr. WoRLEY. It will be inserted in the record at this point. 

(The statement referred to is as follows :) 

Purpose and Function of the Weather Burkatt in Relation to Foreign Trade 

AND Shipping 

Although weathfr and climate are not articles of commerce, their influence 
on foreign trade and shipping is fundamental. This influence is direct in some 
cases as in storms which damage shipping and cause loss of cargo, and indirect 
in other cases such as abnormal climatic conditions which increase or decrease 
the normal supply and demand for articles of trade. Thc^ Weather Bureau can- 
not produce weather and climate to order hut it can provide information neces- 

99579 — 45— pt. 4 11 


sary for efficient planning and economical operation. Thus, its relation to trade 
and shipping takes the form of advisory services rather than production of 
marketable articles. The legal basis for these meteorological services is found j 
principally in the act of October 1, 1890, 26 Stat., 653; the Civil Aeronautics ] 
Act of 1938 and the annual appropriation acts vrhich make the Bureau responsible 1 
for the forecasting of weather, the issue of storm warnings, and other meteoi'o- 
logical services for agriculture, commerce, and navigation, and for the collection 
and transmission of marine intelligence for couimerce and navigation, in the j 
air as well as on the sea. 

The purposes and functions of the national meteorological service of the 
Weather Bureau in relation to foreign trade and shipping may be placed under 
three headings : 

(1) The direct service of storm warnings and other weather advices which 
enable shippers to protect carriers and cai'go from storm losses, and often jwint 
the way to economies in operation. 

(2) The somewhat indirect service of furnishing information of weather and 
climate as they greatly affect production in many industries and engineering 
works, as well as in agriculture. Moreover, meteorological service can aid in 
discovering and developing new markets for agricultural and industrial prod- 
ucts, and taking opportune advantage of temporary markets largely dependent 
upon weather. This becomes especially important in air commerce and fast 

(3) The stimulus to and channels for international exchange of meteorological 
data of benefit for general weather service to almost every field of business — 
aeronautics, agriculture, commerce, construction, engineering, industry, mining, 
transportation, and public utilities. 

The functions of a national weather service may be described briefly. It ob- 
tains weather observations daily, sometimes hourly, at points throughout the land 
and on adjacent oceans, collects these at certain centers where the data are 
processed and used to analyze the conditions of the atmosphere and determine 
its trends. Reports and analyses are exchanged by wire and radio among na- 
tional and international meteorological centers. There, weather forecasts and 
warnings are prepared and issued by press and radio to all public and private 
interests. This constitutes the daily or current weather service. The collected 
meteorological data are also used to prepare climatological summaries which 
present the facts of weather in form of averages or frequencies of occurrence. 
These services include information of "three-dimensional" weather — that is, in 
the upper air where aircraft pilots are interested, as well as near the ground. 

In the actual operation of steamships and other shipping facilities, the Bureau's 
storm warnings and shipping weather forecasts enable carriers to take pi'ecau- 
tions against weather conditions that would otherwise cause serious loss, and 
show where to find the best markets for many kinds of produce. While meteoro- 
logical service of this kind applies especially to air commerce and the fast air 
freight of the future, it often applies also to international trade by rail or sur- 
face ship. Expert meteorological advice can make the difference between profit 
and loss both 'if\ quality of product and in timeliness wliich brings fancy market 
prices. New trade and new markets can be created and developed to a maximum 
with the aid of meteorological information which indicates where, wlien, and by 
what means of transportation. Meteorological service can show a multitude of 
ways to exploit favorable weather conditions and reduce the operating losses from 
ifnfavorable conditions. 

In post-war international trade, if the United States is to meet foreign compe- 
tition, its relatively high labor costs may have to be offset by increased efficiency 
and mass production. Anything tliat contributes to this efficiency will improve 
the Nation's competitive position. The meteorological service that contributes to 
increased production and efficient operation requires an extensive organization for 
collecting, processing, and exchanging weatlier information internationally. 
Reports must be accumulated over long periods of years in order to derive reliable 
climatological values, and it is necessary to have agi'eements among nations as to 
standards of observations and reports, and provisions for regular and uninter- 
rupted transmissions and exchange of daily reports. International exchange of 
meteorological information is necessary because atmospheric conditions that 
determine weather and climate are not confined within national boundaries. The 
winds that produce the weather over any given country come from far distant 
regions of land and sea. Since meteorological bureaus are dependent in part 
upon the observations and reports obtained from ships and aircraft over unin- 


habited areas, they need the cooperation of shipping agencies in maintaining the 
international exchange of weather reports essential to optimum use of Weather 
Bureau services. 

With reference to the relation of the Weather Bureau to other government 
agencies, it is the function of the Bureau to serve as the general meteorological 
service for all national interests and to serve as a clearing house for meteorological 
information from all sources and channels, domestic and foreign. This committee 
is interested primarily in foreign trade and shipping; therefore, the relationship of 
meteorological services to agricultural production is not discussed in detail, 
although the Bureau has an imix>rtant part in American agriculture and the work 
of the Department of Agriculture. The basic services of the Weather Bureau are 
not greatly changed in process of converting from peace to war and vice versa 
because the general organization and requirements are the same and only the 
interpretations and applications are materially different. The post-war plans of 
the Weather Bureau are, therefore, essentially an extension of the meteorological 
program that has developed during the last decade or two under the stimulus of 
aviation needs and other American technical advances. 

Mr. WoRLEY. You may proceed, Mr. Reichelderfer. 

Mr. Reichelderfer. I think what I have to say can be summarized 
very briefly by pointing.out that there are three general ways in which 
our work may have a bearing on the particular work of this committee. 

The most direct way is that there are many times when our storm 
warnings or other devices can be very helpful in reducing the loss of 
carriers or of cargoes. 

In a second, and more indirect wa}^, we have a very fundamental 
relation to the field of trade, not only as to agriculture, but as to many 
industrial and other production fields. That may be expanded or 
applied even to the extent of developing new markets through the 
application of meteorological knowledge. 

The third way is that it is through the facilities of shipping, particu- 
larly ocean shipping, and now more recently air transportation, that we 
get some of the information on atmospheric conditions over the globe. 
This is essential, in turn, to permit us to render our service, and 
that reacts not only on shipping and trade itself, but also on almost 
every other national interest depending on the weather, and there are 
many of them. 

Mr. WoRLET. You say we get the reports from all over the globe ? 

Mr. Reichelderfer. Yes, sir ; primarily the Northern Hemisphere, 
but also some from the Southern Hemisphere. 

Mr. Worley. Other nations get it how ? 

Mr. Reichelderfer. Exchanges by radio are organized and set up 
so that the information is transmitted back and forth daily in peace- 
time. Exchanges are carried on now through secret means by the 
United Nations during wartime. 

Mr. Worley. Those are three good points, and, I think, very close 
to the question we are studying here and are interested in. 

Do you have any questions ? 

Mr. Arthur. I wondered about the developments in the Weather 
Bureau's work for the past some 10 or 12 years. 

Your efforts primarily are of value as forecasts, I presume ; is that 
not true ? 

Mr. Reichelderfer. Primarily ; yes. Of course, everything we do is 
directed toward the future; we are not so much interested in the past, 
as such. 

When you speak of forecasts, you mean the daily forecasts and what 
you say is true, but we mustn't overlook the vei*y broad application of 


climatolo.gical information in determining^ what conditions are best 
for industry, trade, agriculture, and so forth, I don't know that you 
had that in mind. 

Mr. Arthur. No ; I did not. 

I assume, also, that your ability to predict the weather conditions 
that apply to crops in various parts of the world would enable traders 
and otliers to appraise quite promptly the prospective volume of goods 
tliat may be available. 

Mr. Reichelderfer. The daily meteorological reports and weekly 
and monthly bulletins have a very direct influence on market quota- 
tions. V/e do regularly publish forecasts a week in advance. 

Mr. WoRLEY. Are they reliable ? 

Mr. Reichelderfer. At the end of the week they are not sufficiently 
accurate to justify publication. The curve of accuracy^ beginning" 
with the aviation forecasts of a few hours, runs from 95 or 98 percent 
down to the "no skill" base line, at the end of the sixth or seventh day. 
That applies to the specific daily forecast and not to tlie general 
monthly summary I referred to awhile ago. 

Mr. Arthur. Your work has had to be broadened to cover laore 
specific conditions, I presume, because of the particular needs of gov- 
ernments for your service. For instance, the airplane operator wants 
to know something affecting his operations that might not have been 
of great importance some years ago. The shipper may want to Imow 
something about whether there is going to be rain and freezing at a 
particular time, whether icy roads are going to result. 

Should the weather forecasting service be expanded to cover a lot 
of other particular phases of the weather conditions? 

Mr. Reichelderfer. There is always room for improvement. We 
are, to a large degree, meeting the general demands for specific fore- 
casts, and it is in that field that the advancements in meteorology have 
been made in the last decade or two, rather than in the period covered 
by the forecast, the period in advance. 

We do very much more and very much better in specific forecasts 
for shipping, for aeronautics, for the citrus industry, and a large 
variety of specialties, than we were able to do a decade or two ago. 
There is more to be done. 

We expect the private practice of meteorology will be developed after 
the war. There never has been private practice of the profession to 
any great extent, but we think the extensive training programs during 
the war will furnish enough meteorologists so that many bu inesses 
and industries will employ a company meteorologist, and that some 
of the need for expansion will be filled in that way. 

They will, in turn, call upon the Weather Bureau for more basic 
data to enable them to do their individual company jobs. The Bureau 
has ahvays been active in that particular phase of meteorological serv- 
ice, but I expect it to expand and inci-ease after the war. 

I talked recently with a representative of one of the large railroad 
companies. He pointed out some of the difficulties they have with 
weather and climate, for which they have not found a solution, and I 
am very sure that a company meteorologist could find the answer to 
many of those needs which the AVeather Bureau has not been able to 
meet simply because the Bureau does not have the facilities to go into 
individual company requirements. 


Mr. WoRLEY. Do you have any additional comments? 

Mr. Reicheldekfer. I think that covers the general points, Mr. 

Mr. WoRLEY. Every morning I look to see what you have to say 
before I look to see what has happened. 

Thank yon very much. 

Mr. Lyons. Mr. Chairman, I have here some copies of bulletins in 
connection with air-transport developments and potential air-trans- 
port developments for three countries in South America — Argentina, 
Brazil, and Peru. 

Mr. WoRLEY. Thank you very much. I want to have you back again 
at some future meeting to develop this foreign trade zone situation. 

Mr. Lyons. I will be glad to come back. 

Mr. WoRLEY. Thank you and the members of your department. We 
appreciate your cooperation. 

Without objection, the committee stands adjourned until 10 o'clock 
tomorrow morning. 

(Whereupon, at 4:15 p. m., an adjournment was taken at 10 
o'clock a. m., Thursday, September 28, 1944.) 



House of Representatives, 
Subcommittee on Foreign Trade and Shipping of the 

Speoial Committee on Post-war Economic 

Policy and Planning, 

WcRshi/ngton, D. C. 

The subcommittee met, pursuant to adjournment, at 10 a. m., in 
room 1304, New House Office Building, Hon. Eugene Worley pre- 

Present : Representative Worley (Texas). 

Also present : H. B. Arthur and Vergil D. Reed, staff consultants. 

Mr. Worley. The committee will be in order. 

The Subcommittee on Foreign Trade and Shipping resumes hear- 
ings this morning by considering the Foreign Economic Administra- 
tion, its functions and relations to the particular question of foreign 
trade and shipping. 

We are glad to have with us this morning, Mr. Currie, Deputy Ad- 
ministrator of Foreign Economic Administration, who, I understand, 
has jDrepared a statement outlining the functions of F. E. A. 

After you have finished with your general statement, Mr. Currie, 
we will try to ask questions that might not have occurred to you in 
your outline which we think will be important to the work of this 
particular subcommittee. AVe welcome you and appreciate your co- 
operation in coming here. 

Mr. Currie. Thank you very much. 


Mr. Currie. Mr. Chairman and gentlemen, I very much appreciate 
this opportunity to discuss with the committee some of the problems 
of foreign trade that will face this country after the war. 

I understand that the committee has until the present primarily 
concerned itself with the domestic post-war problems of the coun- 
try. I should like to say at the outset that unless the domestic economy 
can be kept in reasonably full operation in the post-war years, it 
will not be possible to effectuate the foreign economic policies that 
are needed. A constructive foreign economic policy will, however, 
assist in the solution of our domestic problems. Our domestic and 
our foreign economic policies are interrelated, each affecting the 
other, and they can only be made fully effective if they are consid- 
ered as complementary. The decision of the committee to consider 



the foreign aspects of our post-war economic problems is, therefore, 
a very welcome one, and of vital importance. We must look for- 
ward and bend all pur energies toward the achievement of full em- 
ployment and prodiiction at home and a high level of international 
trade abroad. 

It may be helpful to the committee if I first describe briefly the 
major operations of the Foreign Economic Administration. These 
activities are, of course, wartime activities but they have an impor- 
tant bearing on the foreign economic problems with which the United 
States will be faced after the war. 


In the first place, the Foreign Economic Administration regulates 
commercial exports from this country through licensing procedures. 
In order to conserve materials, resources, manpower, and shipping 
for war purposes, it has been necessary to curtail our exports during 
the war. Our post-war objective, however, will be to keep them up 
and, with this end in view, the Foreign Economic Administration is 
now lifting these controls whenever opportunity offers. Among the 
controls which will be abandoned as soon as military- and foreign- 
policy considerations permit are those designed to prevent strategic 
supplies from reaching the enemy by way of neutral countries. This 
again is, of course, a wartime activity. 

The Foreign Economic Administration has also been engaged in 
obtaining in world markets the strategic and critical materials which 
the War Production Board and the War Food Administration deter- 
mine are needed for war purposes. Where private importers have 
been able to arrange for needed supplies, the F. E. A. has assisted them 
by assuming war risks such as increased insurance rates or by pro- 
viding loans, technical assistance, or equipment. Where the required 
amounts of strategic commodities could not be brought in effectively 
through commercial channels, the F. E. A. has itself procured the 
needed strategic supplies and organized development programs where 
necessary to bring forth the materials needed. In general F. E. A. 
has procured abroad (1) where private importers were unable to obtain 
supplies owing to price inflation in foreign countries and price ceilings 
in this country, (2) where the output of submarginal mines and high- 
cost plantations was needed for war purposes, and (3) where new labor 
forces had to be recruited and housed in order to mine or produce 
vitally needed war supplies. Where necessary, F. E. A. has arranged 
to explore for new sources of vital supplies, built roads, repaired rail- 
roads, and initiated new air transport services to give access to needed 
supplies. In neutnil countries considerable purchases have been made 
as a part of our economic warfare activities to prevent strategic materi- 
als from reaching the enemy. 

These procurement activities are all aimed at the successful prose- 
cution of the war and the Foreign Economic Administration is pre- 
paring to adjust them to the progress of the Avar. They will not all 
be terminated until after the defeat of both Germany and Japan. 
When Germany is defeated the F. E. A.'s activities will be reduced 
accordingly, and will be directed to the support of the armed forces 
in fighting Japan. 

1 See appendix for exhibits 20 to 23, pp. 1196 to 1202. 


Tlie Foreign Economic Administration is also responsible for ad- 
ministering the appropriations made by Congress under the Lend- 
Lease Act. This act also is a war measure. Present military events 
make it necessary to plan lend-lease policy anew for the period dur- 
ing which we shall be fighting Japan. The type and quantities of 
lend-lease supplies which will be furnished after the complete defeat 
of Germany will depend on the strategic decisions which have been 
m.ade for the defeat of Japan. 

Consideration has also been given to the orderly and efficient liqui- 
dation of the lend-lease program after complete victory over Japan. 
Se^'tion 3 (c) of the Lend-Lease Act authorizes the practical and 
sensible termination of lend-lease. It permits for a time the carry- 
ing out of agreements to deliver supplies in procurement or production 
for war purposes where the agreements were made prior to the termi- 
nation of the basic provisions of the act. Under this authority it will 
be possible to avoid canceling all contracts for vital supplies in the 
process of manufacture when the war actually ends. Manufacture 
can be completed and goods can be delivered to the foreign country 
on credit or other terms under the provisions of the Lend-Lease Act. 
This will ease the burden of contract termination and minimize the 
amount of Government surplus property when the war is over. 

The Export-Import Bank, which is a part of the Foreign Economic 
Administration, has during the war exercised its authority to extend 
and guarantee loans. Most of its activities have been directed toward 
the financing of expoi-ts to Latin America, which will assist in the 
production and transportation of strategic and critical materials 
nee<led for war purposes. 

The Foreign Economic Administration has, therefore, been occu- 
pied with many of the vital problems of war. These operations 
Inquire much detailed knowledge of foreign trade. They also yield 
much information concerning our foreign trade of the future. We 
have economic missions in nearly every country. These missions pro- 
A'ide a flow of information reo;arding economic conditions in these 
countries. The necessity for finding the way out from under most 
of the present controls has compelled considerable thought concerning 
the foreign trade problems of the United States after the end of the 
war in Europe and Asia. I should like to offer to the committee the 
results of our experience in the hope that we can assist Congress to 
formulate a policy which will pave the way to national prosperity and 
international peace. 



Our policies for the post-war world must be considered and formu- 
lated in the light of the facts concerning our wartime economy. I 
should like to summarize these facts before discussing possible Amer- 
ican policy. 

1. The United States will be the greatest industrial power and 
almost the only important industrial Nation which has suffered no 
physical war damage to its industrial or agricultural equipment and 
no undermining of the health of its people. 

2. The United States has enormously increased its manufacturing 
plants and equipment during the war. Our gross national produc- 


tion has been far higher than it has ever been in the history of the 
country, and despite war demands, our civilian population has con- 
sumed more goods and services than ever before. Present figures 
indicate that we are turning out about $196,000,000,000 of goods and 
services a year, which is about double our highest production in any 
year up to 1939 (which was 99.4 billion dollars in 1929). These fig- 
ures, however, are not corrected for price changes. This tremendous 
output was acliieved although some 11,000,000 young men and women 
had been taken out of productive work. These in general in- 
clude our most vigorous and efficient workers. If we fall greatly short 
of this wartime achievement, we shall be faced with considerable un- 
employment. It is apparent tliat this country will be under tremen- 
dous pressure, and properly so, to find ways of achieving full em- 
ploj^ment. One of the ways would be to export far more than ever 

3. Reasonably full use of these national resources will require both 
thought and leadership. The curtailment of the war program will 
call for a drastic change in the nature of production. At the same 
time exports through lend-lease will be curtailed. These lend-lease 
exports are now running at the rate of 11.5 billion dollars a year. 
The loss of this business will be serious for both industry and agricul- 
tui'e. The lend-lease exports alone represent nearly four times our 
average total exports in pre-war years and nearly 6 percent of our 
present national output of goods and services. 

4. The reconversion necessitated by the drying up of the war and 
lend-lease orders for goods will be partially assisted by the accu- 
mulation of purchasing power available to make up arrears of mainte- 
nance in industry, agriculture, and in the home. But to take the 
place of Government spending for the war, it would have to amount 
to about $90,000,000,000 a year. To maintain present employment 
we shall need greatly expanded markets both at home and abroad, 
and we need the markets more particularly to supply jobs for the men 
and women returning from the armed forces. 

5. During the war, and excluding all lend-lease exports, we are 
exporting at the rate of $2,800,000,000 of goods and services a year. 
During the decade fi^om 1929 to 1939 our exports ranged between 
$2,100,000,000, and $4,000,000,000, which was about 4 or 5 percent of 
our gross national production, just as we must raise our sights for 
total production in post-war years and our standard of living, we must 
also raise them for exports. I should like to point out to the committee 
that merely to fill the gap left by lend-lease exports our present exports 
must be raised from $2,800,000,000 to $14,300,000,000 (present lend- 
lease exports being at the rate of $11,500,000,000 a year) . 

Exports at this rate would have a very far-reaching effect on the 
domestic economy. Money paid for goods for exports helps to main- 
tain employment in the plants of the manufacturers producing those 
goods. But the effects flow back to the mines, farms, transport, bank- 
ing, insurance, and other parts of our industrial and economic system. 
Manufacturers buy materials, equipment, and services from others. 
The workers employed in turning out the export goods spend their 
earnings on the things they need and desire. The manufacturers, 
farmers, and workers producing these things also increase their ex- 
penditures, so that the stimulating effects spread all through the 


economy. The effect on profits and employment, therefore, extends 
far beyond the lines of goods exported. In many Imes, moreover, 
larger volume means lower costs and the opportunity for lower prices 
in this country. Since exports offset any tendency to general shrink- 
age in our operations, their value greatly exceeds any measurement 
based on the volume of exports. 

6. Fourteen billion dollars would admittedly be a high level of 
exports compared with the past. But we shall need to export much 
more than before the war, and foreign countries will need much more 
from us. The need for American goods abroad will far exceed the 
need at any previous time. A great many countries, always less richly 
endowed than the United States, have been more or less seriously 
damaged. Their plants, the houses of their people, their railroads, and 
bridges will have been bombed or dynamited. Their people will have 
been weakened by malnutrition or by the pressure to apply the utmost 
of their powers to resisting the enemy by long hours of production, by 
home defense and firefighting, by underground resistance, and many 
other ways. 

Thus many of our potential customers will be impoverished. For 
a time, relief from the outside will be necessary to prevent starvation, 
but relief must be nothing more than a temporary measure. Never- 
theless, these countries can begin to support and help themselves only 
after their damaged economies have been repaired. Many of them, 
therefore, will be desperately anxious to obtain supplies from abroad. 

These people will turn to the United States for roadbuilding ma- 
chinery, trucks, railroad equipment, utility equipment, industrial 
machinery, and much more. Our armies have carried American 
products and American methods across the world and have, as a part 
of the military program, staged an impressive demonstration of these 
products and methods. Wartime training in the United States of 
foreign technicians under the lend-lease program has also acquainted 
foreign countries with our equipment. The way has, therefore, been 
prepared for increased exports. 

There will also be many countries whose standard of living is low 
partly because of their lack of capital. Their transportation, indus- 
tr}', and agriculture are relatively primitive. But the war has increased 
the determination of these people to improve their means of produc- 
tion and their standard of living. They also need agricultural 
machinery, transportation equipment, and machinery for the simpler 
industries. American technical aid will also be required. These 
countries are potential customers on a very large scale for a very 
wide variety of consumers' goods as well as equipment. But their 
needs can become effective in the markets of the United States only 
after their standard of living has been raised above present, often 
very low, levels. 

7. One of the factors that will affect our exports of new goods 
will be the disposal of surplus goods abroad. As in the domestic 
market, competition with new production from this source will de- 
pend upon the extent to which surplus goods can be disposed of in 
places and for purposes that would otherwise not be markets for new 

8. As the greatest industrial Nation, this country is especially in- 
terested in the export of manufactured goods. Before the war, Ger- 


many was a very serious competitor in this field and Japan was in- 
creasing rapidly in importance. German exports, when the Nazis 
came to power, were about 1.6 billion dollars per year and increased 
in 1938 to 2.2 billion dollars a year. Japanese exports in 19e38 were 
$800,000,000. Both of these countries will be seriously crippled as 
exporting nations. 

Great Britain has always been an important exporting country. 
In 1938 it exported products of United Kingdom origin to the value 
of $2.3 billions. To finance its grim fight against the Axis Powers 
before the United States entered the war. Great Britain dis- 
f)osed of very considerable foreign investments. During the war 
it has lost much of its shipping. If Britain is to live even on its 
pre-war standard after war damage has been repaired, and take a 
large share of the responsibility for maintaining the peace, it must 
export more goods than before in order to pay for the same amount 
of imports. Recent discussions in England indicate that the British 
are fully conscious of the necessity for a vigorous policy to secure 
export markets. The British Government is preparing to stimulate 
and assist its manufa-cturers and exporters, and for some years it 
has provided insurance against credit losses in foreign trade. 

Canada has been increasing in importance as an exporter. In 1937 
its exports exceeded $1,000,000,000. During the war there has been 
very considerable industrial development in Canada and the Dominion 
is looking toward increased exports after the war. The Dominion 
Parliament has recently established the Canadian Export Credit 
Insurance Corporation to insure exporters against certain losses on 
■exports up to a total of $50,000,000. In addition, the Corporation 
is authorized to provide, during the transition from war to peace, 
loans and guaranties to foreign governments for the purpose of facil- 
itating and developing trade. This Government financial aid is at 
present limited to $300,000,000 outstanding at any one time. 

The fact that these countries and others are seeking export markets 
need not result in economic warfare Uetween them or between us 
and them. But serious shrinkage in German and Japanese exports 
will not alone make room for all the exports that the exporting nations 
will wish to make. It will also be necessary to expand world trade 
as a whole. Only in this way can the danger of nationalistic controls 
of foreign trade, such as developed during the thirties, be avoided: 
only in this way can American exports be raised to lev(els that will 
aid in maintaining employment in this country without resulting in 
unemployment elsewhere. 


I should now like to turn from some of the salient facts in the post- 
war trade world to the Government policies which I believe will pro- 
vide a sound basis for our foreign trade. 

1. An adequate peace organization: The first requirement for 
healthy international trade is, of course, military security. Efforts to 
achieve national self-sufficiency are hardly conducive to the expansion 
of international trade. We have made a start in dealing with this 
problem at the Dumbarton Oaks discussions. 

2. Full employment : Tlie second requirement is the fullest possible 
employment and production in the United States and in the other 


peace-lovin<2; nations. The prosperity and economic well-being of 
the United States is fnndamental to the economic well-being and 
j)eace of the world. If we were to approach the present rate of pro- 
duction, it would mean that we would buy much more abroad and 
thus be able to sell more abroad. 

3. Stable exchange rates : The next requirement is stable exchange 
rates. Wide fluctuations in exchange rates increase the financial 
risks of foreign trade, militate against foreign investment and invite 
currency wars. We have begun to deal with those problems at the 
Brett on Woods Conference. 

4. The establishment of fair exchange rates : The establishment of 
an adequate foreign trade may also call for action to ensure that the 
foreign exchange rates established after the war do not place our ex- 
porters at a competitive disadvantage. If foreign countries place an 
excessively low value on their money in terms of the money of other 
countries, their exports are stimulated and their imports discouraged. 
In this country the executive branch of the Government no longer 
has power to reduce the foreign exchange value of the dollar by re- 
ducing its gold content. We must urge, therefore, that other countries 
do not undervalue their money. Our initial share of post-war foreign 
trade may be greatly affected by these foreign exchange rates. The 
Treasury is fully alive to the significance of the problem. 

5. Freeing blocked or frozen cui-rencies : During the war many cur- 
rencies have been "blocked.'' The balances to the credit of foreign 
countries can be spent in the country liolding the balances only under 
severe restrictions. When those restrictions are removed the holders 
of the balances will want to spend them. The exports of the countries 
holding the balances will be stimulated wliile exporting by other 
countries will have tougher sledding. This blocking of currencies has 
unfortunately been a wartime necessity and it may take some time to- 
release the balances that have been accumulating. But countries 
sliould be free to spend the current money proceeds of their exports 
in any market they may choose. To this end we should use our na- 
tional influence and assistance if necessary to put an end to this block- 
ing of balances as soon as it ceases to be needed to aid in prosecuting 
the war. The adoption of the recommendation of Bretton Woods 
would be most helpful in this connection. 

6. Removal of import and export controls: It is to be hoped that 
tlie whole complex of import and export controls will not long survive 
the war. Most of these controls were established to prepare for the 
war or to mobilize the resources of various countries during the war. 

In the immediate period before the war, however, Germany, by a 
series of clever devices in foreign trade, used its great industrial power 
as a means of dominating many other countries. It declared economic 
war years before it declared physical war. It made economic war- 
fai'e an integral part of its policy of world conquest. Exchange con- 
trols and barter deals preempted man}^ markets for Germany. These 
methods must be eliminated as quickly and as thoroughly as possible. 

As for our own wartime controls, I have already indicated the 
program of the Foreign Economic Administration for the removal of 
such controls as it administers. 

7. Lowering tariff barriers : It will not be sufficient, however, to get 
rid of controls that we associate directly with the war. In this and 
other countries excessive import duties have for long imposed undue 


obstacles to the development of world trade. If we wish to be an 
exporting country and to be paid for our exports and have the interest 
and i^rincipal on our loans paid, we must also be an importing country, j 
Bilateral and multilateral action to adjust tariffs and other trade re- \ 
strictions is necessary to a high level of international trade. But the i 
absorption of additional imports will be possible only if over a period j 
of time we succeed in achieving a high production and consumption j 
economy with employment opportunities for all. | 

The lowering of trade barriers will soon be a matter of prime I 
interest. Article 7 of the master lend-lease agreement between the ' 
United States and the United Kingdom of February 23, 1942, states | 
that: I 

In the final determination of the benefits to he provided to the United States of j 
America by the Government of the United Kingdom in return for aid furnished ( 
under the act of Congress of -March 11, 1941, the terms and conditions thereof I 
shall be such as not to burden commerce between the two countries, but \ 
to promote mutually advantageous economic relations between them and the 
betterment of world-wide economic relations. To that end, they shall include 
provision for agreed action by the United States of America and the United 
Kingdom, open to participation by all other countries of like mind, directed 
to the expansion, by appropriate international and domestic measures, of pro- 
duction, employment, and the exchange and consumption of goods, which are { 
the material foundations of the liberty and welfare of all peoples ; to the ! 
elimination of all forms of discriminatory treatment in international commerce, j 
and to the reduction of tariffs, and other trade barriers; and, in general to the 
attainment of all the economic objectives set forth iu the joint declaration made 
on August 12, 1941, by the President of the United States of America and the 
Prime Minister of the United Kingdom. 

The joint declaration here referred to is the Atlantic Charter. 

Other countries look to this country for reassurance that we will 
take action to implement these objectives. They must act soon, and if 
they are left in doubt as to our desire to have international trade on as 
high and free a basis as possible, they will be compelled to look out for 
themselves and will turn again to restrictive nationalistic policies. 
But if we take advantage of our opportunity for international leader- 
ship, we can open up to private initiative enormous opportunities to 
economic progress. In this progress the United States itself will 
obtain a large share of the benefits. It is hoped, therefore, that rapid 
progress can be made in the generalized system of reciprocal trade 

8. Orderly liquidation of surplus property: Particular care will 
have to be taken to assure that the disposal abroad of surplus prop- 
erty will interfere to the Ijeast possible extent with the export of 
neAvly manufactured American products. 

9. Financing exports : If we are to have a full flow of goods from 
the United States during the transition from war to peace, extensions 
of credit will doubtless be required. The principal difficulty in ob- 
taining export orders will arise from the fact that many potential 
foreign customers will lack the means of paymsent. Some neutral and 
other countries have accumulated considerable quantities of dollars 
during the war, but many others have not. There are t^vo important 
waj^s in which these countries can obtain dollars: They can sell goods 
and services to us, or we can extend credit to them. 

In the immediate post-war period, the export of goods will be hin- 
dered in many countries by either the necessity for reconversion to 
peacetime production or the reconstruction of Avar-damaged indus- 


tries, agriculture, and transport. In some countries, tliese difficulties 
will be temporary and foreign aid will be necessary only to obtain 
the materials necessary for reconstruction before exports can be pro- 
vided. In some of the less-developed countries, on the other hand, 
such problems will be of long duration, and they will call upon us 
continuously for capital assistance over a longer period. Thus the 
ability of a number of countries to obtain dollars on loan will be one 
of the principal determinants of our foreign trade after the war. 

Experience in recent years with farm and home mortgages in this 
country has shown that many borrowers who are poor risks at high 
rates of interest and short-repajanent schedules become good risks if 
the terms and maturities are adjusted to their capacity to pay. If 
proper precautions are taken, I am convinced that we may safely re- 
sume our foreign lending on a large and sound scale. Such fina-ncing 
might take the form of low-interest rates and long maturities. In 
addition, we would be wise to ensure that the proceeds of the loans 
are used productively and contribute to the development of the bor- 
rowing country's ability to service its foreign debts. General action 
to stabilize foreign exchanges to provide against periodic collapses 
in the world demand for the raw materials and other products of 
debtor countries would further enhance the safety of their loans. 

Some of the risks of these loans depend upon the political future 
of the world. If there is political insecurity, men and resources 
will be turned away from peaceful purposes to preparation for war. 
Attempts to achieve economic self-sufficiency will result in inefficient 
use of their resources. Governments acting in concert can greatly 
reduce these risks. Since they alone can act to minimize the political 
risks involved in foreign loans, governments can properly be expected 
to assume such nonbusiness elements of risk and thus facilitate private 
lending abroad. 

There is much to be said for the nations' jointly guaranteeing 
foreign loans. They then have a joint interest in the maintenance 
of conditions that will permit the servicing of the loans. In essence 
the International Bank for Reconstruction and Development provides 
such a guaranty. It must be borne in mind, however, that the pro- 
posed bank is designed to supplement and not to su])plant lending by 
the member nations. In fact, additional lending by the United States 
as well as other member nations will be necessary to finance reconstruc- 
tion and development and maintain an export trade of the size that is 
necessary for our domestic economy on a full employment and pro- 
duction basis. 

^Ye have already seen that the volume of wartime exports ap- 
proached $15,000,000,000 and that this is roughly four times our peace- 
time exports. From what we know of the needs of foreign countries 
for imports and their presently inadequate ability to pay for them, it is 
apparent that if a high level of exports is to be maintained it will be 
necessary for the United States Government to make and guarantee 
loans on favorable conditions in terms of the interest rates charged and 
the periods for payment. I believe that we can afford to take some 
risks, because to some extent we will be balancing one risk against 
another. The alternative — failure to lend — m411 result in a reduction 
in our exports from present high levels. The reduction of our foreign 
markets, like a reduction in our domestic markets, may result in unem- 


ployment, the full cost of which is difficult to measure but which may 
many times exceed any losses incurred in financing exports. 

In addition to the extension of credit, careful consideration should 
be given to proposals for extending the practice of guaranteeing 
foreign loans. The idea is not, however, a new one. After the 
Government insured bank deposits, there was never any hint of uncer- 
tainty on the part of depositors. Moreover, loans have been guaran- 
teed within this country by the F. H. A. and more recently, under war 
conditions, by the P'ecleral Reserve System for war production and 
contract termination purposes with considerable success. They have 
also been guaranteed in the foreign field, to a limited extent, by the 
Export-Import Bank. The guaranteed loan has the general advan- 
tage that it necessitates the cooperation of the banker in appraising 
the loan and distributing the issue. Moreover, bankers can be left 
free to compete for the business of selling the bonds to the public. 
Apart from the controls I have mentioned over the spending of the 
loans to provide a means of servicing them, domestic business can be 
left free to compete in selling the goods upon which the borrowed 
funds are to be spent. 

I have already mentioned the British and Canadian arrangements 
to provide Government insurance (without subsidy) of foreign -trade 
risks. Generally speaking, the arrangement is for the Government to 
take part of the credit risk on a short or moderately long credit up to, 
say, 10 years on individual transactions, or groups of transactions, in 
the export trade. The usual banking facilities carry the remainder 
of the risk. Premiums are fixed for each transaction, or set of trans- 
actions, and are designed to cover all anticipated losses. The Export- 
Import Bank of the United States has engaged in a number of com- 
parable transactions. 

I can foresee such large sales of industrial machinery, transporta- 
tion and utility equipment of various kinds that even large manufac- 
turers would be unwilling to tie up their own capital over relatively 
long periods of time or take the risks involved. Government partici- 
pation relieving bankers of part of the risk may make possible more 
reasonable terms and thus assist the export trade. 

Smaller manufacturers and smaller exporters will have even greater 
need of financial assistance if exports are to be raised to a high level. 

If we take into consideration past experience in this field, it would 
seem that if we are to achieve the level of exports which we have had 
during the war, relatively large scale financing will be necessary in 
the peace. The scope of any such program will, of course, be a matter 
for the Congress to determine. 

In closing, I should like to make one point very clear. I do not 
believe that whenever unemployment appears we should attempt to 
eliminate it by indiscriminate foreign lending. In the longer run, 
foreign loans must be made only wlien they facilitate additional pro- 
duction out of which interest and principal can be paid. But we must 
not be guided by present ability to pay. A soundly conceived pro- 
gram of foreign lending, such as I have outlined, will lead to such 
an increase in productivity throughout the world as will raise stand- 
ards of living and increase ability to repay debts to levels never 
hitherto approached. However, we must prepare to take payment 
in goods and services. 


It is important that we recognize the absence of any foundation 
in fact for the oft-expressed fears that industrialization abroad will 
destroy this country's ability to export profitably. It is indeed reas- 
suring that the forward looking business groups engaged in post-war 
planning are themselves working actively to dissipate this myth. 
Our foreign trade has actually been greatest with those countries 
which, like Great Britain, have been relatively the most highly indus- 
trialized. I am confident that in the future, too, industrialization 
will be found to promote international trade. 

The post-war world will be united in two objectives, namely, to 
prevent still another and more destructive war and to maintain full 
emplojanent and raise the standard of living of the people. We have 
seen some of the factors which make it important for this country, 
as a matter of self interest, to promote foreign trade in the interests 
of full employment and production. Pacts to insure military secur- 
ity, financial stability, and other similar and necessary purposes can 
be successful only if they are accompanied by fidl employment and 
production and a rising standard of living in this and the other coun- 
tries of the world. 

Mr. WoRLEY. We wish to thank you, Mr. Currie, for making suck 
a s]3lendid statement. 

Do you agree that to encourage foreign trade and shipping is a 
sizable task? 

Mr. Currie. Yes. 

Mr. WoRLEY. Your agency is primarily a war agency, is it not? 

Mr. Ci'RRiE. That is right. 

Mr. WoRLEY. Will you go out of existence when peace is declared? 

Mr. Currie. We are set up by an Executive order as a war agency, 
but some of the activities of the agency will have to be continued, 
regardless of the continuation of the agency itself. 

Mr. Worley. Some of your functions, such as lend-lease? 

Mr. Currie. Lend-lease will take time to wind up. The disposi- 
tion of surplus goods abroad will take a number of years. The loan- 
ing activities of the Export-Import Bank will continue under con- 
gressional authorization. 

At the present time we are also engaged in assisting the Army in 
staffing the control commissions in ex-enemy countries. That is a 
service we perform for the Army that will have to be continued 
by some agency. 

Mr. Worley. Does your agency make policy? 

Mr. Currie. It makes policy within limitations. The over-all for- 
eign policy is determined by the Department of State. Within that 
framework we make a good many policies. 

IMr, Worley. You have authority to carry out specific functions 
under the Executive order and congressional action? 

Mr. Currie. That is right. 

Mr. Worley. But so far as your actual policy is concerned it is 
dictated basically by the State Department? 

Mr. Currie. In the field of foreign policy and foreign relations. 

Mr. Worley. I am trying to establish just what field that is. It 
seems to me that the foreign field is primarily your field. 

99579 — 45— pt. 4 12 


Mr. CuRRiE. There are many important economic policies that must 
be determined within the framework of our foreign political policy 
or our foreign relations. 

Mr. WoRLEY. I see. 

Mr. CuRRiE. "VVlien it comes to a question, for instance, of deciding 
what ])olicies we should adopt in securing materials from some coun- 
try, like mica, that is entirely our responsibility. We determine 
where it is to be procured, the price to be paid, and other terms under 
which it is procured. That is entirely our responsibility. 

Mr. WoRLEY. Without authority from the State Department? 

Mr. CuRRiE. That is right, but of course subject to our foreign policy 
as determined by the State Department, 

Mr. WoRLEY. I was wondering how much consideration had been 
paid to those several points you make in your outline by the othei] 
departments which will have jurisdiction, perhaps, after the war is 

Mr. CuRRTE. Many of these points I mentioned in this program are 
not properly within our jurisdiction, but primarily under the juris- 
diction of other departments. 

The questions of exchange rates, foreign exchange, and blocking of 
currencies are primarily in the province of the Department of the 
Treasury. The question of tariff barriers is primarily in the province 
of the Department of State and the Tariff Commission. 

Mr. WoRLEY. Would you say they endorse these views? 

Mr. CuRRiE. Yes, sir; to the best of my knowledge and belief this 
is the policy of the Government departments. 

Mr. WoRLEY. This is the first long-range over-all program the com- 
mittee has had the advantaoe of securing and, whether it works or not, 
I think you are to be commended for going into this as thoroughly 
as you have. 

If you don't object, would you mind taking these points up one by 
one ? 

Mr. CuRRiE. No ; not at all. 

]Mr. WoRi.EY. There are a few questions on which the committee 
would like to be enlightened. Your point No. 1 which is that — 

Basically our post-war objective will be to keep our exports up, and with this 
eud in view the Foreign Economic Administration is now lifting these controls 
whenever opportunity affords. 

The amount of goods we can export will determine in large meas- 
ure the prosperity we enjoy here at home. That is true, is it not? 

Mr. CuRRiE. Yes. There is a reciprocal relation there. 

Mr. WoRLEY. Assuming that our domestic purchasing power re- 
mains the same, then we will have to continue to export approximately 
the same amount we are exporting under lend-lease. 

Mv. CuRRiE. That is right. 

Mr. WoRLEY. Say, between 10 and 12 billions of dollars. 

Mr. CuRRiE. Our total exports now are running about 14 billions — 
our own private exports, plus lend-lease. 

Mr. WoRLEY. You think we could aim at $14,000,000,000? 

Mr. CuRRiE. I think that would be necessary to maintain present 
employment levels unless additional domestic consumption is induced. 
If we are to maintain the present amount of employment in this coun- 
try, which is now based partly on our total exports, we would have to 
reach that goal. 


Mr. WoRLEY. Admiral Land testified this week that we were aiming 
at carrying in our own ships 50 percent of our exports. How does 
that goal compare with your $14,000,000,000? 

Mr. CuRRiE. I have not calculated what it would mean in terms 
of shipping tonnage. 

Mr. WoRLEY. It is difficult to do that. 

Mr. CuRRiE. It would obviously mean a very large amount of busi- 
ness for our merchant marine — such a volume of tonnage. 

Mr. WoRLEY. Assuming our shippers use our own ships. 

Mr. CuRRiE. Yes. 

]Mr. WoRLEY. Mr. Arthur, staff consultant, would like to ask you 
some questions. 

]Mr. Arthur. We have had some indications that the volume of 
foreign trade should be related to our total national production and 
national income. We expect to get the results of studies from the 
Department of Commerce in that regard, and I assume that they will 
give us some figures for our expected exports and imports. 

Do you know whether their studies come close to the figure you have 
of 1-4 billions of exports in the projection they are taking of national 
income 't 

Mr. CuRRiE. No ; I am not familiar with their studies, but, offhand, 
I should say that they were not. 

Both our imports and exports are a function of our national income, 
but since a large part of our exports today is based on what is in eco- 
nomic terms equivalent to an extension of credit througli lend-lease, 
I am certain you could not anywhere near approach this volume of 
exports in the next 4 years after the war without extension of credit, 
and I don't suppose that those calculations envisage that. 

Mr. Arthur. In other words, the 14 billions of exports represent 
a disproportionate part of national income compared with our past 
peacetime experience? 

Mr. CuRRiE. Yes ; in terms of our past experience. 

]Mr. Arthur. And a projection of that 14 billions of exports would 
mean that exports would have a much larger ])art in our total national 
economy than in the past two decades before the war? 

Mr. CuRRiE. Yes. In the decade before the war our exports 
amounted to only about 4 or 5 percent of our gross national product. 
I should think they would have to be larger than that to meet tlie 

Mr. Arthur. It might go to 8 or 10 percent, according to your 

Sir. Currie. It might very well ; yes. 

^Ir. Reed. Mr. Currie, I have noticed the studies that the Bureau 
of Foreign and Domestic Commerce has made on tliat and, in keeping 
with the remarks, I believe has set up as a goal after the war $7,000,- 
000,000 of exports and $7,000,000,000 of imports. 

That M'ould be more consistent with the past existing relationship 
to our total national income? 

Mr. Currie. Tliat is right, but I believe that study was based on tlie 
assumption that pi-e-war relationships would continue after the war. 

Mr. Reed. I realize we do have the facilities and possibilities of 
l^roduction that would give us as much as you say, but do you think 
the probabilities are very great that we would get, even with 160 to 


170 billion dollars of national production, beyond seven or eight 
billion dollars of exports ? 

Mr. CuRRiE. I think not immediateh', in the absence of foreign 

Mr. Reed. Extensive foreign lending? 

Mr. CuERiE. That is right. Only in that way can j'ou raise the 
figure of exports very much above the figure you mentioned. 

Mr. Reed. Have you seen any figiu^es — I realize these are extremely 
questionable in some respects, but I have never seen any figures of 
any kind as to how many people depend directly on exports and 

Say under our pre-war levels, would you assume that as many as 
5,000,000 people depend either directly or indirectly on our foreign 
trade ? 

Mr. CuRRiE. I am awfully sorrj'. Dr. Reed, I don't have the figures 
in mind. 

Mr. Reed. I simply wondered if you had run across any such figures. 
I have never found any such figures myself, that I considered reliable, 
but everybody is trying to find out what it does mean in employment 
to get so much in exports and imports. 

Mr. CuRRiE. I would be extremely glad to investigate and see if 
I can throw any additional light on that. 

Mr. WoRLEY. I have one additional question. 

You mentioned that credit would probably be needed in oixler to 
attain this volume of exports. Is that a temporary proposition, 
thinking in terms of decades, and does it mean our exports will greatly 
exceed our imports during that near period, or do we expect to im- 
port as much as we export over the longer period of time in order 
to balance the accounts? 

Mr. CuRRiE. Over the longer period, of course, if the plan is soundly 
conceived, we would have to balance the accounts and take our pay- 
ments of principal and interest in the form of goods and services. 

I think one substantial offset in the future could be the expendi- 
tures of our tourists abroad, but, for the time being, the proposal 
would envisage an excess of exports over imports. 

I think we are now in the position of a local merchant in a region 
that has been devastated by fire, flood, or drought, and he cannot help 
being impoverished if all his customers are impoverished, and an 
extension of credit under those circumstances that would increase the 
well-being and prosperity of his customers would redound to his 

Mr. Arthur. You contemplate at some later date, if this level of 
exports should be maintained over a long period of years, it Avould not 
only equal but exceed this level you speak of, fourteen billions? 

Mr. CuRRiE. That is right. 

Mr. Arthur. The statement has been made that the British policy 
of long-term credits to foreign nations has paid dividends in the form 
of repatriation in periods of British emergency. 

Have you given any thought to that aspect of the policy ; in other 
woi-ds, not expecting repayment of these loans during normal peace- 
time operations but rather accumidating foreign credit which will be 
available as a strategic reserve, let's say? 

Mr. Currie. I hope, Mr. Arthur, that the need for such a thing will 
never arise. 


Mr. Arthur. In other words, you would, in your thinking, try to 
plan the thing contemplating a definite repayment of those credits 
in normal course of accounts. 

Mr. CuRRiE. I think it should be : and that is why I emphasized the 
fact that, in making these loans, care should be given at the time to 
insure that the debt -paying capacity of the borrowing countries is 
being increased correspondingly. 

Too many of our loans in the twenties were made without any 
tliought of ultimate repayment and used unproductively. They were 
made at a high rate of interest and with short maturities. I think that 
led to collapse of foreign economies in the whole decade before the 

Mr. Reed. Is there any reasonable way, Mr. Currie, that we can 
insure the use of loans so that they go into increased production in 
the country and increased purchasing power? 

For instance, I have in mind two or three instances — you probably 
do. too — in which most of it was frittered away, you might say, in 
nonproductive uses entirely, not even in preparing for war or any- 
thing of that sort, but got into other channels. 

Is there any way you can control those loans so that they do actually 
go into increased production and purchasing power? 

Mr. Currie. I think you could make that a condition of the making 
of the loan, that the project must be soundly conceived ; that the requi- 
site talent and ability must be available for the erection and operation 
of the proposed project, or, if not, that arrangements be made wnth 
American technical firms to erect the project, and perhaps with a man- 
agement contract ; that the project must be liquidated over a period 
of years; that some care, either directly in connection with that proj- 
ect or other parallel projects must be taken to increase the ability of 
the country to sell more abroad to increase its debt-paying capacity. 

I think all those things can be and should be made conditions of 
those loans. 

Mr. Arthur. Do you think we should have Government supervision 
of all individual loans abroad to insure that that condition is met, or 
do you think that private enterprise of itself will direct loans in those 
sound channels ? 

Mr. Currie. No: I think it would be possible only in the case of 
direct Government loans or those loans which the Government under- 
wrote through a guaranty system. I think in that case we would be 
justified in laying down conditions to assure the soundness of the loan. 

I am afraid it will be some time before you can expect a large volume 
of private lending without any guaranty. The experience has been 
so bad in the past that I think banks and exporters will be leary of 
investing large amounts abroad without a guaranty. 

Mr. WoRLEY. After this war is over, Mr. Currie, most of the na- 
tions are not going to be in position to buy what we have to sell. 

Mr. Currie. That is right if you are speaking in terms of large 
amounts. " 

Mr. WoRLEY. You propose to create purchasing power in those 
countries for the express purpose of being able to buy what we have 
to sell? 

Mr. Currie. That is right. 

Mr. WoRLEY. You do not believe that we can develop our foreign 
trade in any other fashion? 


Mr. CuRRiE. I wouldn't go so far as that, Mr. Chairman. I think 
that our foreign trade will grow, but very much more slowly than it 
would if we now help our potential customers to put themselves on 
their feet, 

Mr. AVoRLEY. How big a program do you suppose this would entail ? 
Can you give us any idea how much money, for example, Great Britain 
would require to carry out a part of your suggestion ? 

Mr. CuRRiE. I am nfraid, Mr. Chairman, I am unable to give you 
any idea of the magnitudes involved. 

In the case of Great Britain, I doubt very much that she would 
be a borrower. I think Great Britain pretty much intends to finance 
her own reconstruction. That would mean, however, so far as Great 
Britain does finance her own reconstruction, she would have that 
much less to loan abroad arid that much less to export. 

Mr. WoRLEY. It might be desirable to try to induce Great Britain 
to borrow from us if it would increase our exports, might it not ? 

Mr. CuRRiE. Of course, if Gi-eat Britain borrowed from us it would 
temporarily increase her ability to purchase our goods. 

Mr. WoRLEY. Wouldn't that be logical in accordance with the tenor 
of your proposition ? 

Mr. CuRRiE. It would be logical, but I think that Great Britain 
is one of the countries of the world that will not need much assistance 
from us in rehabilitating herself. 

Mr. WoRLEY. As a matter of principle, if we can help one country 
increase its desire or demand for additional things we have to offer,, 
then it seems that we could do that with all countries, and increase 
the desire all over the world and sell considerably more than we have 
ever been able to sell. 

Mr. CuRRiE. That is perfectly true, Mr. Chairman, but certain 
countries probably will not need much assistance, like Britain and 

Mr. WoRLEY. We could not force it on them ? 

Mr. CuRRiE. No ; but I have been speaking of countries which need 
and desire our goods and which have not at present the ability to pay 
for them. 

Mr. WoRLEY. Now, we are going to owe about 300 billions of dollars — 
I hope it is not any more than that — after this war is over. 

Your plan contemplates Government loans; is that correct? 

Mr. CuRRiE. Government loans and guaranties of private loans. 

Mr. WoRLEY. The Government will have to underwrite those guar- 
anties of private loans ; the Government will be liable for them ? 

Mr. CuRRiE. Yes; we take a contingent liability there. 

Mr. WoRLEY. Do you suppose we are going to he able to take on a 
biffger job in the face of this $300,000,000,000? 

Mr. Ctjrrie. I think so. 

Mr. WoRLEY. I think so, too. I am glad to hear you say so. That 
is why I was trying to get some idea of how mucli money would be 
involved in carrying out to the fullest extent your idea. 

You can't give us any idea on that score? 

Mr. CuRRiE. I don't believe I can at the moment. 

Mr. WoRLEY. You don't believe we can hope to increase our foreign 
trade without taking those steps — I misstated you again, you cor- 
rected me a minute aero. 


You say that will be the main thing we wall have to do? 

Mr. CuRRiE. I think we are going to be confronted with a job of 
reconversion that is staggering in its magnitude. When you take out 
some $90,000,000,000 expenditures from our domestic economy for 
the war eifort, the gap that Avill have to be filled there is just terrific. 

I hope you gentleman will make wise sugoestions for the domestic 
field, but in addition to that I think we will need greatly increased 
exports if we are to achieve full employment and make up this gap. 

%h\ WoRLEY. I hope we do, too. 

^Ir. Arthur. Expanding that point of full employment one step 
further, the goods we are exporting do not increase our standard of 
living in this country except as they provide employment and the 
means of buying to workers and business in this country. 

Mr. CuRRiE. Yes, our standard of living will be increased by the 
imports, goods, and services we receive as payment for our exports. 

Mr. Arthur. Would you, therefore, say that the amount of exports 
that is desirable to this country is the amount that is needed to employ 
the residual working force of the country that is not occupied in pro- 
ducing goods for domestic consumption ; in other words, that it occu- 
pies a residual position in planning for full employment? 

Mr. CuRRiE. Well, it is very difficult, Mr. Arthur, to say which 
would be the residual from the various types of expenditures — plant, 
and equipment. Government expenditures, or foreign loans. I am not 
sure what benefits there would be in picking any one of them out as 
being the residual item. They are all necessary to make up your total 

I should have mentioned Dr. Reed's point earlier. I don't think 
we ouglit to concentrate on the direct employment resulting from. 
exj)orts, because we do have a multiplier there which is as important 
as the direct effect. Exports which are exactly offset by corresponding 
imports are of benefit to the country in giving us goods we would not 
otherwise get and giving us goods cheaper. They do not, however, 
give you this multiplying effect. It is the additional goods over and 
a))ove that which may be financed that give you your net stimulating 

Mr. Arthur. I was thinking of financed exports in my statement 
and trying to reach some basis for estimating how large these loan- 
financed exports should be as a matter of national policy. Can that 
be tied to a continuation of full employment in this country rather 
than to continuing the wartime level of exports as the criterion for 
determining how much that loan-financed export volume should be? 

Mr. CuRRiE. Yes ; I think that would be the scientific way of going 
at the problem. When I referred to our level of wartime expoi-ts, 
I was merely presenting the factual picture. 

I assume your committee in its studies will attempt to set forth the 
arithmetic of the problem, the total amount of capital expenditures 
that will be necessary to full employment, and that will give you 
some indication of the amount of expenditures in the foreign field. 

I just give you this figure today of the amount of exports, including 
botli exports to lend-lease and private exports. 

]Mr. WoRLEY. Where can we secure those figures, ]\Ir. Currie ? 

Mr. CuRRiE. I am sure that your technical staff, Mr. Chairman, 
could work that out for you. Any help that we can give, we will be 
delighted to. 


Mr. Arthur. We will be looking for help. 

Mr. Reed. Mr. Ciirrie, I don't believe there is any way of estimating 
it, but the first and important factor is how much will be our imports. 

You have spoken of helping to finance exports. Do you see any gain 
that could be made by lending assistance to finance imports, particu- 
larly if we need large amounts for stock-pile purposes? Do you see 
any advantage to be gained by Government assistance in financing 
imports, or do you think that the sales competition itself between sup- 
pliers will keep that at a level where they, themselves, in other coun- 
tries, would take care of that financing? 

Mr. CuRRiE. I should think the latter. 

Mr. Reed. That we would not need any Government assistance at 
all in financing imports of that kind ? 

Mr. CuRRiE. No. There is an indirect effect. I think, as we in- 
crease efficiency and productivity of other countries, we may expect, 
as a byproduct, to get some imports more cheaply, but I don't think 
there will be any particular need to finance imports themselves. 

Mr. WoRLEY. I am trying to figure out the element of risk involved 
in this. 1 think I have an analogy here. I don't know^ how close it 
would be. 

When I was practicing law, one of my clients came to me, and he was 
in pretty bad shape and he owed me some money. He said he could 
pay if I went on his note over at the bank for a small amount, so I 
went on his note. 

He went over to the bank and borrowed the money. With part of 
that money he paid me what he owed me. The balance he took him- 

That was fine up to that point, but when the note came due he was 
not to be found, so I had to go over and take up the note. As a result, 
it was a loss to me, and that man hasn't paid me to this good day. 
When we finance these governments in order to try to increase our own 
purchasing power, just how much risk will we assume? 

Of course, it is desirable, if we can do it without loss. "Wliat steps 
can be taken to avoid a loss? 

As I see it, if we have a cinch on a degree or portion of world trade 
and commerce, which we undoubtedly will have, with the nations of 
the world in the condition they will be in after the war is over — if we 
have a virtual cinch on those markets, why should we risk more money 
to develop more markets? 

The conservative ajjproach, it seems to me, would be not to lend 
money, but to take what we have now and rely on other means than 
lending money. 

What I am trying to ascertain, Mr. Currie, is how can you reduce 
that risk and still obtain maximum return ? Can you give us any idea ? 

Mr. Currie. I think if you analyze the element of risk in the past 
it will give us some clew. 

Mr. WoKLEY. Can you give us any indication on that ? 

Mr. Currie. Some of the factors which have made foreign loans 
risky in the past have been war and political and military insecurity. 

Mr. Worley. How can we avoid the risk of war? Of course, we 
cannot avoid that risk, but your plan is predicated on the accomplish- 
ment of these other factors that go in there. 


xVssume that we have a peace Avhich will, as far as possible, elimi- 
nate wars or make them less likely. That is your first assumption; 
we must have that before your plan will operate. 

Mr. CuRRiE. That is right ; and I think we have to proceed on the 
assumption that we are now making plans and taking steps which, 
if they do not abolish, at least greatly reduce the risk of wars and 
the necessity for each and every country of the world maintaining 
and building the largest possible military and naval establishments 
they can carry. If we are not successful in that endeavor, all these 
other plans become immaterial. 

Mr. WoiiLEY. That is the foundation of your whole program. 

Mr. CuRRiE. That is right. 

Then, the next great element of risk has been the exchange risk. 
Serious fluctuations in exchange have made it very difficult for private 
lenders, particularly, to loan with any certainty whether they can get 
back money of the same value. 

Mr. WoRLEY. How much of that has been going on in the past? Do 
3'ou have any idea how much loss has been sustained by private lend- 
ers in the fluctuation of exchange ? 

Mr. CuRRiE. Not in terms of billions — but you would have to think 
of it in terms of billions. 

Mr. WoRLEY. Unless we know what has gone on in the past, can 
we fiet a very good idea of what we can do in the future ? 

Mr. GuRRiE. There is one thing we can do about that ; and I think 
a most promising start has been made by the Bretton Woods Con- 
ference in recommending the establishment of the monetary fund. 
That would be the most significant and constructive development 
we have exer taken, if adopted, to insure a large measure of exchange 
stability in the future, and that, at one stroke, will greatly decrease 
the risk of foreign investment. 

Mr. WoRLEY. Of course, that is all in the embryo stage. 

Mr. CuRHiE. Yes. 

Mr. WoRLEY. That is point No. 2. 

Mr. CuRRiE. That is right. 

Mr. WoRLEY. Your peace and then your international exchange, the 
stability of your money. 

Mr. CuRRiE. That is right. 

Mr. WoRLEY. All right; what are the other foundations? 

Mr. CuRRiE. The third factor I mentioned is that I think you have 
to take care to adjust your loans to meet the borrowing capacity of 
the borrowers. 

Mr. WoRLEY. We have to increase that borrowing capacity, don't 
we, by these loans? 

Mr. CuRRiE. Their debt-paying capacity, I should say, their ability 
to service loans. 

I think, if you will recall, the typical home mortgage of the twenties 
was a short-term loan, and usually there was a second, and in some 
cases a third mortgage at very much higher rates, running up to 8 
or 10 percent. That tvpe of loan invites default, because it is too 
heavy a burden for the borrower to carry. 

Mr. WoRLEY. Short term and high interest ? 

Mr. CuRRiE. Yes. I think it is the path of wisdom to plan for longer 
maturities and lower rates of interest to put it within the debt-paying 


capacity of tlie borrower. In that way you enhance your security, tb 
payment of your loan. 

Mr. WoRLEY. The details of this plan are that the Government itself 
would lend the money. Would it lend it to the Government of the 
foreign country ? 

Mr. CuRRiE. It could do that. 

Mr. WoRLEY. Or would it lend directly to private persons ? 

Mr. CuRRTE. Lending directly to private people would more likely, 
take the form of guaranteeing private loans of foreign exporters. 

Mr. WoRLEY. This Government would guarantee loans made by our 
people to people in foreign countries ? \ 

Mr. CuRRiE. That is right. So far all the loans we are making by ' 
the Export-Import Bank are directly to foreign governments or ' 

Mr. WoRLEY. I assume we would require proper security. Do you j 
have any idea what kind of security ? : 

Mr. CuRRiE. Your ultimate security is the debt-paying capacity of , 
the borrowing country. 

Mr. WoRLEY, Of the country and not the individual ? 

Mr. CuRRiE. Yes; in the case of private loans now, the British, in 
their export guaranty system, guarantee the loans of private indi- 
viduals to foreign importers and, in certain parts of their work, main-- 
tain rather elaborate credit files of tlie credit standing of individual' 
merchants throughout the world. 

One of the main sources of risk in the past has arisen from the pe- 
riodic swings in employment, and from depressions. 

It so happens that, characteristically, borrowing countries in the past 
have also been raw material producing countries, and they usually 
have been the hardest hit by collapse in the world markets for raw 
materials. I think it is part of our planning to do everything we can 
to insure a stable financial system throughout the world. 

Mr. WoRLEY. That is true. It would be desirable to create this 
stable financial situation throughout the world so we could sell more 

Mr. CuRRiE, And the greatest contribution to that, Mr. Chairman, 
would be stable conditions at home, because we are tlie largest buyer in 
the world, and in the past it has been the collapse in the American 
home market that has been a great factor in causing the raw material 
producing countries to collapse. 

Mr. WoRLEY. In trying to develop these markets, it might bring on 
chaos or calamity over here? 

Mr. CtTRRiE. On the other hand, the development of these markets 
makes a contribution to the development and stability at home. 

Mr. WoRLEY. That is right. It is tweedledum and tweedledee. I 
am trying to get your ideas as to the best steps we can take to have our 
cake and eat it, too, to have a stable economy over here and the maxi- 
mum foreign trade and commerce. 

After your financial plan, what is your fourth point? 

I believe Mr. Arthur has a question. 

Mr. Arthur. In connection with foreign loans, what Government 
agency at the present time does the job of appraising the risks? Is 
that the Export-Import Bank at the present time? 

Mr. CuRRiE. Yes. The only agency established to make foreign 
loans at the present time is the Export-Import Bank. 


Mr. Arthur. They are appraising the risks in terms of ability to 
pay or tJie productivity of the enterprise financed? 

Mr. CuRRiE. That is right. 

Mr. Arthur. Are there not at least three conditions essential to 
the soundness of these loans ? Let me state them, and then you restate 
them correctly. One is the ability to repay in terms of the produc- 
tiveness of the enterprise created ; secondly, the political stability of 
the nations to which we make loans; and, third, the availability at 
some time in the future of the foreign exchange required to make 
that repayment, the transfer problem. 

Does that fairly state it? 

IVIr. CuRRiE. I could not possibly improve on that statement. I 
think that puts it very well, indeed. 

]Mr. Arthur. Are those taken into account by the Export-Import 
Bank in its loans very fully, in your opinion? 

Mr. CuRRiE. Yes; I believe they are. I think all those considera- 
tions came into the granting of a rather large loan to the Volta Re- 
dondo project in Brazil, for instance. It was the subject of very long 
investigation on the soundness of the project, and consideration was 
given to the political stability of Brazil and also to its foreign ex- 
change position, which at the moment is very good. 

Mr. Reed. As I recall, before the war, most of our trade was han- 
dled on 90-, 120-, and 180-day paper. 

]\Ir. CuRRiE. Yes. 

]\Ir. Reed. And a lot of it cash. 

Mr. Currie. That is right. 

Mr. Reed. When you speak of long-term loans, what terms are you 
thjnking in, 3, 5, 10 years? 

Mr. Currie. It depends on the nature of the transaction. 

Mr. Reed. On the country and the nature of the transaction? 

Mr. Currie. The nature of the transaction; yes. In general, I 
think the maturity of the loan ought to be related to the length of 
life of the project or transaction. Heavy capital plants, like a steel 
plant, can obviously carry much longer maturities than the sale of 

Mr. Reed. With a shorter term, of course, on consumer goods that 

Mr. Currie. That is right, although variation from this principle 
may be necessary in the immediate post-war period. I should have 
mentioned earlier, Mr. Chairman, in listing the factors that would 
enhance the safety of foreign lending, our willingness to accept 

Mr. Worley. Yes; in what — goods and services? 

Mr. Currie. In goods and services. 

Mr. Worley. It is probable that other nations will be willing to 
pay us in goods and services. 

Mr. Currie. That is right. One of tlie difficulties in the past has 
been that we have been happy to loan but have not been too happy 
to receive payment, because we put a high tariff on the goods with 
which these countries could pay. 

Mr. Worley. Develop that a little more. 

Do 3^ou think, in order to be successful in your program, we will 
have to go so far as to remove all tariff barriers ? 


Mr. CuRRiE. No ; I wouldn't go that far, but I would hope that we 
would resume and continue the whole program of reciprocal trade 
agreements, which contain the "most favored nation" clause and gen- 
eralize the benefits to all countries. 

We made an awfully good start on that before the war. and 1 hope 
we can continue it after the war. If we can persuade other countries 
to do the same, we can establish a basis for larger world trade. 

I also look forward to great expansion of our tourist travel. Amer- 
icans can go abroad and get payment in person, and, with the world 
growing as small as it is through the development of air transport, 
I think we can look forward to volumes of expenditures of tourist 
travel far beyond anything experienced in the past, and that will 
be of great assistance in enabling foreign countries to meet their pay- 
ments to us. 

Mr. WoRLEY. The ranchers down in my district are not very strong* 
for Argentine cattle coming up there. Then I understand there are 
some manufacturers in the East who are not interested in having 
certain products come in without paying heavy duty. I think that is 
rather generally true, depending on the given interests, as to whether 
they are for or against reciprocal-trade agreements. 

How would you meet that problem? Aren't you, by reducing the 
taritf or eliminating the tariff, in a sense hurting home industry? 
Are you looking at it from that point of view, or a broad point of view? 

Mr. CuRRiE. That is a matter, Mr. Chairman, which is so far out- 
side the province of the Foreign Economic Administration that I 
w^ould hesitate to give any answ^er to it. 

Mr. WoRLEY. But that comes in your plan. 

Mr. CuRRiE. It is on the basis of bargaining. Every one of these 
reciprocal-trade agreements are questions of bargaining and quid pvo 
quo and I think, that in all good bargaining, both parties benefit, 
but they are long, tortuous negotiations. 

Personally, I have never taken any part in them and would hesi- 
tate to give any opinion on them. 

Mr. WoRLEY. Your program sounds good, if we could do it, but 
I am just trying to see w^hat the practical difficulties might be in some 
of your suggestions. 

Mr. CuRRiE. There are many difficulties, but the achievement of 
our objectives is so important that we must overcome them. 

Mr. WoRLEY. You say that there would be some practical difficulties. 

Mr. CuRRiE. Yes. On the other hand, we did make a good deal of 
progress in lowering taritf barriers under the reciprocal trade agree- 
ments program, and I think it is safe to say that the progi-am as a 
whole is a popular program, well received and accepted by the coun- 
try as a whole. I should hope we could continue that. 

Mr. WoRLEY. I join you in the hope. 

On page 12, Mr. Currie, you say : 

The fact that these coTintries and others are sp*^kins pxpor^ markets need 
not result in economic warfare between them or between us and them. 

I was under the impression that when more countries began manu- 
facturing 3^ou immediately had competition. 

Mr. CuRHiE. You have competition, Mr. Chairman, but it always 
seems to me there is a difference in the severity' of the repercussions 
of that competition depending on Avhether you are struggling for a 



larger slice of the same pie or whether you all have a larger pie in 
which to share, 

I think we can nii':imize the violence of that competition if there is 
a larger total volume of world trade. If there is no expansion of world 
trade and Britain, for example, has to export more in order to main- 
tain her standard of living, you can see that the violence of that com- 
petition will be more intense than if there is a total increase, I think 
we have to plan for a total increase in world trade rather than 
struggle for a shrinking and small volume, 

Mr. WoKLEY. You say : 

But serious shrinkage in German and Japanese exports will not alone make 
room for all the exix)rts that the exporting nations will wish to make. 

Mr. CuRRiE. Yes. I think that is a matter of arithmetic. The 
German exj^orts were about two billion three hundred million, and the 
Japanese, eight himdred million. 

^Ir. WoRLEY, I understand that it is contemplated they won't be 
large exporters for awhile, 

Mr, CuKRiE. No; and that gap will be taken up by other nations, 
I assume, 

Mr, WoRLEY. Will you tell us, in that connection, how Japan and 
Germany built up their exports? 

Mr. CuRRiE. In the case of Germany, as you know, she expanded 
her trade considerably in the years inunediately preceding the war 
through exerting economic pressure on the surrounding smaller coun- 
tries and forcing them to take German goods as a condition of her 
taking their exports and forcing down the prices of the exports of 
these surrounding countries. 

Mr, WoRLEY, How did Germany do that ? How did she force the 
other countries to take her goods? 

Mr. CuRKiE. Germany, being in the center of Europe, has always 
been an important market, particularly for agricultural products of 
other countries, and she used her dominant economic strength to get 
more favorable terms and then brought pressure on those countries 
not to buy from other countries but to take German goods. She used 
various devices to do that, including threats, Germany went in for 
a whole system of bilateral trades — we will take so much if you take 
so nnich of our things — which, of course, is very much against our 
national policy, since we are firmly committed to multilateral trade. 

Mr, AVoRLEY, You think it is more desirable to have multilateral 
trade than bilateral trade? 

Mr, Ci'RRiE. Yes; by all means. 

^Ir. WoRi.EY. But it worked in Germany. She built up her export 

Mr. CuRRiE. It works for one country. But it will create an atmos- 
phere nothing short of fatal for the Dumbarton Oaks conference. 

Mr. WoRLEY. If it will work for one country, why wouldn't it work 
for us, the United States? 

Mr. CuRRiE. To put it in those terms, I don't think we are in as 
strong a position as some other countries to use this weapon. 

Mr, WoRLEY, On account of competition? 

Mr. CuRRiE. Yes, Countries which are large importers of raw 
products are in a favorable position to force their exports, 

^Ir, WoRLEY. Germany is quite an industrial nation. 

Mr. CuRRiE. Yes, 


Mr. WoRLEY. The United States is quite an industrial nation, too. 

Mr. CuRRiE. That is true ; but we are also a great raw material pro- 
ducing nation, and we haven't got so many countries entirely depend- 
ent on our market as Germany, so that I don't believe — I have never 
examined this very much, Mr. Chairman, because it runs contrary to 
my predilections. 

Mr. WoRLEY. We are trying to get some idea as to the best pro- 
cedure and the procedure we ought to follow after this war is over, and 
I think we can do that by finding out what other countries have done 
in the past and how successful they were. 

Have you given much attention to the Japanese Empire and her 
exports — how she built those up? 

Mr. CuRRiE. Not very much. My impression is — it would have to 
be verified — that she did not make use of so many of these German ] 
devices but rather took advantage of her cheap labor and cheap types 
of products, which were forced particularly in the far East and South 
Pacific markets. 

Mr. WoRLEY. To do that, we would have to lower our standards of 
living over here. 

Mr. CuRRiE. Yes. 

Mr. Keed. Aren't we misleading ourselves a little? I have been 
thinking about that question of dividing up what Germany and Japan 
will not get. German}' and Japan, if they cannot export, would not be 
importers, so' we would lose that total market. 

Mr. CuRRiE. Yes; that cannot be pushed too far. I think it is a 
fallacy just to take their exports and say those are available to other 

The disappearance of Germany and Japan from world markets will 
lead to a contraction of imports as well as exports; but in terms of» 
say, Britain or the United States, it does open the markets that Ger- 
many would otherwise have supplied in, say. South America. You 
can't quite follow through all the ramifications, but I think individual 
countries will gain as the result of the disappearance of Germany 
and Japan, 

Mr. WoRLEY. Japan seemed to be very much interested in develop- 
ing her foreign trade in one fashion or another, but j^ou wouldn't 
advocate our following the Japanese policy? 

Mr. CuRRiE. I wouldn't like to make too sweeping a statement,, 
because I am not too familiar with Japanese practices, but I think our 
strength always lies peculiarly in what we consider the benefits of 
mass production, which enables us to get such economies in the use- 
of labor. It is in those fields that we can get the greatest advance- 
ment in our trade; and in the fields where we are technically ahead 
of other countries, and that, in turn, is due to the enormous size of 
our domestic market, especially when we operate under conditions of 
full employment. 

Mr. WoRLEY. Another suggestion you make, on page 12, is: 

It will also be necessary to expand world trade as a whole. Only in this way- 
can the danger of nationalistic controls of foreign trade, such as developed during: 
the thirties, be avoided. 

Can you give us some idea as to the situation that developed during 
the thirties — what particular practices we engaged in that you think 
we should not engage in again ? 


Mr. CuRRiE. I had particularly in mind there the system that was 
being developed by the Germans, bilateral deals, subsidizing exports, 
bringing pressure to bear in order to push their own export markets. 

Going back a little earlier, I think the Ottawa agreements tended 
in the direction of setting up a bloc of nations which would grant 
concessions within the bloc. 

Then, during the war, many countries have learned the technique 
of import controls and exchange controls, and there is some danger, 
once you learn those controls, you would like to continue using them. 

JNIr. WoRLEY. What sort of techniques do you mean ? 

Mr. CuREiE. Of having licenses for all imports, licenses for all 
expenditure of funds abroad; and, at the present moment, there is 
quite a wave of that practice sweeping through Latin America. Most 
of the countries now are adopting import control. 

With some justice, they point out that unless they do so, the moment 
we remove our controls after the defeat of Germany, and goods become 
abundant, their nationals may buy very heavily here and so squander 
their foreign exchange and lead to the importation of many goods 
which may not be so necessary to their economy, and they want to be 
sure that those funds are used for industrialization and development. 

It is a reasonable case they put up, but, looking at the world as a 
whole, the practice of government interference with private trade and 
deciding what shall be imported, who shall spend what money for 
what purposes, is I think, an undesirable trend. But it is a trend that 
will be very difficult to combat if there is a small and shrinking volume 
of world trade and if dollars remain the scarce currency of the world. 
Unless we can assure these countries that dollars will not be scarce — 
that there will be an expanding world trade and that they will all share 
in multilateral trade — we may have to have these controls. 

Mr. WoRLEY. We have to sell them on the idea that, by playing 
ball with us, they will make more money. 

Mr. CuRRiE. That is right. As you know, there was a fairly strong 
group in Britain that was by no means enthusiastic over the Bretton 
Woods proposals regarding the monetary fund. There is a fairly 
large element in Britain which thinks that Britain should use its 
curiency and exchange to improve its condition, and which says it is 
by no means sure that the United States will follow through by main- 
taining a high level of employment here and a high level of national 
income. I think we are at the crossroads now. 

Mr. WoRLEY.. Have we given any assurance that that will not be 
the case ? 

Mr. CuREiE. So far as the administration can give that assurance. 

Mr. WoRLEY. Has the British Government given us any assurance 
that it is for this program, this Bretton Woods Conference? 

Mr. CuREiE. Oh, yes. The official policy of the British Govern- 
ment is very definitely along the lines I have outlined. 

Mr. WoRLEY. And the other nations? 

Mr. CuRRiE. The other nations, too. So we got off to a very favor- 
able start. I think we have to follow through. 

Mr. AVoRLEY. There is no authority for that now? 

Mr. CuRRiE. No. These were not ministers plenipotentiary — ^I 
think they are called ; in other words, they cannot bind their govern- 
ments. But they were Government officials, mostly finance ministers 
and others, and their recommendations will be given great weight. 


Mr. WoRLEY. They will probably be followed? 

Mr. CuRRiE. Yes, sir; I hope so, 

Mr. Reed. Do you foresee, Mr. Ciirrie. any great interference with 
exports, such as the Stevenson Act on rubber and controls on nitrates 
in Chile, and tea and a number of other materials, where, either by 
controlling prices or other controls, they really exerted more control 
of their exports than of their imports'? To what extent do you think 
that can be done away with by international agreements? Is that 
being considered in our reciprocal trade agreements? 

Mr. CuRRiE. I am not sure, Mr. Reed, whether it has been considered 
in connection with reciprocal trade agreements. There has been a 
good deal of internal discussion in the Government of the desirability 
of getting away from those restrictive agreements. 

In addition, I think the ability of those countries to follow that 
practice has been greatly decreased by the growth of synthetics. 

Mr. Reed. In the case of Chile, for instance? 

Mr. CuRRiE. In the case of nitrates by the production of synthetic 
nitrates or ammonia ; and in the case of rubber, by the synthetic rub- 
ber plants. So there are fewer countries that have a monopoly of 
export goods. 

Mr. Arthur. This is on a somewhat different line, Mr. Currie; 
but you mentioned, on page 4 of your statement, that under lend- 
lease authority — 

it will be iwssible to avoid canceling all contracts for vital supplies in the proceas 
of manufacture when the war actually ends. 

And you state further — 

Thi^ will ease the burden of contract termination and minimize the amount of 
Government surplus property when the war is over. 

Mr. Currie. Yes. 

Mr. Arthur. Some of the other procurement agencies, as I un- 
derstand it, have developed rather detailed plans for the cancelation 
as promptly as possible of production activities as soon as the war 
needs are concluded. I believe this committee, in its report, indicated 
that it Avas not desirable to continue production for war purposes 
merely to preserve a given level of employment. 

On what basis does your policy, which differs from that of the other 
agencies, have its foundation? What are the reasons why certain of 
these contracts for production should be continued while others should 
be canceled? 

Mr. Currie. Perhaps, Mr. Arthur, I should have underlined the 
words "on credit" here. Section 3 (c) of the Lend-Lease Act gives 
us the possibility of completing the delivery of certain types of goods 
after the President has declared the war at an end. Lend-lease, as 
such, would end with the termination of the war, with the finding 
of the President, or the expiration of the act, but it is possible for 
us, in the case of things which have a peacetime utility, to make a 
special agreement with the lend-lease countries whereby they would 
say that they would like us to continue the manufacture of this 
particular thing, for which they will pay us full value over a period 
of years. 

Mr. Arthur. In other words, in addition to your, power to make 
expenditures for purposes which are directly war purposes, you are 


permitted to make loans for purposes that may not be required for 
the prosecution of the war. 

Mr. CuRRiE. No; no. All these things must be in connection with 
the prosecution of the war, but many types of industrial goods may 
be desirable for the prosecution of the war and yet have a useful 
peacetime function : and it would be only in those cases that we could 
conceivabl}' make arrangement with a country whereby they would 
undertake to take those goods off our hands at a given price, to be 
paid over a period of years. 

Mr. Arthur. In a sense, you can be more liberal in determining 
the surplus nature of these goods, even after the war may have been 
won, and therefore we cannot conceivably tie it up with the prosecu- 
tion of the war. 

Mr. CuRRiE. Yes; because this 3 (c) section of the Lend-Lease 
Act does permit you to cany on contracts made before the termina- 
tion of the act for a period of 3 years after termination of the act. 
You can see that it would be very much to our national interest, say, 
to complete a mobile jDower plant which you may have half or three- 
quarters constructed at the time of the termination of the war — 
that to cancel that contract would be a net loss to everybody. If we 
can dispose of that at its total cost and get paid over a period of 
3'ears, it is very much to our interest to do so, and it may be to the 
interest of the borrowing country, because, although it was originally 
requisitioned for war use, it has a useful peacetime function too. 

Mr. Arthur. In other words, it will tend to ease over some of the 
transitional problems by providing useful employment which, by 
the nature of the circumstances, although initiated for war, may be 
now classified as a peacetime enterprise? 

Mr. CuRRiE. That is right; and, to that extent, to the extent to 
which this could be done, it would reduce the magnitude of our post- 
war problem, of our cut-back and reconversion problem. Actually, 
we have not concluded au}^ such agreements j^et, but we have been 
exploring them. 

Mr. Arthur. To turn to another problem of the committee not 
directly related to foreign trade and shipping, do you have plans 
developed for the orderly termination of contracts with the end of 
hostilities in Germany and in Japan? 

Mr. CuRRiE. Well, that is not our operating resjDonsibility. 

Mr. Arthur. The commitment is a commitment in your 

Mr. CiRRiE. We don't actually place contracts in the F. E. A.; we 
ap])rove requisitioning. 

Mr. Arthur. Once approved, they are free to go ahead, then, on 
the basis of your approval. You do take steps to withdraw that 
approval at the termination of hostilities? 

Mr. CuRRiE. Yes ; on the goods that would be going under the lend- 
lease program to foreign countries, we do have an interest and a 
voice in deciding how much shall go, and we can cut off the shipment 
of an}' goods at any time to any country ; but the actual handling of 
that here, what is to be done to a particular contract, whether it is to 
be canceled, we do not handle that. 

Mr. Arthur. You are proceeding, then, and you have people in the 
F. E. A. who are looking over and reviewing those commitments 

Mr. Currie. Constantly. 

99579 — 45 — pt. 4 13 


Mv. Arthur. With the idea of cutting them off when the time is 
appropriate ? 

Mr. CuRRiE. Yes; and that is a continuing thing. There is an ex- 
amination all the time of the requisitions being submitted under lend- 
lease, the flow of goods under lend-lease, and the diversions from one 
country to another that take place in connection with the changing 
needs of the war. 

The primary responsibility on the military items is taken by the 
services. Our major responsibility is for the nonmilitary items. 

Mr. WoRLEY. On page 17 of your statement, Mr. Currie, subsection 
8, Orderly Liquidation of Surplus Property, you suggest that — 

particular care will have to be taken to assure that the disposal abroad of 
surplus property will interfere to the least possible extent with the export of 
newly manufactured American products. 

Mr. Currie. Yes. 

Mr. WoRLEY. Do we have any machinery abroad now which might 
compete with American machinery? 

Mr. CuERiE. Yes; very large amounts. We have engineering sup- 
plies of all^ sorts, tractors, road-building machinery, bulldozers, that 
whole range of material. 

Mr. WoRLEY. I though you meant manufacturing machinery. 

Mr. Currie. We also have furnished various countries under lend- 
lease varying amounts of machine tools, to which we retain title, that 
will have to be disposed of after their lend-lease use has terminated. 

Mr. WoRLEY. That is a rather knotty problem that will have to be 
disposed of. Why is it desirable to dispose of it without interfering 
with production back here? 

Mr. Currie. Because, I think, we must consider employment at 
home, as well as the collection of dollars from abroad. It is conceiv- 
able in certain cases that we might flood the market for years with 
American goods being sold abroad, which might cause a great deal of 
unemplojnnent and cause our exporters to lose their organizations or 
foothold in that market, and I don't think it would be to our national 
interest to push surplus goods too much at the expense of our new 

As you say, it is a difficult problem and there will have to be some 
interference. Insofar as we can place the goods in countries which 
would not otherwise take new goods, because of their economic condi- 
tion, or in connection with relief and rehabilitation activities, I think 
it would be to our interest to do so. 

Mr. Worley. Does your department handle that, will it handle it, 
the disj^osal of those commodities? 

Mr. Currie. Yes; abroad. 

Mr. WoRLEY. Can you give us any idea of your present plan of 

Mr. Currie. The policies are being laid down under the new act by 
the three-man board. We are only an operating agency in that case. 
There are six operating agencies, the Treasury, the Maritime Com- 
mission, the War Food Administration, the War Shipping Adminis- 
tration, the R. F. C, and the Foreign Economic Administration. 
The board will determine the policies to be followed. I don't like to 
antcipate the policies they will adopt. I just express the hope that the 
policies they adopt will not interfere with our export trade. 


Mr. "WoRLEY. Are yon in position to give us any suggestions as to 
how that ought to be done ? 

Mr. CuRRiE. One thing that ought to be explored is the possibility 
of using as many of these goods as possible for relief purposes where 
they can be sold, but not sold in places which would be markets for 
our new goods. 

For instance, there will be many surplus goods left in Italy. It 
would seem to be to our national interest to dispose of them on the spot 
to the Italian people at as good terms as can be gotten for them rather 
than bring them home or dispose of them in other markets. 

Mr. WcRLEY. Our national interest, do you mean by that the finan- 
cial position the Government would be in or the manufacturers of 
those products ? 

Mr. CuRRiE. I think you have various elements. I shouldn't think 
you would take any single criterion in disposing of foreign goods. 
You can't say that we will consider nothing but the highest net return 
to the United States Government. I think that would be unfortunate. 
If you took that as the criterion, you would have to balance that 
against other considerations such as the effect on domestic employ- 
ment and our national income. 

It may not be to our interest to dispose of all these goods very 
quickly, if, in doing so, we create a great deal of unemployment — the 
closing down of our industries. Perhaps we will need a more orderly 
liquidation, working it cut over a period of years. 

Mr, WoRLEY. You are exploring tlie proposition now of disposing of 
these to countries where otherwise they would have no markets? 

Mr. CuRRiE. Yes ; and that is quite a proposition. 

Mr. WoRLEY. There would be quite a competitive spirit between 
some of the countries, some who could use them and some who want 
them but can't buy them ? 

i\lr. CuRRiE, Yes, It is conceivable you might work out an agree- 
ment with a country to take a certain large block of our surplus equip- 
ment, provided, at the same time, it took a certain amount of new pro- 
duction, and in that way we wouldn't interfere with production. 
There are various possibilities, 

Mr, WoRLEY. About how much is the value of the surplus property 
abroad ? 

Mr. CuRRiE, We have no idea. We know it is very large in France, 
Italy, north Africa, and various places in the Pacific. 

Mr. WcRLEY, You don't think at the present time that it would be 
desirable to bring those goods back over here ? 

IVIr. CuRRiE, At the present time 

Mr, WoRLEY. I don't mean at the present time; I mean after the 
conclusion of hostilities. 

Mr. CuERiE. After the conclusion of hostilities I would think it 
would be rather a rare case where it would be worth our while to bring 
those goods home rather than dispose of them abroad. 

Mr. WoRLEY. Do you know whether we returned any after the last 

Mr. CuRRiE. Most of the supplies in France were disposed of to the 
French Government by the armed services at the time. Some did get 
back as reimports. 

]Mr. WoRLEY. You mean they sold them back to us ? 

Mr. CuRRiE. That is right. 


Mr. WoRLEY. Did we make any money out of that? 

Mv. CURRIE. No. 

Mr. WoRLET. Has there been any provision made to prevent the 
return of goods back here? 

Mr, CuRRiE. I don't remember whether that provision was incor- 
porated in the Surplus War Property Act. 

Mr. Davidson. 1 think that discretion was given to the Surplus War 
Property Board to prohibit the reentry of imports which would be 
detrimental. I would have to check that with the law, but I believe 
that is the fact. 

Mr. CuRRiE. That is my impression. 

Mr. Arthur. On page 16 you say : 

The agreement between the United States and the United Kiugdcmi of February 
23, 1942, states that : "In the final determination of the benefits to be provided 
to the United States of America by tlie Government of the United Kingdom in 
return for aid furnished under the act of Congress of March 11, 1941, the terms 
and conditions thereof sliall be sucli as not to burden commerce bPtween tlie two 
countries, but to promote mutually advantageous economic relations." 

Are those terms implemented in the advances made under lend-lease 
in more specific phraseology than that contained in this quotation? 

Mr. CuRRiE. No. This particular section, which occurred in the 
master agreement with the United Kingdom, has been incorporated in 
lend-lease agreements with other countries, but there has been yet no 
final settlement made of any lend-lease agreement. 

Mr. Arthur. The whole settlement is no more definite then ? 

Mr. Davidson. I think it should be pointed out that we have ditt'ereiit 
types of agreements with dilferent countries. 

For example, we have a special agreement with the French Com- 
mittee of National Liberation which provides that they shall pay for 
all civilian supplies that we provide to them. So, in that sense, we 
have made a final agreement there. 

We have special agreements with the countries of Latin America 
wherein provision is made for part payment, according to certain 
specified terms. 

It is true that, with respect to the major lend-lease agreements with 
Russia and with the United Kingdom, they have not been fully imple- 
mented in the sense that there have not been further special agree- 
ments. Even with those countries, however, we have made fui'ther 
agreements which would look toward the final settlement, such as 
the reciprocal-aid agreements we have made with Australia, Great 
Britain, and other countries, and it is specified both in the nuister 
agreement and in these reciprocal-aid agreements, that the reciprocal 
aid furnished shall be taken into consideration at the time of the settle- 
ment of the lend-lease account. 

So that in that way certain phases of the lend-lease settlement have 
already been agreed to. 

Mr. CuRRiE. I think it is true, to answer Mr. Arthur, that as yet 
there has been no attempt to implement this particular provision of 
article VII. 

Mr. Arthur. I am trying to get as clear an iniderstanding for the 
committee as possible of the value to this country in putting its poli- 
cies into operation of the obligations we have from other nations to 
which we have granted lend-lease aid. 


How, specifically, would we undertake to use the lend-lease obliga- 
tions in securing agi'eements with us on some reciprocal-trade agree- 
ment after the war or some other international arrangement, such as 
the agreement not to engage in empire preference or bilateral-trade 
arrangements? Is the machinery set up at least to approach those 
problems in a fairly definite way, or does this stand as a statement of 
good intentions, without anything back of it to make it a forceful bar- 
gaining item? 

Mr. CuRRiE. I think that the negotiation of a reciprocal-trade agree- 
ment would be conducted outside the framework of a lend-lease agree- 
ment. I am almost certain of that, but that would really be the 
res})onsibility of tlie State Department, not mine. 

Mr. Arthur. This statement certainly indicates a spirit of coopera- 
tion along those lines, or, at least, a cooperative frame of mind. It 
does not go beyond that, however, as far as I can read the quotation. 

Mr. CuRRiE. I believe that the State Department has been doing a 
good deal of thinking on the ways and means by which the master 
agreements may be implemented, but I would hesitate to speak for 
them. I think you had better ask them. 

Mr. WoRLEY. On page 17, Mr. Currie, under "Financing Exports," 
is this the main point of your thesis : "They can sell goods and services 
to us or we can extend credit to them?" Am I correct in assuming 
that, in order to build up our export markets we will have to take one 
of those two steps ? 

Mr. Currie. Yes; I think, apart from the expenditure of such bal- 
ances as they have here at the moment, these will be the only two ways. 

Mr. WoRLEY. Then, without extending credit to them, we will still 
have to exchange goods and services in order to increase our foreign 

Mr. Currie. That is right. 

Mr. Worley. No matter what method the Government pursues in 
financing, in lending money in order to encourage our foreign trade, 
we will always have to import a considerable amount in goods or 

Mr. Currie. That is right. 

Mr. WoRLEY. If there is no objection, the committee will recess until 
2 o'clock. 

(Whereupon, at 12 noon, a recess was taken until 2 p. m. of the same 
day. ) 

afterkoon session 

(The committee reconvened at 2 p. m., upon the expiration of the 

Mr. Worley. The committee will come to order. At the conclu- 
sion of the hearing this morning, Mr. Currie was on the stand, and 
we are glad to welcome you again this afternoon, Mr. Currie. 

During the course of the testimony this morning the committee 
did not fully develop the exact scope of the F. E. A., its origin, or 
to some degree the scope of its functions, duties, and powers. We 
would like, Mr. Currie, to devote a little time this afternoon to a 
brief outline of the functions of F. E. A. 

The first question I would like to ask is, When and how did the 
F. E. A. originate? 



Mr. CuRRiE. Mr. Chairman, F. E. A. was created by Executive 
Order 9380, on September 25, 19-1:3. This order provided for the 
consolidation of various Government agencies which were engaged 
at that time in activities relating to foreign economic affairs. The 
agencies consolidated included the Office of Economic AVarfare, the 
Office of Lend-Lease Administration, and the Office of Foreign Relief 
and Rehabilitation. Among tlie functions of the Office of Economic 
Warfare transferred to F. E. A., were the activities of the former 
Board of Economic Warfare, the Export-Import Bank, and the for- 
eign activities of the Reconstruction Finance Corporation and its 
subsidiaries, such as the U. S. Commercial Company. In addition, 
F. E. A. was given responsibility for certain foreign-food programs, 
formerly administered by the Commodity Credit Corporation, and the 
foreign economic operations of the Office of Foreign Economic Co- 
ordination. All in all, the foreign economic functions and staffs, 
scattered formerly through 14 different agencies, Avere transferred to 

The basic purpose of the order was. to centralize in one agency all 
activities relating to foreign economic operations of the United States 
Government. These activities, by the terms of the order, are to be 
carried out in conformity with the foreign policy of the United States 
as defined by the Secretary of State. 

Mr. WoRLEY. You are concerned only with economic operations 
and not at all with economic policy ? 

Mr. CuRRiE. We are not concerned with foreign policy ; no. 

Later, I should add, it was proposed under Executive order, the 
order that set up the Surplus Property Administration, that we be 
designated as the agency to dispose of sui-plus property abroad, that 
obviously being an economic operation. 

Mr. WoRLET. Could-you give us some idea of its functions, duties, 
and powers ? I believe you have covered the origm pretty well. Your 
poAvers are derived from an Executive order ? 

Mr. CuRRiE. Yes. Running over them briefly, we license all ex- 
ports under the export-control statute. We administer the Lend-Lease 
Act. We procure strategic commodities abroad in connection with the 
war effort. We have certain responsibilities in connection with relief 
and rehabilitation in liberated areas. 

The President has designated us pursuant to an act of Congress 
as the agency to handle funds for U. N. R. R. A. 

We are engaged in economic warfare in all its aspects— blockade, 
preclusive buying. We have worked closely with the Army in such 
work as the selection of bomb targets, the assessment of bomb dam- 
age, and appraising the economic strength of the enemy. 

Of course, there is the activity of the Export-Import Bank, of 
which Mr. Crowley is chairman of the board of trustees. He is also 
President of the Petroleum Reserve Corporation, and acts as the 
Chairman of the Rubber Development Corporation. 

^ Recently we have been servicing the Army in supplying certain 
civilian personnel for the Allied Control Commission in Italy, and 
we expect to do some of that work in Germany, too, and perhaps 
later in Japan. 



Mr. WoRLEY. We hope so. Now, what is the relation of the F. E. A. 
at the present time to Lencl-Lease and U. N. R. R. A. ? 

Mr. CuRRiE. Well, our activities in the field of exports have taken 
two forms; one, restrictive, and one expansive. On the one hand, 
we have undertaken some responsibility for acting as claimant agency 
for the civilian economies of other countries. 

Mr. WoRLEY. What do you mean by "claimant agency" ? 

Mr. CuERiE. In assisting them to secure the minimum essential 
supplies necessary for the conduct of their civilian economies during 
the war. We appear as what we call a claimant agency before the 
W. P. B. Requirements Committee. We act in behalf of foreign coun- 
tries in presenting their needs for scarce materials, materials under 
allocation in this country. 

In many cases a block allocation is made for the foreign field, and 
we, in accordance with reports from our missions abroad, try to 
distribute them where they are most urgently needed. 

]\Ir. WoRLEY. For example, would we be interested in supplying 
some country a piece of machinery by which it could produce some 
strategic war material? 

jNIr. CuRRiE. Yes; exactly that type of thing. On the other hand, 
if it is a scarce material and we are satisfied that the country does 
not propose to use it in any way relating to the war effort, or for 
maintenance of health and minimum standards, then we deny export 

Mr. WoRLEY. That is maintenance of health in foreign countries. 
Of course, they pay for these commodities. 

]\Ir. CuRRiE. Yes. 

Mr. WoRLEY. Unless it is to our advantage to let them have them 
under lend-lease. 

Mr. Ci RRiE. This is a cash basis in all this field of work. 

Mr. WoRLEY. You just act as an agent to help them get these com- 
modities ? 

Mr. CuRRiE. That is right. In the other aspect of our exports, 
of course, we act as a claimant agency in another sense in lend-lease 
countries for lend-lease supplies. 

Mr. WoRLEY. Could you give us an instance of that? 

Mr. CuRRiE. Well, our particular responsibility, as I mentioned this 
morning, is in the field of nonmilitary lend-lease supplies. We screen 
the requirements of Britain, Russia, China, and other Allies for 
articles which are of a nonmilitary nature and yet which contribute 
to the total war effort in those countries. 

Mr. WoRLEY. You say you screen them ? 

Mr. CuRRiE. Yes ; we screen them, or review their requirements. 

Mr. WoRLEY. That is to see whether they really need them ? 

Mr. CuRRiE. That is right. 

Mr. WoRLEY. The second question is with regard to imports. 

Mr. CuRRiE. On imports our activities have consisted largely in 
assisting private importers to bring in goods which are necessary for 
our total war effort, and in certain cases actually procuring them 
ourselves, and in some cases going out and developing sources of 

Mr. WoRLEY. We have done that to a considerable degree in Latin 


Mr. CuRRiE. Particularly in Latin America, but it is a world-wide 
operation. We are the largest buyers in the world of glass eyes, for 
instance, and we are the largest buyers in the world of pig's bristles. 

Mr. WoRLEY. Do you mean that we cannot make those glass eyes 
here, or what is the advantage ? 

Mr. CuRRiE. We need them ; there is a great demand for them here. 
We operate in this field almost exclusively under directives from the 
W. P. B. They tell us what they need and in what quantities, and j 
it is up to us to go out and get them. Of course, our procurement of 
glass eyes is not a large operation, but it is an interesting one. 

Mr. WoRLEY. I thought that by using that as an illustration we | 
might get a good idea of the scope of your activities. I 

Mr. CuRRiE. The bulk of the dollar value is in minerals and metals, j 

Mr. WoRLEY. Yes; that was my understanding. Do you call that 
preclusive buying? 

Mr. CuRRiE. JSIo; that is buying of strategic materials. 

Mr. WoREEY. That is, materials that we need ourselves rather than 
to deprive the enemy of its source of supply. 

Mr. CuRRiE. We have engaged extensively in wliat we call preclusive - 
buying or preemptive buying — that is, bujdng things we don't need 
very much, but the enemy does and we want to deprive him of it. We 
have engaged in preclusive buying of tungsten in Spain extensively, j 
of chrome in Turkey, and ball bearings in Sweden. 

Mr. WoRLEY. Do you have any idea how much money we have 
invested in that sort of buying? 

Mr. CuRRiE. We have the information, but I haven't got it at my 
finger tips. 

Mr. WoRLEY. Would you consider that as a part of your surplus 
j^roperty ? , 

Mr. CuRRiE. Yes; in some cases it would be surplus, but in many 
cases there are war uses for these commodities. 

Mr. WoRLEY. Over here in this country you have nothing to do with 
it, I understand. 

Mr. CuRRiE. That may or may not be. At the time of the termi- 
nation of the war and the cancelation of contracts we may be engaged 
in the purchase and shipment of certain commodities which will then 
become surplus to our needs. We do not anticipate that that will be 
a very large volume. 

Mr. Reed. Is there any considerable extent of leaving the stocks at 
the source, in your preclusive or preemptive buying, probably with 
the intention never of taking them up actually physically, but selling 
them back and disposing of them, or are they actually bought outright 
for shipment or getting title to them in order to keep the enemy from 
getting to them? If we actually don't need them, what do we do — 
hold them there for disposal later? 

Mr. CuRRiE. Most of the things are things we could use. They are 
not awfiilly necessary, but we can use them. We have brought back 
the bulk of our preclusive buying. There may be some stock piles still 
in Spain, but I am not sure of tliat. 

Mr. WoRLEY. Tliat Avas a mighty strong weapon — just as powerful 
as any weapon we had for actual warfare. 

According to present plans, what part will F. E. A. take in these 
matters we have just gone over between the end of the European war 
and the end of the war with Japan ? 


Mr, CuRRiE. At the present time we anticipate that with the con- 
chision of the European war a great many commodities will pass 
from the scarce to the abundant category and will be taken off from 
W. P. B. allocation. We hope, as far as possible, to remove such 
commodities through individual export license requirements when that 
happens. We will put them under what we call the general license. 

Now, it may not prove possible in all cases to do that because there 
will still be a stringency of shipping to certain areas. We will have 
to work out with other agencies some means of assuring, in the case 
of scarce shipping, that the most essential commodities go to those 
areas. Whether that will be done through export license or other 
wa3'5 we are not quite sure, but our hope is to relax on export control 
as rapidly as W. P. B. relaxes on material allocations. 

We also anticipate that with the initial cut-back after the collapse 
of Germany there will also result a cut-back in our requirements for 
strategic materials, which will lead to a considerable curtailment of 
our buying operations abroad. 

Mr. 'WoRLF.Y. You antici])ate no new operations in strategic buying 
to carry out the war with Japan? 

Mr. CuRKiE. No;- but rather a continuation of certain programs. I 
can't think of any new programs to be initiated. 

]Mr. WoRLEY. What are your present plans for operation after the 
war Avith Japan i 

Mr. CuRRiE. I should anticipate at that time that the great bulk of 
export coxitrol work will have passed, that is the export licensing. 
There may still be a problem in connection with the maintenance of 
the blacklist against certain unfriendly neutral firms which the State 
Department has indicated will remain for a period after the War. 
That may require some implementation. Whether it will be done 
through export license, or through other devices, I am not sure. That 
is the only case I could see where export licensing would continue after 
the defeat of Japan. 

Mr. WoRLEY. You say that it would continue ? 

Mr. CuRRiE. It might conceivably. I am not sure it would, even 

Mr. WoRLEY. Ordinarily in peacetime the Commerce Department 
handles that, does it not? 

Mr. CuRRiE. No. In peacetime we have never had export licensing 
and export controls. This is a new wartime activity. 

Mr. WoRLEY. AVe never had export or import licensing? 

Mr. CuRRiE. No; this was a wartime phenomenon. 

IMr. WoRLEY. Have any of the other countries had export and im- 
port licensing? 

Mr. CuRRiE. Oh, yes. I cannot give you a list, but I know a number 
of them had. 

Mr. WoRLEY. That does not work exactly to our advantage, does it? 

Mr. CuRRiE, Through the device of the lend-lease and the com- 
bined boards, we have brought about a pooling of scarce materials in 
most of the United Nations for the common end of the prosecution of 
the war, so they have been handled in concert and after consultation 
through the device of the combined boards, the Combined Raw Mate- 
rials Board, the Combined Production and Resources Board, and the 
i Combined Food Board. 


Mr. WoELEY. But ill peacetime those other countries have the same 
restrictions generally? 

]Mr. CuRRiE. No; 1 think the export controls were inaugurated in 
practically all countries ^Yitll the war, except in the case of Germany, 
of course. 

Then also, with the defeat of Japan I should suspect that prac- 
tically all our economic warfare work will cease. There will be no 
more selection of bomb targets, appraising of enemy strength, no more 
blockade, and no preclusive buying. There may be some continuation 
of the work in connection with the "black list," but apart from that 
the economic warfare work will pass. 

Mr. WoRLEY. This is rather a general question, but to what extent, 
if any, will the present or future activities of F. E. A. promote our f 
post-war foreign trade? 

Mr. CuRRiE. Well, so far as the present activities are concerned, I 
feel that a byproduct of the lend-lease program will be the promo- 
tion of our post-v7ar foreign trade. A large part of the world will 
have become accustomed to the use of American equipment and meth- 
ods. I mentioned this morning the fact that we have trained foreign | 
technicians in this coiintrj^ in the use of our products under the lend- : 
lease program. We have established foreign missions throughout the 
world. We have built up a staff now of some thousand people who 
have acquired a good deal of familiarity with particular problems of ;' 
particular countries, economic problems, and either with the Govern- '. 
meiit or private business after the war that should be a valuable 
national asset — that knowledge, and that training. 

Mr. WoRLEY. We are colonizing to some extent. 

]Mr. CuRRiE. That is right. 

Mr. Eeed. To what extent do those goods which we send abroad, 
consumer goods, foods, and soft goods, and even industrial goods for 
that matter, bear the trade marks or identification of the producers 
over here so that they would reap benefits from what you might call 
sampling ? 

Mr. CuRRiE. Mr. Davidson can answer that. 

JMr. Davidson. Their identification as United States products is 
assured in two ways : All lend-lease items that are capable of being 
labelled are labelled as having their origin in the United States, and 
in addition the manufacturer or processer of the goods is free to indi- 
cate that it is a machine tool, for example, made by a particular manu- 

Of course, the Chevrolet truck or Ford truck, or whatever it is, would 
bear its own trade name. We have made every effort to encourage 
and promote the identification of all articles shipped under lend-lease 
as of United States origin. 

Mr. Reed. And showing the identity of the producer? In canned 
goods, for instance, would the identity of the producer be on them? 

Mr. Davidson, Yes, sir. I have some actual photographs which we 
could show you of various products with their labels and with the 
trade names of makers. 

Mr. Reed. As a byproduct, there is no question about it — it has been 
probably the biggest samj^ling campaign carried out in the world. 

Mr. CuRRiE. That is right. 

Mr. WoKLEY. Do you think they will like our samples ? 


Mr. Davidson. I think our experience shows they like our samples 
veiy nuich. 

iSIr. WoRLET. Do 3'ou think they will be willing to pay for them after 
the war ? 

Mr. Davidson. I think that in the post-war period they will be 
anxious to buy goods in this market, and the problems that we have 
been wrestlino- with have been those of working out the financial ques- 
tions involved. The need will be there, and the desire will be there. 

Mr. WoRLEY. The need and desire present, all they need is the pur- 
chasing power. 

^Ir. CuRiiiE. That is right. I don't think I answered the second 
part of your cjuestion, Mr. Chairman, as to our future activities. That 
is a little bit more difficult for me to answer, because I. am not sure 
what the activities will be in the future. 

In the field of surplus disposal, for instance, we feel that that is 
an obvious opportunity to promote our post-war foreign trade. As 
I indicated this morning, it is a two-edged weapon which may inter- 
fere with new trade. On the other hand, in many cases it could very 
well be the seed corn to encourage the later buying of American 
products. There may be certain areas which can afford to get com- 
modities which would not be in the market for new goods. The repeat 
orders would com'e back here after they become used to American 

jMr. WoRLEY. We might provide them with parts. 

Mr. CuERiE. That is right. 

Mr. Da\t:dsox. I might just point out, Mr. Chairman, that that 
will be a veiy real possibility in terms of developing our foreign trade. 
Items which have been furnished under lend-lease, and which they 
nni}^ retain under settlement arrangements, will require maintenance 
and upkeep and repair parts, which will in many cases be solely ob- 
tainable from the United States, 

jMr. WoRi.EY. Will F. E. A. have anything to do with the rehabilita- 
tion of devastated or economically undeveloped areas? Suppose we 
restrict that to devastated areas. 

Mr. CrRRiE, Yes ; we have various responsibilities in that field. We 
are establisliing economic missions in all the liberated areas. Those 
are eligible for lend-lease. We work with them on their requirements. 
We work closely in connection with U. N. R. R. A. in connection with 
its relief and rehabilitation activities. 

Mr. WcRLEY. Ma}^ I ask this question : How does lend-lease compare 
with U. N. R. R. A.'? I was under the impression that U. N. R. R. A. 
was to replace lend-lease in a sense of providing assistance to these 
devastated countries. Am I correct in that? 

Mr. CuERiE. Yes, its field is primarily restricted to relief, whereas 
lend-lease is restricted to the prosecution of the war. 

We do not supervise U. N. R. R. A., but we are custodians of its 
American contributions. We spend money for it at its request. 

Mr. WcRLEY. But you participate in it? 

Mr. CuRRiE. That is right. The American alternate on the U. N. 
R. R. A. council is an F. E. A. man, for instance. Our supply 
people work closely with the supply people of U. N. R. R. A. in making 
up their programs. 

Mr. WoRLEY. I wanted to clear that up in my own mind. 


Mr. CuKRiE. In the case of Italy, the ranking American member of 
the Allied Control Commission, which yesterday became the Allied 
Commission, is a joint representative of the State Department and the 
F, E. A. He has a number of civilian employees, as well as military, 
being supplied by F. E. A., although in his capacity as president of the 
Economic Section of the Allied Commission he, of course, works under 
the direction of the Combined Chiefs of Staff, 

Mr. WoRLEY. We will forget about the economically undeveloped 
areas. You have nothing to do with rehabilitation. 

Mr. CuRRiE. We are a point of contact, I may say, in the more 
ecnomically undeveloped areas. We are a point of contact with their 
Government officials and businessmen in the development of their 
post-war plans for industrialization and matters of that sort. They 
come to us initially in order to see whether they can get export licenses 
for lieavy capital equipment at this time. 

Mr. WoRLEY. Does that come under U. N. R. R. A. ? 

Mr. CuRRiE. No. 

Mr. WoRLEY. What does tliat come under? 

Mr. CuRRiE. That is on a cash basis. It comes to us initially now 
because we give export licenses and act as claimant for foreign coun- 
tries. As a byproduct of this, there has been a good deal of discussion 
between the technicians of our country and others >of plans for future - 
development. In that way we have acquired a good deal of informa- 
tion on the thinking and the requirements of China, Brazil, and many 
other countries. 

From time to time we have sent technical missions to these countries 
to help and advise them on their own planning. That, I think, in 
time will lead to exports from this country. 

Mr. WoRLEY. Are those missions trying to overhaul the economies 
of those countries, or are they just maJdng suggestions as to how they 
might produce the things they want to sell to us? 

Mr. CuRRiE. The orientation of the missions has been primarily to 
aid in mobilizing those countries for the war. There was one mission 
to India, the Grady mission, which made a lot of suggestions as to 
things which could be produced in India and save shipping space. 
There was the Cooke mission to Brazil which did the same thing. 

Mr. WoRLEY. Do these missions seem to be generally successful ? 

Mr. CuRRiE. They are greatly welcomed by the countries. They go 
only at the request of the country, and they have been most apprecia- 
tive of their suggestions and help. Unfoitunately, we have not been 
able in some cases to implement their suggestions because of the 
shortage of capital equipment. 

I may say that at the present moment some of our people attached 
to the Allied Commission in Italy are very busy assisting the Italian 
Government in canvassing their needs for a minimum rehabilitation 
Ijrogram in Italy to get the economic machinery started again. 

Mr. WoRLEY. Do they make recommendations? 
Mr. CuRRiE. Yes; the requests will come in from the Italian Gov- 
ernment and are approved by the Allied Commission. In addition, 
when the time comes when the Italians have some dollars themselves 
to spend, some of the work will have been done ; some of the obvious 
needs will have been canvassed to place orders here. 


Mr. Reed. The commitments for helping the devastated areas and 
the economically undeveloped areas won't start, of course, immedi- 
ately after the war? 

Mr. CuRRiE. No. 

Mr, Reed. I presume there is no way of knowing whether F. E. A. 
or some other organization will carry that on, but undoubtedly the 
policy of the Government will be to continue that assistance for some 
time until the areas are economically back on their feet. 

Mr, CuRRiE, Yes; I should think so, 

Mr, WoRLEY, We covered this question reasonably well this morn- 
ing, but could you give us a brief statement as to what are the major 
difficulties you foresee in expanding our foreign trade, exports and 
imports, over what they were prior to the war ? 

Mr, CuRRiE. Well, Mr. Chairman, that was pretty well covered 
in my statement this morning, 

Mr. WcRLEY. Could you give us about a paragraph ? 

Mr. CuRRiE. The difficulties center around the impoverishment of 
so many of our potential customers and around our willingness to 
accept what they have to sell us. That is putting it in a nutshell. 

Mr. WoRLET. Therefore, in order to increase our exports we are 
going to have to increase our imports. Does that follow — either the 
goods or services ? 

Mr. CuREiE. That is right. 

Mr. Wop.LEY. Or else we can extend credit to those nations, and 
does it then follow that we would thereby reduce our imports? 

Mr. CuRRiE, Not reduce our imports, because to the extent to which 
we build up our exports through assistance and financing, we will also 
bring about a multiplied effect on increasing our own domestic em- 
ployment, income, and spending, and thereby buy more abroad. So 
the very act of making foreign loans will in turn help to encourage 
and increase the volume of imports. 

In many cases we will buy more, anyway, because many of our 
imports in the past have been a function not so much of price here 
and abroad, but of domestic activity here at home. For instance, 
natural rubber. Our importations of natural rubber were far more a 
function of the total number of motor cars we produced in this coun- 
try than they were the price of rubber. 

Mr. WoRLET. And always, Mr. Currie, hasn't it been true that in 
peacetime in order to increase our exports we necessarily had to in- 
crease our imports. Is that a fair statement? 

Mr. CuRRiE, Yes; I should say so, in the absence of other sources 
of Ijuying power. 

Mr. AVoRLEY. Is that not true generally and broadly speaking ? 

^Ir. CuRRiE. For the long rim; yes. For a shorter period, no. 

Mr. WoRLEY. I mean the broad period, because other nations won't 
trade unless it is mutually profitable, and we have to recognize that> 

Mr. CuRRiE. That is right. For a short time it is possible for for- 
eign nations to spend what dollar balances they now possess, but that 
is a very short-run proposition. 

Mr. WoRLEY. Then in the plan which you presented to us, the only 
new element would be the financing of these countries to increase their 
purchasing power so they can buy more. 

Mr. CuRRiE. Yes, and that is not very new, I am afraid, 

Mr. WoRLEY. No, but we never tried it on a very big scale. 


Mr. CuERiE. The other elements of the program, I think, must go 
along with that. I would not v.ant to be put in the position of advo- 
cating that unless current and parallel action were taken to stabilize 
currency, for instance. 

Mr. WoRLEY. But you can't simply extend financial aid to carry out 
to a successful conclusion the plans you advocate for increasing foreign 
trade. There are several links in there that have to be accomplished 
before you can hope to have any successful foreign trade: First, what 
is the permanency of your peace ? Second, the international exchange 
of money; The third is that we will have to import more in order to 
export more. 

Mr. CuRRiE. That is right. 

Mr. WoKLEY. Those are the three things which must be, accom- 
plished, and we are going to have to help tlie other countries by pro- 
viding the financial ability. We must get money over there so that 
they will have a bigger purchasing power. 

Mr. Cui;rie. And those other points I mentioned will be helpful and 
necessary ; that is, we hope that we will have after the war the establish- 
ment of what, from our point of view, will be fair rates of exchange. 

Mr. WoRLEY. Well, that is part of it. 

Mr. CuRRiE. If other countries sliould take advantage of our posi- 
tion and undervalue their money, it would be difficult for our exporters 
to have any foreign market. 

VCe hope as soon as possible after the war to do away with the system 
of blocked and frozen currencies. At tlie present time, for instance, 
it would be very difficult for us to loan to India, because all the dollar 
proceeds of India's exports go into the sterling pool and are not availa- 
ble to spend on our products. 

Now, as a peacetime proposition, that migljt be much against our 

Mr. WoRLEY. Your department is concerned with the cartel agree- 
ments, is it not? 

Mr. CuRRiE. Not directly, no, sir. 

Mr. WoRLEY. You go into those to some degree, do you not ? ^ 

Mr. CuRRiE. The only place where we especially touch them is in our 
bu5'ing of strategic commodities. 

Mr. WoRLEY. I was going to ask this question : Do you find on the 
whole that cartel agreements have been helpful or hurtful to this 
country during this time of war? 

Mr. CuRRiE. I don't know what our experience has been on that, Mr. 
Chairman, I am ashamed to say. My offhand impression would be 
that the}^ would be harmful, but I have not checked into it sufficiently. 
We are fairly heavy purchasers of industrial diamonds, for instance, 
which we do get from cartels, and two or three other items. But I 
have not gone into it enough to give you a firm answer. 

Mr. WoRLEY. Would you mind providing us with some information, 
later on as to your experience with cartels? 

Mi\ CuRRiE. I would be very happy to. 

(This is marked "Exhibit No. 24" and is found in the appendix on 
p. 1202.) 

Mr. WoREEY. What suggestions do you have for overcoming any 
of these difficulties? You have given us some very good answers. 


In your judoment, ^Yhat change in the nature or direction of our 
foreign trade can be expected as a resuk, of or after the war is over? 

Mr. CuRRiE. I really don't feel competent to answer that question, 
]\fr. Chairman. There are just a few obvious things which occur to me 
which were suggested by our discussion this morning. I assume that 
in certain cases we may become heirs to the German or Japanese 

jMr. WoRr^Y. To a portion of them? 

INIr. CuRKiE. Yes. In general the trend in the past, and I suspect 
in the future, has been toward those types of products which we have 
been peculiarly good at in this country, the thinos that lend them- 
-olves to mass production, or things technically superior in perform- 
ance and quality to other markets. 

I should expect that our great potentialities of our export trade 
would be in those directions rather than in the raw materials. 

]\Ir. "WoRLEY. There will be no change? 

]Mr. CuRRiE. I should not expect any pronounced change in these 
long-run trends at all. 

^Slr. Eeed. Mr. Currie, there is one thing I wish to ask. Before the 
war the tendency was very definitely toward trade flowing more north 
and south. Naturally in 1890 and along there the flow was largely 
from east to west. Now then, we have gotten to a place where in the 
north-south trade for our particular country it has become a problem 
of sending ships out lightly loaded and coming back with plenty of 

For instance, in the South American trade, very often we send 
down ships lightly loaded in peacetime for the simple reason that we 
are bringing up heavy returning cargoes and are sending high-value 
low-bulk manufactured goods down. 

Could you tell us anything as to whether that has an appreciable 
effect on our ability to operate profitably our merchant marine? Is 
that, in your opinion, a big factor in our power of operating a mer- 
chant marine? 

Mr. CuRuiE. I don't know, Di\ Reed, just how that would work 
out. I have a great deal of faith in the potentialities of our South 
American market for American exports. Countries like Brazil are on 
thfe threshold of vast industrial development. 

Mr. Reed. The probabilities are that the demand for goods will 
increase, but you still have such high-value low-bulk cargo down 
there as compared to the high-bulk, low-value cargo coming back. 
The Grace Line steamers often return loaded, but go down with a 
light cargo. 

"Mr. Currie. I would prefer that you refer that question to Admiral 

Mr. Worley. I think we touched on that question with Admiral 
Land, but it seems that some other departments Avere handling that 
particular phase of it. 

Are you in a position to comment on the extent to which our export- 
ers will have to sell to governments rather than to private purchasers? 

Mr. Currie. I don't think, Mr. Chairman, that thei-e will l)e very , 
much change in the conditions that prevailed before tlie Avar in that 
respect. All trade Avith Russia, of course, will bo carried on Avith the 
Russian Government. For the time being, trade with France and 
north Africa is beinp; conducted through govei-nmental channels. AVe 


have been assured by the Frencli that that is a wartime measure, and 
it is due to the necessity of conserving their foreign assets now, and 
their inability to introduce at this time a good system of import con- 
trols. They have advised us that for the time being they feel that it 
is necessary to canalize all purchases in metropolitan France and north 
Africa through Government channels. 

As I say, we have been assured that that is not contemplated as a 
permanent condition. Apart from that, I might also mention China. 
Certain purchases and certain sales will continue, I think, to be made 
to the Chinese Government. It is almost entirely centralized now 
through the Chinese Government agencies. There again we have 
been assured that there will be a wide field available for private enter- 
prise just as soon as China is reopened. 

Mr. WoRLEY. Will that same situation prevail in regard to our own 
importing? Will importers have to buy through Government chan- 
nels ? 

Mr. CuRRiE. Even at the present time they do not in most cases. 
One of our corporations, the United States Commercial Corporation, 
noAv acts on behalf of American importers and purchasers from north 
Africa, for instance, where private trade relations do not exist at 
present. j 

That may prove to be necessary as a transition device in newly liber- 
ated areas, in the case of Italy, for instance, before the regular trade 
channels are established. We may have to do so,me of that in con- 
nection with the Philippines. It will be a very short, and a transition 

Mr. WoRLEY. In general, what will be the stock-pile situation of the 
imported materials at the end of the war? Could you give us any 
idea as to that? 

Mr. CuRRiE. The following information presents the status of the 
stock-pile situation of the imported materijUs at the end of the war : 

PosT-WAK Stock Piles 

Estimates of what raw material stock piles will be left in this Government's 
possession at the end of the war with Japan can obviously be made only with 
the greatest uncertainty, for they represent the sununation of a wide variety of 
demand and supply factors of which few can be predicted with even reasonable 

It is, moreover, particularly difficult for the Foreign Economic Administration 
to prepare such estimates because although this agency conducts our public 
purchase programs abroad, it retains no responsibility over the stock piles 
accumulated in this country except to transfer its own imports to them. 


The current situation in terms of accumulated stock piles and procurement 
commitments is, of course, clearly defined. Government agencies have procured 
more than 200 different types of commodities abroad, either to supplement our 
own inadequate dome.stic production or to make possible expanded aid to our 
allies. Of these, more than 100 are now held in Government stock piles. 

In looking ahead, it is reasonable to assume that our foreign procurement j 
for military purjwses will tend to decrease ; that the relief and rehabilitation 
needs of liberated areas will tend to increase ; that domestic civilian consump- 
tion demands will also tend to increase; and that the supply for some types of 
foreign produced gocKls may be improved as our armies liberate former sources | 
of production. But it is difficult to predict the timing of these developments 
and the extent of their irapacts on the United States supply position. All manner ji 
of uncertainties are involved. The length of the war against Japan and the [l 


shifts in military requirements whii-h will take place during its progress are 
uncertain. The speed with which current procurement commitments will be 
cut back and the rate at which war-induced restrictions on civilian production 
will be relaxed are likewise still undelined. The scale of liberated areas demand 
will be determined not only by the state of devastation to be left by the enemy 
but also by our willingness to divert supply from our own citizenry and by 
the availability of financing mechanisms for effectuating such transfers, neither 
of which have yet been fully clarified. Important sources of foodstuffs and 
other commodities may become available as our troops advance in the Pacific but 
their effects on United States stock piles will depend on the timing of such 
liberation and on the extent to which facilities for production remain un- 

These manifold uncertainties clearly render quantitative estimates impossible, 
except such as would be subject to so wide a margin of error as to be worthless. 


It is within the foregoing framework of uncertainties and lack of authorita- 
tive responsibility, then, that the following conclusions are liazarded in response 
to your conmiittee's request : 

1. In the best current judgment of the Foreign Economic Administi-ation 
officials, the end of tlie war with .Japan may find tlie United States in possession 
of significant stock piles of tlie following commodities of which a sizable propor- 
tion has been procured abroad under public purchase : Aluminum, antimony, 
asbestos, bauxite, cadmium, chromite, cobalt, copper, cryolite, industrial dia- 
monds, graphite, iodine, lead, manganese ore, mercury, mica, molybdenite, opium, 
platinum, quartz crystals, quinine derivatives, rosin, shellac, strontium ores, 
tantalite, tin, tungsten ore, wool, zinc, and zirconium ore. 

It should be noted, however, for the information of the committee that the 
War Production Board and the War Food Administration are more fully informed 
about domestic Government stock piles than this agency. Moreover, both of 
them also play a larger role than the Foreign Economic Administration in 
determining the size of United States Government holdings through their 
guidance of what shall be procured abroad for import into. this country and 
through their control of domestic restrictions both on production and con- 

2. Most of the Government's stock piles of metals and minerals at the end 
of the war with Japan, and mucli of its stock piles of other imported commodi- 
ties, may well be absorbed into the strategic stock piles to be established under 
section 22 of the Surplus Property Act of 1944 in accordance with the Army and 
Navy Munitions Board's definition of United States defense needs. Only the 
Board itself, however, can indicate the precise extent of such strategic require- 

3. Of the remaining stock piles of substantially imported comnjodities held by 
the Government, it is expectetf that virtually none will be in excess of relatively 
immediate business demands witli the possible exception of the lower grades of 
mica and quartz crystals and a small supply of bail bearings which were pur- 
chased preclusively. Such a wholesale disappearance of war-accumulated stock 
piles is particularly likely if di.sposal agencies should approve appropriate down- 
ward price adjustments in accordance with peacetime market conditions.' 

4. The foodstuffs which have been procured abroad in substantial quantities 
for United States consumption have been sugar and molasses, fats and oils, 
coffee, tea, and cocoa, and such miscellaneous commodities as tapioca flour, 
cottonseed meal, and poultry, and turkeys. None of these is expected to be 
present in sizable stock piles at the end of the war. In fact, it has been difficult 
in respect to most of them to procure enough to meet current demand. 

Mr. WoRLEY. This very substantially covers the information which 
I requested. 

Mr. CuRKiE. The W. P. B. will be chiefly concerned with it. The 
only two obvious ones that occur to me at the moment, of course, are 
wool and copper, but I dare say there will be others. 

The most serious stock pile which will confront us is wool. I have 
seen estimates that the world will have a 4-year supply of wool on hand. 

99579 — 45 — pt. 4 14 


]Mr. WoKLEY. And if we don't bring in some from Australia, the 
great wool-producing country, we cannot increase that country's pur- 
chasing power? 

Mr. CuEKiE, That is right. 

jNlr. WoRLEY. If we cannot increase their purchasing power, that 
Avill lessen our prospects for prosperity over here. 

Mr. CuERiE. I believe the tariff people have made a special study 
on wool. I believe you are having them here tomorrow. 

Mr. ^I'oRLEY. What comments or suggestions can you make as to 
how we can develop our foreign trade to make the maximum contribu- 
tion toward full employment of our labor force and facilities? We 
went into that question thoroughly, I believe. 

Do you have any further comments or suggestions or infomiation 
Avhich you think would be helpful to this committee, and in turn help- 
ful to Congress, in trying to promote our prosperity after the war is 
over ? 

Mr. CuRRiE. I think that I incorporated all my suggestions in my 
statement this morning, Mr. Chairman. 

JMr. "WoELEY", I would like to say that we have thoroughly enjoyed 
and appreciated both your cooperation, your personal cooperation and 
that of your staff, and the information you have given us. Could 
5'OU give us any idea as to how far you think the recommendations 
you have made here today might be carried out in other departments 
of the Government? 

As I understand, you said several of the points you presented would 
be utilized bj^ other departments. For example, the Bretton Woods 

Mr. CuRRiE. Yes. This statement does not purport to be a statement 
of the whole Administration's ]3rogram for foreign trade. On the 
other hand, I have no reason to believe that any of the points I men- 
tioned would be inconsistent with the attitude of the other Government 
departments. The peace organization is obviously a part of our pro- 
gram. Full employment is. The financing of exports would be assisted 
by the International Bank for Development and Reconstruction pro- 
gi'am. Stable exchange rates have been one of the primary purposes 
of (he Bretton Woods agreement. • 

I feel that my views on the necessity of establishing fair exchange 
rates and freeing frozen curriencies after the war would be endorsed 
by the Treasury Department. Removal of import and export controls 
is a matter within our province and upon which we speak with more 
authority. The lowering of tariff barriers and trade barriers gen- 
erally has been enunciated many times by Secretary Hull and has been 
incorporated in the lend-lease agreement. 

Mr. WoRLEY. He did not make any specific recommendations? 

Mr. CuRRiE. No, other than the resumption of reciprocal trade agree- 
ments. The orderly liquidation of surplus property, I think, will be 
a matter which the new board, which has not yet been created, will 
have to be concerned with. That will be one of its major problems. 

In connection with the point on financing our exports, I think it was 
made perfectly clear by our spokesmen at Bretton Woods that they 
did not regard the proposed plan for the International Bank for 
Reconstruction and Development as supplanting the necessity for 
domestic action by the member countries, but was rather to supple- 
ment loans by individual countries and not supplant them. 


I think there is some disposition within the Government to feel 
that we do need more facilities for financing our exports. At the 
present time we have virtually no machinery or mechanism at hand 
for aiding in the rehabilitation or reconstruction of the devastated 
areas, for instance. 

As for the Export-Import Bank, its loaning authority, is very 
small. It is negligible in relation to the task. I (lo not think lend- 
lease could properly be used for reconstruction of .luse areas where 
(li'.t vec(/nstruction does not constitute a part of the war effort. 

[r. WoRLEY. WeLl, there is no provision that it should be, is there? 

^Alr. CuRRiE No; so that there is at the present time really no ma- 
chinery at hand for this major task. Then, of course, there is the' 
Johnson xVct which stands in the wa}'^ of private loans to certain 
governments, and there is a prohibition in the charter of the Export- 
Imnort Bank which prevents making loans to certain governments in 
default in April 1934 to the United States Government, and that is a 
very restrictive provision. 

jSIr. WcRLET. You think some of these will have to be modified or 
repealed in order to carry out your purposes ? 

Mr. CiRRiE. I should hope so. 

^Ir. WoRLEY. Well, if in the course of 3'our future experiences in 
the F. E. A. you have any experiences or receive any information 
which you think will be of help to this committee and Congress in 
successfully meeting some of the problems we are going to find an 
answer to, we would like very much to have that information. 

Mr. Curries I should be very happy to assist in any way I can the 
work of the committee. 

Mr. WoRLEY. If you run into anything that 3'ou think will help 

. let us have it. 
Ir. CuRRiE. I shall do so. 

Mr. WoRLEY. Thank you again, Mr. Currie. 

The committee will stand adjourned until 10 o'clock tomorrow 
morning, when we will hear from the Tariff Commission. 



House of Representatives, 


I OF THE Special Committee on Post-War 

Economic Policy and Planning, 

Washington^ D. C. 

The subcommittee met, pursuant to adjournment, at 10 a. m., in 
room 1304, New House Office Building, Hon. Eugene Worley presiding. 

Present: Representative Worley (Texas). 

Also present : Dr. Vergil Reecl and Mr. Henry Arthur, staff con- 

]\fr. Worley. The committee will come to order. 

Tlie Subcommittee on Foreign Trade and Shipping continues hear- 
ings this morning. We have asked the Tariff Commission to appear 
before the committee supplied with ideas as to the scope of the work 
done by the Tariff Connnission, and its relation to foreign trade and 
shipping and other problems of both domestic and world importance. 

We are very happy to have Mr. Ryder with us. 


Mr. Worley. I understand, i\lr. Ryder, that you have a prepared 
statement to make. 

]Mr. Ryder. Yes, I have a statement which I prepared which deals 
with our work and with the laws under which we operate, and which 
analyzes to some extent the work tliat we are doing with regard to 
the many problems of foreign trade in the post-war period. 

I am very glad to appear before your committee to do that. Perhaps 
I should say that most of my statement is entirely factual, and any 
conclusions arrived at are mine and not those of the Tariff Commission, 
of course. 

First. I might briefly tell of the history of the Tariff Commission. 
It was established just 28 years ago this montli, in September 1916, 
in the midst of the First World War. It was established as a biparti- 
san body — three Democrats and three Republicans — to suppl}^ the Con- 
gress with unl)iased, nonpartisan information on which it might rely 
in determining policies with resj^ect to the foreign trade and tariff 
problems coming into existence then, as now, as an unwelcome by- 



product of war. The Ways and Means Committee, in reporting the 
bill creatin<r the Tariff Commission to the House of Representatives, 
stated : 

Two years of * * * war * * * are bringing abont economic changes 
more varied and far-reaching than the world has ever before experienced. In 
order to ascertain just what tiiose changes may be, the * * * Congress is 
providing for a nonpartisan tariff commission to make impartial and thorough 
study of every economic fact that may throw light either upon our past or upon 
our fiiture * * * policy with regard * * * to the changed and chang- 
ing conditions under wliich our trade is carried. 

The Tariff Commission is, unlike other Government agencies, con- 
cerned with matters of foreign trade in that it has no administrative 
fimctions and is not, strictl}^ speaking, a part of the administrative 
branch of the Government. It is a fact-finding organization charged 
by law with reporting to the Congress as well as to the President and, 
in fact, was established primarily to supply information to the Con- 
gress. The bipartisan composition of the Commission was intended 
to assure, and I believe has resulted in, the organization of a competent 
staff and the attainment of a high degree of nonpartisanship and ob- 
jectivity in the Commission's reports, practically all of which deal 
with highly controversial matters. It is a matter of importance, I 
think, that the Congress has at its service a fact-finding organization 
on which every Member of Congress, whatever his party affiliation 
and whatever his views, may rely on as a disinterested source of au- 
thoritative information on tariff and foreign-trade problems. 

The Tariff Commission has always regarded itself as primarily an 
arm of the Congress and for that reason, if for no other, I welcome 
the opportunitv of appearing before you. 

The period up to 1939 : 

Prior to 1922 the entire work of the Tariff Commission was under 
the authority of Drovisions contained in tiie sections of the Revenue 
Act of 1916 which established the Commission and outlined the gen- 
eral scope of its functions. These provisions required the Commis- 
sion to investigate and report to the Congress and the President on 
such matters as the competitive position of domestic industries, the 
operations and effects of United States customs laws, and the commer- 
cial policies of foreign countries. 

I will state that that is first a summary statement of the number of 
different things that were covered in that act. It was given wide in- 
vestigatory powers, including the power to require the submission of 
costs of production. It was required to cooperate with various other 
departments of the Government. Notwithstanding subsequent addi- 
tional grants of power, these basic provisions — reenacted as sections 
332 and 334 of the Tariff Act of 1930— have afforded the authority 
for the basic work of the Commission and for its general investigations 
and reports. They afford the authority for the great bulk of the cur- 
rent activities of the Commission, including its work for war agencies, 
on trade agreements, ivad en post war lariff and other foreign-trade 
problems in response to the request of congressional committees. 

In the early j^ears folloAving its organization in 1916, the Commis- 
sion occupied itself with assisting in the many problems directly con- 
nected with the First World War, in preparing extensive reports on 
post-war problems of foreign trade and on international commercial 
policies. It also made an analysis of the administrative provisions of 


the United States tariff, leading to a thorouoh revision of them in 
1922. and it began the collection and analysis of information relating 
to tlie thousands of commodity classifications contained in the Tariff 
Act, In the early 1920's the Commission prepared numerous special 
reports on important articles with respect to which the war and its 
aftermath had raised special problems of tariff policy. In addition, 
for use in the tariff revision of 1922, it prepared the first edition of 
the Summaries of Tariff Information containing basic data — produc- 
tion, imports, exports, and competitive conditions — on every item, 
free or dutiable, involved in the foreign trade of the United States. 

The Tariff Acts of 1922 and 1930 gave the Tariff Commission spe- 
cial functions in connection with administering the flexible tariff 
provisions — section 315 of the Tariff Act of 1922 and section SoG of the 
Tariff Act of 1930 — with the prohibition of unfair acts in the im- 
portation of goods — sections 316 and 337 of the acts of 1922 and 1930, 
respectively — and with the provision for penalizing trade of countries 
which discriminate against the commerce of the United States — 
sections 317 and 338 of the two acts, respectively. Of these special 
provisions, the flexible-tariff provision has been far the most impor- 
tant. Under it the Commission is required to ascertain the facts 
regarding differences in costs of production here and abroad in order 
to assist the President in adjusting duties to equalize such differences. 
In a strict sense, this provision, as distinguished from the general pro- 
visions of sections 332 and 334 of the Tariff Act of 1930. did not 
expand the Commission's powers of investigation; it merely gave to 
the President added powers, in the exercise of which the fact-finding 
functions of the Commission played an indispensable part. From 
1923 through 1932 the Tariff Commission concentrated a large part 
of its energies on cost investigations pursuant to this provision. 

In these years, however, the Commission did not neglect its general 
and more basic functions. It ]3ublished a number of extended surveys 
and reports on specific commodities, and, in the later 1920's it expanded 
and brought up to date the Summaries of Tariff Information. The 
latest published edition of these summaries, brought out early in 1929^ 
was a constant source of reference in the consideration of the bill 
which became the Tariff Act of 1930. 

Since 1932 work under the flexible provision has been much reduced 
in volume, although a number of important changes in duty, includ- 
ing an increase in the rates on cotton print cloths, were made under 
it in the period from 1933 to 1938. The Trade Agreements Act, passed 
in June 1934, exempted tariff items included in trade agreements from 
action under this section. After 1938, with the reduction in imports 
from Japan, demand for action under this provision practically ceased. 

At this point attention should be called to two other special pro- 
visions of law under which the Commission has made investigations. 
Under the National Industrial Kecovery Act it made investigations 
to enable the President to determine whether it was necessary to 
impose restrictions on imports in order to safeguard the codes of 
fair competition made operative under that act. Under section 22 
of the Agricultural Adjustment Act of 1933. as amended, it is pro- 
vided that, after an investigation by the Tariff Connnission, the Presi- 
dent may impose restrictions on imports tliat interfere with any pro- 
gram undertaken under that act. Under this section the President, on 


findinjfjs of the Tariff Commission, has imposed quotas on imports of 
cotton and wheat. In view of con<^ressionai acts during the war, guar- 
anteeing for a period after the war minimum loan rates based on 
specified percentages of parity on a hirge number of agricultural com- 
modities, there is the possibility that Congress will find it necessary to 
expand the scope of section 22 so as to authorize the imposition of 
restrictions on imports which might be found to interfere with the 
agricultural program undertaken under these laws. 

For example, the present parity price for flaxseed is about $2.85 per 
bushel. Unless there is a marked recession in the general price level 
in the United States, the loan rate, 90 percent of parity, would be over 
$2.50 per bushel for at least 2 years after the close of hostilities. The 
present farm price of flaxseed in Argentina is about 71 cents per bushel. 
Under existing trade agreements the United States import duty will 
be increased from 321^ cents to 50 cents per bushel after the war. 

I may say that the trade agreements reduced, for the period of the 
war, the present rate in the Tariff Act of 65 cents to 321/25 with the 
provision after the war that it go back up to 50 cents. 

Mr. Worlp:y. I do not follow you there, Mr. Eyder. 

Mr. Ryder. The duty for flaxseed in the Tariff Act of 1930 was 65 
cents. That was reduced in the trade agreement with Argentina to 
321/^ cents for the duration of the war because the feeling was, I think, 
that shipping and things of that sort would control the importation 
largely. After the war, the duty goes back not to 65 cents, but to 50 
cents, so that the duty after the war will be 50 cents. 

Mr. WoRLEY. Now, assuming that Argentina ships flaxseed and pays 
a 50-cent dut}^ what would the price be? 

Mr. Ryder. I discuss that later in my statement. 

Adding the duty to present Argentine price, it is ajjparent that the 
domestic price is likely to be considerably higher than the import price, 
even allowing for transportation costs and assuming a substantial rise 
in Argentine prices. It would seem certain that this situation will 
attract a large volume of imports and thus greatly increase the cost of 
the ])rice-support program. 

Mr. WoRLEY. Just why was this done, this 50-cent import duty on 
Argentina? What advantage did this country secure from setting 
that duty at that price ? 

Mr. Ryder. I do not know how to answer that. The duty was, I 
believe, 40 cents in the Tariff Act of 1922. I think it was raised by 
Presidential proclamation under section 315, and the present Tariff 
Act made it 65 cents. 

Flaxseed is one of the big items in our trade with Argentina, and up 
until the last few years I think more than half our consumption was 
imported from Argentina. 

Mr. WoRLEY. Do you think this duty encouraged the importation? 

Mr. Ryder. It was a concession we made in return for certain reduc- 
tions on duties that they made on our products going into Argentina. 

The Trade Agreements Act, which was passed in June 1934 for a 
3-year period and which was extended in 1937, 1940, and 1943, requires 
that information and advice be souglit from the Tariff Commission in 
connection with the negotiation of trade agreements. Under that pro- 
vision it is tlie particular and continuing function of the Commission 
to present information regarding imported articles that may be made 


the subject of concessions by the United States in trade agreements. 
In performing- tliis function, the Connnission has been continuously 
enoaged in brino;ing up to date and expanding the Tariff Information 
Summaries, which constitute the basic information on tariff questions 
pertaining to individual commodities. It is, moreover, represented on 
the many interdepartmental committees which advise the Secretary of 
State and the President on the trade-agreements program. 

Although from 1934 to the beginning of the war in 1939 work in 
connection with trade agreements constituted the largest segment of 
Commission activities, other work, mainly under its general powers, 
continued on a substantial scale. Of particular importance were the 
extensive reports prepared during this period on the trade and trade 
policies of countries such as Japan, the Pliilippines, Germany, Italy, 
and France. Almost as important were extensive reports prepared — 
on the Commission's own initiative or in response to congressional 
resolutions — on commodities such as wood pulp and nitrates present- 
ing special import problems. 

The period since the outbreak of World War II : 

In describing the activities of the Commission in the period since 
the beginning of the war two distinct phases should be emphasized : 
(1) The period from the fall of 1939 to the end of 1943, when the 
Commission directed its activities largely to immediate war problems; 
and (2) the period which began about a year ago, when the Commis- 
sion began to direct its activities more and more to the foreign trade 
and related problems for the post-war period which the war and war- 
time controls are creating and with respect to which information was 
being requested by congressional committees. 

Almost immediately after the beginning of the war in Europe in 
September 1939 the Commission began work on a study of the current 
and probable future effects of the war upon the volume and composi- 
tion of United States imports and upon the ability of this country to 
provide, by its own production or by importation, commodities neces- 
sary for defense and civilian consumption. In particular an analysis 
was made of the position of the United States as regards strategic, 
critical, and other essential materials for which it had been dependent 
mainly, or to a considerable extent, on imports. When the Office for 
Emergency Management was establislied and undertook to acquire a 
staff for the newly created defense agencies, it not only drew personnel 
from the staff of the Tariff Commission but also — and this fact was 
even more important — relied on certain important phases of its work 
largely upon commodity information ac<?umulated in the Commis- 
sion's files. The Commission cooperated to the fullest extent in these 
matters and through formal and informal arrangements endeavored 
to supply the needed information. As war agencies succeeded defense 
agencies, the cooperative efforts of the Tariff Commission increased, 
and every possible assistance was given to tliose charged with handling 
the economic phases of the prosecution of the war. 

Tlie assistance of the Tariff Commission to the war agencies still 
continues, although during the past year the Commission has turned 
its attention to an increasing degree to the post-war problems which the 
war is creating. It has been possible to do this because the war agen- 
cies have gained the experience necessary to enable them to meet with- 
out assistance new war problems as they arise and they thus have come 
to rely to a smaller extent upon assistance from the Tariff Commission. 


You know, of course, that every war brings in its wake many new 
questions of international commercial policy. Certainly this was true 
of the First World War, and it will be even more emphatically true of 
the present war. In fact, it is no exaggeration to say that the questions 
of foreign-trade policy which this war is creating and regarding which 
the Congress must make decisions will be much the most complex and 
difficult this country has ever faced. On the one hand, we shall have an 
increased need to export if full agricultural production and full in- 
dustrial employment are to be maintained. On the other hand, many 
countries of the world will find it difficult to secure funds to buy from 
the United States even as much as they bought from us in pre-war years. 
Moreover, this Avar, as every other war, will have created new industries 
which may desire restrictive action in respect to imports in order to 
enable them to continue to produce at something like the level to which 
they became accustomed during the war. This states the core of the 
post-war foreign-trade problem of the United States in the simplest 
terms and stripped of all details and all qualifications. 

Mr. WoRLEY. Do you have answers to that problem? Do you go 
on and give us the answers? 

Mr. Ryder. Well, I will let you be the judge of that. 

About a year ago the Tariff Commission began to plan work m 
performance of the duty imposed on it by law of reporting to the 
Congress on the changes being brought by the war in the foreig-n- 
trade position of the United States and in important United States 
industries. Scarcely had this work gotten under vray when, in De- 
cember 1943, the Commission received from the Ways and Means 
Committee of the House of Representatives a letter requesting it to 
investigate the principal domestic industries which may have been 
affected favorably or unfavorably by war changes and to report to 
that committee the pre-war status and conditions of these industries, 
the changes and new developments that have taken place during the 
vrar, and, so far as possible, the probable post-war status of such 
industries witli respect to foreign-trade and international competition. 
About a month later the chairman of that committee wrote the Com- 
mission requesting a report on the general trade position of the 
United States after the war. In February 1944, the Finance Com- 
mittee of the Senate wrote requesting similar investigations and re- 
ports and, in addition, for report on changes since 1929, in the 
international-trade policies of foreign countries, particularly as they 
affect the industry and trade of the United States. 

Tlius the Tariff Commission is again being called upon to do the 
kind of work which caused it originally to be established and which 
it is specially fitted, by its experience and its bipartisan organization, 
to do. In response to the requests made by the House Ways and 
Means and the Senate Finance Conmiittees, the Commission has ex- 
panded its program of work on post-war problems and is giving this 
program primary emphasis in its plans for the next 2 years. The 
program calls for the preparation of the following reports: 

1. A report on the effects of wartime-economic changes on the for- 
eign trade and foreign-trade policies of the United States. 

2. Special reports on the trade and trade policies of the various 
countries of the world. 


3. A series of reports coverincr those United States industries which 
have been substantially affected by the war in such manner as to alter 
their competitive position in relation to the industries of foreign 

Let us consider in order the subject matter of these three groups of 

With respect to the report on the effects of war on the foreign 
trade and foreign-trade policies of the United States, it will be suffi- 
cient to discuss in a rather cursory way the principal wartime economic 
changes which will be the subject of this report. 

The war has brought, as you well know, vast changes in the char- 
acter of the goods produced, in the methods of production, and in 
the capacity to produce. These changes have been most far-reaching 
in their effects in the United States, but they have also been of im- 
portance in the United Kingdom, certain of the British dominions, 
in the Soviet Union, and in Germany, although their effects in Ger- 
many may be expected to be more than canceled out by effects of 
the bombing and the invasion of Germany. Obviously, changes of 
this kind will be important in determining the foreign-trade position 
of the United States after the war. In a report such as we are prepar- 
ing, however, they can be dealt with only in a general way. Of course, 
they will be deall with in the specific reports for the different indus- 

I\lr. WoRLEY. When will that repott be available ? 

]Mr. Ryder. We hope to get it completed within the next 6 months 
or so. but it is a very difficult problem in that we are handicapped by 
a short staff. 

Improvements in productive capacity and productive technique in 
the United States certainly will increase our capacity to produce for 
export ; it will also increase our need to do so, if full employment is 
to be maintained. On the other hand, there is the possibility that 
these improvements may reduce our ability to import goods in the 
volume necessary to enable foreign countries to pay for increased 
United States exports. Certainly this will be the tendency of the 
establishment of a domestic rubber industry and in industries pro- 
ducing nylon and other products competitive with raw silk. It will 
also be the tendency of the greatly increased soybean-oil industry, 
which after the war may continue to replace to a considerable extent 
imported oils and fats. 

In this connection consideration should be given to the fact that 
the establishment of new mining and manufacturing industries in 
Latin America may reduce her demand for American goods of cer- 
tain types. On the other hand, it may increase her demand for certain 
other types of goods, particularly for industrial machinery and 

The war has necessitated extensive governmental control of both 
industry and trade — control of shipping, foreign exchange, exports, 
imports, and of the allocation of materials. The primary questions 
with respect to these controls are as follows : 

AMiich, if any, of the controls will it be necessary to maintain for 
a considerable time after the war and for how long a time? 

How far have the wartime controls created conditions which will 
affect tlie foreign trade and foreign-trade policies of the United 
States after the war and after the controls are abolished? 


In t]iis connection it will be necessary to examine the controls in 
foreign countries, as well as in the United States. Of particular im- 
portance to tlie future of the United States trade are the controls 
exercised during the war by the United Kingdom and Canada, the 
two largest markets for the United States exports. 

Special mention should be made of the control of foreign exchange 
because of its important influence on world trade. The monetary and 
exchange problems will, indeed, together constitute a most difficult 
post-war problem affecting trade. Although this problem is not 
within the scope of the Tariff Commission's functions, there are cer- 
tain results of necessary wartime exchange controls which, because of 
their post-war effects, must be discussed in its report. For example, 
under the British wartime exchange control certain countries — par- 
ticularly India and Argentina — which, during the war, have exported 
to the United Kingdom far in excess of their imports from that coun- 
try — have built up large sterling balances which have been blocked — 
that is, which cannot be used in paying for goods purchased from 
third countries like the United States. Theoretically, they can be used 
to buy unlimited quantities of goods in the United Kingdom, but 
practically their purchases there are severely limited by Great Brit- 
ain's' ability to sell for export under war conditions. 

This situation will make after the war for bilateral trading ar- 
rangements by which the British can work off their accumulated in- 
debtedness by direct shipments of British goods to the creditor coun- 
tries. The avoidance of bilateral arrangements of this kind, which 
are practically always detrimental to United States exports, may 
prove difficult. Doubtless one of the principal reasons for the for- 
mulation of the international monetary fund agreements was to remove 
the pressure for such arrangements. 

It might be mentioned in this connection that some of the Latin- 
American countries have built up large dollar balances with us. 
Although we have not, like the British, blocked these balances, yet 
under war conditions it has not proved possible for these countries 
to use these balances to import goods either from the United States 
or from other countries. 

In addition to discussing the probable effects in the post-war period 
of wartime industrial, trade, and monetary control, the report will 
deal in a thoroughgoing way with the probable effects of tariffs, quotas, 
and other pre-war foreign-trade restrictions, if they should be con- 
tinued after the war. The report will trace the tariff changes in the 
United States in the interwar period — the two congressional tariff 
revisions, the excise taxes on imports and on the processing of im- 
ported materials, and the Trade Agreements Act and its operation. 
It will also analyze the trend of changes in the foreign-trade policies 
of other countries. Stress will be laid upon the development in the 
1930's of quota systems, of bilateral trading arrangements which avoid 
the use of foreign exch.ange. and of p'-^fereTUialtariff-', particularly 
of the system'of British Imperial preferences. 

Mv. WoRLEY. Wliat is a quota system? 

Mr. Rydeh. a system M'hereby imports are restricted not as in the 
old-fashioned way by tariffs, but by a limitation on the quantity which 
will be permitted entry. 

Mr. WoRLEY, Is that done by agreement? 


Mr. Ryder. No. We have a few quotas ourselves. We have a 
quota on sugar under the Sugar Act, and we have quotas on the im- 
ports of shingles, wheat, and cotton, and on tobacco under our Cuban 

Mr. WoRLEY. Would you elaborate more on preferential tariffs? 

Mr. Ryder. Preferential tariffs are an old device by which a country 
permits entry of imports from certain areas at lower rates of duty than 
imports from the rest of the world. We have preferential duties 
with Cuba. 

The most important system of tariff preferences in the world are 
the British Imperial preferences between the United Kingdom and 
the various dominions and colonies. 

A different type of governmental intervention in economic affairs 
from those so far mentioned is found in the measures taken during 
the war to insure adequate supplies of the materials required for 
military and civilian requirements. Such measures have resulted in 
a great expansion in production and productive capacity both here 
and abroad; they have also result^ed in the creating of tremendous 
surpluses of many commodities — copper, aluminum, and wool are a 
few examples. The greatly expanded productive capacity, plus the 
abnormally large surpluses, as you can very well realize, will result in 
very perplexing post-war problems both of domestic and of foreign- 
trade policy. The problem of foreign-trade policy in relation to 
many agricultural commodities, such as wheat, flaxseed, and soy- 
beans will be made more difficult by the operation of the laws guaran- 
teeing mininnun loan rates, to which reference has already been made. 
It will also be made more difficult by the great increase, under heavy 
subsidy, of British production of agricultural products, particularly 
of wheat. Should any considerable part of this increased prt/duction 
be maintained after the war it will result in a decrease in the amount 
of wheat and other agricultural products which the United Kingdom 
will be able to take from the United States after as compared with 
before the war, 

Mr. WoRLEY, Have you any other instances of this type? I under- 
stand the British had to subsidize their oAvn farmers. 

Mr. Ryder. It was a matter of necessity, of course. They began 
subsidization before we got into the war, in the early 30's, I think. 
Before the war they had increased their wheat — I do not know 
wliether it is in acres or bushels — something like from 20,000 to 40,000. 
During the war, under heavy subsidy and without limitation, their 
production has gone up to 120,000. At first they limited the acreage, 
but during the war they took that limitation off. 

^Ir. WoRLEY. Other countries have found, too, that they could pro- 
duce things when necessary which they have been buying from us 
quite a lot. 

Mr. Ryder. The greatest war develo])ment of this kind has been in 
the United Kingdom. I do not know whether there have been similar 
develo])ments in other countries, or not. 

Mr. Reed. There have been in Germany. 

Mr. Ryder. Of course, there has been in the Axis-controlled coun- 
tries, but I was leaving those aside. We have little information with 
respect to them of course. 

Mr. Worley. For exam])le. we have developed a synthetic rubber 
which costs no more than that imported from the Dutch East Indies. 


Mr. Kyder. We are just getting out a report on rubber. I think it 
will be out next week. We could not be clear in our conclusions be- 
cause the industry is changing so rapidly. It is inipossible to say 
what the costs of producing synthetic rubber are going to be under 
normal peacetime conditions, and it is difficult to say at what price the 
plantation rubber people will be able to sell. 

Those two factors cannot be known now, and you have to know both, 
of course, to know what the competitive position of synthetic rubber 
will be. 

In this connection, another war measure in Great Britain which may 
well have unfavorable repercussions on our agricultural exports to^ 
that country cannot be passed over without comment. That is the 
purchase and sale of foodstuffs by the Government. This practice, 
which grew up under the necessities of war, doubtless will continue 
for sometime after the war, and there is a tendency in some quarters 
to have it continued indefinitely. Governmental monopolies of im- 
ports, of course, make unnecessary tariffs and quotas for protection of 
domestic production. They present a most difficult problem of com- 
mercial policy. 

The discussion of wartime economic changes and their effects leads 
up to the consideration, first, of the factors which will affect the 
volume of United States foreign trade in the post-war period, and 
second, the factors which should be taken into account in formulating 
the tariff and other foreign-trade policies of the United States in that 

With respect to the factors which will determine the volume of 
United States foreign trade in the post-war period, it will suffice to 
say there that the war will leave the United States with an expanded 
capacity to produce for export and with a favorable competitive 
position for its principal export products. The magnitude of the 
United States export trade will turn, therefore, upon the height of the 
national incomes of the various foreign countries, upon the willingness 
of those countries to import as evidenced by their import and other 
foreign-trade policies, and upon their ability to obtain the dollars 
necessary to pay for imports from the United States. The question 
of how foreign countries may obtain the dollars necessary to pay for 
the volume of imports they would otherwise buy from the United 
States may well turn out to be the crucial one. As you know, in the 
period between the two wars the United States maintained a large 
excess of exports over imports, in the 1920's by wholesale lending and 
in the 1930's by importing gold on a large scale, gold which we have 
locked up unused in Kentucky. So long as this imbalance continues, 
the removal or moderation of wartime trade controls, of quotas, and 
of other restrictions and discriminations adversely affecting United 
States exports will be difficult. Moreover, the continuance of this 
imbalance might be a factor tending to strengthen the already strong 
tendency in many countries for government control of trade. 

In this connection, stress will also be laid upon the fact that the 
war will reduce the dollars available to certain countries on account 
of shipping services rendered the United States and on account of 
returns on investments held in the United States. This is particularly 
true of the British. Our payments to the British for shipping serv- 
ices and in the way of returns on their investments in the United States 
were important items in the pre-war balance of trade between the two 


countries. Both of these items will be much less important after the 

The balance-of-trade situation will thus be one of the most difficult 
problems in the post-war period. This will be one of the considera- 
tions favoring a liberal import policy. 

Mr. WoRLEY. What do you mean by "liberal import policy"? 

Mr. Ryder. I chose that expression because I mean a policy that 
would allow a considerable expansion in imports. 

Mr. WoRLEY. You assume, of course, that that would be to our 

Mr. Ryder. I am going to cover that. 

Another consideration favoring such a policy, of course, is the 
creditor position of the United States — a position into which we were 
catapulted by the last war and which is being greatly increased by 
this war. Still another is the need of increased exports to help remedy 
the surplus situation with respect to certain agricultural products and 
to assist in the full utilization of the greatly expanded industrial plant 
capacity of the United States. 

The Congress, however, in determining national policies regarding 
foreign trade, will want to take into account the factors which may be 
taken as weighing against a policy looking toward greatly increasing 
imports. These will be brought out in the report. Among them are 
the possible effects of the competitive impact of increased imports on 
certain domestic industries — agricultural, mineral, and manufactur- 
ing — the importance to certain sections of industries which might be 
somewhat reduced by increased imports, and the necessity of main- 
taining certain industries as necessary to national defense. 

One final word on this subject. The future volume of imports will 
depend not only on the tariff and other import policies of this Gov- 
ernment but also on the magnitude of f he national income, which, in 
turn, depends on business conditions. In fact, the size of the national 
income is probably the more important of the two factors. This is 
true even though there has been the tendency for imports in value to 
decline in ratio to national income. However, in this connection, it 
should be observed that under peacetime conditions the ratio tends to 
rise in times of prosperity and high national income and tends to fall 
in times of depression and low national income. If you would like 
to look at them, we have some tables here show^ing the fluctuations. 

Mr. WoRLEY. We would like to have that for the record, if you wilL 



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Mr. Ryder. So nmcli — possibly too much — for some of the points 
which will be covered in the Commission's report on the effects of 
wartime economic changes on the foreign trade and the foreign-trade 
policies of the United States. The second group of reports being 
prepared in response to the requests of the House Ways and Means 
and the Senate Finance Committees may be described much more 
jbriefiy. These reports relate to the changes since 1929 in the trade 
and trade policies of foreign countries, particularly as these changes 
affect the industry and the trade of the United States. 

99579 — 45 — pt. 4- 



The Commission completed, in 1941, reports on the trade of each 
of the Latin-American countries. It is now engaged in reports on the 
changes the war has wrought in the trade and trade policies of these 
countries. These reports, as they become ready in preliminary draft, 
are being made available to various Government departments and to 
the preparatory committee of the forthcoming Inter-American Tech- 
nical and Economic Conference called puisuant to Resolution 25 
adopted at the third meeting of the American republics in Eio de 
Janeiro in January 1943. 

The Commission has had in course of preparation for sometime 
a report on the trade and trade policies of the British Empire, with 
particular reference to the causes and results of the British imperial 
preferential tariff system. 

Although no formal reports have been planned on the Far East, the 
Commission is devoting attention to some of the major trade problems 
which will present themselves to the United States when hostilities 
cease in the Far East. 

Mr. WoRLEY. Mr. Ryder, you have made the statement that — 

The Comniissioii has had in course of preparation for sometime a report 
on the trade and trade policies of the Britisli Empire, with particular reference 
to the causes and results of the British imperial preferential tariff system. 

Would 3'ou say, as a general statement, that the British have found 
that to be successful ? 

Mr. Ryder. It is successful in one way, at least. It has been suc- 
cessful in increasing the British exports to the dominions and British 
imports from the dominions. It has increased inter-Empire trade, 
but the question is whether that has not resulted in a corresponding 
decrease, or at least some decrease, in their trade with other parts 
of the world. 

Mr. WoRLEY. H;is that been of value to the dominions? 

Mr. Ryder. I would say that it has resulted in an increase in their 
trade among themselves and with the United Kingdom. Whether 
it has had unfavorable repercussions on their trade with non-Empire 
countries is a difficult matter to decide, and there would be differences 
of opinion on that point. 

Mr. WoRLEY. That is a multilateral agreement with bilateral effects. 

Mr. Ryder. It is about that. It is a complex situation resulting 
from the agreements between the different dominions and the United 

Mr. WoRLEY. It is not what you would call a liberal policy? 

Mr. Ryder. No; it is generally regarded that preferential systems 
of that sort are more or less contrary to liberal import policies, ; 
although it depends updii how you use the w^ord "liberal." It results, 
no doubt, in greater trade among the Empire countries, and, there- 
fore, from the standpoint of the trade among the Empire countries 
alone, it increases trade. Whether it increases or decreases their 
total trade with the world is a thing difficult to determine; and upon 
that, opinions would greatly differ. 

Mr. WoRLEY. That policy seems to have built up a rather prosperous, i 
good-sized kingdom. That policy seems to have been successful, of ^ 
course, depending upon how y<'ii iise the word "successful." 

Mr. RydT'.r. It was adopted, of course, right in the depth of the de- j 
pression, and the depression had a good deal to do with the establish- j 
ment of those Ottawa agreements as they were called. j 


That is one of the things which makes it difficult to jndge in regard 
to them, because you start from an abnormal period in determining 
their effects. 

Mr. WoELET. Don't we follow the same policy to some extent with 
our territories and possessions? 

Mr, Ryder, Yes ; we have a similar arrangement with Cuba, and we 
have complete free trade with Puerto Rico, With the Philippines we 
had for a time almost complete free trade, but that was limited some 
in later years. 

Mr. WoRLEY. You don't think we follow that principle as closely 
as the British Empire follows it? 

Mr. Ryder. Yes; I would say we have, because we have complete 
free trade with Puerto Rico, and we have a very high preferential 
arrangement with Cuba, and we had something very closely approach- 
ing free trade with the Philippines. 

However, the arguments for and against, or the considerations for 
and against, preferential systems are a little different when you havo 
a country as closely related geographically, as is the case between Cuba 
and the United States. 

On the other hand, the British would no doubt retort that the politi- 
cal ties are just as im])ortant as the geographical ones. 

Mr. WoRLEY. Perhaps more so. Dr. Reed would like to ask a 

Mr. Reed, Mr. Ryder, in the case of the dominions, such as Canada, 
and to a lesser extei\t Australia and South Africa, isn't there increas- 
ing resentment in those dominions themselves against that arrange- 
ment of imperial preference ? It is turning out definitely to Canada's 
disadvantage, is it not? 

Mr. Ryder. I have had a good many conferences with the Canadian 
representatives, and I have yet to have one express that view. If there 
is that view, it certainly is not expressed in official circles ; at least, they 
do not express it to Americans. 

Mr. Reed. Of course, they give a different reason for adopting the 
policy. Tliey would probably cite the Smoot-Hawley tariff bill. 

Mr. Ryder, My one guess is that the imperial preferences would 
have been adopted anyhow without the Smoot-Hawley tariff bill. No 
doubt that made it certain. It increased the pressure. 

We are preparing, for example, a detailed study of our pre-war 
imports from China proper, JNIanchuria, and Hong Kong and are 
analyzing the effects which the war has had both on the production 
of these articles in the Far East and on our domestic production and 
consumption of the same articles and substitutes for them. We are 
doing this primarily with a view to being able to advise the Congress 
on the factors which will determine the composition and extent of our 
imports from China and these other areas in the post-war period. We 
are also making a somewhat similar study of our trade with Japan, 

The Commission is also engaged in making studies of our trade 
relations with the Philippines and with Puerto Rico, The Vice 
Chairman of the Commission, Mr, Lynn R. Edminister, was appointed 
by the President to serve as a member of the Philippine Rehabilita- 
tion Commission, which will consider, among other things, the future 
trade relations between the Philippines and tlie United States, The 
Commission's report on our trade relations with Puerto Rico, now 


nearing completion, was undertaken at the request of the Senate 
Committee on Territories and Insular Affairs for the purpose of ad- 
vising it on the probable economic effects on Puerto Rico of inde- 
pendence. These studies of our trade relations with the Philippines 
and with Puerto Rico are important, not only for themselves but also 
because of the light they will tlirow on the economic implications of 
tariff assimilation by the United States of any other areas wdiich 
may come under our jurisdiction temporarily or permanently follow- 
ing the end of hostilities. 

The third series of reports relate to the major commodities or in- 
dustries M'hich have been affected by the war. Reports are now in 
course of preparation on about 75 to 100 connnodities. With respect 
to each of these commodities, these reports will review conditions of 
liruduction and competition before the war and will indicate the 
changes in these conditions made by the war and the problems 
which will be encountered after the war due to these changes and to 
.the general domestic and foreign economic situation which may be 
expected to exist in post-war years. 

Emphasis will be placed upon the problems of policy which the 
Congress must face in respect to these industries. Reports on six of 
the commodities to be covered have been completed. They are raw 
wool, industrial alcohol, United States stock-pile wools, mercury, 
dehydrated vegetables, and rubber. 

Mr. WoRLEY. Would you provide the committee with copies of 
those ? 

Mr. Ryder. I would be glad to. Other important subjects on which 
reports are in the course of preparation are listed below; in addition, 
less extensive reports are being prepared on numerous other subjects: 
Potash; nitrates; petroleum; starches; oils and fats used princi- 
pally in foods and soap; linseed and other drying oils; magnesium; 
lead; manganese; copper; textile machinery; iron and steel; shingles; 
wood pulp and pulpwood; softwood lumber; newsprint; cattle and 
beef; dried and evaporated milk; pottery; China clay; magnesite; 
watches; zinc; aluminum; cheese; butter; eclible nuts; manila; rayon, 
nylon, other synthetic fibers, and raw silk ; raw cotton ; cotton cloth ; 
woolens and worsteds; plastic products; hides and skins; and leather. 

It is important that the information which will be presented in 
these reports be before the Congress well in advance of the time when 
it considers post-war foreign-trade problems with the view to adopt- 
ing policies regarding them. The Commission, therefore, is making 
every effort to complete this series of reports at the earliest possible 
date. However, the work involved is of such magnitude that, with 
the staff that is available for it, only some of the more important re- 
ports can be completed during t:he current year. This project is one, 
therefore, upon which considerable work may be expected in 1946. 

Mr. WoRLEY. Do I understand that you need a bigger staff? 

Ml'. Ryder. If we are to get these reports out faster than we are 
doing at present, yes, sir. 

Mr. WoKLEY. Do you intend to ask the Appropriations Committee 
for assistance? 

]VIr. Ryder. No; we have requested some increase in the appropria- 
tions in our own right but not any increase in our staff. We have been 
operating not only by funds supplied by Congress, but on funds sup- 
plied by other governmental agencies — the F. E. A., O. P. A., the War 


Food Administration, and, to some extent, the W. P. B. We are 
asking that ^Ye be gi^-en those fnnds in our own right in order that we 
may be able to use a larger proportion of our present staff on Con- 
gressional work. But we are not asking for anything that would 
mean an inc-i'":ise in our total staff. 

Connected with this series of reports is one, prepared at the request 
of a subcommittee of the House (\)mmittee on Agriculture, analyzing 
wool cost data supplied by the Farm Credit Administration for the 
year 1943. This report supplemented one previously prepared by 
the Commission, in which costs for 1943 were estimatecl in advance 
of the end of the year, using as a basis the data for earlier years and 
certain known changes in cost factors. At the request of the same 
subcommittee, the Commission now has in progiess a study to enable 
it to estimate in advance costs for 1944. 

I will say that if Congress wants these reports turned out faster 
than we are able to do with our present staff, our staff would have to 
be increased. I thought that was for Congress to say, rather than 
for us. 

I will say that these reports to which I have just referred take much 
more time than all our other work put together. They are time 
consuming and take most of the time of our commodity staff. 

]Mr. AVcRLEY. Would you mind taking up one of these items and 
giving us an idea of your approach to the problem and what you 
do to secure the information? 

Let's take cattle and beef. Could you give us some idea as to 
your approach to the problem — how you work up your report? 

ISIr. Ryder. Well, in getting up these reports we have first a com- 
modity expert who specializes in cattle and beef. He also, by the 
way, specializes in wool. He has a group of commodities. He has 
spent years on those commodities and knows them pretty thoroughly. 

We gather together all of the information we can get from the 
Bureau of Census, from the Department of Agriculture, from the De- 
partment of Commerce, and imports and production statistics; we 
have a vast amount of material in our files. By correspondence and 
by field work, interviewing, going out in the field, talking to the 
cattle people, we get additional information; and when that is all 
assembled, we write a report. 

Now, in that work the conmiodityexpert usually has the assistance 
of an economist who frequently goes with him in the field and prac- 
tically always collaborates in writing the report. 

That report, when completed by the experts, goes to a planning 
and reviewing committee which reviews it and causes revisions to be 
made in it. 

When they are through with it, it comes to the commission, which 
may also revise or liave it revised. 

When it has gone through all of that, it is published. That is our 
procedure in preparing reports. 

We try to emphasize in those reports all facts which will throw light 
on the competitive situation in the industry and its competition 
with imports. 

I think that is all I can say. We give all the information we can 
about the industry, but we stress the facts which will throw light 
upon the competition of the industry with imports. 


Mr. WoRLEY. Then you would include in that report the status of 
the cattle industry in other countries — all other countries? 

Mr. Ryder. I do not know whether we would include all other 
countries. The only countries we would include, if you confine it to 
cattle, would be Canada and Mexico. If you were going to include 
beef, you would have to take in various other countries — Argentina 
and Uruguay, especially. 

Mr. WoRLEY. Does that suggest a possible foreign market? 

Mr. Ryder. Yes ; we frequently cover the question of foreign mar- 
kets, although that is not the chief emphasis. We practically always 
take up that question, because the ability of an industry to export 
may throw a good deal of light upon its ability to withstand the 
impact of imports. 

Mr. WoRLEY. You generally do discuss it to some degree, anyway — 
the possibility of a foreign market? 

Mr. Ryder. Yes; and we have in preparation a report on cattle, I 

These commodity reports which we are getting up at the present 
time deal with the important industries which have been affected 
by the wai-. A good many of them have surplus situations in the 
way of accumulations of stocks, and frequently surplus situations in 
the way of excess capacity. Copper is an example; also aluminum, 
and some of the others. 

Then, we are covering certain industries that have always had | 
considerable foreign competition. This competition usually has been i 
greatly lessened by the war, but will be renewed at the end of the war. j 

An example of that is pottery, cotton cloth, woolen cloth. j 

Mr. WoRLEY. I understand that we have a good supply of wool 
at the present time. 

Mr. Ryder. Oh, yes. . . 

Mr. Worley. How much do we have, approximately? I 

Mr. Ryder. Mr. Ballif probably had those figures. 

Mr. Ballif. I do not have the specific figures of the wool on hand, 
but we have a sizable amount of foreign wool in stock piles which 
amounts to about 200,000,000 pounds. Then we have a sizable 
amount of accumulations of domestic wool which is supported by the 
Army. About the only use of these domestic wools will be for mili- 
tary purposes, because of the high price relative to the imported wool. | 
That is going to create a serious problem as to how to get rid of these ' 
accumulated domestic wools as soon as the war demand disappears, 
because the fact that domestic wool is way out of line with the price 
of imported wool plus the duty. 

Mr. Worley. How do you mean, "out of line?" 

Mr. Ballif. It is much higher. 

Mr. Ryder. The price at which we buy domestic wool is much { 
higlier than the world price. The price at which the Government buys ^ 
domestic wool is much higher than the ])rice of imported wool. 

Mr. Ballif. That is all included, Mr. Worley, in our report on stock- 
pile wools which we will supply you. There is a very complete dis- ' 
cussion of that problem. 

Mr. Worley. I was wondering why we have a surplus of imported 
wool. Don't we have sufficient domestic wool to supply our demands? 

Mr. Ballif. No ; we do not. We always import a sizable part of our 
consumption of wool. During the war, of course, our imports v( ere 


greatly expanded to provide a safety factor in case our sources of 
supply, such as Australia and the Argentine were cut off. 

During the early part of the war we built up large stocks of wool 
in this country as a war measure. Even in normal times we import a 
quantity of raw wool. 

Mr. Ryder. As I recall, a considerable part of the foreign stocks 
here are owned by the British and a considerable part by us. Is that 

Mr. Ballit. There is a large stock pile owned by the British which 
it was originally planned would be moved out of this country. What 
will eventually happen to it, I cannot say at this time. Presumably 
it will be moved out of the country. 

Mr. Ryder. Of the stocks of foreign wools in this country, part are 
owned l)y this Government and part by the British Government. 

Mr. WoRLEY. I would like to say that you have made a very interest- 
ing and thorough statement, Mr. Ryder. 

Mr. Ryder. Thank you. I tried to cover the problems that are com- 
ing up so that you would know our view of the problems, what the 
problems were, and what we are trying to do in regard to theni. 

Mr. WoRLEY. You do not have an answer ? 

]\Ir. Ryder, No; the Tariff Commission affords all the information 
and lots the other fellow do the answering. 

Mr.WoRLET. Yours is purely a fact-finding function? 

Mr. Ryder. That is right. 

Mr. Worley. Do you have anything at all to do with the policy of 
our foreign trade? 

Mr. Rydeb. Not directly. The Tariff Commission's function, even 
under the flexible tariff provision, has been a fact-finding function 

Under that provision we found what the differences in costs are, 
a very difficult thing, by the way. To the best of our ability we found 
and certified the cost differences. On the basis of that, the President 
acted or did not act, as he saw fit. 

Mr. Worley. In your reports do you make any sort of recommenda- 
tions, expressed or implied ? 

Mr. Ryder. I would say it amounts to a recommendation. I do not 
think we usually put it in the form of a recommendation. 

Mr. Worley. Are they generally accepted by the policy-making de- 
partments of the Government ? 

Mr. Ryder. Yes ; usually. The Presidents, in acting under the flex- 
ible provisions of the tariff, have either not acted at all or have acted 
on our recommendations. In the case of section 22 of the Agricultural 
Adjustment Act, to which I referred, I think action has always been 
taken on our recommendation. Under that section we do recommend 
what action shall be taken. 

Mr. Worley. And other sections, you generally make no recommen- 
dation ? 

Mr. Ryder. That is right. In the case of trade agreements, there is 
a country committee made up of experts from various Government de- 
partments. This committee makes up a schedule of what we ask in the 
way of concessions, and what we offer in the way of concessions. 

Mr. Worley. Wliat is that, the country committee ? 


Mr. Ryder. Yes. We supply that committee with all the infor- 
mation we can get that will bear upon whether a concession should 
be made in a particular product. 

Mr. WoRLEY. What determines whether a concession should be 
made ? 

Mr. Ryder. Well, it is like everything else of that sort. It always 
has to be a matter of judgment. There is no mathematical formula 
by which you can tell whether a duty should be kept where it is, re- 
duced, or increased. 

Mr. WoRLEY. Can you give us an example where the matter of judg- 
ment comes in ? Take manganese, or any instance you prefer. 

Mr. Ryder. Well, in the case of manganese you have a domestic 
production. We determine, so far as we can, what the conditions 
of that domestic production are. 

Mr. WoRLEY. By conditions, you mean the cost of producing it, the 
labor supply, and the price for which it sells ? 

Mr. Ryder. Well, we do not in most cases get the cost of produc- 
tion. If we tried to get costs for every commodity, we would have; 
to have a staff 10 times the size of our present staff. It is hard to 
express it, because it varies from industry to industry; but we try 
to get the factors that indicate the competitive position of the industry. 

Among these factors are : What has been the effect on production of a 
given product of changes in price levels? What is the employment 
situation in that industry ? And, if we can get an index of cost, what 
are the costs in the industry ? 

Mr. Worley. You have the power to investigate the costs of pro- 
duction ? 

Mr. Ryder. Yes, we have the power of investigating and obtaining 
costs of production. 

As I say, we cannot do that for many industries, as it is a, very 
difficult job; so in most cases we have to take whatever other indices 
we can get of the competitive position of the industry. Cost is only 
one of the elements entering into that determination. In most cases 
you can get about as good an indication of the competitive situation 
without getting costs as you can by getting them. 

Mr. WoRLEY. By "competitive situation" you mean world-wide 
competitive situation ? 

Mr. Ryder. That is right. After determining the conditions of 
domestic production we try to ascertain the conditions of production 
in foreign countries; also to determine what is the transportation 
situation, and the competition so far as transportation goes. 

After all these facts are gotten together, the country committee, 
using its judgment based on those facts, makes a recommendation for 
a decrease or no change in the duty. 

IMr. Worley. They make a recommendation for a decrease or no 
change. They make no recommendation for an increase? 

Mr. Ryder. No; under the trade agreements no increases are made 
in duty, although technically an increase could be made. 

There are three things you can do: you can do nothing; you can 
decrease a duty; or you can "bind" the present tariff treatment, that 
is, instead of reducing the duty of flaxseed, for instance, you could 
make an agreement with the country not to increase that dut}', or not 
to impose a duty on a free item. 

Mr. WoRLEY. That would be a decrease in the duty, wouldn't it ? 



Mr. Eyder. No; we would agree not to increase the duty. We are 
not agreeing to decrease it, but we will agree not to increase it. 

In our agreements with some of the Caribbean countries, where 
coffee is the main export to the United States, the main thing we 
gave them was a binding of the free entry of coffee ; that is, we agreed 
that we would not put a duty on coffee. 

The third thing you can do is reduce the duty. 

Now, on the facts presented, using its judgment, the country com- 
mittee recommends either one of those three things. Then that goes 
to a trade agreements committee, which goes over the whole thing 
again, and they report to the Secretary of State and the President, 
who make the final decision. 

Mv. WoRr>EY. Who is on this country committee ? 

Mr. Ktder. The membership varies from time to time and is dif- 
ferent for each country. I could tell you the names of the agencies 
on the committee: The State Department is chairman, of course, 
the Tariff Commission, the Commerce Department, Agriculture, and 
the Treasury. They have always been on it, those that I named, and 
I thinlv the F. E. A. is on it, aiid probably the O. P. A., now. I am 
talking about the trade agreements connnittee, not the comitry com- 

Mr. WoRLET. They screen the facts ? 
; Mi-. Ryder. Yes, they make the final recommendation to the Secre- 
tary of the State and the President. 

Now, the Tariff Commission is represented on all those committees. 
Theoretically, those men on that committee prasent the facts in regard 
to the industries, and those are reviewed by the Commission ; whereas 
in their serving on those committees, they serve in their individual 
capacities, using their own j uclgment. Of course, the Commission does 
not pass on it as a Commission. 

Mr. WoKLEY. Then, it is up to the State Department in the final 

Ml-. Ryder. Yes, it is up to the State Department and the President. 

Mr. WoRLEY. But generally they follow the recommendations made 
by tliese committees? 
' Mr. Ryder. Generally, but there have been exceptions. 

Mr, WoRLEY. Do you consider any political considerations in your 
analysis of these commodities? 

Mr. Ryder. No. 

Mr. WoRiiEY. You just determine whether it would be to our ad- 
vantage or disadvantage to increase or decrease? 

Mr, Ryder. The trade agreement authorities do, yes, but the Tariff 
Commission does not. We give the facts as far as we can get them, and 
as completely as we can get them. We do for the trade agreements 
organization the same thing we do for Congress when Congress is 
making a revision of the tariff — we give all the facts we can to throw 
light on what should be done. 

The decision is initially by these committeas I have referred to, 
but ultimately by the Secretary of State and the President. 

Mr. WoRLEY. iBut as a matter of law, you have no power to make a 
policy of foreign trade ? 

Mr. Ryder, No, 

Mr. W0R1.EY. We have had quite a lot of discussion, Mr. Ryder, about 
tariffs and subsidies. What is a tariff? 


Mr. Ryder. Tariff, of course, is a tax levied on imports, and I be- 
lieve the courts have held that what Congress calls excise tax on im- 
ports is the same as a tariff, for instance, on petroleum, copper, and a 
few other items. 

Mr. WoRLEY. How does a tariff compare with a Government sub- 
sidy ? 

Mr. Ryder. Well, take rubber, for instance. If you are going to 
do something to maintain all or part of the present synthetic rubber 
capacity, you could do that either by a tariff or by a subsidy. You 
could do it by levying a tariff on imports. That, of course, would leave 
the domestic industry to compete with whatever imports might come 
in over the tariff. You could not, by that means, control the size of 
your synthetic rubber industry, and although the public would be 
paying it they would not know they were paying the tax. 

On the other liand, by a subsidy you can limit the amount of pro- 
duction to which it applies. There are various types of subsidy, but 
the simplest kind would be the subsidy of so much })er pound or ton 
of rubber produced. That has a number of advantages, theoretically 
at least. One is that you can limit the quantity on which it will be 

If you want to maintain part of the imports of rubber in order to 
help maintain our export trade, you would limit the amount subsidized, 
say, to two or three hundred thousands tons. You would give a 
subsidy on that amount, distributing, it of course, among the different 
producers. That subsidy would have to come up in the annual appro- 
priations bill. For that reason, it would be easier to get rid of than 
a tariff. 

Mr. WoRLEY. In fact, there is no difference ? 

Mr. Ryder. Yes, there are considerable differences. TVIoreover, 
most forms of subsidy do not raise the price of the entire amount 
consumed as does an effective duty. The tariff is not at all selective ; 
it is a matter of competition under the duty as to what size industry 
you have. By a subsidy on the other hand, you can control the size. 

Mr. WoRLEY. As far as the expense or cost to the Government is 
concerned, is there any difference ? 

Mr. Ryder. A subsidy is an expense to the Government; the tariff 
is a source of revenue to the Government, the amount of the revenue at 
a given rate of duty being dependent upon the magnitude of imports. 
The tariff, however, insofar as it is effective, raises the prices of all 
units consumed. Subsidies which are in the form of guaranties of 
minimum prices may be operated so as to be much like a tariff in this 
respect. A direct subsidy of so much per unit of product, however, 
does not increase prices to the consumer — it may, under certain cer- 
cumstances, reduce them — but, like all other subsidies, lias to be pro- 
vided for out of Government funds. 

Mr. Worthy. Have we always had tariffs in this country? 

Mr. Ryder. Yes, we have always had a tariff. One of tlie first acts 
passed by Congress was the Tariff Act of 1779, 1 believe. 

Mr. WoRLEY. What did that do? 

Mr. Ryder. Oh, that imposed a series of rates. It was a simple ■ 
tariff. I think the evidence was that it was chiefly for revenue needed 
by the new Government. There was a protective intent on certain 1 
items, particularly iron and steel. ■ 


Mr. WoKLF.Y. There is a difference between a protective tariff and 
a revenue tariff, is there not? 

Mr. RvDEH. It is not always easy to draw the line, but there is a dis- 

Mr. WoKLi'Y. Then we began with both points? 

Mr. Rydek. I would say the first tariff had as its principal aim 
revenue, but I think to some extent there was a protective purpose. 

Mr. WoKLEY. We have had protective tariffs ever since? 

Mr. Ryder. I would say that technically all of our tariffs since have 
been more or less ])rotective. Some of the pre-Civil War tariffs, such 
as the Walker Tariff of 1846 and the tariff of 1857, were very low, and 
were not purely revenue tariffs by any means, but could be considered 
more for revenue than anything we have had since then. 

Mr. WoKLEY. When you say "protective tariff," just who is 
protected ? 

Mr. Ryder. The domestic producer, presumably, of the products 
that are imported under the tariff. 

Mr. Worley. And you decide, or it is decided, whether a tariff is 
necessary as a result of the investigations which you -make? You 
decide whether a tariff is necessary after an investigation of the degree 
of competition, what the cost is to produce, and how to maintain our 
standard of living here and at the same time obtain maximum prices 
for those products. 

A protective tariff, then, would protect any given industry? 

Mr. Ryder. That is right. 

Mr. Worley. Now, in the over-all picture, how do you think our 
tariff system is operating — to our long-range benefit, or to our long- 
range harm ? I know that is a very general question. 

Mr. Ryder. It is a subject upon which there is a vast difference of 
opinion. It depends largely upon the period you take. I do not 
think there is any question that during the period from the Civil 
War, roughly to say about 1900, or even 1910, the high tariff system 
then prevailing resulted in a more rapid development of our indus- 
tries than we would have had without it. 

Mr. Worlj:y. That was during our developmental period. 

Mr. Ryder. On the other hand, there was another factor in connec- 
tion with that which is not often taken into account. That is that 
we had free immigration and a high tariff, and the two together made 
for a very rapid increase in the industrializati(m of the United States. 

Mr. Worley. You say we had a high tariff and free immigration ? 

Mr. Ryder. Not entirely free, but ]-elatively unrestricted immigra- 

Mr. Reed. You increase the industry, and then import consumers. 

Mr. Ryder. That is right. 

Mr. Worley. You import workers, too? 

Mr. Ryder. Yes: we imported labor to build up the industries, and 
they, of course, furnished a wider domestic market for the industries. 
The two worked together and made for very rapid industrial develop- 
ment, probably the most rapid the world has ever seen in a given 
length of time. 

Mr. Worley. Do you think we will always need tariffs ? 

Mr. Ryder. Always is a long time. 

Mr. Worley. Well, so far as you can see. 


Mr, Ryder. I would say that with the industries that have been 
built up, under our tariff system, and with the necessities of national 
defense, the probabilities are that for an indefinite period in the future 
in any policy we adopt there would be some element of protection. 

Mr, WoRLET. It has been stated that the Smoot-Hawley tariff bill 
of 1930 reduced our imports during the ensuing years to about 50 per- 
cent of what they would otherwise have been. Keeping in mind that 
the volume of exports is primarily determined by the volume of our 
imports, will you comment on this as a factor in planning our post- 
war foreign trade? 

Mr. Ryder. Well, in regard to the first part of that question, there 
was from 1930 to 1932 a very drastic reduction in our imports and 
exports. That would have occurred with or without the Smoot- 
Hawley tariff bill. No doubt tlie Smoot-Hawley bill was one of the 
factors. How important it was in comparison with the other factors, 
no one can determine. 

In any case, there would have been a large decrease in our imports 
and exports due to the depression. The depression was a main factor, 
no doubt. Doubtless the Smoot-Hawley tariff bill, on certain items' 
in which that bill increased duties, was a factor in making for further 
decrease in imports than would have occurred just by the depression 
alone. I think that is the only answer I can give. 

Mr, WoRLEY, You think it is advisable in the post-war Avorld to 
increase our export trade, our foreign market ? 

Mr. Ryder. Manifestly, it would be to the interest of a large number 
of industries which have a capacity for production beyond the ability 
of the domestic market to consume to have increased exports, and a 
good many of these industries are agricultural — cotton and wheat, for 
instance. There are also manufacturing industries — automobiles, 
typewriters, and numerous other articles. 

No doubt an increase, as I said in my statement, in exports would aid 
in preventing unemployment and lessening the surplus situation with 
regard to certain articles like cotton and things of that kind. ■ 

On the other hand, I pointed out that certain repercussions would 1 
conf I'ont Congress. 

Mr. WoRLEY. We could not increase our export trade without , 
inci'easing our import trade. 

Mr. Ryder. Not in the long run. Of course, you can, by a lending: 
system or by taking gold, expand your export,s for a considerable period 
without a corresponding expansion in imports. No doubt, for the 
first few years after the war, we will have to do that. We will have to 
loan on a large scale in order to enable the various counti'ies that 
have been injured by the war to restore their industrial equipment. 

I think we would be justified in having, for a long period, a fairly 
liberal foreign lending policy. Of course, ultimately your i-eturns on 
foreign investments equal your new loans. 

Mr. Worley. Before we can increase our exports, we are going to 
have to make it mutually profitable to other countries; are we not? 

Mr. Ryder, Oh, yes. 

Mr, Worley, When you come to that point where it is a question 
of our making a profit or that country making a profit, what happens? 

Mr, Ryder. I suppose both sides make a profit ; otherwise it would 
not continue very loi^g. 


Mr. WoRLET. Would we be willing to concede a loss here and there 
on a given commodity in order to increase the trade? 

Mr. Ryder. That would involve subsidizing a given industry. 

Mr. WoRi-^Y. Have we done that ? 

Mr. Ryder. We have had some expert subsidies on cotton for in- 
I stance. But I cannot recall a subsidy on imports. That would be a 
tariff in reverse. We have, however, used subsidies in place of duties 
to protect certain industries. In the Tariff Act; of 1894, the duty on 
sugar was replaced by a subsidy on sugar. That is the only instance 
I can recall off-hand. It could" be done, of course, on a considerable 
scale if it were desirable to do so. 

Mr. Reed. Mr. Ryder, I agree with you entirely that we have these 
three choices of taking gold or making loans in order to increase our 
imports, but if you take the gold or make the loans, don't you just 
postpone the headache, because they still cannot pay for it in the 
long run except by imports of goods? 

Mr. Ryder. That is right. Of course, a country like England, 
which has large loans, may continue indefinitely to increase its for- 
eign investments. As I pointed out, you get to a point where your 
returns on your old investments exceed your new investments each 
year. England reached that point long before this century began. 

Mr. Rekd. If 3'ou keep it up, you simply raise your prices until you 
cut your exports down. 

Mr. Ryder. That is right. 

Mr. Reed. One other thing. I realize that technically there is a 
difference betw^een subsidies and tariffs, but economically do not 
both have exactly the same effect; that is, the tariff, whether it is 
protective or for revenue only, is, to the extent it raises the price 
of imports, a subsidy to industries in an economic sense ? 

Mr. Ryder. They have the same general effect. They have the 
same tendency, but the differences are two in the main : One difference 
is that in a subsidy you can be more selective. You put a tariff on, 
and you never can predict exactly what is going to happen under 
it. In a given subsidy you can limit the quantity to which the subsidy 
applies, and then I think it is fair to say that it is easier if you want 
to get rid of it to get rid of a subsidy than a tariff, since each year 
Congress has to appropriate for it. 

There are other differences depending on the type of subsidy used. 
Important is the difference between the tariff' and .most forms of 
subsidies in their effect on prices. 

Mr. Reed. Then there is this question. In speaking of tariffs in 
the past, of course, perhaps there was some justification during our 
rapid industrial development — at least we assumed so — for protective 
tariff's, but does not that change differ materially with the country? 

For instance, we have not the same need now, since we have become 
a mature industrial nation, as we would have during a period when 
we were developing those industries. Has it not been true that, as 
nations mature, the position changes? 

Mr. Ryder. Yes. We now have a very diversified industrialized 
economy, and the old infant industry argument is not as important as 
it was then. Because of the national defense developments, there 
might be some room for infant industry arguments now, but it is 
certainly less important than it was in the earlier period. 


I would like to call attention in that connection to the fact that the ' 
emphasis, the center of oravity, I would call it, of our tariff problems | 
has shifted from manufactured goods to raw materials, and certain j; 
agricultural products. I 

The grounds for maintaining protection are different. You would j 
stress now the necessity in certain lines of national defense, certain { 
sectional needs, probably, and what the old economist used to call ; 
"vested interests — that is, interests dependent upon the tariff and \ 
which the Congress may want to pioiect from serious injury. Those j 
fire the factors that have to be considered. 

INIr. Rekd. Of course, the taritl' tliat we actually pay on goods is 
much gi-eater than that shown on the tariff schedule. Do you have 
an}' suggestions as to how we couUl keep fiom compounding such 

For instance, I have in mind one specific product — and there are 
others you may call to mind, I am sure. But there was a product which 
used to be imported from Italy. When it came in and the tariff was 
asserted, we will assume the tariff amounted to $100 — then the whole- 
saler marked that up, say 20 percent, on his landed cost, which meant 
that he added another $20 to the tariff. Then the retailer marked it 
up 50 percent, so instead of paying $100 tariff, the consumer is paying 

Is there any way to keep from compounding that, and still give '. 
protection, giving the consumer purchasing power and still giving 

Mr. Ryder. No, not unless you change the whole distribution system 
and the system of marking up the costs. I do not see how you can do 
that. Of course, that factor is more important in some products than 
it is in others. ^ 

A good many products are imported directly by the people who are 1 
going to use them, and there is little, if any, mark-up. ■ 

Mr. Reed. That would obtain with manufactured products? 

Mr. Ryder. That is right, unless they were bought directly by chain 
stores, and where there would be only one mark-up, I would say. 

]Mr. Arthur. Mr. Ryder, I want to ask one question or two about 
the matter of loans to facilitate imports by our customers — that is, 
exports by the United States in the early post-war period? 

Mr. Ryder. You mean subsidies on exports ? 

Mr. Arthur. Loans to finance exports or to help countries which 
will be importing from us. I wanted to know what considerations 
seem to you important in the making of those advances. Should it 
be tied directly to our trade? Should it be based upon a criterion of 
neetl in foreign countries, or what? 

Mr. Ryder. You mean criterion upon which we could base our loans i 
to foreign countries ? j 

Mr, Arthur. Yes. 

Mr. Ryder. Of course, the Tariff Commission has never gone into 
that phase of our export policy, but I have heard some discussion of 
it from time to time by people from the Export-Import Bank. 

Mr. Arthur. You have made studies, have you not, of the relative 
costs and differences of production of particular commodities in dif- 
ferent countries ? , J 

Mr. Ryder. Oh, yes. 



Mr. Arthur. Is the Tariff Commission brought into discussions for 
advances for the setting up of industries, for instance, in foreign 
countries so that we will have some idea of the relative efficiency of 
production in those different countries to whom we are making ad- 
vances ? 

Mr. Ryder. No, we have never been in on the formulating of our 
own policies with regard to exports. 

Mr. Arthuk. AVould you have material that would be helpful in 
determining whether those bans were going to boomerang and result 
in conmiodities coming back to compete with commodities produced in 
this country? 

Mr. Kyder. We might, in certain instances, have information that 
, would help along that line. 

Mr. Arthur. Well, if we were considering making advances to for- 
eign countries, on Avhat basis do you think we could choose between 
the enterprises that are seeking funds from this country? Congress 
will probably be faced with that problem, and we would like help, if 
you can give it to us. 

Mr. Ryder. Of course, there are several different problems. If you 
have an industry in a foreign country seeking foreign loans, and there 
are other sources for th(;se loans than the United States, then it is just 
a question of whether they want to make the loan or some other country 
make the loan. 

'J'hen, of cou r'-o, it niip;ht be that, for some period after the war, we 
might be the sole or principal source of loans to certain countries. 

Mr. Arthur. Do we want to make loans just to compeie in making 
foreign loans? 

Mr. Ryder. I would say yes, that it would be a good business policy 
for our business concerns and banks to make loans to foreign countries 
in competition with England and other countries in lending markets. 
I do not see vrhy we should not. Of course, I think we should have 
to be more careful than we have been in the past in some instances. 

Mr. WoRLEY. Do you think tliat would be essential to the develop- 
ment of our foreign trade? 

IMr. Ryder. As I understand it, a reasonable loan policy is cer- 
tainly very helpful in export trade. It is helpful in domestic trade, 
as you know, and it is bound to be helpful also "in foreign trade. 

Mr. Arthur. I think I can see this far ; that is, that it is a pouring 
out of dollars which can be used to purchase our goods, but what I am 
trying to narrow it down to is how you channel those dollars. What 
are the considerations? You just don't want to pour them through a 
funnel and, in general, assume that they will come back to us in the 
purcliase of our goods. 

There must be some discrimination in tlie placement of those dol- 
lars that go out in the form of loans. Now, what are those criteria ? 

Mr. Ryter. It seems to me, where you have a straight commercial 
loan made presumably after an assessment of the risk, that there should 
be no limitation on tJiat type of loan. The businessman or bank that 
makes it may misjudge, but he frequently makes misjudgments in 
domestic loans. If we are lending the Government funds through the 
Export-Import Bank and, if particularly we are lending them on 
special terms, then we might very well consider how economical these 
industi-ies ai'e to which tlie loans are being made a/id so forth. 


Mr, Arthur. Well, I can perhaps push it a little further. I am 
sincerely looking for help. I am not trying to press you beyond the ; 
limit of your jurisdiction. 

Mr. Ryder. I cainiot help you there. This is not my particular field, \ 
but I am glad to be as helpful as I can. j 

Mr. Arthur. In making these advances, we are looking first to the i 
risk in terms of the business risk. j 

Mr. Rydkr. That is a straight connnercial matter. ' 

Mr, Arthur. We will also have concern over the political stability j 
of the nation in which the funds are placed. We also, it seems to me, 
have to give some consideration of getting back payment in terms of 
the supply of foreign exchange that that country will be able to 
accumulate at the time of repayment of the loan. 

Now, how should this Government set up its lending operations to 
give full and adequate consideration to at least those three problems? 
Is it a State Department problem? Should the Tariif Commission 
be pulled into it at some phase, and which of those three phases? , 
Should it be internationally handled in your opinion? It may be, 
that this is asking for a personal opinion, 

Mr, Ryder. You can distinguish from the immediate post-war 
situation and that wdiich follows later, I think that in the immediate s 
post-war situation there will have to be abnormal types of lending, 
and there I think it is very well to have international organizations 
such as were proposed at the Brett on Woods Conference, I have not 
studied that in detail, but I think the general idea is a very good one. 

As far as our side of it is concerned, I believe it is handled now by 
the Export-Import Bank, which, I believe is now connected with the ] 
F, E, A,, and by the State Department on the political side, the inter- 
national political side. 

We have never been in on that. We might be hel{)ful in certain 
cases in certain aspects of it. 

Mr. Worley. Mr. Ryder, the other day a witness told the committee 
that he thought we could develop our foreign trade into a $14,000,- 
000,000 industry. Do you agree with that ? 

Mr. Ryder. I hate to deal with figures, especially when I have just 
heard them. I do not think that you could expect that large aai 
exportation ; certainly not as a regular thing at the present price level. 
I should not think that an export like that could be jnaintained as a 
regular matter unless there is a vast change in the situation over what 
we have now. 

Mr. WoRLEY. That w^as based on two propositions: First, a series 
of steps that this Nation would have to take, and, second, it would 
probably be a temporary proposition. But he was of the opinion that 
we should aim at that figure. 

Mr, Ryder. To maintain it? 

Mr, Wor.LEY, Yes. 

Mr. Ryider. I would doubt very seriously whether it would be pos- 
sible to maintain an export of those dimensions at present price 
levels. You would, in the long run, have to have imports at that level, 
imports and services, taking them together. It would also depend, 
of course, on the size of the national income to some extent. The 
larger the national income, the larger your imports and exports. 



But unless we have a very much hxrger national income than has 
been estimated, and, unless we have a very mtich larger ratio of im- 
ports and exports to national income, I do not see how you could 
arrive at a figure as high as that. 

Mr. AVoiu.EY. What do you suppose will be otir expert volume? 

Mr. Kydek. 1 would hate to say. I would not attempt to say what 
would be our export volume. It should be, from all indications, if 
we are able through this international bank or otherwise to finance it, 
very much larger than normal for a few years after the war. 

What follows after that will depend on very many factors, very 
largely on wliether the world is having an increasing economy, in- 
creasing national income the world over. 

If we have that, and if we have policies favoring trade expansion, 
we might have a very considerably larger export-import trade than 
we had before the war. But without those conditions, I doubt if we 

Mr. WoRLEY. What can we do to create those conditions? What 
steps can we take to increase our foreign trade ? 

Mr. Ryder. Well, as I see it, there are two approaches. Probably 
the more important, quantitatively, is the degree of prosperity, the 
size of the national income. The larger the income, the larger your 
imports and the larger your exports. 

Mr. WoRLEY. Well, the amount of trade determines to some extent 
the degree of prosperity, the amount of your export trade contribut- 
ing to a good measure to what our national prosperity would be. 

Mr. Ryder. All of these things are interrelated, of course. Also of 
importance w^ill be your national policies regarding imports. In 
other words, both sides will have influence. 

Mr. WoRLEY. Generally, what would you recommend those policies 
to be? 

Mr. Ryder. I do not make recommendations. 

Mr. WoRLEY. I want your ideas, not officially. We do not want to 
press you, but you are in a position, through your recommendations 
and ideas, to be very helpful to us. 

Now, tell us what you think, w^hat your ideas are as to what the 
policies should be. 

Mr. Ryder. I could not answer that for two reasons: In the first 
instance, the Tariff Commission has always refrained from making 
reconunendations as to policy, because we always want to be in a posi- 
tion where our facts, the things we furnish, will be taken as fair by 
all sides, and as unbiased. 

Mr. WoRLEY. That is why we think your ideas would be valuable. 

Mr. Ry'der. Secondly, what should be our policies depends on so 
many things that I could not foresee. What should be our policy in 
regard to foreign trade would depend not only on what we would 
like to do as a country, but on what other countries are going to be 
willing to do. I would not want to make our policy in a vacuum, but 
with some knowledge or agreements with leading countries in the 
world— the United Kingdom, Canada, France, and various other 
important countries. 

INIr. WoREEY. ^Miat sort of agreement do you think we ought to 
make with them i 

99370 — 45 — i)t. 4 16 


Mr. Ryder. What we would like to make, doubtless, is agreement 
which would eliminate such things as imperial preferences, which 
would eliminate various types of agreements such as the clearing 
agreement which made it difficult for us to get into certain foreign 
markets. We would like to eliminate policies which cause the in- 
creased production of agricultural products in England, and other 
countries under subsidy. 

Mr. WoRLEY. Now, what would they like to see us do ? 
Mr. Rydp:r. They would like to have us reduce our tariffs drasti- 

Mr. Worley. It is like a couple of fellows trying to horse-trade; 
that is all it amounts to, isn't it? We will go as far as it is necessary 
to go so long as it is ])rofitable for us, and they will go as far as it is 
necessary to go so long as it is profitable for them. 

Mr. Ryder. That is the line upon which negotiations usually turn. 
It is a very complex situation we have to face, and it is made very 
much more difficult temporarily by the surpluses in a large number 
of commodities, some agricultural, some mineral, and I think it ought 
to be emphasized that you cannot look at your foreign trade policies 
separate from your domestic policies. The two policies have to agree; 
otherwise, they cancel out. 

Mr. Worley. We have some pretty good horse traders in this 
country, don't we? 
Mr. Ryder. Oh, yes. 

Mr. Worley. I hope ^^e maintain them and develop them more. 
Mr. Arthur. I have one other question. You have, in the Com- 
mission, had a good deal of contact with varirais industries which 
feel they need protection and possibly with some tliat would be willing 
to have less protection. Have workers appeared before your Com- 
mission or presented their case to your Commission as to whether they 
are willing, on the whole, to see less tarif restrictions, or whether they 
feel they need more tariff restrictions? 

Mr. Ryder. Well, in the past, working under section 336 of the 
Tariff x\ct, the flexible tariff provision, we have had labor representa- 
tives appear. Practically always when they appeared — and that has 
not been very often — it has been either for an increase in duty, or 
against any decrease in duty. 

In the hearings before the C. R. I., the Committee on Reciprocity 
Information, which holds hearings in connection vvith trade agree- 
ments, in some cases labor unions have appeared before that commit- 
tee. I was chairman of that committee for 3 years. I think practi- 
cally always the unions appeared against reduction, but I do not know 
whether you can judge from that, because there were a limited number | 
of cases. 

Mr. Arthur. Do you have ;in opinion as to the position that labor 
would take in respect to the tariff? Would you say they are pro- 
tective tariff advocators, or are they in favor of increasing our inter- 
national trade to provide an outlet for more goods? 

Mr. Ryder. From my knowledge of it, I would say that if they are 
workers in a protected industry, they would be in favor of a higher 
tariff. That is true of your pottery workers, and various others. 

On the other hand, if you have workers in the industry on an export 
basis, like automobiles, you will probably find them in favor of a.- 
reduction. ^ 



Mr. Arthur. You feel they would be pretty much in harmcny with 
•emplo'yers in those cases? 

. Mr. Eyder. Pretty much so. The workers in each industry, as well 
as the owners, usually look at things from the standpoint of what they 
think is to the advantage of that particular industry. 

Mr. Worley. I have a very broad question to ask you. What do 
you suppose would be the effect if all countries were to remove all 
trade barriers, all tariffs, and all restrictions on trade and have free 
world trade in its pure essence? What do you suppose would be the 

Mr. Ryder. Well, I would say this: temporarily, particularly in 
countries which have had very liigli tariff's, there would be a good 
deal of dissatisfaction among industries who, because of the change 
in policy, find it necessary to reduce their production. 

Maybe in a few cases small industries would be out of business. 
Usually, however, it would not be a question of going out of business ; 
it would be a question of lopping off some of your higher cost pro- 
duction. That would no doubt be the first result domestically in 
various countries. 

Of course, the long-run result would be that each country -vyould 
produce less in certain lines and produce more in certain other lines. 
Presumably, the increases would be in the lines where the countries 
had the greatest advantage in production. 

Mr. Worley. How would we stack up in that situation? 

Mr. Ryder. Well, certain of our highly developed industries with 
a high degree of mechanical and organizational efficiency, like the 
automobile industry, would gain to a great extent by such policies. 
Other industries would no doubt lose to some extent. 

Mr. Worley. Is it not the purpose of these international confer- 
•ences and meetings to try to effectuate a more liberal policy in trade? 

Mr. Ryder. The policy of this Government since the passage of the 
Trade Agreement Act. has been in that direction, and conferences with 
foreign governments held under that act and the Lend-Lease agree- 
ments have been in that direction. 

Mr. Worley. If all l)arriers to trade were removed, there would be 
no question but that all the peoples of the world would have access to 
all commodities; commerce would flow freely. 

Mr. Ryder. There would be no doubt but what there would be a 
somewhat larger total world trade. That is assuming, of course, the 
same national income, the same degree of prosperity. 

Mr. Worley. We could not assume that, could we ? 

Mr. Ryder. I say, assuming that. Now, if by a depression or other- 
wise your national income in the various countries should be reduced 
to half, then you probably would have a net decrease despite your 
■change in policy. 

Mr. Worley. But regardless of the income the purchasing power 
would be adjusted too. 

Mr. Ryder. But with the same income, no doubt the increase in 
trade would be considerable. 

Mr. Worley. The law of supply and demand would come into actual 
and free operation. 

Mr. Arthur. Under those conditions that Mr. Worley has men- 
tioned, you would agree, would you not, that there would be an 
increase in trade ? 


Mr. Ryder, With the same world income — assuming the same in- 

Mr. Arthur. Also, it is your belief that trade represents a net gain, 
to both traders, if it is intelligently conducted. 

Mr. Hyder. I would say so ; yes. 

Mr. Arthur. Would such a change as would be brought about by a 
removal of these barriers then raise the standard of living in the 
United States over a period of years ? 

Mr. Ryder. Well, that again depends upon whether the net elfect 
would be to raise the total national income. 

Mr. WoRLEY. You say its effect would be to raise it ? 

Mr. Ryder. I say that would depend upon whether the net effect — 
and there would be effects both ways — would raise the national income, 
and I presume the tendency would be in that direction. 

Mr. Worley. Fundamentally, it is desirable to have a balance of 
supply and demand. Is that correct? 

Mr. Ryder. Yes. 

Mr. Arthur. I am asking you for your judgment now, rather than 
even a forecast. If the tendency would be to raise the standard of 
living, your conclusion then is that removal of these trade barriers 
would not result in a leveling-out process pulling us down to the level 
of other countries, necessarily? 

Mr. Ryder. That would depend on a great many factors. It would 
depend upon the policy regarding wage conditions in various coun- 
tries, and it would be a rather difficult question. 

Mr. Arthur. That is a tough question, I realize. 

Mr. Ryder. It is a question which is very difficult to answer. It 
depends upon the purchasing power in the countries that would have 
to take the greatly expanded exports necessary under those conditions. 
Assuming everything to turn out favorably, you would have one an- 
swer — the answer you indicate. 

Mr. Arthur. Specifically, you mean what? 

Mr. Ryder. A higher national income and standard of living. 

Mr. Worley. But rather than risk that possibility, all nations have 
built up a series of artificial barriers to protect their industries. 

Mr. Ryder. Of course, since they have done that, you have the 
problem of sustaining those industries; and there are very few coun- 
tries that are willing to sacrifice important industries, even though 
tJiey might be uneconomical. 

Of course, you get the added factor of the necessity of maintaining 
certain industries for national defense, and then you also get into the 
question of sectional interests, the importance of certain industries 
to which the tariff may be necessary in the economies of certain sec- 
tions, and that sort of thing. 

Dr. Reed. Wouldn't the tendency be in the case of lowering the 
barriers toward free trade to reduce money wages but actually to 
increase real wages? In other words, it would reduce the number of 
dollars that a laborer gets per day, but he would probably get a 
larger ]nunber of goods for the same dollar. 

Mr. Ryder. That is the theory. How it would work out under 
absolute free trade, I am not quite sure. 

Mr. Reed. That is apart from the need of military protection. 
There is some justification for some industries purely on a military 


Mr, Ryder. Yes ; I just pointed that out. 

Mr. WoRLEY. We certiunly a])]Treciate your information. 

Mr. Rydek. I am very (jlad to have been here. I ho])e I have been 
of some hel]) to you, and if there is any further hel]3 we can be to .you, 
please call upon us. 

Mr. WoRLEY. You have impressed upon us some interesting prob- 
lems which we will have to find answers to. If you will provide the 
committee with these studies from time to time as they are published, 
we will appreciate it. 

Mr. Ryder. We have here some charts which we got up in connec- 
tion with our work, showing the expansion in production during the 
war, and the changes in the areas in which that production is located. 
You might be interested in seeing them. 

Mr. WoRLEY. You work in conjunction with W. P. B. in compiling 
those figures? 

Mr. Ryder. Yes. 

Mr. WoRLEY. We went into those rather thoroughly several weeks 
ago, Mr. Ryder, if those are the same figures W. P. B. has. 

Mr. Whitcomb. I assume they are. We would be glad to leave these 
charts for the committee to look at, if you wish. 

Mr. WoRLEY. Yes ; if you Vill, we should like to examine them. 

Thank you again, Mr. Ryder. If you have additional information 
from time to time which you think would help tis, we would like to 
have it. 

The committee is adjourned. 

(Whereupon, at 12:05 p. m., the committee adjourned subject to 
•call of the Chair. ) 



. House of Rei'Resentatives, 

' SuBCXDMMirrEE ON Foreign Trade and Shipping 

OF THE Special Committee on Post- War 

Economic Policy and Planning, 

Washington^ D. G. 

The subcommittee met, pursuant to notice, at 10 a. m. in room 
1303, New House Office Building, Hon. Eugene Worley, presiding. 

Piesent: Dr. Vergil Reed, consultant, and Dr. G. C. Gamble, eco- 
nomic adviser to the committee. 

The Chairman. The committee will be in order. 

This morning the Subcommittee on Foreign Trade and Shipping 
of the House Special Committee on Economic Policy and Planning 
reopens the second of a series of its hearings. 

xV ])reliminarv examination of the functions of this subcommittee 
revealed the participation of a number of Government agencies in 
formulating policies in connection with our foreign trade; conse- 
quently, the first hearings consisted of testimonies from representa- 
tives of the Maritime Commission, the Department of Commerce, 
the Foreign Economic Administration, and the United States Tariff 

Because of the involved and intricate nature of the problem, the 
subcommittee is especially desirous of learning the points of views 
and projected programs of private enterprise. The subcommittee is 
primarily interested in measures to maintain employment at a high 
level and fully realizes the importance of the role which foreign 
trade and shipping can contribute to this goal. Recognizing the 
economic dislocation in this trade due to the war, we are desirous to 
learn the probable size and characteristics of our export and import 
trade after the war and gain some knowledge of the problems of 
expanding trade relationships, both fi'om a post-war and long-time 
trend angle. 

As the first representative of private enterprise, we will hear from 
Dr. Alexander V. Dye of the National Foreign Trade Council. 

Dr. Dye, will you take a seat at the table ? 


Dr. Dye: Mr. Chairman, I regret very much that due to illness 
the president of the National Foreign Trade Council. Mr. Eugene 
P. Thomas, is not able to be here this morning. He has, however, 
handed me a short statement which, with your permission, I shall 



read, and which represents no doubt, in part at least, what Mr. Thomas 
would have said had be been here, and is as follows : 

The National Foreij^n Trade Council was formed in 1914, as an 
organization nationally representative in character, for the purpose 
of coordinating the foreign trade ])romotion activities of the Nation. 
It was also charged with the organization annually of a national 
foreign trade convention, representative of the industrial and business 
interests concerned directly or indirectly with American foreign 
trade — exports and imports, direct investments, transportation, bank- 
ing, and so forth, 

Tlie thirty-first of tliese annual conventions was lield (his year on 
October 9-11, inclusive, attended by approximately 2,()0Q delegates, a 
large number of whom are not members of tlie council. At each of 
these annual meetings of American foreign traders resolutions are 
adopted, known as the final declaration of the convention. A copy of 
this year's final declaration, unanimously adopted, is submitted to this 
committee as a consensus of the views of the delegates to the conven- 
tion on the major problems to be considered, in the effort to increase 
the foreign trade of the United States. 

The preamble to this series of resolutions relating to our major 
foreign trade problems is precise in its declaration that the goal of 
this and other nations is that of increasing living standards and the 
highest level of employment, by increased production, increased trade, 
and increased consumption. A prerequisite to the attainment of this 
goal, in the words of the final declaration of the convention, is — 

Thf" assurance of peace, of internal political and economic stability, of the 
equitable treatment of foreign capital, the elimination of restrictive and discrimi- 
natory trade practices, and of basic honesty among nations. 

It is further emphasized that we are a part of the world in which we 
live, that our own economy and the economies of other nations are 
interlocked and interdependent, and that a greatly increased volume of 
international trade ia indispensable to support the increased produc- 
tion and the complete reconversion to the processes of peace that a 
healthy world economy demands. The idea of international coopera- 
tion, as opposed to isolationism, is considered to be basic to any sound 
planning for the future. 

In furtherance of these objectives, the convention strongly em- 
phasizes the essential part that private enterprise must be free to take 
in bringing about the restoration and expansion of our international 
trade. It is I'ecognized that changes may be found necessary in the 
relative positions of private enterprise and Government in business. 
For this reason it is held to be of the highest importance that the 
future line of demarcation between the two should be clearly defined in 
order that no unnecessary minimization or impairment of the freedom 
of private enterprise, as the traditional American way of progress, 
shall be permitted to harass private traders with uncertainty as to 
what constitutes the legitimate boundaries of Government in business. 

Arising out of this is the further ])roblem of private enterprise in 
international trade; its relations with foreign markets in which the 
collective idea prevails under Government control. The declaration 
of the convention with respect to this is as follows : 

To trade widi peoples who follow a different philosophy of government and 
trade, it Is not necessary to dilute our owti traditioiuil methods of government 
and trade. On the contrary, we should hrmly maintain the strength and the 
virtues of the American way of life. 


In this connection it slioukl be recalled that we had no difficulty in 
the past in trading witli Soviet Kussia — a Government which has 
been meticulous in the observance of its obligations, and which in the 
future should form a most valuable market for our products, 
especially in exports of heavy industry goods. 

The difficulty in arriving at a post-war international trade policy 
is fully recognized. Until political conditions and future national 
economic boundaries are more clearl}' envisaged, any inunediate prog- 
ress will be by a process of gradualism and adaptation to exceptional 
circumstances in a world of varied national economies and conditions. 
It is important, however, that no emergency post-war policies, applied 
in exceptional circumstances, shall retard or render more difficult even- 
tual approach to a long-term international trade policy acceptable to 
all the Unit'ed States. The kej" factor in all planning for the fuUire 
must be an international policj^ that will open the door in all countries 
to increasing production, trade, and employment. 
■ In our eliort to reconstruct the channels of international trade and 
to establish stable and satisfactor}" trade relations with the rest of the 
world, the convention favors the extension in its present form of the 
Reciprocal Trade Agi-eement Act; that is, without requirement for 
either Senate ratification or congressional approval. The convention 
reaffirmed its belief that the reciprocal trade-agreements program is 
the most effective way yet devised in our history to bring about the 
reduction of tarift' barriers here and abroad and to foster a greater 
volume of foreign trade. 

It is the contention of the delegates to the convention, that the war 
has accentuated the preponderant credit position of the United States 
in its relations with the rest of the world ; that in order to maintain 
a high level of employment and a rising standard of living in the 
United States, we must greatly increase our imports as well as our 

It is further pointed out that, in view of the creditor position of the 
United States, any excess of goods and services furnished to other 
nations beyond what we receive from them will eventually turn out to 
be an economic loss to the Nation. 

I respectfully refer the committee to the final declaration for the 
convention's views relating to other major problems involved in the 
effort to increase our foreign trade and to their proposals for a solution 
of them. These include : 

Private enterprise. 

Monetary policy and exchange stabilization. 

Direct private foreign investments. 

Reciprocal trade agreements. 

Treaties of friendship and commerce. 

International business agreements. 

The Webb-Pomerene Act. 

Protection of American foreign property rights and interests. 

Merchant marine. 

Marine insurance. 



Integration of foreign-trade protection and promotion. 

Anglo-American combined boards. 

Lend-Lease and Government purchasing practices. 

Preserving distribution channels abroad for American goods. 

Government controls affecting export trade. 


Government controls affecting import trade. 

Export price control. I 

Surplus stocks. 

That, gentlemen, is about the best I think I can do in trying to set 
forth to yon the position of the National Foreign Trade Council. Un- 
fortunately, I have with me only a very few copies of the final decla- 
ration and those, while they are incomplete in text, are without the 
index, but I shall be very glad to furnish for each member of the com- 
mittee and anj^ others you desire a complete set, just as soon as they 
come from the printer. I shall be very glad to answer any questions 
which the committee might like to ask and which ai'e within my power 
to answer. 

The Chairman. I would like to say that we are very sorry that Mr. 
Thomas was unable to be here today. 

Dr. Dye. I shall so tell him. 

The Chairman. And we do appreciate his statement. 

Dr. Dye. Thank you. 

The Chairisian. Would you mind, Dr. Dye, giving us scmie idea of 
the nature of the Foreign Trade Council, for example, its member- 
ship and its functions? 

Dr. Dye. The National Foreign Trade Council was formed, as 
stated, in 1914. The leading spirit in that was the late Mr. James A. 
Farrell, Avho conceived the idea that all foreign traders would do well 
and advance their interests materially if they coidd consult with each 
other with regard to their connnon })rol)lems, so the National Foreign 
Trade Council was organized as a council of foreign traders to consider 
their problems among themselves and furnish each other mutually 
with infoimation that might be helpful to some other member in sim- 
ilar circinnstances. 

One of their first acts was to sponsor the holding each year of a na- 
tional foreign trade convention to which all those who were inter- 
ested in au}^ way in foreign trade might come and consider their prob- 
lems, and while the national foreign trade convention is sponsored by 
the National Foreign Trade Council it is distinct from the council. 

The council has about 1,000 members, scattered Nation-wide throiigh- 
out the United States, consisting of those firms and individuals, mostly 
firms, who are interested in foreign trade. 

The Chairman. As I understand, you maintain a regular staff — 
a research bui'eau. 

Dr. Dye. It has only one office. There are no branches throughout ' 
the Nation. The head office is at 26 Beaver Street, New York City,, 
and it has a staff of officers and a board of directors, and is a private 
educational corporation. 

The Chairtan. It is supported by assessments? 

Dr. Dye. By membership dues. 

Mr. Gamble. Does it come under the category of trade organiza- 
tions, or is it more of an educational organization ? 

Dr. Dye. I should consider it more in the nature of an organization 
for disseminating information of mutual value to its members. It is 
not exactly a trade organization. It is not an organization for profit. 
It.s main id^a is for the mutual dissemination of information to its 
members. It publishes no periodicals regularly except the one volume 
each year of the proceedings of the national foreign trade conventicm 
Avhich is published by the council. 


The Chairman. As I understand it, this declaration represents the 
nnanimons vote of all the membership of your organization. 

Dr. Dye. Yes, it was adopted unanimously, but, of course, it was 
prepared by the declaration committee of 100, who then submitted the 
declaration' to the convention for adoption and the convention adopted 
it unanimously. But naturally there are divergences of opinion among 
both the members of the council and the members of the convention. 

The council, I should state also, is nonpartisan in its organization 
and does not represent any particular trade except that of all those who 
are interested in foreign trade, both export and import. 

The Chairman. You have no minority report reflecting the disagree- 
ment with the declaration? 

Dr. Dye. None that I can recall. 

The Chairman. Then we can assume generally that this does re- 

Dr. Dye. You may assume that this represents the well-considered 
opinion of the foreign traders of the United States as an organization. 

The Chairman. What problems did the association meet prior to 
the outbreak of the war wdiich prevented foreign trade or disturbed 
foreign trade? 

Dr. Dye. Prior to the outbreak of the last World War the chief 
difficulties in foreign trade were caused by the fact that each nation 
tried to increase its exports and decrease its imports. While they 
nuist have had the intelligence to know that one nation's imports are 
another nation's exports, they apparently were not able to put that 
intelligence into effect in practice but, instead, restricted imports into 
each nation with the result that the total trade of the world was not 
able to expand in a satisfactory manner and commensurate with the 
progress of civilization in other directions. 

That is about as concise as I can put it. 

The Chairman. Then, no nation built up its export trade? 

Dr. Dye. No nation built up its export trade to the fullest extent 
with economic benefit to the nation. It is well known that Germany 
did develop her export trade for the purpose of military advantage. 
In other words, she subsidized her export trade and limited her im- 
ports, but that was of no economic value even to Germany, but was of 
military value, and she did increase her exports. 

I wouldn't say that no nation increased its foreign trade for the years 
immediately after the war. Of course, all nations did have a revival 
of foreign trade immediately after the war, due to the fact that 
foreign trade was practically nonexistent except for war purposes 
during the First World War, and immediately after, of course, all na- 
tions did increase. 

There was, however, no permanent increase in foreign trade which 
was commensurate with the general advance of civilization. 

The Chairman. Do you suppose we will make the same mistakes after 
this war ? 

Dr. Dye. I don't think we will. 

Tlie Chairman. Wliy not ? 

Dr. Dye. I believe that the principal nations of the world are better 
advised, that they have considered this matter more fully. For in- 
stance, in the United States I tried, over the last 3 years, to keep track 
of the organizations that were studying post-war policy. When the 
number got up to some two-hundred-odd I lost track, but it shows the 


wide interest in post-war conditions which was not present after the 
First World War and which I think is a very helpful sign, and I do 
know that among the Allied Nations that there is tlie same interest in 
foreign trade and the same discussions going on. 

The Chairman. What do you suppose Congress can do to increase 
foreign trade? 

Di\ Dye.^Iu the first place, I think the first step that Congress could 
take to increase foreigji trade is to extend the Keciprocal Trade Agree- 
ments Act and to continue the reciprocal trade agreements program as 
it stands. That, in my opinion, is the best device that has yet been 
found in the United States for a sound increase in our foreign trade. 

I do not need to go into a long argument in favor of that program-— 
I suppose you are familiar with it — but that is my opinion, that it 
is the best device which we have yet found for safely increasing our 
foreign trade. 

If I may go on a little further, the United States during the war 
is devoting about 50 ]iercent of the total product of the United States 
to war purposes. That 50 percent of increased production has not 
been obtained by dividing the productive energy of the Nation in half. 
It is an increase over and beyond what we were doing in 1938. That 
increase has been brought about by a number of factors : First, tech- 
nological improvement, Avhich increases production. Take the case of 
petroleum alone. We now bring up to the surface of the ground 
1,000,000 more barrels of petroleum per day than we brought up before 
the war. 

Not only that, but the petroleum is better quality. The 100-octnne 
gasoline which we furnish our bombers is a superfuel. In fact, tlie 
energy which is derived from petroleum alone in the United States 
today would amount to the energy of 36 .able-bodied slaves, for every 
man, woman, and child in the United States. 

I cite that as only one product, but in every line of human endeavor, 
in agriculture, mining, distribution, the railroads, we are doing more 
work than ever before. Women liaA'e entei'ed employment. We ai'e 
throwing more energy into our work. We have the advantage of 
scientific development and we are developing a tremendous volume of 
production and consumption. You cannot turn back that vohune 
into the old channels of disuse. We have got to make some provi- 
sion for continuing the high level of employment and high standard 
of living, or this high production and this mighty force which we 
have unleashed is going to create a serious danger. 

What can we do? An increase in foreign trade will help that 
situation very greatly. 

The Chairman. Is that a complete answer? 

Dr. Dye. It will do. 

The Chairman. I mean, you tell us to build up our foreign trade 
in order to absorb this excess 

Dr. Dye. It will help a great deal. I don't think it will entirely 
solve the problem, because the first thing Ave must face is to increase 
our domestic production and consumption. An increase in our for- 
eign trade depends primarily on an increase in our domestic produc- 
tion and consumption and not vice versa. 

The Chairman. Would you care to elaborate on that? How can 
we increase our production and consumption, domestically? 


Dr. Dye. By making a gradual shift over, and yet as fast as may 
be, from war production to tlie production of consumers goods — 
production and consumption in the United States. 

The Chairman, Are you familiar with the legislation Congress has 
already passed on contract termination, demobilization, and disposal 
of surplus goods? 

Dr. Dye. Somewhat, but foreign trade is my field and I would rather 
stick to the foreign-trade angle. 

The Chairman. You mentioned the point that the foreign trade 
would largely depend upon the conditions at home. 

Dr. Dye. That is true. The value and the amount of foreign trade 
which we are able to do will depend on the volume of production 
and consumption which we can maintain at home, for the reason 
that we must import in order to export. We are predominantly a 
creditor nation. Any increase in the amount of goods and services 
which we send to other nations will in the long lun turn out to be an 
economic drain on the United States unless we can also increase the 
amount of goods and services we receive. 

If we have a high level of employment, a large amount of pro- 
duction and consumption in the United States, we shall be able to 
buy certain raw materials vvhicli we need from abroad to keep our 
factories going. For instance, we shall need hides in the leather 
industry, linseed oil in the paint industry, tungsten for metallurgical 
products ; we shall need a number of raw materials. 

With an increasing pay roll we shall be able also to increase the 
import and consumption of foodstuffs, such as tea, coffee, bananas, 
sugar, and a great many of the so-called luxury products, which range 
all the wav from Irish linen to Scotch whisky, which Avhile they may 
not contriLute to a higher standard of living some of our people want. 

We shall thereby increase the total volume of foreign trade. 

But the crux of the whole situation is this : Any increase in our 
exports over what we take in under the present creditor position of 
the United States must eventually result in giving the goods away, 
unless we can counterbalance it by an increase in imports, and that can 
only be done by maintaining a high standard of living and production 
and consumption in the Uited States. 

Tlie Chairman. And we are right back where we started. 

Dr. Dye. Yes ; we are right back where we started. 

The Chairman. We have to maintain a high production and a high 
consum])tion over here, and therefore a high standard of living. 

Dr. Dye. Yes, sir. 

The Chairman. Your first answer was with regard to reconversion 
from wartime to a peacetime basis. Would you go on and explain 
the rest of the answer? Does that fully answer the question? 

Dr. Dye. I think that is about all tliat I can say in the way of in- 
creasing domestic production and consumption. It would depend en- 
tirely on the goodwill, the courage, and the amount of initiative which 
is left to private traders in the United States to carry on their business 
with maintenance of the profit incentive, in my opinion. 

The Chairman. Then all we need, in your opinion, to maintain high 
production and higli consumption is orderly reconversion to peacetime 
production, without wartime jestrictions and control ? 

Dr. Dye. I think that is all we can do. 



The Chairman. Didn't we have that same situation existing prior 
to our entry into the war? We were capable of producing, were we 

Dr. Dye. But we did not have a high level of either production or 
consumption, or a sufficiently high level. 

The Chaikman. Well, didn't we have a high level? The Govern- 
ment did come in and buy a lot of excess agricultural products. 
Wouldn't that indicate a high level of production? 

Dr. Dye. That, of course, did increase the level of production in the 
things that the Government bought. That is perfectly true. 

The Chairman. But it did not increase the high level of consump- 
tion which we have to have along with the production? 

Dr. Dye. A high level of consumption must be present, because 
our trade — all trade — depends upon an exchange of goods with each 
other. We cannot trade, either nationally or internationally, by any 
other metliod, and both from the national standpoint and from the 
individual standpoint, it is what we buy that makes us happy and 
not wliat we sell. We sell what we don't want in order to buy what 
we do want, and in ni}^ opinion we have got to get back to this funda- 
mental pi'inciple botli in national and international trade. 

Tlie Chairman. It takes two to make a trade, in other words. 

Dr. Dye. It takes two to make a trade. Men of good will must be 
able to go out and buy and sell in the open market. 

The Chairman. Did you see in the press a story with a London date 
line headed "British begin major bid for post-war world markets," 
which reads : 

London, October 19. — ^Bidding for post-war world markets, hundreds of com- 
mercial travelers already have left England with Government help to start a 
"Buy British" campaign around the world, the Daily Express said today. . 

Harcourt .Johnstone, Secretary of the Department of Overseas Trade, said i 
that while the Americans are making "more spectacular" eftorts to capture world 
markets, England "is not going to be left out in the cold." 

The Overseas Trade Department has made ti survey of 26 countries outside 
the battle area of Europe for the "Buy British" drive and has organized 140 
exporting industries, it was announced. 

Do you know of any effort this Government or the citizens of this 
Government are making corresponding to the efforts made by the 

Dr. Dye. No ; I don't know of any specific efforts, but I think it may 
be safely assumed that they are doing and will do after the war aU 
they can possibly do to increase their export trade, and very legiti- 
mately so. 

The position of the United Kingdom in that respect is different 
from the position of the United States, to this extent — that foreign \ 
trade is very necessary to their national life. Before the war the ; 
United Kingdom produced about 40 percent of their food. That is, J 
40 percent on a calory basis, and 50 percent on a cost basis ; roughly | 

They had to import 60 percent of their food just to keep alive. In 
order to do that, they had to export the products of mining and manu- 
facturing. About 5 percent of the workers of the United Kingdom 
])roduced the 40 percent of food that was raised at home; the other 
t).") percent of the workers were engaged in mining and manufactur- 
ing and producing goods for export in order that they might buy food 


and the raw materials necessary to maintain their national life, so 
that their foreign trade is a vital necessity to that nation, and I think 
it may be safely assumed that they must do everj^thing that they can 
to increase their foreign trade. 

The Chairman. You don't know of any spectacular effort this coun- 
try is making to develop its post-war trade? 

Dr. Dye. No ; I do not. I know of no spectacular effort at all. 

The Chairman. Do you know of any effort? 

Dr. Dye. Our foreign traders are thinking and planning, although 
they are not doing a great deal at present because all their efforts are 
devoted to the war. But they are thinking very seriously about those 
things, making their own plans as to what they shall do as soon as 
they have an opportunity to enter foreign trade. 

The Chairman. You say that it takes two to make a trade. We 
first have to buy if we want to sell. That is generally true? 

Dr. Dye. That is generally true ; yes. That is a fundamental tnith 
that we must accept in the situation. 

The Chairman. How do you suppose purchasing nations will pay 
for what we want to export ? 

Dr. Dye. In the long run there is only one way in which they can 
pay. and that is by furnishing us goods or services, or gold. 

The Chairman. Goods or services or gold ? 

Dr. Dye. Or gold. Now, as to gold, they will probably not — we 
don't need the gold. I don't need to tell you that we have over half of 
the world's gold now, that we are paying $35 an ounce for gold from 
otlier foreign countries. We pay for that in United States currency, 
which is a draft on the products of the United States and can only be 
spent in this country, and can only be converted into things j^Miople 
need through our furnishing goods and services to correspond to all 
the currency and credit we supply. 

■ We may postpone the furnishing of goods and services by other 
nations for a long time, in two ways: (1) We can make loans, but we 
must bear in mind when we make a loan that there is only one way in 
which that loan, or even the service on the loan, can be brought back 
to the United States, and that is in the form of goods and services. 

The loan may stay out a long time, but it cannot come home an}'^ 
other way. 

The Chairman. When j^ou say "We" make a loan, do you mean the 
Government or private industry ? 

Dr. Dye. It doesn't make any difference, either the Government or 
private enterprise. There is only one way that that loan or the pro- 
ceeds can come back home and that is in the form of goods and services 
furnished to the United States or the citizens of the United States. 

(2) Investments may postpone the return, perhaps, for a still longer 
period. You may postpone the return for a very long time, but even- 
tually even tlie investment or the return on the investment can come 
home only as goods and services. You cannot get avmv from that, 
because from a monetary standpoint the nations of the world are 
divided into what we might call watertight compartments. If a man 
sells his products in any foreign country he has to accept the currency 
of that country in payment for those goods. If he wants to buy some- 
thing from that countr}^ he can sjoend that currency there. If he 
doesn't l^.e must exchange that currency with somebody who does. 


Eventuality the balances of ti'ade between nations must be settled in 
goods and services. 

The Chairman. You are familiar, of course, with the Bretton 
Woods Conference and the recommendations made at the conference? 

Dr. Dye. I hesitate to use the word "familiar." I know of them. 

The Chairman. Are you familiar with the subject sufficiently to 
express an opinion ? 

Dr. Dye. No, I wouldn't like to express an opinion, because of the 
fact that I haven't studied the matter sufficiently. It might interest 
you to know that the National Foreign Trade Convention on that 
subject has made the following statement : 

This convention recognizes that it is in the interest of this country to extend 
sound cre<]it in one form or smother to assist other nations whicli are taking 
steps to reliabilitate tlieir eeondniifs and monetary systems. We affirm that the 
United States can malip an important contribution toward international monetary 
stability by making determined efforts to put its own affairs in order and by 
adopting policies with respect to tariffs and other trade restrictions which will 
permit debtor nations to meet their engagements through the delivery of goods 
and services. 

This convention recommends that the National Foreign Trade Council appoint a 
standing committee on international finance and charge such committee with the 
responsibility of further study of the Bretton Woods agreemenfs and the rendering 
of a report to the directors of the National Foreign Trade Council before the next 
Congress convenes in January 1945 ; with recommendations as to whether, and 
when, in its opinion, the agreements re international monetary fund and the inter- 
national bank for reconstruction and development should be ratified by the Con- 
gress of the United States, or what other steps should be taken by Congress to 
facilitate cooperation with other nations in this field. 

The Chairman. You made no recommendation either way ? 

Dr. Dye. No; no recommendation has been made as yet, and, as ^ 
stated, a committee has been set up to give very careful study to this jj 
and report to the directors as to whether or when the act should be 
ratified, or what should be done by Congress, and that report is to be J' 
made before the next Congress convenes. 

The Chairman. During the 10-year period before we got into the 
war, what was the volume of our exports? 

Dr. Dye. Before we got into the war? I 

The Chairman. Yes. | 

Dr. Dye. As I remember it, and I hesitate to speak from memory { 
when the exact data are so readily available, but as I remember it, it 
was about $3,000,000,000. 

The Chairman. That was the general average ? 

Dr. Dye. That was the general average ; yes. 

The Chairman. How much did we import during that time? 

Dr. Dye. Slightly under that. Our exports are always a little over 
our imports, or have been for a number of years. ] 

Tlie Chairman. This post-war foreign market we are trying to ] 
build ui^ — what do you suppose we ought to aim at, in terms of dollars? 

Dr. Dye. Well, we ought to aim at the highest possible exports we 
can obtain, without setting any figure in dollars, I don't see any prac- 
tical value in setting a definite goal and saying, "We will export so 
many dollars worth of material." We ought to export all the goods 
we possibly can if we can get a sound way of paying for them without 
economic loss to the United States, and I wouldn't say that it is worth 
v.'iijk' to set any definite figure, except all that we can possibly do. 



The Chairman. Isirt that the crux of the whole matter, that we 
should not export more than we can get paid for? 

Dr. Dye. That is the crux of the whole matter. The whole crux of 
it comes down to how much we can do, bearing in mind the general 
welfare of our people. It all boils down really to that. 

The Chairman. Do 3'ou gentlemen have any general questions? I 
think I would like to have a few generalities, and then run through 
some of these final recommendations. 

Dr. Dye. Whatever you like. 

Mr. Reed. Dr. Dye. do you consider, in practical exporting, the 
Webb-Pomerene Act would need any change as a legislative instru- 
ment? At present, I believe that when you enter into importing;, you 
are subject to restrictions, but as long as you confine it purely to ex- 
ports, which is a difficult thing to do, you can go ahead in combination. 

Has 3'our organization made any reconnnendations as to what may 
be done under the Webb-Pomerene Act? 

Dr. Dye. Article 7 of the final declaration headed "The Webb- 
Pomerene Act" reads as follows : 

The principle expressed in the Export Trade Act (Webb-Pomerene Act) of 
permitting groups of American exporters to operate collectively in export trade 
is again endorsed by the convention. It is considered that the need for this 
law will be greater during the post-war period than even before, and that such 
a law is essential to enable American exporters in many industries to meet 
foreign competition and to withstand the demands of foreign buying organiza- 
tions. It is the sense of the convention that the administration of the Export 
Trade Act should be vested in but one administrative agency. 

Mr. Reed. Well, now, as to the extension of it, is it workable as it 
stands, or should it be changed, and in what respect should it be 
changed? There has been a great deal of criticism of it for many 
years, that it ties our hands too much, and many of our concerns 
are afraid to take advantage of it because the moment they do any 
importing they become subject to prosecution. 

One of our firms is at the present time under investigation for op- 
eration under the Webb-Pomerene Act. 

Dr. Dye. There is, I am sure, a general feeling among foreign 
traders that the Webb-Pomerene Act should be clarified, due to in- 
terpretations which have been placed on the Webb-Pomerene Act by 
the courts. 

Mr. Reed. So that it is a matter more of interpretation than it is a 
change of the act itself? 

Dr. Dye. Well, in view of interpretations which have been placed 
on it, it is not now the value that it was to foreign traders. I think 
that is the general opinion. 

Mr. Reed. If they do any im]:)orting they are precluded from using 
this act, so that it becomes really a handicap, because the first thing 
they know, they find themselves in a position where they have to do 
some importing, and then they find themselves open to prosecution 
under the act. as I understand it. 

Dr. Dye. I believe that is the position. 

Mr. Reed. Do you have any suggestions as to how that could be 
changed so that it would be a little more flexible? 

Dr. Dye. Xo concrete suggestions, except that it should be clearly 
known to foreign traders just what they can do under the act. 1 

99579 — 45 — pt. 4 17 


think they are quite willing to conform to what the law prescribes 
if they can be quite sure what the law does prescribe. 

Mr. Reed. Another question I have been constantly running into 
in talking with foreign traders, Why don't we have a foreign trade 
policy ? What are the elements of foreign trade and shipping policy ? 
How do we know what they can do? Now, if the organization you 
represent was laying out two or three basic foreign-trade policies 
which you thought should be consistentlj^ followed as a course to 
arrive somewhere, rather than for daj'-to-day operations, what would 
those two or three basic policies of foreign trade be, so that the 
foreign traders could understand that this is the Government's policy ? 

Do you have any suggestions along that line ? 

Dr. Dye. I might 

Mr. Reed. The Britisher knows that his Government's policy with 
reference to foreign trade is one, two, three and four. We have not 
been in that fortunate position. 

Dr. Dye. So far as we could declare a foreign trade policy for the 
United States, I think we have stated, or I have stated, some of the 

Point No. 1 : Such a policy must always be considered in the light 
of the greatest good to the greatest number; the second point is that 
so far as possible private enterprise in foreign trade should be re- 
stored. Next, that we must recognize the fundamental truth that 
foreign trade is always, if it is profitable, a two-way trade, that we 
must import as well as export; that we must recognize the funda- 
mental position that the United States is now predominantly a credi- 
tor Nation, and that comes back to what I have said, I am afraid, 
with some repetition. 

The Chairman, You mean the people do not recognize the fact 
that we are a creditor Nation ? 

Dr. Dye. I don't think many of them do recognize that we are 
a creditor Nation. We are still, I am afraid, nationally under the 
idea that the main idea is to export and export and export, without 
stopping to realize that we must import in like measure, or we will 
give away the goods and services of the United States. 

Mr. Reed. And as we become a creditor Nation to a greater de- 
gree, we have to do more and more of that? 

Dr. Dye. As we become a creditor Nation to a greater degree it is 
inevitable that we nmst. In other words, from now on, logically and 
economically, our imports should exceed our exports. That is as 
near, in a few words, as to what I can do in the monumental task of 
laying out a policy. 

The Chairman. Do you anticipate you will have any difficulty in 
convincing the people in the Government? 

Dr. Dye. I think they believe in such principles. 

Mr. Reed. One other thing: We have always been handicapped in 
the past by the amount of market information on foreign markets 
that is available. For instance, most countries, when they try to 
figure out the U. N. R. R. A. expenses, could not figure within a 
billion of their national income. What would you say would be the 
minimum of types of information that our Government should be 
encouraged to collect, or what should be made available to exporters 
and importers concerning foreign markets? 


In otlier words, what would be a skeleton of information which 
should be made available to exporters and importers by the Govern- 
ment that would assist them the most without being a waste of the 
taxpayer's money in collecting such information? 

Dr. Dye. Well, I think that the foreign traders should be fur- 
nished with all the information which is in the possession of the Gov- 
ei-nment and which would not be in any way injurious to the war 
effort. At the present time, of course, we realize there is a great deal 
of information in the hands of Government departments which can- 
not be given to private traders. 

But in the post-war period I think we should organize our Govern- 
ment and cooperate with our private interests and enterprise in such 
a way that there will be the most complete confidence and mutual flow 
of information from the one to the other, because the most happy 
situation would be that they supplement each other daily with the 
information which they can furnish to the Government, and the 
information which the Government can furnish them, and that I hope 
will take place. There isn't exactly any minimum. 

I think the men now in the Government, and who will be in the Gov- 
ernment in the post-war period, will have sufficient intelligence to sift 
out what is of value (and that can easily be collected) by constant 
consultation with business as to what they need and what it is the^ 
appropriate function of the Government to furnish. 

Mr. Reed. Is there any information on various countries of com- 
parable nature available in such form that it can be fitted' together 
into a complete picture ? We cannot now find data on any two coun- 
tries which we can j)ut together, but we have to piece together widely 
varying data. 

Do you know if our Government has ever undertaken to encourage 
or assist other governments in collecting and getting together any kind 
of standard information that would be mutually advantageous, from 
their standpoint to us, and from our standpoint to them, or is that 
practical, in your opinion ? 

Dr. Dye. Yes. in pre-war times we had frequently — not frequently,^ 
but at least quite a number of visits of statisticians and people in 
Government departments from other countries who came to the United 
States to study our methods of gathering trade statistics, in order that 
they might go home and see if they were doing the best they could, and 
in that way there was some cooperation. But I don't know of an}^ 
organized system, except that of the League of Nations. The League 
of Nations, of course, did try to get uniform statistics, as far as possi- 
ble, and tliey are published in a number of volumes of the statistical 
reports of the League. 

But we do need more uniformity, and at almost all meetings of for- 
eign traders one of the declarations, as in this one, is that there should: 
be an effort to secure uniform statistics from all countries. 

Mr. Reed. One other question. You can answer this either off or on: 
the record, so far as I am concerned. 

"\^Tiat, in your opinion, is the reason why our shippers and our 
tourists seemed to use our shipping to so little an extent before the: 
war? Consistently, we heard from shipping men that Americans 
would not use their own ships. I think I know some of the reasons, 
but what, in your opinion, was the main reason that we suffered? 


Didn't we furnish as good service? Do we have any better chance of 
encouraging our own exporters and importers to use our own ships 
after this, than we had before the war? 

Dr. Dye. Any general dechiration or statement of that sort is a bit 
dangerous to make, because there are variations in the service. But 
generally speaking, perhaps it was because of two main ideas in the 
minds of Americans who used ships. One was the question of price, 
and there were cheaper services furnished on some lines, particularly 
between here and Europe, than the American lines charged. There 
were also more expensive services. 

But there was also, perhaps in the American mind, the idea that he 
wanted to go abroad, that he wanted to see foreign things, and he 
wanted to ride on a foreign ship. 

But generally speaking, I think it was probably due to tlie fact that 
the American public is not as well acquainted with the service which 
American ships can give as they ought to be. I think that perhaps is 
one of the main reasons, because they were not properly appreciative 
of the service which American ships could render both in the way of 
freight and passenger service. 

And there is this that must always be borne in mind with regard 
to freight. It has long been a tradition, not only tradition, but cus- 
tom, that the exporter designates the steamship line on which his goods 
shall go. Naturally, the importer in a foreign country designated 
a foreign boat. So that is a very natural reason why the foreign boats 
got the majority of freight. 

.Mr. Reed. What do you think should be done on guaranteeing ex- 
port credits? Let us leave out the idea of straight loans for the 
moment. But what do you think the Government should do, if any- 
thing, on straight export credits, that is, credit for goods and services 
sent abroad. Have you any ideas on that ? 

Dr. Dye. That is a much debated subject among foreign traders 
themselves. Tliere are some wdio feel that we should, for instance, 
meet the competition, say, of Great Britain, which does guarantee 
credits, I believe, at the present time, up to 90 percent. It was started, 
as I remember, in 1926, with some 40 or 50 percent guaranty of cred- 
its and then as the v;ar became more threatening was advanced to 
some 90 percent, and there was a feeling that in order to assist our 
foreign traders our Government should likewise guarantee credits up 
to a certain amount. 

But there is this factor which must be considered : If the transac- 
tion is one which ordinary commercial prudence would dictate might 
be made, the commercial banks will usually supply credit for the 
transaction. There is a shadow land, a varying zone in foreign trade 
where perhaps private banks are not justified in taking the risk but 
where the Government, particularly a Government to which exports 
are a very vital necessity, could guarantee sound credit in excess of 
the amount the exporter and the b:tnks would assume, and there might 
be a legitimate field for that. But at the present time it seems to 
me, quite frankly, that that field is filled or could be filled by the 
Export-Import Bank. 

Mr. Eeed. On a long-term basis, say 10 years 

Dr. Dye. Perhaps not on a very long term, for in principle tliere 
is really no difference between very long-term credit and the making 


of a loan or a foreign investment. What yon do is to take over and 
gnarantee a very long-term credit which can be repaid only to the 
United States by the import of goods and services, so you come back 
pretty much to' the position of the ordinary straight loan, 

Mr. Gamble. Dr. Dye, what is your attitude, or what is the at- 
titude of the Council, toward lend-lease and its extension ? 

Dr. Dye. I cannot tell you what the attitude of the Council as an 
organization would be, because that attitude could be determined only 
by the board of directors. There is a paragraph in the final declara- 
tion on this subject which, if you like, I shall take a moment to read 
to you : 

Lend-lease is a war measure and shoidd be continued only as long as required 
for the successful military prosecution of the war in Europe and the Far East. 

Lend-lease should be restricted to the handling of such purchasing only as 
cannot be done through regular commercial channels, and should not be used 
to meet the civilian requirements of a country when such procurement can be 
secured through conunercial trade channels. 

The rapid reduction of cash-reimbursable lend-lease procedure is commended. 
This procedure should be immediately abolished. Where fimds are available to 
reimburse lend-lease in dollars, purchases should be made through commercial 
trade channels. Cash-reimbursable lend-lease procurement of commercial items, 
at United States Government prices, disturbs and renders impotent export and 
import trade channels. 

Commercial channels of distribution abroad are essential in the post-vs^ar 
period. Government bulk pvirchasing of American goods for distribution by 
governments themselves should be discouraged. Elfective supply and transpor- 
tation assistance should be made available to private traders to enable essential 
goods to move entirely through commercial channels both here and abroad rathei 
than continuing bulk purchasing operations. 

We recommend greater use by all Government agencies concerned of foreign- 
trade advisory groups, both generally and in specific industries, to bring about 
the prompt implementation of the above recommendations. 

I think that states pretty clearly the position of the foreign-trade 

The Chairman, Yoti have a copy of the final declaration before 

Dr. Dye. I have a copy and shall be very glad to furnish you with 
copies just as soon as they are available. 
• The Chairman. Would you mind turning to page 4? 

Dr. Dye. Yes ; I have that. 

The Chairman, That is headed "Private enterprise." 

Then, on page 5, you say: 

There nmst be neither private agreements nor Government monopolies oper- 
ating in restraint of trade * * * There must be freedom of opportunity open 
to all, to buy and sell in the best markets. 

Do you find that? 

Dr, Dye, Yes, "There must be freedom of opportunity, open to all, 
to buy and sell in the best markets." 

The Chairman, Are there any restrictions now, or were there any 
in peacetime prior to our entry into the war? Was anyone denied an 
opportunity to buy and sell, if they wished to do so? 

Dr, Dye. I don't think there was, except in many countries there 
existed quota systems, exchange control, unreasonably high tariffs, 
and other barriers to trade, even in some cases absolute embargoes, 
which constituted lack of opportunity. I think you are thinking par- 
.ticularly of this country, and we have in mind the general trade situ- 
ation of the world. 


The Chairman, There was no law or regulation or rule in this 
country which would deny freedom of opportunity to buy and sell in 
the best markets. 

Dr. Dye. No. In this country, as I remember it, there is no hin- 
drance to free trade except the high tariffs in some instances, but that, 
of course, is not exactly a lack of freedom, because it is equal to all, 
and our tariffs were the same for all countries and all peoples. 

The Chairman. We talk a lot about freedom of enterprise and 
initiative and the American way of life. I think, of course, everyone 
subscribes to that, but there seems to be some confusion in some 
sources as to what the Government should do in peacetime. What 
restriction imposed by the Government, or what rules of law in peace- 
time would operate to interfere with private initiative or enterprise? 
If you can, will you give us some examples of what you think would 
restrict private enterprise and initiative? 

Dr. Dye. The whole question, Mr. Chairman, of private enterprise 
is extremely difficult, because none of us has been able to define to the 
satisfaction of everybody just what is private enterprise. J 

The Chairman. When you say "freedom of enterprise," what do 
you mean? 

Mr. Dye. What I mean by freedom of enterprise is a freedom; 
within established laws and regulations which are designed for the ' 
protection of all, for the human individual to operate, and I mean 
particularly by private enterprise that he should be allowed the in- 
centive of private profit. In other words, that, to my mind, is the key- 
note to the whole question of private enterprise; that the profit motive 
should be left to the human being to carry on, and in this day we 
all realize that we do a great deal of collective activity in human 
life. None of us is entirely free, none of us is entirely private. It ; 
is just a question of the relationship between the amount of col- 
lective activity which we shall do and the amount of private work 
which we might do, with the profit incentive whereby we alone 
receive the profits derived from our own efforts. It gets into a 
rather theoretical and somewhat of a metaphysical discussion. But 
that is what I conceive to be the right of private enterprise, and the 
crux of that whole question of private enterprise is that a man should 
be allowed to retain the profits which are due to his own efforts. 

The Chairjian. ^Vhat laws have been passed by the Congress that 
would restrict that? 

Dr. Dye. Well, we do many things by collective activity which' 
restrain the private individual. We have restrictions about the 
movement of vehicles on the highways; we have harbors with regu- 
lations; we have tariff's, among other things, which to some extent 
limit the fi-eedom of the individual as to what he may do. But I 
don't know that Congress can do anything more than to fully recog- 
nize that the keynote of the dynamic force which has made our 
Nation what it is today is private enterprise, in the sense which I 
have indicated, and that it is vitally necessary to the preservation of 
this country that we keep alive that principle and make it strong and 

The Chairman. I think you are eminently correct, but do you have 
any suggestion as to what Congress might do to repeal any laws which 
vou think interfere with that freedom? 



Dr. Dye. Not beyond the fact that we all recognize that many laws 
and regulations in evidence now are due to the war effort. 

The Chairman. That is true. 

Dr. Dye. And those shoidd be repealed as soon as conditions per- 
mit. But beyond that. I have no suggestions. 

The Chairman. You think in peacetime our laws are sufficient to 
permit profitable operation in foreign trade for anybody who wants 
to operate? 

Dr. Dye. They certainly have been. 

Mr. Reed. Doesn't it depend a great deal on interpretation? 

Dr. Dy-e. Well, that is another problem. 

The Chairman. I see in your resolution No. 2 — 

This convention recognized that it is in the interest of this country to extend 
sound credit in one form or another to assist other nations which are taking 
steps to rehabilitate their economies and monetary systems. 

Dr. Dye. That is right. 

The Chairman. If I understand your position, you think, since we 
iire already a creditor nation, we will ha^e to continue that policy? 

Dr. Dye. We shall have to extend, and I think should extend, sound 
credit to assist other nations. In addition to that, we are, as you are 
aware, preparing to give away, through the United Nations Relief 
and Rehabilitation Administration, an amount which was calculated 
at that time at $1,340,000,000 of goods as a sheer gift, and I think we 
all endorsed that, but we shall have to extend credit to foreign coun- 
tries, sound credit, and I think that is the position of the foreign 

The Chairman. In the following paragraph you suggest : 

We affirm that the United States can make an important contribution toward 
international monetary stability by making determined efforts to put its own 
affairs in order and by adopting policies with respect to tariffs and other trade 
restrictions which will permit debtor nations to meet their engagements through 
the delivery of goods and services. 

Can you give us a better idea as to where our domestic affairs may 
be out of order ? 

Dr. Dye. I would hesitate to interpret a declaration of the conven- 
tion of 2,000 individuals in that respect. 

The Chairman. I understood it was a committee of 100. 

Dr. Dye. Well, even a committee of 100, I should hesitate. But 
my guess at what is meant is that eventually we must balance the 
Budget. We must do so in the interest of the stabilit}'^ of our own 
financial affairs, and that, I think, is what is intended — that we must 
balance our Budget, our Federal Budget. 

The Chairman. In your association you have many very success- 
ful individuals. 

Dr. Dye. Yes. 

The Chairman. During the course of the discussion on this par- 
ticular resolution, did anyone suggest how the Budget could be and 
should be balanced ? 

Dr. Dye. No, I can't recall any particular discussion except that I 
think the eventual idea is that in order to balance the Budget it is 
obvious that we must stop spending more than we take in. 

The Chairman. I don't think there is any question about that. Is 
that as far as vou can ffo? 


Dr. Dye. I think that is as far as we can go on that subject. 
The Chairman. There is no disagreement on that at all. Continu- 

By adopting iwlicies with respect to tariffs and other trade restrictions which 
will permit debtor nations to meet their engagements through the delivery of 
goods and services. 

Will you elaborate on that? 

Dr. Dye. Well, I think what they had in mind was that we should, 
so far as possible, with an eye to the welfare of the entire Nation 
and the maintenance of a high level of employment and production, 
reduce our tariffs, provided we can get a compensating increase in our 
foreign trade through a reduction of trade barriers in some other coun- 
try, which brings us back to the reciprocal trade-agreements program. 

The Chairman. Which you endorse. 

Dr. Dye. Which we endorse. 

The Chairman. On page 7, in the concluding paragraph of reso- 
lution No. 3, you say : 

The essential objective is that private investment capital be induced by at- 
tractive terms and sound opportunities to flow to those areas where it can be 
productively employed. 

What do you suppose this Government can do to encourage that? 

Dr. Dye. The one thing which the Government can do is, through 
its foreign relations to try always to see that justice is obtained in 
a foreign country in which investment takes place, and that the 
same conditions of protection are accorded to such loans and invest- 
ments in foreign countries as is given to loans and investments of 
other countries in this country. That must rest on a mutual arrange- 
ment. That is one thing which the Government could do. 

The Chairman. Do you think it is desirable that we should en- 
courage our own people to invest in other countries ? 

Dr. Dye. I don't believe they need any encouragement. I think if 
the outlook is attractive that they will take it, and I don't think there 
should be any artificial stimulation of the investment of private 
capital in foreign countries. 

The Cil\irman. In other words, you think it is a good idea for 
foreign governments to come over here? 

Dr. Dye. Exactly; it has, and it does. That is what made our 
country really very prosperous in the early days, the investment of 
foreign capital in this country, which received justice and fair treat- 
ment and made good profits and endured up to perhaps the First 
World War when we were able to pay back most of the investments, 
although quite a good many still persist. That is the way in which 
all of these investments, I think, should be considered, on the basis 
of mutual protection in accordance with international laws of justice. 

The Chairman. You don't suppose that foreign capital would offer 
too much competition to our own domestic capital? 

Dr. Dye. No ; I don't think it would. There are many investments 
in this country and the field is open in fair competition, and I think 
we need bother little about that. 

They will invest in this country if they see a good chance to make 
money, and they do. 

The Chairman. And if we saAV a chance in other countries? 



Dr. Dye. And if we saw a chance for private industries in other 
countries, I should think we should go in. 

The Chairman. Have you any idea how much foreign capital is 
invested in the United States '? 

Dr. Dye. No; but I think it can be secured through the Bureau 
of Foreign and Domestic Commerce. They issue annually a book 
called the Balance of Payments which I think gives you very accurate 
information in that respect. Dr. Reed would be familiar with that. 

(Dr. Dye advised subsequently that the amount at the end of 1940 
was $9,785,000,000, which figure is still subject to revision upward 
according to the Department of Commerce.) 

The Chairman. Have you any idea how much we have invested 
abroad ? 

Dr. Dye. I am sorry to say at the moment I cannot remember, but 
it is readily available. 

(Dr. Dve advised subsequently that the amount at the end of 1940 
was $11,181,000,000.) 

• Mr. Reed. Would you preclude the guaranteeing of loans in those 
areas where you coulcl not get private capital to invest? 

Dr. Dye. Xo; I wouldn't preclude that, if you consider that as a 
stimulus. I think that would be all right. The one thing I should 
like to point out — well, we get back to the same old statement — that 
private enterprise in making such loans, or even the Government, 
should bear in mind that the return of the interest must be eventually 
in the form of goods and services. That must always be borne in 

The Chairman. On page 8, resolution No. 6, International Business 

Dr. Dye. Yes. 

The Chairman. Now, on page 5 of resolution 1, you say that there 
must be neither private agreements nor Government monopolies oper- 
ating in restraint of trade, and the first paragraph of resolution No. 6 
says : 

The question concerning cartels in foreign trade is not whether American busi- 
ness favors or opposes them. It is rather to find the best method in the national 
interest for Americans to play an active and effective part in a world in which a 
substantial portion of trade and business is conducted by either governmental 
or private cartels. 

Would you mind giving the committee the benefit of your experi- 
ence and information as to just what a cartel is? AVliat is your defini- 
tion of a cartel? 

Dr. Dye. I tried once to make a definition of cartel and it ran to 
three pages, and I was still not satisfied. The question of what is a 
cartel is really one thing that is very difficult to determine. Many 
definitions have been attempted. 

I think we all have the idea generally that a cartel is a combination 
or an agreement between producers or buyers or sellers to substitute 
cooperation for competition, and that such cooperation usually takes 
the form of fixing prices or marketing areas, or some other definition 
which may restrain trade. But I am afraid that that is not a satis- 
factory definition, nor a full definition. 

The Chairman. What is a satisfactory definition ? 

Dr. Dye. As I say, I am not quite sure that I can make one. 


The Chairman. Well, am I correct in saying that a cartel is an 
agreement between two parties by which the competitive effort is 
abridged or injured? 

Dr. Dye. A cartel might do that, but not all cartels do that. 

The Chairman. Well, what cartels don't do that? 

Dr. Dye. Well, a cartel in which an agreement is made that if they 
do not furnish a competitive price, or if they do not furnish sufficient 
service, or if for any reason they are not able to establish a quota of 
business, they drop out of the cartel. And there are such cartels in 

The Chairman. There are ? 

Dr. Dye. Yes. Not in this country, but abroad. Or there were 
before the war. 

The Chairman. Generally, I think we have some idea of what we 
mean by cartel. 

Dr. Dye. I think we have a general concept of it, as we have both 
stated. I think that is the general concept in the public mind of a 

The Chairman. Generally that they will interfere with or impair 
or liave an adverse effect on competition. 

Dr. Dye. Yes, and as stated in the declaration, a willing buyer and 
a willing seller must not only be permitted to get together; they 
must be encouraged to the maximum to do so. There must be neither 
private agreements nor Government monopolies in restraint of trade. 
I think we are all agreed on that. 

There must be reasonable freedom of action under broad controls established 
by law, and not by bureaucratic mandate. There must be freedom of opportunity 
open to all, to buy and sell in the best markets. 

I think that is a fair statement of the question of cartels. The rest 
is a little long, but if you w^ould like to read it, or have it read 

The Chairman. I have read it, and am interested in what you have 
to say about it. But that does not answer the question we are facing in 
Congress. Do you think, on the whole, that cartels are desirable or 
undesirable ? 

Dr. Dye. On the whole, they are undesirable. 

The Chairman. Why? 

Dr. Dye. Because they do restrain trade. But the problem which 
faces us as foreign traders is not really whether they are desirable 
or undesirable, or whether we approve them or whether we favor 
them — — 

The Chairman. Wliy? 

Dr. Dye. The practical problem is they do exist and how are we go- 
ing to carry on our foreign trade in the face of that existence ? That 
is the practical problem which faces the foreign traders. 

As it says : 

Most foreign nations important in trade favor or at least permit the cartelized 
system. They have done so in the exercise of their sovereignty and in response 
to their ovpn economic needs. Attempting to convert them to our system appears 
impracticable, not only because we should respect their autonomy but also because 
of the numerous exceptions binder which each nation would insist and because 
of the inevitable differences in enforcement policies. 

So the problem we have is to go along with them and carry on our 
foreign trade to the best advantage of the Nation, recognizing that 
they do exist in most foreign countries, and that in the case of Soviet 



Russia it is perhaps 100 percent cartel, and we do have to do business, 
with that country. But how, is the problem. 

The Chairman. You then would favor the lesser of two evils ? 

Dr. Dye. It is how we shall carry on in tlie face of what we believe is 
an evil. 

The Chairman. You believe the cartel is an economic evil, but as 
long as others have subscribed to that evil, we must embrace it in order 
to carry on trade ? 

Dr. Dye. Yes ; and I would say this, which I believe is a fair state- 
ment of the case, that in our country, which is devoted to the private 
enterprise system, or has been hitherto, we believe cartels are an evil in 
this country, but I would hesitate to say that for other countries which 
are in an entirely different position. I would hesitate to criticize their 
contiiniance of cartels because their economic needs, their entire posi- 
tion, may be different, and I would not like to try to convert them to 
the idea that they must abandon them. 

The Chairman. Not that they must abandon them, but we should 
adopt them. 

Dr. Dye. Well, I don't know that they have made efforts 

The Chairman. There has been evidence that since they have them, 
we should also have cartels. Do you subscribe to that ? 

Dr. Dye. Not necessarily. I know of no effort to establish by other 
governments, or even individuals from other governments — to try to 
convince us of the value of establishing a cartelized system in this 
country. They just do, in the interests of their own economy, have 
those cartels, and they feel they are the basis of their particular eco- 
nomic purpose, and the question we have to face is. Shall we attempt to 
persuade them to abandon cartels or shall we attempt to do business 
with them as they stand? 

The Chairman. Suppose Congress was to pass a law prohibiting 
all cartels from doing business in this country? 

Dr. Dye. It has. Isn't that in the antitrust law, the Sherman 

The Chairman. That was my impression, but it seems to be operat- 
ing in spite of the antitrust law. 

Dr. Dye. I don't know of any cartels in this country operating. 

The Chairman. Do you know of any instance where the effect of 
the cartel system has been felt over here in spite of the antitrust, the 
Sherman Act? 

Dr. Dye. No; I don't know of any instance. Of course, we all 
understand that the Webb-Pomerene Act was passed in order to 
permit competition with countries in which they existed. That was 
the sole purpose of the AVebb-Pomerene Act. 

The Chairman. But there is some question as to whether the pro- 
visions of the Webb-Pomerene Act have been construed to vitiate 
the Sherman antitrust law. 

Dr. Dye. I believe that question has been raised in the courts, that 
is true. That is where we come back to the question that the whole 
situation needs to be clarified. 

The Chairman. You endorse the Webb-Pomerene Act? 

Dr. Dye. Yes. 

The Chairman. I see on page 12, under "Merchant marine" you 
have in the last paragraph on that page — 

That participation, ownership, or operation, by Am3rican shipping companies 
in overseas aviation should not be prohibited by law, or by administrative regu- 


latioiis when found to be in the public interest ; otherwise foreign shipping com- 
panies, generally free from such restriction, would have a competitive advantage 
over, American shipping companies. 

That is a statement of principle of the association ? 

Dr. Dye. That is a statement of policy or principle of the conven- 
tion ; yes. 

The Chairman. Yonr membership includes aviation companies, 
air-line companies, and the shipping industry as well? , 

Dr. Dye. Yes. There is a separate one on aviation but this is the 
declaration of the convention in that respect. 

The Chaieman. On the next page, you suggest — 

That no fast vessels be sold or chartered to foreign operators, but utilized for 
replacement of obsolete ships of the active American merchant fleet and the 
enlargement of its operation. 

Although you do suggest that we sell, after we put some ships 
in sanctuary for protective purposes, what we can to American pur- 
chasers, and then dispose of tlie balance to foreign purchasers. Is that 
correct ? 

Dr. Dye. That is in the statement in the next to the last paragraph. 

The Chairman. But you suggest that no fast vessels be sold. Do 
you suppose any foreign coimtries would be interested in the slower 
type, obsolescent or obsolete types? 

Dr. Dye. I think there is a possibility, yes ; of their being interested 
in the so-called Liberty ships which are the slower moving ships. In 
some countries there may be quite a little market for those. It is hard 
to tell. 

The Chairman. You suggest that we retain the best for our own 

Dr. Dye. Tliat was the interpretation of the convention: That 
it would be better to retain for the American merchant marine the 
fast vessels, for one reason. You will remember that it is only very 
recently that we have started building fast vessels. The predomi- 
nance of construction at the beginning was of the Liberty type of 
ship, which was slower, but lately we have been constructing the 
C-1, C-2, and C-3, ships which are faster, running from, I believe 
16 to 18 knots, whereas the Liberty ships were around 9 to 11 knots 
per hour. 

The Chairman. In the second paragraph you suggest : 

That new vessels be sold to American citizens for guaranteed operation ; pur- 
chasers to be safeguarded by a fall clause against subsequent sale to others at 
more favorable prices or terms. 

What do you mean by that, that we sell ships when they are available 
to a purcliaser for, say, a million dollars, and in spite of the fact that 
we may have more ships we want to get rid of, we can't sell them under 
$1,000,000 at any subsequent time ? Is that it ? 

Dr. Dye. That means that in selling those to purchasers the Govern- 
ment should safeguard the buyer by stating to him that no subsequent 
sale would be made to others at more favorable prices or terms, because 
it is obvious that if we sell a ship, say, to an American buyer at 
$1,000,000 and then sold the same type of ships for a half-million 
dollai's to some foreign purchaser, it would place the purchaser of the 
ship who paid $1,000,000 in a disadvantageous position for operation. 
That is the reason for the safeguarding with the fall clause, that in 


order that he may be assured that he will not be undersold and put at 
a disadvantage by a subsequent sale at a lower price, he will be allowed 
to operate his ship on a competitive cost. That is the reason for the 
so-called fall clause, that there will not be a fall in the price to a subse- 
quent purchaser that would run him out of business. 

The Chairman. You think that is a sound principle for the Govern- 
ment to follow in all such matters. 

Dr. Dye. I think it is a sound principle for the Government to 
follow in all things. Simply, a man must make a calculation when he 
purcliases that, that he can operate with a net return on his capital of 
so much. Then if that calculation is thrown out of gear by a later 
sale to his competitor at a much lower price, of course he has really a 
riMit to claim injustice. 

Mr. Reed. Dr. Dye, what do you think the probabilities are for so- 
called superliners after the war? Is there any economic justification 
for our trying to get into that type with the airplane traffic probably 
taking the cream of the trade ? 

Dr. Dye. In conversations with shipping men I have found no idea 
expressed at all that we should go into superliners, but many sugges- 
tions to the contrary. I believe that a great majority of shipping men 
are convinced that the day of the superliner is gone. 

The Chairman. The following resolutions and recommendations 
you have touched on rather generally, either in Mr. Thomas' state- 
ment or your own statement. 

Dr. Dye. I think we have, Mr. Chairman, covered the main points. 
I should add, though, that if there are any others that occur to you 
at any time, I am quite sure that Mr. Thomas or myself or some other 
member of our organization would be very glad to appear before you. 

The Chairman. We appreciate your cooperation. 

On i^age 16, Dr. Dye, Resolution No. 16, "Preserving Distribution 
Channels Abroad for American Goods." I have only glanced at it, 
but can you elaborate on that please ? 

Dr. Dye. That is the second pargraph of article 15, which says : 

Lend-lease should be restricted to the handling of such purchasing only as 
cannot be done through regular commercial channels, and should not be used to 
meet the civilian requirements of a country when such procurement can be 
secured through commercial trade channels. 

What that means is that it is desirable, as long as it can be done, 
that lend-lease sales and distribution in a foreign country should 
be done through the usual commercial trade channels. Our exporters 
have built up abroad many special trade-marks and brands which 
are well known for their quality. They have their distributors abroad. 
The feeling is that as soon as possible in distributing these goods 
the}^ should be left to the channels of private competition in the 
countries in order to enable them to distribute through those channels 
as soon as possible. 

The Chairman. It seems, according to the newspaper report I read, 
that the Allies are already engaged in those operations. 

Dr. Dye. You mean our other allies? 

The Chairman. Our British Allies. 

Dr. Dye. That I cannot say is true or not, but I do know that tnere 
is a great pressure upon private traders in all countries, and there 
is a constant feeling that the other fellow is going to get the edge 


over hiin in getting back to private channels of trade before lie does. 
That is true in every country, I am quite sure, including our own, 
that is true, and therefore great care must be exercised in the removal 
of Government restrictions in order to give all of them an even break. 
The Chairman. If I understood you, you said that most of the 
efforts of those interested in the post-war market are now devoted to 
winning the war. 

Dr. Dye. Yes ; that is true. 

The Chairman. And as soon as the war is over, they will be ready 

to go out 

Dr. Dye. There are stories that appear, and there is a great need 
for careful examination and investigation of all of these stories, and 
if there is a tendency in any country to take advantage and get private 
traders into a private country before another country, I think it should 
be taken up and fully investigated, and I am quite sure that that evil 
would be corrected if it exists. 

The Chairman. It is only fair, is it not, for all countries to be on 
the same basis ? 

Dr. Dye. Absolutely. That is the only way that I see it can be 
done, and preserve harmonious relations between the countries, to let 
them all have an even chance at the trade and remove restrictions 
for all countries simultaneously so that private trade in all countries 
may have an even chance at the trade which develops. 

The Chairman. And that would be the result of negotiations and 

Dr. Dye. Oh, yes; that would have to be done through international 

The Chairman. Do you know of any agreement we have entered 
into that would have that effect ? 

Dr. Dye. I don't know of any definite agreements, but I do think 
there is a complete understanding with the Allies on that subject. I 
can't say offhand whether it has been written into any definite agree- 
ments or not. Maybe it has. 

The Chairman. After the war is over, do you think the traders 
themselves should start in and try to build up and develop post-war 
markets immediately without any encouragement or help or subsidy 
from the Government ? 

Dr. Dye. Yes; and I think they will. I don't think the foreign 
trader needs any subsidy. I think he will develop the connections 
in foreign countries which most exporters have, or did have. Those 
connections have been disturbed in many cases. In some cases they 
still exist, so far as they are able to ascertain, and connection can 
be resumed and trade will be resumed in any market that is attractive. 
I think all our foreign traders need is the green light and for you 
to say, "Let's go." 

The Chairman. And you would not need any additional legisla- 
tion ; all you will need 

Dr. Dye. Is the removal of wartime restrictions. 
The Chairman. The removal of wartime restrictions? 
Dr. Dye. I think that is all we need. 

The Chairman. And you can take the excess production we have 
now and go out and sell it to tlie world. 

Dr. Dye. There will be, in my opinion, such a tremendous demand 
for American goods all over the world that our trouble is not going 


to be a selling trouble but a trouble in getting; payment. We can sell 
anything almost that the United States produces anywhere in the 
world if we can just figure out a way to get paid for it. That is the 
tough one. 

The Chairman. Then, will you need some help from the Govern- 
ment to insure those payments ? 

Dr. Dye. Yes ; if the Government could give any help in that way 
it would be helpful, bearing in mind always that any Government 
assistance has to come back in the same way. 

Dr. Reed. That would be just postponing the headache. 

Dr. Dye. Yes ; you have to bear that in min,d. There is no way you 
can eventually settle it — you can postpone it, and it will be wise in 
many ways to postpone it. 

The Chairman. Until the other nations are rehabilitated. 

Dr. Dye. Until they can be rehabilitated, but always remembering 
that sooner or later it has to be paid off that way. 

The Chairman. It has to be paid in goods or services. 

Dr. Dye. In goods or services. It has just got to come back that 
way or not at all. 

The Chairman. Or gold. 

Dr. Dye. But we have about 60 percent of the world's gold now, 
and I don't think that really we want to take any more gold. We 
don't need any more gold ; we have got enough. 

The Chairman. And that leaves only goods and services. 

Dr. Dye. Practically only goods and services. 

Mr. Reed. On the question of brands or trade-marks, naturally 
lend-lease has been one of the best means of distributing those brands. 
Do you foresee any special problems American exporters will have in 
reestablishing the old brands and establishing new brands in foreign 
markets? I can't see any special ones, but I wonder if you can. 

Dr. Dye. I think the over-all effect, as you say, of making known 
in foreign countries American goods and services, particularly since 
Lend-Lease adopted, as they did quite a long time ago, the policy of 
not obliterating brands and names, has been beneficial on the whole, 
but there will be isolated or separate instances where the bulk of the 
brand trade has been lost. 

Mr. Reed. Would that be because of a reduced standard of living? 

Dr. Dye. In some cases it would be because of the reduced standards 
of living; in other cases it has been abolished, and it dropped out due 
to the disappearance of the agent, or for some other reason, but I 
don't think that is a serious problem. I think those are isolated in- 
stances which can be ignored in the general situation. 

The Chairman. Doctor, we appreciate your cooperation in appear- 
ing before this committee and the information you have afforded us. 

Do you have any additional information or suggestions you think 
we should have ? 

Dr. Dye. No, Mr. Chairman; I think we have covered the subject 
as fully as time permits, but I repeat that if there are supplementary 
questions that occur to you at any time we shall be most happy to 
appear before you or furnish it by communication, or in any way you 

The Chairman. Thank you very much. 

The committee will adjourn until 10 o'clock tomorrow morning. 



House of Representatives, 
Subcommittee ox Foreign Trade and Shipping of the 

Special Committee on Post-War 

Economic Policy and Planning, 

Washington^ D. C. 

The subcommittee met, pursuant to adjournment, at 10 a. m., room 
1303, New House Office Building, Hon. Eugene Worley, presiding. 

Present : Dr. Vergil Reed, consultant ; Marion Folsom, staff di- 
rector, and Dr. G. C. Gamble, economic adviser to the committee. 

The Chairman. The committee will be in order. 

The Subcommittee on Foreign Trade and Shipping is meeting this 
morning on the question of our foreign trade, its extension, and the 
best methods by which that can be accomplished. 

The first witness this morning is Mr. Morris S. Rosenthal, execu- 
tive vice president of Stein, Hall & Co., Inc., representing private en- 

Mr. Rosenthal, will you take the chair? 

The committee is very glad to have you here and we hope you will 
be al)le to provide the answer to the problems with which we are faced. 
I understand you have a statement you wish to make. 

Mr. Rosenthal. I would like to make several points, if I may, Mr. 

The Chairman. Go right ahead. 


Mr. Rosenthal. It has seemed to me and some of the other mem- 
bers of the National Council of American Importers that there are 
certain specifics which I would now like to recommend to the com- 

The Chairman. Mr, Rosenthal, pardon me. Will you give us some 
idea of the business Stein, Hall & Co. is engaged in ? 

Mr. Rosenthal. Our company are importers of raw materials, such 
as burlap, starch products, palm oil, kapok, essential oils, natural gums, 
and a number of other products. We also manufacture in the United 
States certain vegetable adhesives and textile sizing materials in our 
own factories, and are dealers in domestic starches as well. 

In addition to speaking for my own company, I am authorized to 
epeak for the National Council of American Importers, of which I 

89579 — 45 — pt. 4 18 875 


am a vice president, and chairman of their post-war research com- ' 
mittee. The snggestiong that I am about to submit were discussed at \ 
a recent meeting of the post-war committee. \ 

The Chairman. How long has Stein, Hall & Co. been engaged in : 
business? _ _ j 

Mr. Rosenthal. We have been in business since 1866. I 

The Chairman. And how long has your association been in exist- 1 
ence ? ' 

Mr. Rosenthal. It was founded in 1921 and represents importers ; 
of consumer goods as well as importers of raw materials. 

The Chairman. You are principally concerned with importing. : 
Are you at all concerned with exporting ? i 

Mr. Rosenthal. To a lesser extent. That is a comparatively small I 
percentage of our business, although we do some exporting as well. j 

The Chairman, Most of your business is importing? j 

Mr. Rosenthal, And manufacturing, i 

The Chairman. And manufacturing? 

Mr. Rosenthal. Yes, sir. 

The Chairman. But not necessarily for export trade? 

Mr. Rosenthal. No, sir ; largely for domestic consumption, some ■ 
of it being exported, but a minor part. 

The Chairman. Most of your attention will be devoted to the 
importers ? l 

Mr. Rosenthal. Yes, sir. I 

The Chairman. Proceed. j 

Mr. Rosenthal. It has seemed to us that there is general agree- 
ment on the need of expanding world trade in the post-war era in 
order to assure our own American system of doing business with the . 
full employment of our population and a decent standard of living |i 
for all of our people. 

The Chairman. You believe that will be necessary in order to in- 
crease and maintain the prosperity of our country ? 

Mr. Rosenthal. I believe that will be vital. If we accept that 
as a premise, I do not think it is necessary for me to generalize on 
the need and wisdom of that expansion. 

1 would rather deal, if I may, with certain specifics that I would 
like to recommend. 

I think that one of our faults is to attempt to solve all of the prob- 
lems in the economic world at once, and unless we are able to achieve 
a perfect pattern, we delay in doing certain things that can be done 
which will be helpful in the proper direction. It is also easy to 
criticize adversely some of the plans that have been submitted for 
international cooperation without adopting alternatives. For that 
reason, I woidd prefer to submit certain specifics which are construc- 
tive and which 1 do not offer as a cure-all, but which I do think will 
be helpful. 

First, we have already endorsed, and I would like to urge upon the 
committee the speedy adoption of S. J. Resolution 120, submitted in 
the Senate by Senators Kilgore, Truman, and Thomas, for the estab- 
lishment of a Foreign Economic Commission. The membership of 
that Commission would consist of a chairman to be appointed by the 
President, representatives of both the Senate and the House, repre- 
sentatives of certain administrative agencies of Government, repre- 


sentatives of industry, labor, agriculture, and the public, with an 
appropriation to permit the employment of a staff of experts to make 
an objective and intelligent study of the specific needs of foreign 
trade both on imports and exports, so that we could have resulting 
legislation which would give the necessary authority to the adminis- 
trative agencies to carry out the policies of the Congress. 

I believe that the resolution has also been introduced into the House 
and is now in the respective Foreign AtTairs Committees of both the 
Senate and the House. 

We believe that such a commission, which would be composed of 
members of the legislative body, as well as members of the executive, 
coupled with representatives of industry, labor, agriculture, and the 
public, wouUl provide a group of people that could make an intelli- 
gent and objective study of the entire foreign-trade problem in the 
light of the needs of our country, and we urge the speedy enactment 
of that resolution to provide for that commission. 

The Chairman. Aren't those functions, or part of them, at least, 
performed in large measure by the Department of Commerce and the 
State Department? 

Mr. Rosenthal. I think they are performed in part by the State 
Department through the reciprocal trade-treaty progi*am. At the 
same time we know that there has been frequent conflict betw^een 
the legislatiA^e and the administrative bodies, that there has frequently 
been a feeling that the administrative bodies have exceeded their 
authority, and it is our feeling that such a commission would pro- 
vide a meeting ground for the legislative and executive, so that the 
legislative could lay down clear policies and give definite authority 
to the administrative to enable the administrative to carry out its 
functions properly, and that it would also draw in representatives 
of these major economic factors in our country and give them an 
opportunity to participate in such deliberations. 

The Chairman. It would be an investigatory body primarily? 
Mr. Rosenthal. It would be investigatory, and recommendatory, 
and it would be my hope that from such investigations, if the Con- 
gress would provide the funds for an adequate staff, that legisla- 
tion would speedily result from policies which the legislative and 
administrative branches of our Government and the members of these 
various public groups could agree upon in advance. 

For that reason we urge the passage of the resolution by Congress. 

The Chairman. We have had testimony before the committee from 

the Tariff Commission and others. It seems from the testimony they 

have given us. that they are doing just what would be accomplished 

in this resolution. 

Mr. Rosenthal. I think to some extent that is true, but it has been 
my observation over a period of years that we have several adminis- 
trative bodies of government each tackling that part of a problem 
which is of greatest interest to that particular body; that these 
agencies themselves have not always arrived at a common policy. I do 
not mean to belittle any one of them. I was a bureaucrat for 2 years 
with the Board of Economic Welfare, and I learned much of my 
own negligence as a citizen in taking an interest in the affairs of 
thf Govermiient. I learned much of how our Government works, 
and I also achieved the greatest respect for that which is done by 
these commonly called bureaucrats. 


But I believe if we could have one focal body which would draw 
upon these various agencies of Government and act as a coordinating 
group, out of which will come specific recommendations — based on 
compromise, if you wnll — that may be arrived at from conflicting 
opinions — we will do much to speed up legislative and administrative 
action which is, unfortunately, too frequently delayed. It is in this 
tying together that I envision the usefulness of this Foreign Economic 

The Chairman. It will act as sort of a flying wedge ? 

Mr. Rosenthal. Very much so. 

The Chairman. You don't think that the State Department, then, 
and the Tariff Commission and the Department of Commerce are at 
the present time concentrating information they are acquiring in any 
responsible body ? 

Mr. Rosenthal. I think that they are doing the very best that they 
can, but I think they are not. I think that this Connnission would 
help them. I have had some discussions with people in the Depart- 
ment of State about this resolution, and it is my feeling that a com- 
mission of that kind could be of help to the Department of State which 
is doing the bulk of the work, to the Department of Commerce, to 
the Foreign Economic Administration, which I think will have to 
be continued for some time to come, in adopting a national policy on 
foreign trade. 

I think that the commission could also be extremely helpful, through 
its composition, having such a broad composition, in the education 
of the people of our coimtry to the importance of foreign trade in our 
national economic welfare. 

I have been about the country quite a bit since I left the Govern- 
ment service, and I found that there is still a lack of understanding 
of the part that we have to play in world-economic affairs, a lack of 
understanding of the relationship of our own economic welfare to 
that of other countries. 

A commission of this kind, constituted as it would be, would present 
something far stronger to the people of our country, out of decisions 
it made, than any individual agency of our Government, or than any 
individual committee of the Congress could do by itself. 

Such a commission in itself would present to the country the feel- 
ings of an objective group of men drawn from industry, agriculture, 
labor, and the public, plus the legislative and administrative branches 
of Government, and I think therein also such a commission could do 
a great service. 

I know the Tariff Commission is now making some very important 
studies, some for the Congress and some on its own initiative and I 
think those studies are worth while, and, as I have said before, I have 
achieved a great respect for these various agencies. But I do think 
they need to be tied together, and I think a commission of this kind 
could not only tie them together, but serve to educate the people of 
our country as they certainly need to be educated. 

Dr. Reed. Mr. Rosenthal, your suggestion seems to hold possibil- 
ities. I wonder, in setting up that commision, if you had in mind 
purely a temporary connnission that would merely recommend, or a 
continuing commission with certain executive powers? 


Mr, Rosenthal. The resolution provides for a recommendatory 
body. The way in whicli our Government works — I am not certain 
at this stage that such a commission coukl go beyond recommendatory 
powers. I wouhl have hopes, however, that the commission would 
be so highly regarded by the Congress and have so much of the back- 
ing of the peo])le, that its recommendations would result in speedy 
legislation which would authorize the administrative agencies of the 
Government to act. I think that is of vital importance. 

The world moves too quickly for us to be able to go along and 
delay as we froc^uently have in the past on matters of importance. 
We have to be prepared to act quickly, and it would be my hope that 
the recommendations of this commission would be accepted. 

Also, I feel this way : I think that it is impossible for us today in 
a rapidl}' changjng world where we can envision some of the problems 
of peace, but not nil, and where there will have to be speedy shifts 
made for the benefit of our economy, to lay down a perfect pattern. 
My suggestions are predicated on acts which I think are in the right 
direction, and there again I think there may have to be changes. I 
think a commission of that kind for a year or two might have only 
limited authority, but at least to set up that commission now, and 
not wonder what it is going to do 2 or 3 years from now, or what 
powers it is going to have 2 or 3 years from now, is an important step 
in the right direction. 

The Chairman. We are glad to have your views on that piece of 

Mr. Rosenthal. My next point pertains to the Reciprocal Trade 
Treaty Act. That act expires on June 12 of next year, and I would 
like to recommend its extension by the Congress for an additional 
period of 3 years. In connection wdth that extension we in the Na- 
tional Council of American Importers feel that Congress should, so 
far as possible, within the constitutional powers of the Congress 
and administrative agencies, give greater powers to the Executive 
than the jDresent act does in the negotiation of these treaties. 

At the present time the powers conferred upon the President limit 
the changes in tariff schedules and excise taxes and so forth to 50 
percent up or down. No goods on the dutiable list may be trans- 
ferred to the free list, and no goods on the free list may be made duti- 
able. It would be my personal feeling, because I realize there are 
some differences of opinion among foreign traders on this subject, 
that if the President, who then acts through the Department of 
State, and with the advice of the Tariff Commission, the Department 
of Commerce, the Treasury Department and the Department of Ag- 
riculture, would be permitted to remove tariffs entirely, or to place 
duties on free goods, we would give the administrative part of our 
Government a real bargaining power with other nations, and we 
'WOlild have better results from this act. 

I believe it important that our Congress give as great powers as 
is proper for the Congress to do, to administrative agencies in rep- 
resenting our Government to carry out the intent of legislation. The 
intent of the Reciprocal Trade Treaty Act was to increase the flow 
of foreign trade through making certain deals with other countries, 
as a result of which we increased our imports, and in turn could 
increase our exports. 


Always, when tariffs are raised or lowered, certain domestic in- 
terests in the United States are affected favorably or adversely. That 
is inevitable. 

I feel the most important thing is for us to think in terms of the 
economic welfare of our entire people. To me one criterion would 
be that even if a domestic industry were affected adversely or favor- 
ably, the test would be whether or not such deals result in a greater 
employment of labor and capital through increased exports than we 
would lose through increased imports ; and so affect adversely certain 
domestic industries. 

It is the net national result that matters, and I think that insofar 
as possible we should trust to the agency of government which has 
to do the negotiating and the bargaining with foreign countries, 
that it will consider the over-all welfare of our country in making 
the best possible terms in the light of the welfare of the whole and 
not the welfare of any individual group, whether it be my company 
or another company. 

I have frequently been asked the question, "How would you like 
it if the duties on goods that you manufacture were lowered, or 
if the duties on goods that you import were increased?" 

My answer is, as a individual, naturally I wouldn't like it. At 
the same time, it would not be a tragedy to 140,000,000 people if a 
certain few had to change jobs, had to. go into other businesses, or 
look for other means of earning a living. For that reason I would 
like to urge that the Reciprocal Trade Treaty Act not only be ex- 
tended, but that as full powers as possible be conferred upon the 
President, acting through the Department of State to negotiate trea- 
ties with other countries. 

The Chairman. Have you found any adverse effect that the re- 
ciprocal trade treaties have had on any particular industry or busi- 

Mr. Rosenthal. I haven't found any. There probably were some. 
I think that certain industries were bound to be affected. Broadly 
speaking, I think that our economy improved substantially in the 
pre-war years of the thirties, after the depression. I have in my read- 
ing and conversations with people heard gripes. There are always 
gripes. I cannot recall that I have seen evidence of substantial ad- 
verse results from the Reciprocal Trade Treaty Act to any specific 
industry. On the other hand, there were very definite benefits. 

Mr. Reed. Mr. Rosenthal, how would you tie in the reciprocal trade 
agreement program — to what extent would it have to be tied in with 
the most-favored-nations clause, and to what extent would that be 
interrelated? Or would you throw out the most-favored-nations 
clause and simply retain the reciprocal trade agi'eements? 

Mr. Rosenthal. That has been a point on which there has been 
disagreement. There are those who have felt that the multilateral 
provisions of the Reciprocal Trade Treaty Act, as a result of which 
an arrangement with one country has applied to the same product 
produced by all other countries, has been unwise. In certain nar- 
row applications, I have felt that way myself. On the other hand, 
from my observation of the way in which the Departm.ent of State 
has negotiated the treaties, they were able to select and describe com- 
modities with discriminating care which were of particular impor- 


tance to the countries with which the treaties were made, and even 
though the same goods came from other countries, the net results 
were good. 

As I personally believe that the "good neighbor" policy, .not only 
with the Central and South American countries but throughout the 
world, is our job of leadership, I would continue the multilateral pro- 
visions of the act and trust to the Department of State to be able to 
conduct these negotiations so that we have the proper benefits. I 
think they have done a fine job in the past, and 1 think they will con- 
tinue to do so. I think it is more important for us to take what may 
be here and there a minor disadvantage applied to a specific com- 
modity than to attempt to get into a bargaining area, where we at- 
tempt to play one country against another country. 

The Department of State has not only selected commodities of par- 
ticular importance to the countries with which the treaties were made 
but in the description of the commodities has been able further to 
refine the treaties so that actual type and quality of the goods were 
confined in a large measure to the country with which the individual 
treaty was made and would benefit little, if any, other countries in 
which the same general kind of goods might be made but which did not 
make that particular type, quality, or description. And, in addition 
thereto, the treaties contain clauses such as the trade agreement with 
Switzerland, in which article XVI further protects the interests of the 
United States. This article reads as follows : 

The Government of the United States of America and the Government of 
Switzerland reserve the right to withdraw or to modify the concession granted 
on any article under this Agreement, or to impose qnantative restrictions on 
any such article, if. as a result of the extension of such concession to third coun- 
tries, such countries obtain the major benefit, of such concession and in conse- 
quence thereof an unduly large increase in importations of such article takes 
place : Provided, That before the Government of either country shall avail itself 
of the foregoing reservation, it shall give notice in writing to the other Govern- 
ment of its intention to do so, and shall afford such other Government an 
opportunity within thirty days after receipt of such notice to consult with 
it in respect of the proposed action ; and if agreement with respect thereto is not 
reached within thirty days following receipt of the aforesaid notice, the Govern- 
ment which proposed to take such action shall be free to do so at any time there- 
after, and the other Government shall be free within fifteen days after such action 
is taken to terminate this Agreement in its entirety on thirty days' written notice. 

We are in favor of the continuance of that part of the act. 

]\Iy next point deals with the Foreign Service personnel of our Gov- 
ernment, our diplomatic personnel, and our consular officials. I would 
like to recommend to the Congress that our Government establish a 
university for the education of American Foreign Service personnel 
as we now maintain Annapolis and West Point for the education of 
our naval and military personnel : that the students, of course, be drawn 
by competitive examination from all parts of the country, and from all 
walks of life; that they be given a far more thorough education than 
I think our present officials abroad have had in those studies that will 
equip them to represent us properly. 

One of the things that a number of us in foreign trade have felt over 
the past 25 years is that too few of our officials abroad have had an 
adequate education in the techniques of foreign trade so that they 
have an understanding of the business problems of the American ex- 
porter and importer and can represent us in those business problems. 


1 believe that the political relation between countries in the future 
Avill depend very lai'<i;ely on their economic relations; and as we in 
the United States have a business economy, a capitalist economy, our 
welfare will depend upon our business and economic relations with 
other nations of the world. 

This does not apply to all of our Foreign Service personnel by any 
manner of means; but I think, by the very nature of what we haA^e 
done in the past, that we need to do a great deal in broadening the 
education and scope of those who represent our Government in foreign 

In addition to the education that they must now have, which is 
quite thorough in the field of international law, diplomatic relations, 
the riglits of American citizens abroad, and so forth, I recommend 
specific courses in foreign-trade technique ; that they know about ship- 
ping; that they know about customs j-egulations; that they know about 
finance, exchange, insurance; everything 'that we exporters and im- 
porters have to know, so that they, located abroad, can be of help to 

I also believe that they should receive a thorough education in the 
history and the customs and habits of the peoples of those countries 
to which they are going so that they can really understand the peoples 
of those countries and thereby better repiesent our Government, 

That means a far greater concentration in the teaching of economic 
geography, in the teaching of histories and cultures, not only of our 
country but of the countries to which they are to be accredited. 

I think, when our foreign representatives come home on leave, if, 
in addition to having the vacations, which they certainlj^ deserve, and 
if, in addition to the number of visits that they pay to various cities 
where we businessmen can have brief conversations with them, they 
have enough time to go into the business structure of our country, to 
learn of the changes that have been made in our economy since they 
were last at home, they and we would benefit greatly. 

I would recommend that the trustees of such a university be not 
only drawn from the Department of State and from perhaps other 
agencies of Government, but also from representative people in for- 
eign trade, from representatives of labor, of agriculture, and of the 
public, so that again the people of our country as a whole would feel 
that they are all vitally interested in those young men who are being 
educated to do one of the most important jobs that any of our Govern- 
ment officials do in adequately representing our Government and our 
people abroad. 

The Chairman. Do you know of any countries that do this? 

Mr. Rosenthal. No, sir ; I do not ; but from my conversations with 
tlie Department of State, I have the impression that there has been a 
great improvement in our Foreign Service personnel over the last 20 
or 30 years. But at the same time othe-r countries, such as Germany, 
have given their consular officials a more thorough education in 
busmess problems in the broadest sense than we have done with our 
Foreign Service personnel. 

I can give as a concrete example that comparatively few of our 
American consuls abroad now know our customs regulations thor- 
oughly and can guide exporters in foreign markets in how to ]:)repare 
our i-ather complicated consular invoices, Math which I will deal in a 


moment. They have not been taught that. It is not that there are not 
many men of intelligence. I have met a great many of them over 25 
years. But I do not think they have been properly equipped, and 
there, again, I do not think it is entirely the fault of the State Depart- 
ment. I think we have not appropriated adequate funds for such an 
important job, and I should like to add to my recommendation as to 
the establishment of such a university that the Congress review the 
compensation to our Foreign Service personnel with a view to increas- 
ing it substantially. 

I think it is generally agreed — I don't think there has been any dis- 
agreement as to the inadequacy of what we pay our Foreign Service 
personnel, from our ambassadors down to the consular clerks. I know 
that we are far behind other countries in relative scales of 

Increased compensation will attract more worth-while people. I 
think it is unfortunate — and I make this as a broad point — that busi- 
ness olfers so much more to our young men in the way of tinancial 
compensation than does Government service. I think that applies 
throughout our Government. 

I think it has applied to legislative bodies, National and State, as 

The Chairman. Are you arguing for an increase in salary for Con- 
gressmen ? 

Mr. Rosenthal. Definitely. I asked a Senator not long ago how 
that could be achieved, and I would like that to stand on the record. 

But dealing with this subject, I would like to mention that I went 
to north Africa for the Board of Economic Warfare shortly after the 
invasion. I know what it cost to live abroad. Mr. Chairman, nobody 
can live abroad decently on $7 a day traveling allowance when you 
send a man abroad on a trip. It is impossible, just as it is impossible 
for a man to live decently on $6 per day if he does much traveling 
today in the United States. 

If you take the entire scale of salaries of our Foreign Service per- 
sonnel, they are hopelessly inadequate, I have heard of many cases 
where a consul has had to do some entertaining, and he has had to 
take his personal savings or give up his life insurance in order to do 
it. When you consider the salaries of our Ambassadors are but 
$17.500 — he may be able to do nicely in Paraguay on that, but he 
certainly cannot live properly and do what he has to do as a representa- 
tive of our country on that salary in any of the major capitals of the 
world. Unless he is wealthy, he suffers. 

The Chairman. During the course of your business dealings abroad 
you have come into close contact with our foreign representatives, 
have you not ? 

Mr. Rosenthal. A good many of them. 

The Chairman, Well, it is necessary for you to operate through 
them, is it not ? 

Mr, Rosenthal, In a great many cases we ask for their help. Usu- 
ally such communications, by preference of our Government, are sent 
either through the Department of State or through the Department 
of Commerce, Legislation was enacted in 1939, as a result of which 
our consuls and commercial attaches are under the Department of 
State, even though a great deal of the information compiled by them is 


used by the Department of Commerce. We address our requests, as a 
rule, to the Department of Commerce on commercial matters. The 
Department of Commerce has had an excellent staff in the Bureau of 
Forejign and Domestic Commerce, with a tremendous amount of 
worth-while information. They have been very helpful to us. 

The Chairman. Would you give us the benefit of the mechanics 
of buying a given commodity for import into the United States ? Will 
you take a specific item? 

Mr. Rosenthal. Yes; if I may take burlap, with which I am par- 
ticularly familiar. The mills in British India do not export them- 
selves. They sell their output entirely to local dealers, many of whom 
are exporters. We importers in the United States, those of us who, 
like my own company, buy for resale, or a certain number of the lead- 
ing bag manufacturers, buy directly from those exporters. 

We may cable to them for offerings, or they may cable directly to 
us the offerings that they wish to make. Some have agents in New 
York or San Francisco to whom they cable their offerings, and those 
agents, in turn, make those offerings to those who act as importers, 
receiving a commission of 1 percent from the sellers in Calcutta for 
their services in the sale of the burlap. 

Our purchases are made, as a rule — that is prewar — either in pounds 
sterling or in the Indian rupee on the basis of delivery to the vessel in 
Calcutta within a certain month. We importers pay for the burlap 
either by a transfer of the funds at the time it is delivered to the vessel 
or through the establisliment of certain bank credits, as a result of 
which the bank undertakes to meet certain time drafts drawn on it b}'' 
the exporter,"'-'and we, in turn, undertake to pay the bank in time for 
the bank to meet its obligations. 

Tlie Chairman. Is that a bank over here ? 

Mr. Rosenthal. That would be a bank, if it is in dollars, over here ; 
if it is in sterling, it would be a bank here asking a bank in London to 
act for it in making the sterling payment. 

The Chairman. In London? 

Mr. Rosenthal. In London. Then the bank here guarantees the 
bank in London, and the bank in London undertakes to notify the 
exporter in India either by cable or by letter. 

The Chairman. Why in London ? 

Mr. Rosektilvl. Because the pound sterling is the currency used in 
England, and that is where sterling funds are on deposit just as dollars 
are our standard of currency. 

The Chairman. You never do any business with the bank in India? 

Mr. Rosenthal. Only if it is in rupees, and there we would not do 
it direct unless we maintained a checking account with the bank in 
India. Our bank in New York would get in touch with the bank in 
India and ask that bank to pay in rupees, and the New York bank 
would undertake to reimburse the bank in India. We, in turn, have 
to make ari-angements for the purchase of the foreign currency, so 
that we would receive the foreign currency at the time we have to pay 
■for the goods, which might be 2, or 3 or 4 months after the goods are 
shipped, depending on the terms of purchase. 

The Chairman. In peacetimes do you have much difficulty with the 
exchange ? 

Mr. Rosenthal. Yes; we have had, certainly in the last 25 years 
since World War No. 1, because of wide fluctuations in exchange rates, 


due to the instability of most countries of the ^Y0^1cl. As the values of 
these moneys vary the cost of the goods to us in dollars will vary. 
That is, if the price of the material itself in its home country, in its 
own currency, which is the currency those people know as we know 
dollars here, would stay the same, all would be easy. But if the pound 
sterling Avould go from $4 to $5, that would mean an increase of 25 
percent, or if it dropped to $3, it would mean a decrease of 331/3 percent 
in the value of the goods. So you have a problem of trying to hedge 
as best you can in foreign exchange to eliminate as nuich risk as 

Large importers and exporters are able to reduce their risk substan- 
tially because they have people in their employ Avho know something 
of foreign exchange. For the average small importer and exporter 
that is frequently difficult to do. He cannot study everything; he has 
not a stalt or the money with which to pay a staff. Assuredly, fluctu- 
ations in foreign exchange have made it extremely difficult for foreign 
traders. I would like to deal with that more when I talk about the 
international stabilization fund. 

The Chairman. The Bretton Woods Conference? 

Mr. ^Rosenthal. Yes. 

The Chairman. You would say then generally that the fluctuations 
of exchange have retarded our business abroad? 

Mr. RosENTiLVL. Yes, sir. 

The Chairman. Appreciably? 

Mr. Rosenthal. Yes ; and have retarded that of every other country 
in tlie world in which there are gyrations of foreign exchange. That 
has applied not only to us, but to world trade generally. 

Nov\\ as to burlap, we importers have our own freight contracts with 
the steamship companies. There is a conference, as provided by the 
Shipphig Act of 1916 

The Chairman. Pardon me. Do you make any request as to what 
ships will transport this burlap? 

Mr. Rosenthal. We direct the transport. It works in two ways, 
Mr. Chairman: If the exporter takes the freight contract, then he 
selects the steamship company and the vessel on which the goods are 
to be shipped. If the importer makes the freight contract, he selects 
the vessel and the steamship company by which the goods are to be 
shi])ped. And both export and import business is done on both bases. 

Burlap happens to be one where we buy the goods, obligating the 
-seller to deliver them to a vessel designated by us as importers. If 
we bought the goods on the basis of what is called cost and freight, 
whereby the seller includes the cost of the freight in his selling price, 
the seller would make the freight contract, and he would select the 
steamship company and the vessel that would carry the goods. 

The Chairman. 'That is c. i. f. ^ 

Mr. Rosenthal. C. and f. C. i. f. goes a step further. In that 
case, in addition to making the freight contract the seller also insures 
the goods against marine loss or damage. In f . a. s. vessel and f . o. b. 
vessel, the importers make the freight contract and undertake the 
insurance. Under cost and freight, the seller pays the freight, but 
the importer undertakes the insurance. Under the c. i. f ., the exporter 
undertakes the freight and the insurance and both are included in the 
selling price by the exporter to the importer. 




The Chairman. We have had some testimony to the effect that very 
little of our exports and imports are carried in our own ships. Have 
iyou had any experience with that? 

Mr. Rosenthal. If I may postpone that until I deal with certain., 
shipping matters, I think it might come in as one subject. 

The Chairman. Yes. 

Mr. Rosenthal. We make the freight contract as importers on tl 
burlap, and we make our contracts of insurance wnth the insurance 
underwriters. We then cable to the sellers in Calcutta the name of 
the vessel and its approximate loading date, so that they can then 
get in touch with the Calcutta repi'esentative of the vessel and arrange 
for the actual date of delivery 

While the goods are in transit they are at the risk of the importers. 
If there is any loss or damage we importers have to file our claims 
against the vessel or against the insui'ance underwritei's and pay the 
seller in full. He has no further worries. 

When the goods arrive we file the necessary papers with the collector . 
of customs at the port of arrival to clear them through customs. We 
then arrange for transportation to our customers, warehouses, or toj 
our factories, as the case may be. We pay for the goods either before si 
shipment or sometimes after shipment, according to the terms which is 
we woi'k out with our sellers. Payment terms are fairly well stand- ]\ 
ardized in most of the important raw^ materials of the world. '] 

The Chairman. Then you sell the burlap to manufacturers over ! 
here ? i 

Mr. Rosenthal. We sell the burlap to bag manufacturers who do i 
not choose to do their owm importing, or to textile mills which wrap 
their grey goods in it, or to the automobile industry which uses it 
for upholstery, or to anyone of some 100 different industries that use 
it for one purpore or another. The same broad pattern is followed in 
other commodities. There are minor variations in technique, but not 

Mr. Folsom. You mentioned a few moments ago that in 1939 the 
foreign attaches were transferred to the State Department. 

Mr. Rosenthal. Yes. I know a number of people who felt that 
taking them away from the Department of Commerce might have 
a bad effect. 

Mr. Folsom. How did that work out? 

Mr. Rosenthal. There are, of course, variations of opinion on that 
betw^een the Department of State and the Department of Commerce. 
I have thought much about this because in the Board of Economic 
Warfare we had occasion to send people abroad, and naturally that 
brought up discussions with the Department of State as to the rela- 
tionship of our personnel to the senior American diplomatic official i 
abroad. I have always been in complete accord with the position of i 
the Department of State that the senior American diplomatic official 
abroad must be senior to the representatives of otlier agencies of our 
Government. I think it is necessary to have someone as senior who 
represents us in the broadest sphere of policy. At the same time, I 
am inclined to the opinion that the various agencies that need people 
to be sent abroad should select them, should give them the specific j 
technical training that they need, and thereafter, when tiiey go abroad, 
they are resj^onsible to the agencies which employ them for the specific 
work that they do. 


At the same time in matters of broad policy and their behavior as 
American citizens they should be responsible to onr senior diplomatic 
official. But they should not in any way be hampered by acts of 
departmental prerojjatives in the exercise of 'functions with which the 
senior diplomatic official is not conversant. There have been too many 
cases of this and I think that the pre-1939 method is better, with more 
consideration by the Department of State officials of the work to be 
done abroad by representatives of other agencies. 

The Chairman. You gave us a very interesting bit of information 
as to imports. Can you give us some idea as to exports? 

IVIr. Rosenthal. Yes, sir. A great many American manufacturers 
do their own direct exporting abroad. They can do that in one of 
three broad ways, with, of course, some variations. They can estab- 
lish a branch office abroad. In many cases they form subsidiary cor- 
porations under the laws of the countries in which they do business 
because of the tax situations in those countries. 

The Chairman. To avoid excessive taxation? 

Mr. Rosenthal. To avoid taxation on foreign corporations doing 
business there and also to avoid dual taxation. In other cases ex- 
porters sell to import merchants in resell markets who resell to con- 
sumers; and, third, they can appoint sales agents who sell for them on 
a commission basis to the various buyers, either dealers or manu- 

Their offerings on commodities whose prices change rapidly would 
be by cable. Other offerings could be by mail, particularly with air 
mail as rapid as it is. The goods, in difficult times, would, of course, 
be sold largely in American dollars. At other times, people sell in 
foreign currencies. I think that depends largely on tlie countries to 
which the goods are exported. 

The Chairman. Wliich is the method most commonly used? 

Mr. Rosenthal. Dolhirs. 

The Chairman. No ; I mean of the three you mentioned. 

Mr. Rosenthal. I would be reluctant to generalize. I think prob- 
ably the largest manufacturers would establish, in many cases, their 
own offices. Smaller manufacturers would find that the agency method 
woukl be probably the most satisfactorj^ in giving them the widest 
sale of their goods. Then also a large number of manufacturers who 
do not care to go into the techniques of foreign trade themselves and 
take the risks thereof, will make arrangements with what are called 
export commission houses or export merchants, to sell their goods 
for them. There are still a great number of such middlemen, because 
there are the risks of foreign exchange, the understanding of the 
techniques of ocean transportation and insurance. There is also need 
for an understanding of the peoples of the countries with which 
you do business; there is a need for the extensicm of longer term 
credits in our exports to many parts of the world, particularly Central 
and South America, than we as importers enjoy in our buying. 

The Chairman. How do you find those representatives? 

]Mr. Rosenthal. I beg your pardon? 

The Chairman. How do you know where those markets exist ? 

Mr. Rosenthal. You can use several methods. The large banks in 
the United States, not only in New York and other seaboard cities, but 
in important interior cities, maintain foreign banking relations. Fre- 
quently I have gone to one of the banks with which our company does 


business and said : "We are looking for a sales agent in this particular 
market. Would you write to your correspondents in that market and 
ask them to recommend somebody and to obtain as much information 
as is possible?" 

We can write to the Bureau of Foreign and Domestic Commerce and 
ask them to ask one of the consuls to give us similar information. 

The Chairman. Have you found that service satisfactory? 

Mr. Rosenthal. Yes, sir; we find both methods satisfactory. We 
can get in touch with organizations such as the National Foreign 
Trade Council and ask them to sound out some of their members to 
see if they can recommend someone who is representing them well 
but who wants to take on an additional noncompeting account. 

So there are those various methods. Then, some companies, of 
course, send their representatives abroad who will go to the markets 
and scurry around themselves to see whom they can get to do the 
best possible job. 

My next point deals with the laws of customs procedure. We, in 
the National Council of American Importers, feel that the laws of 
customs procedure are unnecessarily complicated and overlegalistically 
administered and so work a great hardship upon us in our importa- 
tions. At this time the Tariff Commission on its own intiative is 
making a detailed study. I don't want to bore you by going into a 
number of the regulations. 

The Chairman. You might give us a few. 

Mr. Rosenthal. One of the most difficult things pertains to, I 
think, section 402 of the Tariff Act of 1930 which deals with the value 
on which duties are assessed on an ad valorem basis. That value is 
supposed to be the wholesale market value at the time and place of 
shipment. I think all of our agencies of Government have found it 
extremely difficult to learn what the wholesale market value is. Fre- 
quently the market value may change between the time a contract is 
made and the importer resells the goods and the time the goods are 
shipped. Very frequently it is impossible for our diplomatic officials, 
no matter how diplomatic they may be, to learn something of the cost 
of production and actual market values abroad for dutiable value. 
There has been a great deal of difficulty on that. 

One specific difficulty is that, as the result of the war, the British 
enacted what is called the British purchase tax which I believe on 
some goods run something over 100 per cent. That was put on by the 
British as a means of increasing their revenue to defray the cost of the 
war. It has been held, nevertheless, that the British purchase tax in- 
creases the dutiable value of the goods, so that anything we may have 
done with England in the way of the Reciprocal Trade Treaty Act 
has been completely nullified by our having to pay duty not only on 
what might be the fair price of the goods in England, but on the British 
purchase tax on top of it ; and still that has been the interpretation of 
the Treasury as to what the Treasury is compelled to do under the law. 

You must bear in mind that the law imposes penalties on the im- 
porter if he undervalues goods. We, in turn, must place a value on 
the goods, not the cost price to us but the wholesale market value at 
the time and place of shipment at the time we make the entry. If we, 
even unintentionally, undervalue the goods, we are subject to fines 
and even subject to charge of fraud, which is a criminal offense. With- 
out my trying to make too detailed specific recommendations to the 


committee, because I am not an expert in customs procedure, I think 
that the Laws of customs procedure could well be simplified — perhaps 
taking the price that the importer pays for the goods, unless there is 
a very radical fluctation in exchange rates affecting the market value 
or some other violent change. The legalistic attitude is another 
hidden barrier that handicaps foreign trade. 

Not only that, but our Customs Service does not even have adequate 
personnel to make a detailed study of foreign costs of production and 
foreign market values on all of the ad valorem goods that we import. 
So that is one section, for example, which could be simplified. 

Another section is 481, which pertains to the contents of consular in- 
voices. I don't happen to know them any more, having come down 
here in 1941, and I haven't studied them since. But I recall that the 
preparation of the consular invoices is very complicated. The average 
exporter abroad certainly does not know our American customs laws 
and regulations, and he is not going to study them. Our American 
consular officials do not know all of the technicalities of consular in- 
voices. These invoices should be made simple. We have no desire 
to be guilty of fraud or anything like that, but they should be made 
just as simple as is possible in giving the essential information, so 
that if you make a minor technical violation you don't find you are 
going to be fined heavily by the Treasury. 

I recall one amusing instance of my own. One of olir customs laws 
is that all packages must be marked with the country of origin. I 
think the word is "made in" or "product of." One shipper in Belgium 
used the French words "Origine Beige." That did not get by the 
Treasury. There is a 10-percent fine for that. Obviouslv, the pack- 
ages were marked. You could translate it in English, ^'Originated 
in Belgium," but that was not done, and I think a number of these 
regulations could be simplified. 

Then the currency regulation is a difficult one, particularly for 
periods of fluctuating currency. The Secretary of the Treasury pro- 
claims, I think, on the first day of each quarter, that rate which is to 
applj^ for that quarter, unless the rate changes by 5 percent more than 
the buying rate, during the quarter, in which case it is the rate of 
exchange on the day that shipment is made. 

That sounds very well, but if I buy goods during the month of 
October on a contract where they will not be shipped until next May, 
if I am a wise importer, I will make my exchange contract now so as 
to eliminate any risk by loss of exchange. I will forego the chance of 
profit if I gamble correctly, as gambling on foreign exchange is a 
rather foolhardy undertaking. But when the goods are shipped that 
exchange rate may have fluctuated, and whereas I calculated duty on 
one rate, I may find I am paying a substantially higher duty because 
the rate of exchange changes. 

I think a regulation of that kind might be changed. 

Ma}' I add one more point in connection therewith? 

American exporters complain bitterly about the customs regulations 
of a good many of the countries to which we ship goods. 

The Chairman. I was going to ask you about that. What can you 
do about those ? 

Mr. Rosenthal. You can't do anything about it so long as our own 
customs regulations are as involved as they are. But I think there is 


something that is a definite bargaining point with other countries so 
as to eliminate reguhitions that unnecessarily hamper trade. 

The Chaikman. I intended to ask you long ago, when you described 
your export technique, what restrictions you ran into in other countries. 

Mr. RosKNTHAL. A good many other countries, as we do, require 
that a document which is called a consular invoice, that is, a form 
which the exporter must prepare, certify to, and then must have 
certified by the consul of the importing country. Some of these 
documents are difficult to fill in correctly. If they are not filled in 
correctly when the importer makes his customs entry, he is subject 
to a very heavy fine or confiscation of the goods, even though it is 
a minor clerical error or an unintentional minor violation. 

The Chairman. Do you suppose those restrictions were put on as 
a barrier or an obstacle to trade ? 

Mr. Rosenthal. No; I don't think that. I think they are put on 
very frequently through some of the common faults of inefficient 
people and a desire to be so technically accurate in everything you 
do that you can't be caught making a mistake; that you are going 
to be sure that the other fellow dots every "i" and crosses every "t." 
I would doubt, broadly speaking, if they were put up as obstacles. 

The consul frequently charges a fee. In some cases, it is merely 
a few dollars, but he charges a fee for his services. 

The Chairman. Our own fee is what ? 

Mr. Rosenthal. Our own consular fee is $2.50. The fee itself is 
not important. It is what has to go into the invoice and the difficulty 
in getting a correct invoice. Foreign country fees vary from one 
or two dollars. Some years ago (I think it has been changed), 
Mexico had a 3 percent charge. That was simply another form of 
import duty on all goods, as means of raising revenue. 

For example, one regulation of some foreign countries is that the 
shipping documents must arrive at the same time as the goods arrive. 
In the United States we can post certain surety bonds if we don't 
have the shipping documents. That is costly, too, Mr. Chairman. 
If a surety bond is demanded for the various values assessed by the 
Treasury, it is expensive. On one shipment it cost us $500 to post 
a surety bond because the shipping documents were missing. That 
particular collector, acting within his rights, was unwilling to ac- 
cept a bank guaranty. Most collectors accept bank guaranties. That 
is an expensive procedure to have to go through and pay, but it is 
frequently difficult to have the shipping documents come on the same 
vessel on which the goods are shipped. The vessel may not finish 
loading until a few hours before sailing, and by the time you pay 
the freight, if the freight must be prepaid, and you can get your ship- 
ping documents back from the steamship company and go down to 
the consul and get them validated, the vessel has sailed. A good many 
foreign countries impose very heavy fines, up to the confiscation of 
the goods. I believe that if we revise our customs regulations and 
simplify them, which we think can be done materially, that, too, would 
be a very substantial bargaining point in our relations with other 

ISIy next point deals with steamship conferences. Under the Ship- 
})ing Act of 1916, and continued under the Shipping Act of 1936, 
steamship companies are permitted to get together in steamship con- 
ferences as a result of which they arrive at uniform contracts of car- 


riage and uniform freight rates which otherwise might be in viola- 
tion of our antitrust hiws. 

I am in hearty accord with the principle of steamsliip conferences, 
and I approve strongly of uniform ocean freight rates. I would 
not have that changed — just as we have uniform railroad freight rates, 
so the big shippers do not have the opportunity of making indi- 
vidual bargains with railroads, so I think that all shippers should pay 
the same ocean freight rate and not permit the large exporter or 
importer to drive a better bargain because of his large tonnage. 

The Chairman. T think that point, uniform freight rates on rail- 
roads, is not quite as simple as that. I am sure you are aware of the 
fact that it costs more to ship from Texas up here than it does to 
ship from here to Texas. Do you have that same situation in ocean 
freight rates? 

Mr. Rosenthal. Yes, sir. Ocean freight rates vary widely, and 
that is a point with which I wish to deal. The recommendations I 
am submitting now were submitted by me to the National Foreign 
Trade Convention in San Francisco in 1940,^ but war conditions made 
it impossible to prosecute the matter further at that time. 

The first deals with the Division of Regulation of the Maritime 
Commission which supervises steamship conferences and the manner 
in which they operate. 

We feel that the primary function of the United States Maritime 
Commission has been the building and the subsidizing of the American 
merchant marine, so that we have an adequate number of vessels flying 
the American flag. We feel, however, tiiat it is somewhat anomalous 
to have that agency of government whose function is to build up the 
American merchant marine and help maintain it at the same time 
regulate the relations of those vessels and those who operate them 
with the owners of cargoes, both exporters and importers. Hence, 
we recommend that a separate regulatory body be created by the 
Congress to function in the field of regulating the relationship between 
steamship companies and shippers, as the I. C. C. functions in the 
field of domestic transportation, and that the present Division of 
Regulation be removed from the jjresent Maritime Conmiission. That 
is not at all to belittle the Commission and the job that is being done. 
We think it is an anomalous situation to have them build vessels 
and subsidize vessels, operate some vessels themselves, and then also 
regulate the relationship of those vessels with us, who are the shippers 
of the cargo without which the vessels could not very well profit. 

The Chairman. Just what is your contact, as an importer, with the 
Maritime Commission? 

Mr. Rosenthal. I have had occasional meetings with the Mari- 
time Commission, the Division of Regulation, to discuss certain pro- 
visions of steamship contracts. We have not had a great deal to do 
with them, because the Division of Regulation itself, from my conver- 
sations with some of the staff, has felt certain limitations imposed by 
law, and because the major emphasis of the Commission has been 
placed not on regulatory matters but on the building of the merchant 


The Chairman. You know we subsidize many ships. I under- 
stand, though, that if we were to load those ships, give them more 

1 See appendix, exhibit No 25, p. 1203. 
99579 — 45 — pt. 4 19 


business, the subsidy would necessarily be less. Have you made 
any efforts alonjr that line? Have you made any studies? 

Mr. Rosenthal. I have not made any detailed studies. It has been 
my own policy to divide my business between various members of the 
steamship conference, those flying the American flag and those of 
foreign flags. 

The Chairman. And the foreign flags ? 

JVIr. Rosenthal. And the foreign flags, because conferences are 
composed of both, Mr. Chairman. 

The Chakman. Why do 3'ou use the foreign-flag ships? 

Mr. Rosenthal. For two reasons : In the first place, it has been my 
experience in certain services, and I would prefer not to deal with 
individual steamship companies or conferences, tliat operators of 
foreign-flag vessels have had a better understanding of cargo problems 
than have had some American operators, and vice versa ; and, funda- 
mentally, we have used those steamship companies which have given 
us the best service. 

The Chairman. What goes into that service, their handling of 
your cargo ? 

Mr. Rosenthal. The handling of the cargo, the care with which 
cargo is loaded and unloaded, the rapidity with which cargo is loaded 
and unloaded; a good many intangibles which constitute the rela- 
tionship, such as giving j^ou information that you need, of working 
with you to arrive at equitable freight rates and steamship contract 
conditions. The sum total of what develops in your relations. 

The Chairman. Our Government spends quite a lot of money each 
year to train personnel for the merchant marine. 

Mr. Rosenthal. That is operating personnel of the vessels them- 
selves as distinguished from those who handle the cargo. Some vessels, 
for example, can unload within a period of 2 or 3 days, and will handle 
the goods on the piers so that the goods are quickly and easily available. 

The Chairman. It is the foreign-flag ships that do that more 
quickly ? 

Mr. Rosenthal. In some steamship conferences, yes ; in others, no. 

The Chairman. Well, generally? 

Mr. Rosenthal. No, I wouldn't say generally. I would say that 
would have been generally so 15 years ago. At the risk of hurting 
the feelings of some of my friends, I would say that was generally so 
in the period of the 1920's. I would say it is still so in certain instances. 
If course, you use the best steamship companies in a conference. An- 
other thing, it is in my opinion unwise for me, as an exporter and 
importer, where there is a steamship conference that has from 4 to 
12 members, to give all of my business to any one company. You 
can never tell when vessels will be withdrawn from the service, or when 
a vessel may break down, or where there will be delays for this, that or 
the other reason. Hence, I divide my business. 

Another thing is, you frequently cannot handle all of your month's 
importations on one vessel. You do not have the warehousing facili- 
ties. It would be too costly to put the goods into a public warehouse, 
and you want to spread arrivals over a period of a month, so you divide 
the goods up among different lines. 

And, lastly, Mr. Chairman, if any of us were to take the position 
that he woukt give all of the business to American lines, conversely 


importers and exporters abroad would give all of their business to 
foreign-flag lines. 

The CiiAiiotAN. Don't they give the larger percentage of their ship- 
ping to their own ships? Don't they give a larger percentage to their 
own ships than we do? 

Mr. liosENTiiAL. In a great many cases, yes; in a great many, no. 
Just as we, in a great many cases, would give the larger share to 
American rather than to foreign-flag vessels. 

The Chairman. I was under the im])ressi<)n that perhaps we did do 
that, that Ave gave a larger share to our ships, but the facts do not 
reveal that. 

Mr. RosEXTiiAL. No, I think it will vary. I think the American 
merchant marine has done its best job within the last 10 years. A good 
many foreign-flag lines have been established far longer than our 
lines have been established. It has been a selling job and a difticult 
one, but I have noticed in certain of the trades with which I am 
familiar a steady growth in American lines. 

The Chairman. Doesn't it seem logical to you that in order to 
build up and maintain a good merchant marine that we should use 
our own vessels? It doesn't seem logical that we should use their 
vessels more than we do the shipping facilities of other countries who 
are also planning to build up their merchant marine? 

Mr. Rosenthal. Within certain limits, Mr. Chairman. I have used 
American shipping very substantially. I have not used it more than 
I have done for the reasons I have given. But I would like to add this 
point, which I think is important for consideration and on which I am 
not qualified to speak as an expert, and on which I think experts must 
speak. In considering our world trade and in considering our own 
economic welfare I feel we are inevitably tied to the welfare of other 
countries of the world. We saw, after all, what the depression in 
central Europe and other parts of the world did to our own economy. 

The Chairman. They seem to be pretty well tied to us. 

]Mr. Rosenthal. They are tied to us. In some nations of the world 
the income derived from the operation of the merchant marine is of 
a greater importance to their national economy and welfare than it is 
to the United States. That is one of the reasons why in the post-Civil 
War period our merchant marine fell off. There were other invest- 
ments in the development of our hinterland in the United States that 
offered capital a better return than did ocean shipping which com- 
peted with maritime nations such as the Scandinavian nations, Hol- 
land, and England, which did not have either the natural resources 
or the potential industrial development that we did and therefore 
ocean shipping was of greater importance to them. 

I think when we come to consider what we are going to do with our 
surplus ships in the post-war period and when we try to decide how 
much, if any, of our tonnage we will sell to other nations of the world, 
when through our Maritime Commission and through American 
steamship companies in conferences we Avnrk out with the owners of 
foreign-flag vessels the number of A^essels of each line of each flag that 
will be permitted to operate in a conference, I think that the relative 
importance to national income must be considered. 

Our chief need of the merchant marine is from the point of vieAv 
of naval and military needs and in the carriage of our supplies in time 


of war. That is the reason we need a merchant marine badly. From 
the money point of view, it brings us in a national income. It also 
places us in a position of importance in our whole foreign trade field, 
but that is a matter of rehitionship on which I am not qualified to 
speak as an expert, but I have the feeling that we have to consider 
that problem objectively when we come to a conclusion as to what 
we are going to do with our surplus shipping. 

Up to date these conferences have tried to work out for themselves 
the number of vessels that each one of the lines will carry and, inci- 
dentally, in a number of conferences foreign-flag vessels far outnum- 
ber American-flag vessels. That is another reason why we have used 
foreign-flag vessels in certain conferences. 

The Chaikman. In arriving at your choice of ships, in the final 
analysis it is which one will carry the cheapest? 

Mr. Rosenthal. Not the cheapest. They all have the same 

The Chairman (interposing). It is a business proposition, 

Mr. Rosenthal. It is a business proposition with me as it is with 

The Chairman. A question of dollars and cents. 

Mr. Rosenthal. Dollars and cents, plus the various services that 
you need, would be, I think, a correct answer for me and others. 

The Chairman. And what effect it will have on your business. 

Mr. Rosenthal. Yes, sir. But at the same time I would like to 
add that when new American lines have come into certain services I 
have given them a certain share of the business and tried to work with 
them to have them give me that kind of service. That is done also 
when they themselves have tried to learn what our needs have been 
and are willing to work with us. 

Some years ago, I eliminated a certain American shipping com- 
pany — and I have eliminated foreign lines as well — this particular 
American shipping company stamped a clause on the ocean bill of 
lading which was contrary to the terms of legislation. When I spoke 
to them about it, the answer was, "Why should 3^011 worry ? We are 
not going to enforce it." 

I said, "I am speaking now as chairman of a committee of an asso- 
ciation. It is not what I don't know. I am speaking of the little man 
who may or may not know, and I think it is improper to include 
that clause." 

Now, I think that practice is faulty and should be discouraged. 
The same thing has happened in foreign lines. We have all those 
things that we consider, and it is difficult to point to any one reason 
for giving a steamship company business. You have the sum total 
of your relations with them, and you cannot get away from the per- 
sonal equation of your relations with them, whether they are pleasant 
or unpleasant, as affecting your determination. 

The Chairman. What would be tlie effect of a law which compels 
you to use American ships exclusively? 

Mr. Rosenthal. Chaos. 

In 1928 — I have forgotten the bill — but there was an amendment 
introduced to a certain bill, I think it was by Senator Jones of the 
State of Washington, which would have provided for certain favor- 
able tariff rates on goods imported in American bottoms. I don't 
know the details. I recall there was a ffreat deal of discussion at the 


time. It was defeated. It would have brought the same retaliation 
that the Tariff Act of 1923 brought on us by other countries of the 

Again, I would merely be going back in history to attempt to 
elaborate on that. That does not mean that we should not, as in 
other things, attempt to work out intelligent and equitable rela- 
tions with other countries as to the relative size of the various mer- 
chant marines in foreign service, but I don't think we can go isola- 
tionist in the field of shipping. 

The Chairman, At the present time it is left up to the individual 
as to what ships he will use? 

]\Ir. Rosenthal. Yes. 

The Chairjian. Let me ask you this : Wliat can American shipping 
do to get more business from you ? 

Mr. Rosenthal. Give us good service. 

The Chairman. Now, can you be more specific ? 

Mr. Rosenthal. I can cite a few points which come up in the course 
of some of the suggestions I am going to make. 

The Chairman. What do the foreign nations offer that we do not 

Mr. Rosenthal. This is not universal. I don't think you can dis- 
tinguish it in that way — what does foreign shipping offer that Amer- 
ican shipping does not offer. I think it comes down to a basis of the 
individual steamship company, what has it to offer that the others 
have not — regularity of sailings ; speed during the course of the voy- 
age; low marine insurance; speed in the unloading of cargo; when 
they make a booking with you, they don't overbook the vessel so 
much that you are running the risk of having goods shut out. 
When the goods are unloaded from the vessel, they are unloaded in 
good condition, stacked properly on the pier so that you can get de- 
livery ; that the pier is not such a hodgepodge that the truck will be 
kept waiting 6 hours, with the consequent demurrage you have to 
pay for the truck. 

There are innumerable technical matters such as the speed with 
which the steamship company handles claims. 

We had a claim for a very few dollars against a foreign line once, 
some $45. They rejected it. That is their privilege. I have no 
quarrel with that, but when I called up and asked for an explanation 
of a certain clause in the contract ; I received the none-too-gracious 
reply, ''Read it yourself ; I am too busy." 

That steampship company happened to be a foreign line. 

Cables went out that night to discontinue using it. 

In addition to the mechanics of service, there are the human lela- 
tionships in dealing with people, as to whether they are trying to help 
you in your problems, such as if you go to a steamship line and explain 
certain reasons as to why a certain freight rate should be reduced, you 
at least have a sympathetic hearing on the subject and are not turned 
down without any thought or consideration. 

The Chair:man. Let me ask you this: Does this subsidy tend to 
make these shipping companies who do not give the best service less 
alert ? 

INIr. Rosenthal, No, sir. Some of the best American lines with 
which I have dealt are lines which are subsidized very liberally by our 



( jovernnient, and they are tops in service. I have not noticed that that 
has had any effect whatsoever. It depends upon the competence of 
the people that they employ. 

I have in mind one or two American steamship companies, and i 
haven't dealt wnth all of them — I have dealt with many of them — that 
I Avould say are fully equal to any of the foreign lines and superior to 

The Chairman. You don't think the subsidy has any effect on the 
initiative or enterprise? 

Mr. Rosenthal. Not a bit. 

I would like to make this additional point. A number of the steam- 
ship conferences maintain their executive ofKces abroad, and I have had 
one or two unpleasant experiences where I took a matter up and was 
told that it had to be referred to some foreign port where the executive 
office was located. A year would go by and I avouIcI receive no response 
and neither would the Division of Regulation. So we wish to recom- 
mend that every steamship conference should establish in the United 
States a committee or agency w^hich would meet from time to time 
with committees of the National Foreign Trade Council, being the 
largest export association, the National Council of American Im- 
porters, being an over-all association of importers, as well as with | 
specific commodity associations whose commodities are exported or ,,{ 
imported by those lines and which would have sufficient authority to ' 
discuss and act upon such transportation problems as contract terms | 
and freight lates and so forth. Thus we could not have the buck i 
passed by having someone say, "I have to write to somebod}'' in Ham- I 
burg or London or Liverpool or Rotterdam or Amsterdam," and so I 
forth, "because I can't talk to you about this." ! 

Secondly, whereas the railroads publish their tariffs, steamship j 
companies as a rule do not publish tariffs. You get the rates if you 
call them up. I would like to have steamship companies publish 
tariffs on export and import rates, which would be for sale to exporters 
and importers at the cost of publication, and which w^ould be at all 
times available to them, and that these tariffs would include an exact 
copy of the steamship conference contract and the bill of ladinc: that 
would be used. 

Fourth, we recommend that steamship conferences adopt uniform 
bills of lading. In one conference that I recall, there were two British 
and two American lines. The two British lines used one bill of lading 
and the two American lines used another. 

Fifth, that the steamship conference should be required to make 
public all contemplated changes in freight rates sufficiently in advance 
of the date when such rate is to become effective, in order that Ameri- 
can exporters or importers would have ample time to present their 
views concerning the rates to the conference. 

In my dealings with steamship conferences, I know of only one 
that has always conferred with us as to the rate for the current year. 
We work out the problem with them. That has been going on for well 
over 15' years. The relationship has been a very satisfactory one. 
I think they have enjoyed it, and I know we have. I think they have 
profited, and I know we have. I think that should apply to all 
steamship conferences, and not have a rate that is simply picked out { 
of the air by the conference, and then you can't do anything about it, 


and you can't even get the conference to sit down and discuss it with 

I think the conference should follow the methods of the rate-making 
agencies of railroads. I think they should publish their dockets, in- 
cluding the contention for a change of rates, so that all interested 
parties would have an opportunity of presenting their views. 

The Chairman. These are private conferences, not with Govern- 
ment sanction? 

Mr. Rosenthal. The Division of Regulation has some powers in 
regard to conference operations but not as to freight rates. 

I think, so far as exporters go, they have at times — and I am not 
prepared today to give specific instances — been handicapped by there 
being lower freight rates from various countries of Europe to markets 
in which we compete than there have been from the United States 
to those markets. 

The Chairman. Has the British Government, for example, sub- 
sidized those lines ? 

]Mr. Rosenthal. Not for specific rates, but other governments sub- 
sidize their merchant marine as we subsidize ours. Offhand, I know 
of no cases where specific rates have been subsidized by governments. 

The Chairman, feut they do manage somehow or other to have a 
cheaper rate than we have? 

Mr. Rosenthal. That has happened. 

The Chairman. Based on your experience, is that generally true? 

Mr. Rosenthal. My experience has been limited in such cases but 
I have been informed of a great many. 

I think, Mr. Chairman, I would be correct in making this generali- 
zation, that steamship companies have not studied adequately the 
freight rates on individual commodities, both export and import, with 
a view to understanding the effect of the freight rates on the volume 
of commerce in those products, and the suggestions that I have made 
might lead toward that end. 

The Chairman. They are not quite as alert as they might be? 

Mr. Rosenthal. They have not considered the matter as much as 
they should have, and a good many steamship men with whom I have 
discussed that, have admitted that to me in off-the-record conversations. 

The Chairman. Do you know what plans they may have to do 
something about it? 

Mr. Rosenthal. At the moment I don't know of any. 

Tlie CirAiR:\rAX. Based on what you have said, Mr. Rosenthal, 
the best way to insure the use of our own ships is to get the shipping 
companies themselves to go out and do a little more work; is that 

^Nfr. Rosenthal. Yes, sir. 

The Chairman. They are not quite as much on their toes as com- 
peting lines? 

jNIr. Rosentifal. In a great many cases that is correct. 

The Chairman. Generally — I don't want you to mention any speci- 
fic cases, but generally 

Mr. Rosenthal. It is correct to too great an extent. When I make 
a statement, I like to tliink of a number of lines I know and get down 
to proportions. I wouldn't want to say it is more or less than half, 
but I would say it is so substantially correct as to warrant action on 
their part. 


The Chairman, In order to get business they are going to have 
to increase their operating efficiency. 

Mr. Rosenthal. Yes. 

Mr. FoLSOM. While they might not be uniformly as good as the 
best in the foreign countries, you would still do business with the 
foreign lines? 

Mr. Rosenthal. Yes, sir; and I believe that should be done. 

The Chairman, Why do you think that? Because it affects you 
in dollars and cents? 

Mr. Rosenthal. No, sir. 

The Chairman. Why would you do it? 

Mr. Rosenthal. I do it because I believe that unless you have 
freedom of the seas and opportunity for competing lines to share in 
the business, you get back to a shipping situation which would in 
turn affect all of our foreign economic relations. 

The Chairman. A cog seems to have slipped somewhere because 
our own ships are carrying only a small portion of our exports and 

Mr. Rosenthal. Our own merchant marine, pre-war, as I recall 
it — and don't pin me down too exactly on these figures, I would be 
glad to verify them later for the record — but, as I recall it, our pre- 
war tonnage, out of a total of some sixty-odd-million tons, the Amer- 
ican pre-war tonnage was something in the neighborhood of 10. 

Dr. Reed. As I recall, for some years, it was around 10 or 12 per- 
cent, but normally it is 25 or 30 percent. 

Mr. Rosenthal, You mean of our foreign trade? 

Dr, Reed, Total foreign trade, 

Mr. Rosenthal. Yes; but in world tonnage, I think we ran some- 
thing around nine to ten million tons out of some sixty-odd million 

The Chairman. Of world tonnage? 

Mr. Rosenthal, Of world tonnage, and some of our vessels, I 
think, have been in other services than plying between American 
ports and foreign ports. That is, not all of our tonnage has been 
engaged in American-foreign trade, although the bulk of it apparently 

The Chairman. We are going to have a much larger tonnage after 
the war is over. 

Mr. Rosenthal. Yes, sir. 

The Chairman. Do you know how we can increase the business done 
by our own ships after the war ? 

Mr. Rosenthal. Substantially I would say there must be arrange- 
ments in the steamship conferences as to the relative shares of tonnage. 

The Chairman, As to what ? 

Mr, Rosenthal. Relative shares of tonnage between different lines, 
because otherwise we get back into a cut-throat competition which 
benefits no one. I think that is part of the international merchant ma- 
rine relations which has to be developed, and I think what I men- 
tioned before about the sale of our surplus ships, in attempting an 
analysis of the effect of shipping on the maritime nations of the world, 
as against the industrial part of the world, is all part of the problem 
to which I am not able to give a solution. I think it requires a great 
deal of study. I think the Maritime Commission is now studying that, 
as is the Department of State, but I think that is one of the bases on 


which the American vessels can obtain an increased share as com- 
pared to pre-war. 

I would doubt if the American tonnage can now be 30 percent, for 
example, of the world tonnage, total world tonnage, I don't think it 
is practicable to expect that. Wliat the percentages should be is some- 
thing that I think is a problem the experts have to study and work 

The Chairman. That is the problem we are faced with. 

Mr. KosENTHAL, Ycs, sir ; but I think that is what has to come from 
Admiral Land and his associates, Secretary Hull and his associates. 
You see, I don't think, Mr. Chairman, that you can separate any of 
these problems in international trade from the whole. I don't think, 
for example, that the international bank and stable exchange rates will 
solve all of our problems. I think you get dowji to where you have 
to try to work out the entire economic set-up — the movement of goods 
and services are primary, and the carrying of those goods and money 
rates follow those, and I think that they require an analysis as to what 
we are going to do, what share we are going to take in our own econ- 
omy, and the economies of other countries in relationship to world 

Dr. Reed. Admiral Land has mentioned repeatedly the idea of a 
50-50 basis ; the carrying of 50 percent of our total foreign trade. 

Theoretically that might be possible if we had 50 percent of the ton- 
nage of the world, but it seems to me that it would not be well to 
try to force any such situation. 

]Mr. Rosenthal. I think so, but at the same time. Dr. Reed, I don't 
know if this is practicable or not. I am not a shipping expert, but I 
would like to see, for example, some of our American lines engaged 
in commerce between other countries of the world. For example, we 
have had Norwegian vessels engaged in trade between British Lidia 
and the United States. 

Dr. Reed. Not going into American ports. You mean the off-shore 
lines that do not put into our shores? 

Mr. Rosenthal. I would like to see American lines engaged in the 
transport of cargo between foreign ports, in return for other lines 
engaged in commerce similarly with us, when the country of origin or 
destination is not necessarily their flag line. I don't know why Ameri- 
can-flag vessels should not ply between the Netherland Indies and 
South America, for instance 

The Chairman. You don't know why they should not ? 

Mr. Rosenthal. No; I don't know why they don't. I have never 
asked that question, but I don't loiow why they should not. I think 
they should. 

The Chairman. Do you know whether they do or not ? 

Mr. Rosenthal. Broadly s])eaking, they do not. I have heard of 
isolated cases where that has been done, but I don't think our steam- 
ship services have done it much. 

Dr. Reed. Since the days of the clipper ships. 

Mr. Rosenthal. That is right. 

The Chairman. Speaking of the clipper ships, what has happened 
between the time of the clipper ships and the present day that has 
changed the picture? I unclerstand the clipper was a fast ship. Are 
our present-day ships inferior? 


Mr. Rosenthal. Tlie ships we ai-e building today are as fine as 
any vessels that are built. We have one situation: American crews 
are paid better than are foreign crews. I told a British steamship 
friend of mine about a week ago that I did not think the solution 
of that problem was to lower American wages; I thought it was to 
increase British wages. 

The Chairman, He probably did not agree with that. 

Mr. Rosenthal. Well, not too wholeheartedly. 

Our shipbuilding costs have been higher here than have l)een ship- 
building costs in other countries. 

The Chairman. The subsidy will offset that. 

Mr. Rosenthal. Yes, sir. I don't know and I am not qualified to 
speak as to whether or not the subsidy has extended to the point of 
putting our lines ii^to service between other countries where they 
would not touch American ports. I think psychologically it is im- 
portant. We speak of proper international relations, trying to have 
our people understand foreign peoples, and foreign peoples under- 
stand us. 

Dr. Reed. On the preference for any particular flag, so far as eco- 
nomics is concerned, it is a matter on which you and I are agreed — 
there are, however, such minor things as taking cargo up to the last 
minute when another line will not, or more courtesy about this and 
that, and so forth. 

There is one thing I would like to ask here. As I recall, the same 
stevedores unload foreign and American ships. So, as far as the 
unloading services are concerned you get about the same service at 
our terminals from one line as you do another? 

Mr, Rosenthal. No, sir; because even though the same stevedores 
handle various lines, there are different stevedoring companies. Some 
steamship lines do their own stevedoring. They go out and employ 
their own longshoremen. Of course, they are all vmion longshore- 
men, but still, as in all business organizations, Government agencies, 
and educational institutions, the spirit engendered by the manage- 
ment, plays an important part in the service given by employees, and 
that will vary. 

The Chairman, Mr, Rosenthal, in determining which line you 
select, whether domestic or foreign line, why do you select the foreign 

Mr. Rosenthal. The service, plus the personal relationships that 
have been developed over a period of years. 

The Chairman. Everything being equal, assume our own ships 
would operate just as cheaply and give as good service? 

Mr. Rosenthal. What I have tried to do in those cases has been 
to take the number of vessels operated in a conference and divide my 
business up among the different lines in proportion to the number of 
vessels that they have had, when the amount of my cargo has been 
important enough to talk about. 

The Chairman. That is foreign and domestic? 

Mr. Rosenthal. Foreign and domestic. What I have done is this: 
if over a period of a year there are 72 vessels in a service, and of those 
vessels 48 are operated by foreign lines and 24 by domestic, and every- 
thing is equal, our relationships, the service given, and so forth, we 
would give two-thirds to the foreign and one-third to the domestic. 


because I would divide my business equally among all the lines accord- 
ing to the number of vessels they have. 

That is the fairest method that I could arrive at. 

The Chairman. Is that generally true of other concerns? 

Mr. Rosenthal. No; I wouldn't say that is generally true, because 
I think everybody has his own ideas as to how he works. Some com- 
panies I know have given all their business to one line or another. 
They may give it all to one American line, even if there are other 
American lines. 

The Chairman. Or they may give it all to one foreign line, even 
if there are other American lines ^ 

Mr. Rosenthal. That is right. It is like the purchasing agent of 
a cor]>oration. He arrives at certain policies and no two adopt the 
same policies. 

The Chairman. Here we have been appropriating money, subsi- 
dizing ships, trying to get our ships to carry a lot of commerce and 
build up world trade and have our own flag flying on the seas. Yet a 
lot of people over here who are very interested in seeing that done, still 
do not put their business in the proper channels to make it possible, 
without some Government expense. We are trying to find out what 
we can do to encourage the use of our own ships. 

Mr. Rosenthal. In the conferences I know, I think the American 
lines have gotten a fair share of the cargo. I am not acquainted with 
all of them, and my knowledge of exports is less than my knowledge 
of imports, but broadly speakiiig, I think, of the total amount of 
tonnage handled over a specific route during the course of a year, that 
the American lines have been doing increasingly better over the past 
decade, even pre-war. 

I think the records of a good many were quite satisfactory to them. 

The Chairman. We don't want to spend all your time on one point. 
Will you proceed? 

Mr. Rosenthal. My next point deals with foreign-trade zones. A 
foreign-trade zone is a small area which is set aside under Government 
regulation and supervision in which goods can go without the payment 
of customs duties, and which in Europe, wdiere the foreign-trade zones 
originated, can be exhibited and also manufactured from raw materials 
or semifinished goods, without going through any procedure of the 
payment of duty and afterward obtaining a draw-back. 

Until the last few years we had no such foreign trade zones in the 
United States, but the Congress passed the Foreign Trade Zone Act — 
I don't recall the exact year — as a result of which we now have one 
foreign-trade zone at the port of New York. 

In 1937 there were 742 tons at a value of $60,000 handled in that 
foreign-trade zone, which in 1941 jumped up to 24,000 tons of some 

The foreign-trade zones perform a useful service without: injury in 
any way to our domestic commerce. Steamship companies cannot 
afford to call at all of the small ports of the world. That would be true 
of a good many of the steamship services originating in the Far East 
which could not, for example, call at Central and South Amei-ican 
ports, but where the goods can be imported through the port of New 
York and then transshipped to Central and South America. 

There are at the present time provisions whereby you can make 
entries of goods in bond, and so on, and so forth, but they are cumber- 


some and costly. The foreign-trade zone has shown in these few 
years even though its activities have been stimulated by the war, 
that they can economically and efficiently handle that kind of trans- 
shipping cargo. At the present time there are only three old piers up 
on the Hudson River doing that. 1 would like to see the Foreign Trade 
Zone Act liberalized to provide for two additional features : One is to 
permit the importation of goods duty free which would have to be kept 
in the foreign-trade zone for purposes of exhibition. 

By special act that was permitted at the World Fair in New York, 
and also at the World Fair at San Francisco, but it is not at the 
moment permitted as a matter of permanent exhibition, and assuredly 
there can be no harm in allowing goods to be imported and kept on 
exhibition. The minute they leave the foreign-trade zone, if they 
were to enter the rest of the United States, they would have to pay 
duty, so that I do not think there is any valid objection to permitting 
such exhibition of foreign goods. 

The Chairman. Just as the farmer can bring his produce into town 
and put it in the market. 

Mr. Rosenthal. Exactly the same. I would like to see that, not only 
for the port of New York, but I would like to see similar foreign-trade 
zones established in other ports. 

The Chairman. Are there similar zones in other countries ? 

Mr. Rosenthal. Yes, sir. There was the Free Port of Danzig until 
a few years ago ; Liverpool, Rotterdam, Hamburg, Bremen, Antwerp 
were at one time or another free ports. They lessened in importance 
with World War I. Prior to World War I, for example, the bulk of 
the imports of our own company from the Netherlands Indies was 
shipped first to Rotterdam or to Liverpool and then transshipped to 
the United States. The results of World War I were to start direct 
steamship service, so to some extent those free ports have been elimi- 
nated, but there is an opportunity for a certain amount of trade with- 
out any valid objections to free zones, as they cannot possibly hurt us 
in any way, and if anything they can stimulate our foreign trade. 

The next point is that the present act permits manipulation but 
not manufacturing within the foreign-trade zone. I am not sure of 
all the technical definitions. Repacking of goods would constitute 
manipulation, but if you change their character at all it is manufac- 
turing. I would like to see manufacturing permitted in the free trade 
zones in the United States. 

The Chairman. You mean actual manufacturing in that zone? 

Mr. Rosenthal. Yes; manufacturing in the zone. Then if the 
manufactured goods entered into the United States they would pay 
duty, but then the manufactured goods can also be exported abroad, 
in which case they would not pay duty. 

Our present tariff act provides that if a manufacturer imports a ! 
dutiable raw material he may manufacture it for export, through 
using certain special bonded buildings, or in his own factory if he. 
goes througli extensive red tape, and obtains a draw-back of 90 percent 
of the duty that he has paid. By the time he goes through the motions 
of filing for draw-back and keeping the additional records a good many ', 
manufacturers have estimated to me that they might get back 90 
percent of the duty and not 99 percent. 

There could be an objection on the part of a great many manufac- 
turers located at inland points who have been doing some of that, in 



that they might suffer in the loss of exports if manufacturing were 
permitted at the free zones and they would lose thereby. I think they 

On the other hand, I think the over-all good would be greater, be- 
cause, after all, you have to pay railroad freight on the raw material 
from seaboard to the interior; you have to go through the motion of 
obtaining the draw-back, which is costly. You then have the railroad 
freight on your finished goods back to seaboard, so that if you per- 
mitted manufacturing in the free zones for export, you would save 
the railroad freight from seaboard to interior, and back from interior 
to seaboard, as well as all the other handling that jou have in the case 
of the production of goods. 

The Chairman. The railroads would not be heartily in favor of 

Mr. Rosenthal. Perhaps not. The railroads would lose a certain 
amount of traffic, the inland manufacturers might lose a certain amount 
of business, unless they themselves put up small factories in the free 
zones, but I think the over-all results for the Nation would be prof- 
itable and worthy of consideration. 

1 Dr. Reed. Would 3'OU say that there should be one in New York, 
I one in San Francisco, and maybe an additional one at New Orleans? 
' Would you think that would be all that is necessary to do a good 
job, without running into unnecessary resistance? 

I Mr. Rosenthal. My personal idea is that three — New York, Gulf, 
! and Pacific coast — would be ample in the beginning. What you get 
I up against there is the difficult problem of the rivalry of municipali- 
I ties, to decide Los Angeles versus San Francisco, versus Portland, 
' versus Seattle ; New Orleans versus Mobile, versus Houston. I don't 
k wish to attempt to solve that, but on the other hand, I do think that it 
is a problem which must be solved. I don't think that we accomplish 
anything by saying that because of rivalry of municipalities we will do 
I nothing. 

The next point deals with a very general subject — Dumbarton Oaks. 
That is so much a field in which our Government officials and those 
others who were called in as consultants are experts, that I am a 
bit reluctant to attempt to testify. But I would like to say this, 
and here I am not going to be as specific as 1 have been on these 
other points I have made: We, in the National Council of American 
Importers, assuredly endorse the principles of Dumbarton Oaks. We 
think it is a very excellent beginning. At the same time, I think 
there may be those who would disagree with me on this or that detail. 
I also feel that that part of the statement made by the Department 
of State which refers to the economic and social council as part of 
the general assembly is worthy of greater consideration than was 
given in the release of the Department. 

I would like to leave, if I may, with the committee a very inter- 
esting pamphlet written by Otto T. Mallory, called Practical Ap- 
proach to a World Trade Board.^ I don't think that' it requires a 
great deal of discussion on my part other than to say this : Unless the 
nations of the world are willing to approach the problem of the 
exchange of goods and services, steamship operations, and everything 
that goes with their economic relations in an objective way, we are 

^ See appendix, exhibit 26, p. 1205. 


going to continue the seiies of crises and wars that we have had during , 
the period of our lifetime. 

I don't think that which is culled the political reluuunships of , 
countries can be solved in a political vacuum. I think we are beyond ! 
the stage where the relationship between two countries depended upon ! 
the personal relationships of the kings or emperors or any other rulers i 
of those two countries, as to whether or not they got along, or whether | 
their children married each other in their royal families. I believe 
strongly that the economic relationships of the countries will dominate | 
what we call their political relationships. And the economic rela- ; 
tionships of the countries of the world will be affected by the stand- 
ards of living of their peoples. While we must be primarily con- 
cerned with the standard of living of our own people. I think that ' 
we must recognize that our own economic welfare is affected by the j 
standards of living of other countries of the Avorld. 1 do not think | 
that there can be a world at peace if there are vast areas in which \ 
there is hunger and no prospect of raising the standard of living | 
for the people of those countries. The "have nots" will not allow the 
"haves" to live in peace. Hence, I urge expansion of the economic 
council along the lines of the world trade board that Mr. Mallory 

But I think such an organization has to get down to cases. I d(jn"t 
think it is enough to orate about beautiful principles and to pass a 
great many resolutions. I think we will solve these problems only 
if we get down to cases, cases of exchange rates, cases of the number | 
of vessels on different flag lines, and so forth. So, in urging the j 
Congress to support the principles and the basic organization of \ 
Dumbarton Oaks, I would urge that we approve and authorize our f 
administrative agencies to enter into a world-trade organization or i 
world-economic organization which can study and make appropriate I 
recommendations of specifics to our legislative body, and the legis- ' 
lative bodies of other countries of the world, for enactment, and not 
merely for debate. 

I would like to add something about Bretton Woods. I am not an 
authority on money. I have heard a great deal of discussion — I have 
seen pamphlets written for the recommendations that came from Bret- 
ton Woods, and I have seen pamphlets written against it. In my dis- 
cussions with some of the banks in New York, I felt that a great many 
of them, not all of them but a great many of them, are agreed as to 
the need for stabilization of international exchange. I don't think we 
are going to achieve stabilization by wishing for it. I don't know 
whether what came out of Bretton Woods is the greatest plan in the 
world or not. But what I do feel is that we have to make a beginning 
with some kind of organization, such as that fund, and an interna- 
tional bank. I think we have got to get going and participate in an 
organization speedily, so that we can provide intelligent long-term 
credits to those countries that wish to develop their economies for pro- 
ductive purposes. 

The Chairman. Did you say Government or individuals? . 

Mr. Rosenthal. The individuals should do it, but I feel certain^, 
from a memorandum given me by one of the leading bankers in NeWi 
York, that individuals are not going to be able to do all of this withiffl 
the scope of what they consider sound private investment without some^ 
Government guaranty and help. 


The Chairman. That is the point I wanted to ask you about. In 
your projected phin, just how much do you think the Government 
will have to do, and how much will what we call private enterprise 
have to do ? 

Mr. Rosenthal. As a businessman, I would like to see everything 
left to private enterprise and initiative that private enterprise can and 
will do. 

The Chairman. As a Member of Congress, I would like to see that. 

Mr. Rosenthal. But I think we have to consider this, too : The trend 
of thinking in a number of countries in Europe, even among the areas 
still to be liberated, is that for some years to come their governments 
will have to do a great deal in the regulation of their economies, a great 
deal more than they ever did before. 

I would like to submit also to the committee a copy of a brief article 
that I wrote recently in the New York Journal of Commerce.^ In my 
discussions with the representatives of some of these governments, I 
have had the feeling that it is their feeling that they are going to have 
to reguhite foreign trade and even some of their productive industries 
for some time until they can reeducate their people to the ways of 
peace, to the ways of free enterprise, and to the ways of political de- 
mocracy. If that is the trend of foreign governments, then we in the 
United States, as exporters and importers, in my opinion — there are 
many who agree and many who disagree — must look to the adminis- 
<^rative agencies of our Government to give intelligent assistance. It 
is for that reason that I believe that the Foreign Economic Adminis- 
tration, which is the successor to the B. E. W., with which I was once 
connected, must continue certain of its export and import controls. I 
wouldn't have those continued in a vacuum. I would have F. E. A. 
work with committees of associations of exporters and importers, so 
that each problem is tackled on the basis of its specific needs. 

As to financing, it is true that we are in an unusually sound financial 
condition compared to other countries of the world. I think that we 
have found in our own history, as well as in the history of other coun- 
tries, that our own trade has risen most with those countries that have 
undertaken industrialization, even though it has resulted in some 
competition with them. But the more highly industrialized countries 
of the world have been our best customers. 

We have a tremendous productive capacity in the United States. 
Other countries will be increasing their productive capacity. There 
are hundreds of millions of people in China, India, Africa, Central and 
South America whose standards of living beggar description. We v/ill 
benefit in our own economy if their standards of living rise. 

To the extent that private banking and private enterprise cannot 
finance the long-time building of a railroad or of an industry or of 
long-term agricultural development, our Government should par- 
ticipate in long-term loans, guarantee them, if necessary, as is pro- 
posed in the international bank as advocated at Bretton Woods. I 
think our Government will have to play a part. I think it is a delicate 
balance as to how much the Government should do and how much 
private enterprise can do. Private enterprise should do all that it 
can. That delicate balance can be achieved only if there is close co- 
operation between the administrative agencies and those who repre- 
sent business through their various associations. 

1 See appendix, exhibit 27, pp. 1211 to 1212. 


I have frequently urged upon my fellow businessmen that there has 
been too much feuding and too much suspicion on the part of business- 
men with Government agencies, and vice versa, and 1 think that we 
have to recognize the need for a closer partnership between our Gov- 
ernment and industi*y if we would succeed in achieving that balance. 

Dr. Reed. The other day I heard Dr. Kung, who is the assistant of 
Chiang Kai-shek, make this statement, which I think is so simple it 
was rather shocking; nevertheless, it shows what can be done along 
the lines you have mentioned. He said that there are 450,000,000 
people in China, and if their purchasing power could be increased just 
$5 apiece per year it would amount to $2,250,000,000 a year. That 
certainly shows what can be done by increasing the purchasing power 
of populations. 

The Chairman. Do you know of any information you can supply us 
that would be of help to the committee that we have not asked you 
specifically ? 

Mr. Rosenthal. No, sir. I would like to send to the committee, if 
I may, certain documents. 

The Chairman. You may do that. 

Do you know of any questions that we have failed to ask you? 

Mr. Rosenthal. I can't think of any now. I think you have been 
very thorough in examining me. 

The Chairman. Thank you very much for your cooperation. 

The committee stands adjourned until 2 o'clock. I 

(Whereupon, at 12 : 05 p. m., an adjournment was taken until 2 p. m., I 
of the same day.) \ 

afternoon session 

Mr. WoRLEY. All right, let us proceed. Mr. Minor, will you identify 
yourself for the record ? 


Mr. Minor. My name is Clark H. Minor. I am president of the In- 
ternational General Electric Co., New York. 

Mr. WorIjEY. What business are 3^ou engaged in? 

Mr. Minor. Electrical manufacturing and trade outside of the 
United States and Canada. 

Mr. WoRLEY. Is that a subsidiary ? 

Mr. Minor. That is a subsidiary of the General Electric Co. 

Mr. WoRLEY. How long have you been so engaged in foreign trade? 

Mr. Minor. I have been in foreign trade business residing outside of 
the United States 39 years and have only been resident of the United 
States during that period since the World War, 1939. 

Mr. WoRLEY. You may proceed. 

Mr. Minor. It should be the function of our Government in plan- 
ning its post-war economic program to provide a framework of sound 
international trade policy within which the free enterprise system may 
work. It should be the purpose of all our laws and regulations to 
facilitate the exchange of goods and services in the largest possible 
volume by providing reasonable security as well as rules of conduct 
under which the private trader may carry on his normal activities. It 
should be the function and the purpose of private enterprise to develop 


the maxiimun amount of world trade because upon this reciprocal flow 
of goods and services our domestic prosperity as well as that of the 
rest of the world depends. 

In working out the details for any constructive plan of foreign trade 
reconstruction we must recognize that certain fundamental principles 
must form the basis for this work, regardless of the great political 
and economic changes that have been brought about by the war. 

The first step is to know what we want, wdiat other people want, 
what things are economically sound and reasonably practicable of 

Our first requirement is a somid domestic economy. Since our 
domestic economy is but a segment in the world economy, we have to 
make sure that what we insist upon for ourselves harmonizes with 
the other parts of the world economy. 

Whether we like it or not, we will hereafter live in a world so small 
and so closely drawn together that all nations are interdependent. 
We cannot have prosperity and high standards of living in the United 
States at the expense of other nations. Likewise, our prosperity de- 
pends upon the progress toward better living conditions and employ- 
ment in other countries. This calls for the closest cooperation between 
the private traders as well as the governments of the world. 

Our second requirement is collective security. Without peace there 
can be no continued economic or financial security and only a pros- 
perous world can long remain at peace. 

It is generally recognized that the success of our post-war economy 
will depend upon wdiether or not we can provide jobs at high wages 
for all who desire to work. This objective can only be obtained 
through an ever-increasing volume of production and the unrestricted 
interchange of goods and services. We know that the former channels 
of trade have been completely disrupted and that many of the eco- 
nomic centers of gravity have been permanently shifted. The trade 
channels must be reestablished, stability and balance must replace 
the chaos created by a world upheaval. This means that trade barriers 
of all kinds must be removed or adjusted. 

The onl}' way to promote a sound world economy and to have full 
employment at home and abroad is through the flow of goods and 
services between the nations. 

It seems logical, therefore, that the Reciprocal Trade Agreements 
Act which provides for the negotiation of reciprocal adjustment and 
removal of trade barriers should be made a permanent part of the 
foreign trade policy of our country. 

Economic warfare is an integral part of war and, while an extensive 
system of government controls over private business transactions has 
been essential as a war measure, those controls must be relaxed as 
rapidly as conditions warrant if the incentive which is inherent in 
the private enterprise system is to be restored. This process has been 
well described as one of controlled decontrol. Stability of exchange 
in a free market can only be the consequence of the gradual restora- 
tion of active trade and investment. 

Mr. WoRLEY. Pardon me, Mr. Minor, would you repeat that sentence 
just before that about trade? 

Mr. Minor. The stability ? 

Mr. WoRLEY. Yes. 

99579 — 45 — pt. 4 20 


Mr. Minor. Stability of exchange in a free market can only be the 
consequence of the gradual restoration of active trade and invest- 

By that I mean stability Aoats from the normal activity of trade 
and investment. 

Mr. WoRLEY. You don't mean financial stability? 

Mr. Minor. Beg your pardon ? 

Mr. WoRLEY. You don t mean financial stability ? 

Mr. Minor. No; the normal stability. I would point out, the sooner 
trade is released from wartime controls to the initiative of private 
traders the speedier will be our return to })rosperity. 

It seems evident that the agencies whose genesis and functions were 
l^rimarily to facilitate the war effort must, with the return of peace, 
give way to the normal departments of government. In any event, 
all functions of these wartime agencies should be eliminated to the 
extent that they compete with private enterprise or exercise controls 
over private business for the purpose of conducting the war. 

The Department of Commerce, and especially its Bureau of Foreign 
and Domestic Commerce, under w^hose guidance, with the aid of the 
Department of State, business and industry formerly conducted trade 
in other countries of the world, should again become an effective 
operating organization for the promotion of foreign trade and in- 
vestment through private channels. 

The Webb-Pomerene Act was designed to permit American busine&o 
enterprise to associate cooperatively in their export business in ways 
not generally allowed in the domestic market. This act, mider the 
jurisdiction of the Federal Trade Commission, should be modernized 
and strengthened to make possible even wider cooperation in export 
business. Our Nation needs a Federal Trade Commission to assist 
and cooperate with business, both domestic and foreign, in establish- 
ing a fixed set of rules that will, on the one hand, prevent unfair com- 
petition and, on the other hand, promote the development of a sound 
foreign trade policy. 

The task of world trade reconstruction is a gigantic one. The 
problem is complicated by every advance of science and industrial 
progress by all social and political changes. 

International consultation is essential in the rebuilding of the in- 
tricate network of world trade. National differences can only be 
adjusted through compromise and cooperation. There must be the 
Avill to consult, the inclination to compromise on details, and the de- 
termination to cooperate in the execution of agreements for the devel- 
opment of world trade. 

It is important that all international business agreements be filed 
with some Government agency such as the Federal Trade Com- 
mission for public assurance that they are consistent with our foreign 
economic policy and that they do not involve practices that are against 
the public interest. 

Economic cooperation is, in my opinion, the only means by which 
we can gain permanent world peace. 

When nations of such diverse culture, customs, and political think- 
ing as China, Russia, the British Empire, and the United States can 
unite to win a war, it ouglit to be possible to arrive at mutually satis- 
factory conventions for the purpose of winning the peace. Only in 
this manner can we find practical ways of reconciling the differences 


of economic methods and policies which divide the nations of the 
world. Only by international cooperation can we avoid the ruinous 
practices of monetary devaluations, quotas, and excessive tariffs. 

Some form of international commerci;il policj- organization should 
undoubtedly be established to give effect to such rules, regulations, 
and controls of international trade as will contribute to orderly world 
markets, full employment, and bring peace and prosperity to all 

Mr. WoRLEY. This is off the record. 

(Discussion off the record.) 

ISIr. WoKLLY. We want your opinion as a businessman with practical 
experience in international trade and foreign commerce. First, is it 
desirable to increase our foreign trade ? 

You answered in the affirmative? 

Mr. Minor. I Avoiild say it is essential to increase our foreign trade, 
and foreign trade includes both export and import business. 

Mv. WoRLEY. Your company has operated in foreign trade for a 
good many years, has it not { 

Mr. Minor. Yes. 

Mr. WoRLEY. When did it start? 

Mr. Minor. The International General Electric was organized in 

Mr. Worley, 1919. It has been operating .steadilj'^ up until we got 
in the war? 

Mr. Minor. Right. 

Mr. FoLSOM. But you personally did export business a long time 
before that? 

Mr. Minor. Yes, for 20 years before that I was in the foreign busi- 
ness of the Western Electric Co. 

Mr. FoLsoM. That company was engaged in foreign trade? 

Mr. Minor. In foreign trade. They operated very much of the same 
type of a business. 

For instance in 1918 I built a telephone factory in China which is 
still operating. 

Ui\ WoRLET. 1918. At the end of the World War. 

Mr. Minor. Just before I came with General Electric I was 4 years 
in China. 

Mr. WoRLEY. What commodities do you sell, export, mostly? 

Mr. Minor. Every type of electrical apparatus from the largest 
generator to the smallest lamp, and associated apparatus that go into 
the power plants in any countr}', and the household appliance and 
other electrical devices. 

]\Ir. WoRLEY. Has your company enjoyed a steady growth in volume 
of exports ? 

Mr. Minor. I would say that our export business has always had 
quite a definite relationship to the volume of the blisiness of the Gen- 
eral Electric Co. in the domestic market, and I observe that when we 
have prosperity • at home we usually have a larger export sale and 
lai'ger import business. 

For years I believed that export business filled a gap in the domestic 
factories and that when your business at home was down you could 
fill up your factory by going out and getting export business. The 
statistics prove that that is not correct, and that the area of the world 
that goes up and down together depends very largely on how closely 


we are knit to^jether by communications and contacts. As the sphere 
of influence of the United States extends beyond our border we are 
going up and we are going down together with a very much larger 
percentage of the earth's surface. 

Mr. WoRLEY. Then before we can have an increase in our foreign 
trade we will have to remain stable and prosperous here at home. Is 
that the conclusion that you have drawn? 

Mr. Minor. I think that is sound. We must have a sound domestic 
economy before we can hope to have an increased foreign business. 

If our factories are unable to buy raw materials abroad, if we are 
in such economic position that we do not want to buy products of 
other nations, we place automatically a limit on the amount of goods 
we can sell to other people and have them paid for. 

Mr. WoRLEY. How do you suppose is the best way to arrive at a stable 
and prosperous domestic state over here ? 

Mr. Minor. We have to follow all those policies that will promote 
the flow of goods and services across our borders. In other words, we 
can no longer be self-sufficient and be prosperous. 

Mr. WoRLEY. In order to be prosperous here we have to trade with 
other nations ? 

Mr. Minor. We have to trade with other nations. And we can only 
trade with other nations if we help to make them prosperous. 

Mr. WoRLEY. In order to trade with other nations we have to be 
prosperous here ? 

Mr. Minor. That's right. But if you want to increase the volume 
of trade I personally believe you have to assist in the industrializa- 
tion of other countries so that by increasing the income and pur- 
chasing power of their people you create a demand for a larger number 
of things that we might supply. 

Mr. WoRLEY. Who do you think should extend this credit to lend 
this money ? As I understand it you say that it is necessary in order 
to increase our foreign trade that we rehabilitate in some other way 
other nations who are prospective purchasers for what we have to sell. 
Is that correct ? 

Mr. Minor. Yes ; we have to work to create stability in all the coun- 
tries with wliom we wish to do business. The mere making of loans 
is of itself a temporary stopgap because loans have to be repaid. 
They can only be repaid in the long run by goods and services, other- 
wise we have defaults and have to write them oflF. 

In the reconstruction period immediately after the war, where you 
have absolute chaos, it may be in our self-interest to make substantial 
loans through Government channels toward the program of recon- 
struction to assist them in getting their industrial machinery alive 
and going. Beyond that point you cannot support an unsound econ- 
omy abroad by the device of granting loans. Each country must 
eventually go on the basis of paying its own expenses and being sound 
economically or your whole world structure begins to go down hill 
instead of going up. 

Mr, WoRLEY. Let me see if I understand what you mean. iTou 
mean that in order to build up foreign markets we must lend money? 

Mr. Minor. No, sir; not as a permanent policy except on the basis 
of ability to repay. 

Mr. WoRLEY. As a temporary measure? 


Mr. Minor. As a temporary measure to speed up restoration we 
have to loan money. Yes ; I will put it that way. 

Mr. WoRLEY. And even though there is a good possibility of our 
losing the money we lend? 

Mr. Minor. We have to measure the advantages we might get at 
home and abroad, for instance, in a restored China, to use a name. 

JNIr. WoRLEY. In a what? 

Mr, Minor. Consider a Chinese government i-estored during a period 
of 10 years, if you will, as against letting them go through a long 
period of disorganization, lack of capital, and having their indus- 
trialization program delayed perhaps for a century. 

Mr. FoLSOM, Do you think those loans should be made by this 
Government to the other government, or by private bank to private 
bank on long credits during the reconstruction period? 

Mr. Minor, Personally, I think that loans made through private 
channels under some form of Government insurance would be more 
effective than those made directly by the Government to the 

Mr. FoLsoM. I saw in the paper the other day where your company 
is going to sell some turbines to Russia. 

Mr. Minor. Yes. 

Mr. FoLSOM. I imagine that was probably on lend-lease. Assuming 
lend-lease was not in, in that case you would sell these turbines, and 
should the owner have some sort of a guaranty by the Federal Govern- 
ment here or Federal insurance? 

Mr. Minor. Well, in that particular case we considered the credit 
of the Russian Government is as good as that of any other nation in 
the world, and we have been prepared as a company within our finan- 
cial resources to take certain orders on an equipment-trust basis, that 
is, credits of short-term payments not over 5 or 6 years, and do that 
quite independently. We have followed that policy with Russia since 
1928, and we have had several hundred million dollars worth of busi- 
ness with them, and without any credit losses. 

There may be a limit, however, to that type of business if Russia is 
planning a reconstruction program that runs into $3,000,000,000 or 
$4,000,000,000; you are then talking in magnitude of funds involved 
that is beyond the scope of private industry. 

Mr, FoLSOM, Well, even similar companies might have difficulty in 
making sales because of their limited capital resources ^ 

Mr, Minor, That is correct. But in my judgment, we should have 
an expanded Import-Export Bank that would examine thd various 
projects and the amount of money involved and on a sound basis guar- 
antee the credit so that the manufacturer could discount the paper, or 
make loans to the manufacturer to facilitate the smaller industries in 
handling that work. 

Mr. FoLsoM. That would be in addition to an insurance plan ? 

Mr, Minor. That might be in addition to an insurance plan, but I 
think for the average firm the insurance plan would be preferable. 

Mr. FoLSOM. Well, how would that work? You would simply pay 
a certain percentage ? 

Mr. Minor. You would pay a certain service charge for the guar- 
anty of the loan and the Government would, through this insurance 
operation, expect to take a percentage of losses, just as a fire-insurance 


company recognizes that it is going to have some losses. But the 
balance of premiums paid in would be sufficient to offset the losses. 

Mr. FoLSOM. Does England have such a plan as that? 

Mr. Minor. It is my understanding that England has been follow- 
ing such a phm. And Canada is considering such a plan in a small 

Mr. FoLscM. How long has England had that ? Before the war, 
wasn't it ? 

Mr. MiN< R. I should think she had it 10 or more years before the 

Mr. Reed. The Canadian plan was only for some $50,000,000 or 
something like that. 

INIr. Minor. Yes, that is my understanding. The total amount in- 
volved was relatively small. 

Mr. FoLsoM. Was this particular transaction on the turbines under 
lend-lease ? 

Mr. Minor. It was not. 

Mr. FoLSOM. Was it on sales contract ? 

Mr. Minor. A sales contract witJi the security of the Russian Gov- 
ernment and with payments starting with the order and every 6 months 
for a 5-year period. 

Mr. WoRLEY. Incidentally, do you suppose this lend-lease program 
would fill the bill you were talking about a while ago — lending money ? 

Mr. Minor. Well, it would be possible to have a modified lend-lease 
that at the end of the war would take over the fulfillment of all out- 
standing contracts that were for materials other than strictly mili- 
tary, on a basis of repayment over a relatively long period of time and 
at a very nominal rate of interest. 

Mr. WoRiJ<:y. I undeistand that your position is that you want pri- 
vate enterprise, private capital, to make as many loans as. they can or 
as it can to these foreign countries, and then, in case private capital 
cannot meet all these demands, you think the Government should come 
in and underwrite any additional loans. Is that correct? 

Mr. Minor. I think that states tJie case, yes. 

Mr. Worley. Then in order to increase cur foreign markets we have 
to have stability at home. 

]\Ir. Minor. Right. 

Mr. WoRLEY. And in order to have stability at home we have to in- 
crease our foreign markets? 

Mr, Minor. The two are tied up together, yes, sir. 

Mr. WoRLEY. It is more impoi-tant to have stability at home first. 

I know that nobody can give any definite answer to this but we are 
back where we first started : 

What, in your opinion as a practical experienced businessman, is 
the best way to have stability here at home as soon as the war is over? 

Mr. Minor. Well, I think that we should make up our minds to 
have a declaration, supported by our rules, laws, and regulations, that 
we ]5ropose to restore and support the private enterprise system, and 
that we should create between government and industry a feeling of 
cooperation toward developing the best interests of American busi- 
ness, to replace a feeling of opposition to business, investigation of 
business, and a suspicion of every ti^ansaction an American firm ever 
had with anvone across our borders. 


I think fnrtlier that the jurisdiction of our country should be lim- 
ited to the United States of America ; that our business relationships 
with other nations should be covered by international covenants, 
creatinfj; internationally the same framework of rules and regulations 
in the international field that are essential for stability in our domestic 

Mr. WoKLET. Well, I think, generally speaking, your attitude re- 
flects the attitude that most everybody else has. Certainly I think 
that is true in Congress. It is our job not to try to retard foreign 
trade arid commerce but to try to help. 

Mr. Minor. Surely. I believe it should be. 

Mr. WoRLEY. It is. That is the biggest duty we have. Because we 
are all after the same objective. You say to restore, which presup- 
poses that has been removed. 

Mr. Minor. I say restore in the sense that we are stepping out of 
a war period. Now in a war period everytliing is suppressed to bene- 
fit the war effort. 

Mr. WoRLEY. That is true. 

Mr. ]\IiNOR. The time has come, then, when I say "restore," to put 
it back on a free-enterprise basis. I believe there are many people 
in this country that never intend to put it back on the old basis, and 
that there is a very strong movement. It is only human nature that 
it should be so; namely, that in the bureaus that are essential for a 
vrar-control basis, they should desire to survive after the war and have 
their jobs. Thus, why make an argument that the State can carry on 
international business better than private business, and that is some- 
thing which I think must be replaced by definite restoration of the 
private-enterprise system. 

Mr. WoRLEY. You don't think the Government has any business in 
foreign trade, then? 

Mr. Minor. I beg your pardon ? 

Mr. WoRLEY. You don't think the Government, as such, has any 
particular business in foreign trade? 

Mr. JMiNOR. Government does not have the ability, or the know- 
how to handle foreign business and to keep commercial transactions 
separate from politics. 

Mr. WoRLEY. Aren't other nations pretty closely identified with 
their trading interests in one form or another? 

Mr. Minor. Yes. When the war is over, of course, the Russian 
business will be state-owned, state-controlled. 

The British foreign business will be mider the friendly guidance 
of their Export Credits Division. 

Mr. WoRLEY. Is that a Government agency? 

Mr. Minor. That is a Government agency. Underneath that agency 
will be their trade associations where their industry by lines will be 
cooperating; so that the British proposal in the export field will be 
as effective as the combination of Government and industry can pos- 
sibly make it. 

In this country we have thought it wise to adopt a policy against 
anything approaching monopoly or restriction of trade, and our 
manufacturers are therefore not in a position to sit down and consult 
as British industry consults with the approval and support of their 


Mr. WoRLEY. Does that put us at a disadvantage in competing with 

Mr. Minor. In my opinion, we have to separate what we consider 
good domestically from what we are forced to do when we leave our 
jurisdiction and go into the jurisdiction of another counti-y which may 
have other ideas, and has established other methods of doing business. 

In other words, I believe that it is not our job to convince the world 
that our domestic rules and regulations are the best and, therefore, 
should be adopted in Great Britain, or France, or any other country 
you might name. Our job when we go abroad is to recognize that 
the other fellow has adopted perhaps a different system, a different 
program that suits him, and we therefore have to come into a field 
where there is no successful way of doing business except by com- 
promise, and cooperation, and international agreements. 

Now, it is inconsistent, it seems to me, to have a situation where the 
governments of the world can enter into a contract for the orderly 
distribution and marketing of wheat — and I admit that such a con- 
tract is an essential to keep a stabilized market — and at the same 
time raise the question as to whether we have the right to enter into a 
corresponding type of agreement on the part of American industry, 
where it is equally essential to have that same kind of orderly distri- 
bution with industrial products. 

Mr. WoRLEY. You have particular reference to cartel agreements. 
Is that it? 

Mr. Minor. Most any international agreement is often referred to 
as a cartel. 

Now, about cartel agreements 

Mr. WoRLEY (interposing). I was going to ask you, You are 
familiar, are you not, generally, with cartel agreements? 

Mr. Minor. With some. 

Mr. WoRLEY. Haven't you had a great deal of experience in them? 

Mr. Minor. I wouldn't say that. My knowledge is only incidental to 
living abroad and trying to carry on international business. 

Mr. WoRLEY. Well, I say as a result of your position. 

Mr. Minor. Correct. Now, there are good cartels, there are bad 
cartels — just as there is good and bad in all human relations. 

Mr. WoRLEY. Would you mind giving your definition of what a 
cartel really is ? I have heard any number of definitions. Would you 
tell lis what your definition is? 

Mr. Minor. Well, that is difficult to define, because there appears to 
be no accepted definition as to what the word "cartel" means, but in 
general it is an agreement between the competing elements of interna- 
tional industry in order to obtain orderly markets, promote research, 
bring about the adoption of international standards, development of 
the technique of the industry, and to provide a greater volume of goods 
for more people in the world for less money. Such agreements have 
been more effective than any other device that has yet been found to 
promote international business. 

Mr. WoRLEY. That sounds like a good cartel. 

Mr. Minor. That is a good cartel. 

In addition, agreements involving a grant of patent rights and of 
technical information are sometimes termed "cartels." Technical in- 
formation is distributed internationally so that the art in the whole in- 
dustry can advance certain given standards. 


As a rule firms are not prepared to give technical information with- 
out having some assurance of protection in their home market. 

The question at issue in all discussions of cartels seems to be whether 
the restraints inherent in any agreement are reasonable or unreason- 

Mr. WoRLET. Who determines that? 

Mr. Minor. Business can only determine that by knowing whether 
the end results of the operation are against the development of sound 
and expanding international trade or are restrictive of trade resulting 
in lack of service to the public. 

Tliis problem is going to be in international business whether you 
call it a cartel or whether you call it something else. 

I think that international agreements or cartels developed as an 
economic necessity in international business due to the complications 
that are inherent in highly industrialized and technical industry 
throughout the world. 

]\Ir. WoRLEY. How long have cartels been with us ? 

Mr. Minor. I have no idea when the first agreements were made. I 
would think they have always been a part of the system of interna- 
tional commerce. Perhaps we have only called them cartels in the past 
25 years. 

Mr. Worley. You said there were good cartels and bad cartels. 
Would you give us an illustration of a good cartel ? 

Mr. Minor. I have tried to describe what I would call a good cartel. 

Mr. WoRLEY. Well, I agree with you. What is a bad cartel ? 

^Ir. jNIinor. a bad cartel is one that restricts production, that 
hinders distribution, technical development, and that endeavors to get 
an unfair price for a product. 

I think those are some of the things that you find in a bad cartel. 

Now, wdiether you would call the tin agreement which was a cartel 
between corporations and certain of the foreign governments that 
definitely restricted production and only allowed production to come 
out at a given price, a good or bad cartel, I don't know. Nor can I say 
whether in the long run it helped the world or hindered the world. It 
has a certain similarity with the international wheat agreement. 

Mr. Worley. That is tin? 

Mr. Minor. Tin. 

Mr. Worley. Well, give us an example in your opinion, or an in- 
stance, a concrete example, of a good cartel agreement. Can you do 

Mr. Minor. Could I prepare a statement and submit it to you on 

Mr. Worley. You could. 

Mr. Minor. Later? 

]Mr. Worley. Yes. 

JSIr. Minor. I would be glad, to do that. 

Mr. Worley. All right. Then can we ask you what is a bad cartel ? 
A specific instance of a cartel agreement which has resulted in harm. 

Mr. Minor. Offhand, I don't know of any. Frankly, I think in most 
cartels that have been severely criticized the criticism has been in- 
fluenced by war psychology, the elements of damage have been exag- 

Mr. Worley. Well, that is why we ask you this information. We 
want facts. 


Mr. Minor. Unfortunately, I cannot ^ive you the exact facts that 
you would like to know about these things. 

Mr. WoRLET. Where can we get the best facts on the cartel agree- 
ments that would help us ? 

Mr. Minor. I understand there are in the International Foreign 
Trade Council and in the United States Chamber of Commerce groups 
that are specifically studying facts regarding cartels, and I would 
reconmiend that you put in your record an historical report having to 
do with international agreements that has recently been prepared by 
counsel for the National Foreign Trade Council and was published 
about 2 weeks ago. 

Have you seen that, Mr. Folsom ? 

Mr. FoLSOM. No; I haven't. 

Mr. Minor. It has just been distributed. 

Mr. Reed. Is that the report prepared by the council? 

Mr. Minor. No; that is the report prepared by Mr. Micou, of the 
law firm of Malet, Prevost & Micou, at the request of the council. 

That is part of the work of this committee, and I would rely on that 
source of information to get correct or specific information rather 
than ask you to consider any offhand things I have said here about 
the general principles of a good or bad cartel. 

Mr. WoRLEY. I understand, though, that you don't know of any bad 
cartels but you do know of a lot of good cartels and that you will 
provide us with a memorandum of illustrations of a good cartel. 

Mr. Minor. I can only so far as I know cartels. 

Mr. WoRLEY. Yes. 

Mr. Minor. I know of somQ that are good. 

Mr. WoRLEY. Well, if you know — at least the impression I have is 
that cartels today have a very black eye. 

Mr. Minor. I realize that. 

Mr. WoRLEY. And unless they are to continue to have a black eye 
the whole facts and the truth ought to be known about all of them. 
Because you know we have the Webb-Pomerene Act and antitrust 

Mr. Minor. Well, Mr. Chairman, the problem is that everything 
that seems to have an international flavor is called publicly in the press 
a cartel. 

I have seen an organization chart of our company published in the 
press of this country and described as a great international cartel. 

I have seen a diagram of the Phillips Lamp Co. in Holland showing 
the main company and its subsidiaries throughout the world described 
in glowing terms as a cartel. 

Let me cite those two as good cartels, and yet in my judgment they 
are merely organization charts and not a cartel at all. 

That is the difficulty in giving a description as to what you call 

Mr. WoRLEY. We are generaly afraid or suspicious of those things 
we know little or nothing about, and the suspicion of cartel agree- 
ments and international — — 

JVIr. Minor (interposing). That is why I have suggested in my 
statement that all international agreements should be handled on 
what I believe you would call the "fish -bowl'* method. 

Mr. WoRLEY. You mean Government regulations? 


Mr. Minor, I mean that they should be recorded and be a matter of 
public information. 

Mr. WoRLEY. They are not that now, are they? 

Mr. INIiNOR. They have been in some instances. So far as my own 
company is concerned we have not made a contract abroad since 1924 
that has not been filed with the Federal Trade Commission and w^hich 
has not been a matter of public record, and I believe that all inter- 
national agreements having to do with licenses, trade-marks, exchange 
of technical information, should be filed so that they are a matter of 
public record and so that the Government authorities may know that 
they correspond to the announced policy of our Government. 

Mr. WoRLET. Do other countries require the same procedure? 

Mr. JNIiNOR. I don't know. 

JNIr. WoRLET. You don't know that ? 

Mr. Minor. I don't know. 

Mr. WoRLEY. We hope to go into the question of cartels more thor- 
oughly later on. Do you have any additional information or com- 
ment you would like to provide us with at this time on the cartel 
agreements ? 

Mr. Minor, Nothing more except that I would urge that the work 
that is being done through the chamber of commerce and the National 
Foreign Trade Council be made available to this committee, because 
that is where I think industry is making some of its most serious 

]\Ir. WoRLEY. You do agree that it is a problem which deniands care- 
ful and understanding consideration? 

i\Ir. Minor. I think any situation such as the one created by the 
publicity that has been given to the cartel problem demands a good 
deal of consideration and definite correction. 

Mr. WoRLEY. I have heard a great deal of criticism but not a whole 
lot of defense of cartel agreements. That was why I was particularly 
interested in giving you an opportunity to say or defend, make any 
comment that you would like to make, as one who is interested in 
them, representing a concern which is interested in them. 

Mr. Reed. Mr. Minor, in your opinion would such a thing as the 
control of prices through export taxes on enterprise constitute a car- 
tel? Take the Stevenson Act where the Dutch and the British got 
together finally, would yoti call that a type of cartel agreement, in 
which the two of them, not a unilateral act, but the Dutch and the 
British, and to a less extent France, got together on prices; would 
you call that a cartel? 

Mr. Minor. I would not consider an export tax a cartel but your 
second example is what I would understand to come under the defini- 
tion of a cartel. 

Mr. FftLsoM. Wliat kind of specific legislation would you recom- 
mend? I gather you would recommend modification of the Webb- 
Pnmerene Act, that it be brought up to date. 

Mr. Minor. I would suggest that it be made specific. The difficulty 
under the Webb-Pomerene Act seems to be that it is only after 20 years 
of operation that the work done under that act is now going through 
a most critical and searching review as to where something has been 
done that is illesfal. 


In some method that law should be so defined that you could operate 
on it with reasonable assurance that having I'ead it you knew that you 
were within the boundaries or the framework of that law. 

Mr. FoLSOM. And you would recommend an extension of the Trade 
Agreements Act ? 

Mr. Minor. Yes. 

j\Ir. FoLsoM. Without change? 

Mr. Minor. Without change. 

Mr. Reed. That would be without requiring the approval of the 
Senate or Congress as a whole for specific agreements ? 

Mr. Minor. Yes, sir. It seems to me that the adjustment of these 
barriers and restrictions of trade are primarily questions that can 
best be settled by the technical staff, the permanent staff, of the vari- 
ous governments, and therefore for that reason I personally would 
favor an extension without change. 

Mr. WoRLEY. Other governments seem to operate more closely with 
their private traders than we do over here. 

Mr. Minor. Right. 

Mr. WoRLEY. Does that not operate to put us over here to a disad- 
vantage with them? 

Mr. Minor. Well, the correction could be in your technical board, 
your tariff staff, and your board of review without necessarily changing 
the set-up of the law. 

Mr. WoRLEY. In making the shipments abroad of your exports, how 
do you go about determining who shall carry these turbines and these 
lamp bulbs and all the other things which you sell ? Who determines 
that presently? 

Mr. Minor. In many cases your customers specify it. 

Mr. WoRLEY. Is that generally true ? 

Mr. Minor. I would say it is true in the majority of cases, especi- 
ally if he is a national of a country that has some form of shipping 

Otherwise it is determined in the normal course by service, by fre- 
quency of sailings, of accommodations of the ships that are available. 

I think that would be my answer. 

Mr. WoRLEY. Well, generally speaking, do foreign purchasers insist 
these goods should be carried by their own ships ? 

Mr. Minor. Yes ; for instance, if you w^ere to sell to the Dutch they 
usually insist on Dutch ships. 

The British are very apt to insist on British ships and the Brazilians 
W'ill very often specify, particularly if the Government is the pur- 
chaser, that we ship on Brazilian ships if they are available. 

IMr. WoRLEY. The Japanese did that about 80 times out of every 
hundred ? 

Mr. Minor. Right. 

Mr. WoRLEY. Does your concern do much importing or any im- 
porting ? 

Mr. Minor. Very little importing. 

Mr. WoRLEY. Well, Mdiat imports you do buy 

Mr. Minor (interposing). Practically we have had no importing 
business for the last 10 years. We are studying the problem for the 
future as to whether it would be wise for us to handle two-way busi- 
ness, but we have so far adopted a policy of local assembly or manu- 
facture as a contribution to the national industrialization in each 


country, and by that process reducing the amount of exchange that 
is required in ptitting a given article on the h)cal market. 

I might give you an example. If we were to export a radio set 
100 percent manufactured in this country we might require $20 of 
exchange to pay for it; but if we made the housing locally and the 
loudspeaker locally and some of the other parts locally, we might 
put the same product on the local market with the use of only a few 
dollars of exchange. 

Mr. WoRLEY. Getting back to your shipping references, I am sure 
you are aware of the fact that our own ships haul less than 30 per- 
cent of our entire foreign trade. 

Mr. Minor. Right. 

Mr. WoRLEY. Do you have any suggestions whereby we might in- 
crease that percentage? 

]\Ir. Minor. That is one place where I think you need an interna- 
lional cartel, with the aid of government, that provides for a dis- 
tribution under some regulations, of shipping accommodations and 
facilities, the general use of any shij) going to any port. 

Our policy as shippers has been to use American ships when avail- 
able provided a restriction has not been placed upon us by the pur- 

Mr. WoRLEY. Do you have any hopes that as a practical matter that 
will ever become a fact, your suggestion of an international cartel 
on shipping? 

Mr. Minor. I have a hope that if we can have an international 
league or an association of nations to keep the political peace, that it 
will seem perfectly natural to have some form of international asso- 
ciation that will establish some general rules and regulations in the 
economic and commercial field. 

I think that is as essential toward keeping economic peace in the 
world as it is to have a league of nations to keep your political peace. 

Mr. Worley. AVell, they are closely tied together. 

Mr. Minor. They are tied together. 

Mr. Worley. Do you have any more specific suggestions as to how 
Ave might best utilize our own ships? 

Mr. Minor. I am afraid I don't have anything further to suggest. 
I believe in the principle that wherever we can we ought to use 
American ships. 

Mr. Reed. Do you think we should continue to subsidize? 

Mr. MiJ^OR. I have no opinion to express on subsidies. 

Mr. Worley. Well, if we can give our ships enough trade there 
would be no necessity for such, but aj)parently there seems to be an 
alarming lack of desire on the part of our exporters and importers to 
use our own shipping facilities, yet we spend money on subsidies to 
keep them up on a par with other nations. We fail somehow to take 
advantage of it. 

Mr. Minor. I doubt if in the long run either shipping commerce 
or any other form of industry can be considered as sound if it has 
to depend on a Government subsidy, and in the long run if we cannot 
compete in a given line, we have to give away. The only sound reason 
for a subsidy is the extent to which any activity is essential for national 


Mr. Reed. Would you apply that, Mr. Minor, to what you might 
call reverse subsidies in the form of tariff' and say that in the long 
run the same thing would apply as to principle ? 

Mr. Minor. Generally speaking, I would say "Yes." 

Mr. Reed. From the purely economic standpoint there is no ques- 
tion about it if it cannot stand on its own feet it is not economically 
sound then. There might be other reasons for keeping it up. 

Mr. Minor. In a well-organized world where there is peace and 
flow of goods between the people of the world, no industry should 
be established in any place w4iere it is not economically sound to 

Mr. Reed. In other words, under ideal conditions ? 

Mr. INIiNOR. Under ideal conditions. 

Now, there are variations from that. We have to recognize special 
conditions. The major reason is, of course, the question of national 
defense and national interest. If we go back to self-sufficiency and 
high protection and we w^ant to make things in our own country for 
the pride of doing it with the aid of a subsidy, it is not a permanently 
sound thing to do, in my judgment. 

Mr. WoRLEY. We can produce an awful lot of stuff over here after 
the war is over that the rest of the world will want, Mr. Minor. Is 
that true ? 

Mr. Minor. No question about it, and for the first several years they 
will buy because they have to, because it is the only source of supply, 
and practically without regard to what it costs, using tlieir accumula- 
tion of gold and exchange as far as they can; but that is a temporary 

Mr. WoRLEY. They run out of that. 

Mr. Minor. This period will be relatively short so that our planning 
should be of the kind that provides the maximum flow when this 
abnormal period has disappeared. 

Mr. Wori:ey. But the only way w^e can put them in a position to 
pay for our goods now is to loan them some money to do it with? 

Mr. Minor. Well, yes. Now, aren't we all in this position : If v. e 
have all been playing poker and you have got all the chips and then 
the rest of us say to you, "You want us and we would like to get back 
and play poker again but you have got to stake us to some chips.*' 

The United States is in that position, and if we want this world to 
go on we may find it profitable to pass out some of the chips. 

Mr. WoRLEY. Well, don't you find a lot of times it all flows back 
the other way and the other fellow is not willing to give us? 

Mr. Minor. When you have got them all back again and the game 
is over you are going through another world depression and you have 
got to make up your mind whether you are better off living in that 
world with all four of us sitting around here broke or passing out 
some more chips. 

Now, it is your own self-interest. It isn't what we want. We want 
to live, naturally, but we can get along without your chips in a very 
meager way. But you have got to come downi to our level sooner or 
later, and your chips just burden you, that's all. 

Mr. WoRLEY. Those are yellow chips too, aren't they? 

Mr. Minor. Any color. Any color. 


Mr. Gamble. Mr. Minor, all the evidence so far has spoken of very 
high production and very high consumption. We received a piece of 
evidence this morning from the October issue of the Whaley -Eaton 
Service [reading] : 

The British tend to become a little panicky over the possibility of America's 
trade superiority after the war, due to their almost unlimited production capacity. 
The same fear is noted elsewhere in Europe. Thus, each of the liberated coun- 
tries wants to take from America only what is needed for immediate rehabilita- 
tion. Long before the invasion, the French were taking the position that they 
would not want to import from the United Sates either capital or consumer goods 
that they themselves could later produce, except as immediately needed. They 
wanted hieir own domestic market for their own steel production, as an illus- 

As an example suppose we took a target that is aimed lower. What 
suggestion would you have in this beautiful rosy picture? What sug- 
gestion would you have under that circumstance? 

Mr. ]MiN0R. I don't know just what is the correct answer to that 

We may be talking of more employment than we are going to have; 
there is a great difference of opinion as to the deferred demand that 
awaits us to work on ; these are all speculations as to the future. 

I do have a feeling that many of the foreign nations are fearful that 
we will misuse our economic power in the post-war period. 

I think it is a fact that we probably will be the most powerful and 
have a greater possibility of forcing our way in any market than any 
nation ever had in the world ; but the big problem is whether we know 
how to use this power to the mutual advantage of ourselves and 

I think we must restore and assist the British Empire to come back 
and be an associate with us, economically strong, if together we are 
going to deal with the state organizations that will develop in other 
countries and keep peace in the world. We do disturb our British 
friends by exaggeration of figures as to the enormous production 
that we are going to have and our power to go outside and control 
the markets of the world; and therefore she is planning to protect 
her own interests. 

We have to assume a very generous attitude in our apj)roach m 
international relationships, to avoid misunderstanding. 

]Mr. Gamble. I would imagine you have an engineering background 
and I wonder what your factor of safety is. 

Mr. Minor. I think there are plenty. 

Mr. WoKLEY. We hear an awful lot of talk, Mr. Minor, as to what 
this Nation should do in overtures made to other countries, economi- 
cally and otherwise, after this war is over. 

It seems to me that has been largely a one-way road. Don't you 
think that it is to our in