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American ships in the last 3 years have only carried 20 percent of United States export cargoes, the other 80 percent being carried on the vessels of foreign registry.

And this is in spite of various Government preferences and financial subventions to the American merchant marine.

So to any injured industry who points to encroachment by foreign competition, may we cite the case of American-flag ships which are outsold in the American market 4 to 1 by foreign competitors.

But despite this experience, we urge in the strongest terms possible the continuation, indeed the enhancement of our sound, well-conceived trade policy, based on reciprocity between nations.

The American merchant marine and its 1,000 privately owned vessels has been aptly described as our Nation's fourth arm of defense, and our first arm of commerce.

As servants of both commerce and defense, and as an instrument of our foreign policy, our industry wholeheartedly subscribes to the words in the President's message when he said: "The enactment of this legislation, unweakened by amendments of a kind that would impair its effectiveness, is essential to our national economic interest, to our security, and to our foreign relations. It will provide a powerful force in waging total peace.'

In reviewing the testimony thus far, it would seem clear that the Congress has the simple choice of protecting the job security of 4 million Americans who live off of exports, achieving this according to a proven formula of reciprocity; or to step backward into a volatile system of regionally dictated tariffs to "protect" the job security of only 200,000 workers in "injured" industries.

Mathematically, the weight of evidence is on the side of continuing our present reciprocal tariff program.

Merchant shipping is the servant of world trade. Its usefulness and reliability is heavily dependent upon stability of that trade. An important ingredient in this international exchange is to know whether or not your own country, as well as the country of your trading partners, will keep a checkrein on tariffs.

Even the threat of tariff increases frustrates months and years of trade promotion. And what is true for our customers, the exporters and the importers, is true for us in merchant shipping, namely, that without stability we cannot provide service, and without regular dependable service, at reasonable rates, foreign trade would revert to the law of the jungle.

In no area of merchant shipping is the need for stability more important than in the investment of new vessels. New modern competitive cargo ships built in United States shipyards now cost $10 million, and will replace warbuilt vessels costing an average of only $11 million.

Future planning for replacement of our rapidly aging warbuilt merchant fleet is in no small part dependent upon the kind of framework in which foreign trade of the world is conducted.

At present there is under contract, or in the stage of active planning, some $3 billion worth of new vessels for the American merchant marine.

As much as one-third of this will be paid for out of construction subsidies, appropriated by the Congress. It is inconceivable that Con

gress should on the one hand engage in a joint venture of this proportion with ship operators, and on the other hand consider taking away or detracting from the international agreements that form the framework of the foreign trade these ships will serve.

We recommend favorable action on this legislation.

The CHAIRMAN. Thank you very much.

Mr. DEWEY. Thank you, Senator.

The CHAIRMAN. Are there any questions?

Senator MALONE. You mention subsidies to build ships. What are these subsidies?

Mr. DEWEY. The Merchant Marine Act of 1936, Senator, was passed in an atmosphere of a depleting national asset, namely our merchant marine, and that legislation makes provision for Federal appropriations, to achieve parity, between the cost of constructing a vessel in American shipyards and the cost of constructing an equivalent vessel in foreign shipyards.

In the Tariff Act there is a 50 percent duty on repairs. And we are forbidden by law from buying ships for United States flag operation in foreign shipyards. So in exchange or in compensation for that statutory forbiddance, the Congress made provision that if we are going to have the shipbuilding industry and if we are going to have a ship operating industry, that some sort of dramatic measure must be taken to compensate financially the construction and operating of vessels under the United States flag.

Senator MALONE. Well, now, that 50 percent duty, I didn't understand what you meant by that.

Would you explain it?

Mr. DEWEY. Yes. Any American ship that is repaired in a foreign yard is subject to 50 percent duty under the Tariff Act of 1930. Senator MALONE. You mean when you bring it back to the United States?

Mr. DEWEY. When you bring it back to the United States, your first arrival at the United States, you are assessed a 50 percent duty. Senator MALONE. On the amount of the repairs?

Mr. DEWEY. On the amount of the repairs.

Senator MALONE. Does that make up the difference in cost, would it have?

Mr. DEWEY. I am sorry, Senator, I am not sure I understand that question.

Senator MALONE. What is the difference, say, in Japan and in building a merchant vessel and in the United States, a ship, any ship?

Mr. DEWEY. It varies, of course, between various shipbuilding centers. Japan is a shipbuilding center, as are Holland and England. Senator MALONE. I know that. So I just asked about one of them. Mr. DEWEY. Actually, I am not familiar with the percentage but it is in the neighborhood of between 42 and 44, 45 percent in most shipbuilding centers, that is the differential between constructing an equivalent ship in those centers.

Senator MALONE. It was not far off, any way, was it?

Dr. DEWEY. It is close.

Senator MALONE. Fifty percent was not very far off. I was not aware of that tariff to equalize the difference in costs.

But I say it isn't far off. It could be adjusted.

And it is flexible, that tariff, whatever it is, wasn't it? Can't you hear me?

Mr. DEWEY. Yes, Senator. I am trying to understand. When you say the tariff is flexible, I am not aware that the tariffs on merchant ships

Senator MALONE. All of the tariffs in 1930 were flexible. In other words, the Tariff Commission would adjust them up or down to make the difference in cost.

I was not aware of this tariff, but it could be adjusted to 44, or 40? Mr. DEWEY. As any tariff could be adjusted.

Senator MALONE. Yes; that is right.

Mr. DEWEY. This one could be adjusted, I assume; yes sir.

Senator MALONE. You think the subsidy to make up that diffrence is right and should be continued in the building of a merchant marine? Mr. DEWEY. It matters very little whether I think so or not, Senator. Either you are going to do it or you are not going to have a merchant fleet.

Senator MALONE. I asked you if you thought it was proper, you didn't answer that.

Mr. DEWEY. Well, naturally, I am quite in favor of the program, Senator.

Senator MALONE. That was a very complete answer.

Mr. DEWEY. Thank you.

Senator MALONE. I don't know what motivates Congress I have been here only 12 years and I haven't found out.

You talked about 4 million Americans employed in foreign trade. The Secretary of State estimates four and a half million. You don't differ with him, do you?

Mr. DEWEY. No.

Senator MALONE. Four and a half million would be all right?

Do you know that if you subtract the amount of money that you give these nations each year, we have given them approximately $70 billion since World War II, and subtract the subsidies on the material we export, and the things that we give out, that you are exporting a less percentage in money of your exportable goods today, than you were in 1934 when you passed the act?

Mr. DEWEY. I hadn't rationalized those figures in just the same framework that you had, Senator.

Senator MALONE. It would be a good idea.

Mr. DEWEY. I am keenly aware a large measure of our annual exports consists of foreign aid.

Senator MALONE. In other words, we are putting out the money in billions to buy this trade, and it all comes back to the taxpayer anyway. As a fellow said, whether you stand up in the stirrups or sit down in the saddle, the weight is still on the hoss, you know, and that is the taxpayer.

If that is true, and I wish you would study the table that was put in the testimony when I was cross-examining the Secretary of State Saturday, if you find anything wrong with it when the testimony is printed after certain corrections are made, I wish you would write to me, because I want to know when I am wrong in a matter of computations.

But if I am right about that you do not do away with all our foreign trade if this act expires, you just drop back to the profitable trade, which is all some us want.

And it is all you want. You want the profit yourself, whether it comes from the taxpayers or from some place else, you have to make a profit or you would go out of business, wouldn't you?

Mr. DEWEY. Well, indeed we would.

Senator MALONE. Yes, of course.

Now, you said something about 200,000 men in injured industries. There are 6 million of the boys on the street. Where do you get all these men that are on the street?

Mr. DEWEY. Well, Senator, if there are any statistical evidences that the 6 million unemployed are directly

Senator MALONE. Yes; we have it.

Mr. DEWEY. Are directly related to our reciprocal trade program, I am not aware of it.

Senator MALONE. I know you are not. I could tell from your statement. I am not quarreling with you, I don't want to embarrass you, but there are 243 depressed areas in the United States, practically all of them in areas where they produce things that are now imported cheaper than they can make them.

You would say that would rather connect it, wouldn't you?

Mr. DEWEY. I am sure there are industries, Senator, where importation of low-cost foreign products are causing a burden on the employment figures and sales figure of those companies.

I don't think there can be any denial of that. It is a case of balancing in my mind the plusses and the minuses in a program such as this.

Senator MALONE. Well, there are 6 million unemployed now as against the four and a half supposedly employed in foreign trade who, it is implied, would all be unemployed if you changed this act which, of course, they would not.

Mr. DEWEY. Assuming the premise

Senator MALONE. There are 243 depressed areas. Let me ask you this question. If, in any one depressed area where they produce the things that are being imported, and now they are no longer producing them or producing less, you would say that may have some connection, would you not?

Mr. DEWEY. I would say that had some connection other things being equal, Senator

Senator MALONE. Yes. I don't know what things you are talking about being equal, because the boys working out there with their hands get $18 or $20 a day, and in Japan they get 20 cents an hour. Mr. DEWEY. Well

Senator MALONE. I want to give you just one illustration.

You know titanium, the metal with the very high weight-strength ratio and heat resistance. In that industry the Du Ponts in New Jersey were making about half of what we consumed and the other half was made in Henderson, Nev., about 10 miles out of Las Vegas with Hoover Dam power. They were doing very well, but suddenly about the end of last year they laid off 500 men.

No one knew what happened until they found that there was more titanium produced with American capital in Japan with 22

cent-an-hour labor and imported here than they made at Henderson, so they just no longer needed it.

Do you think then that that is all right? Would you be in favor of the Administration's position which the Secretary of State has testified in favor of a few times here, that we should appropriate money to train these men for other work and pay their way to some other area where they might get another type job?

Mr. DEWEY. Senator, I would say as a trade organization of steamship operators we have not taken a position on that particular problem but will you permit me to say that personally that philosophy does complement the philosophy that lies behind the Merchant Marine Act under which we now have a very fine hard core of good ships but which still carries only 20 percent of our commerce. least it is a nucleus of a fine, fast modern merchant marine. Senator MALONE. Yes.

But at

Mr. DEWEY. Now, if there is an element of common ground in what you have just said and in the philosophy in the Merchant Marine Act so to that extent I would have to

Senator MALONE. I approve of the merchant marine. But, Mr. Dewey, that is the way they do it in Russia except they do not need a constitutional act.

Mr. DEWEY. They sure do not.

Senator MALONE. They just get them up and transfer them to Siberia and if they die it does not make much difference because they don't need them anyway.

Now to skip over some of the things that you are probably not familiar with, would you believe that a fixed price or a tariff or duty as they call it in the Constitution of the United States, that made up the difference in the effective wages and cost of doing business here and in the chief competing nation on any product produced commercially in this country along the lines that you just outlined for the merchant marine, would be proper?

Mr. DEWEY. No, sir, I do not. I would prefer your previous theory, your previous proposition.

Senator MALONE. What?

Mr. DEWEY. I would prefer the previous proposition, to the interim

Senator MALONE. The State Department proposes we retrain the working man to go to other areas and get other jobs.

Mr. DEWEY. Yes.

Senator MALONE. Of course they do not propose what jobs, because almost all industries seem to be trying to compete with imports.

You think about reciprocity. Do you know what it costs to get an American automobile into England, for example?

Mr. DEWEY. Senator, I think I would only have that knowledge if I were engaged in that particular kind of business.

Senator MALONE. I am about to tell you. It costs about 55 percent of the price of the automobile, so there is not much reciprocity and I won't try to question you on this.

Mr. DEWEY. Actually, Senator, I think you and I are talking about the things that are the subject for the people whose industries are involved and for the Tariff Commission who has expertise in these matters. Actually you and I might wind up agreeing on all kinds of

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