purpose of replacement of subsidized vessels and fulfilling the objectives of the Merchant Marine Act, 1936.

With respect to the specific cost items which are subsidized, section 603 (b), Merchant Marine Act, 1936, reads in part as follows:

"Such contract shall provide that the amount of the operating-differential subsidy shall not exceed the excess of the fair and reasonable cost of insurance, maintenance, repairs not compensated by insurance, wages and subsistence of officers and crews, and any other items of expense in which the Commission shall find and determine that the applicant is at a substantial disadvantage in competition with vessels of the foreign country * * *."

The following table shows the breakdown on items of subsidizable expense for the year 1957, the latest figures available:

With respect to the question concerning the increase in subsidy cost, no such figures are available from the year 1930, which was the date mentioned at the hearings. The implementation of the Merchant Marine Act of 1936 was well underway by 1938, but the war interfered with the obtaining of accurate data useful for evaluation purposes on this subject; therefore, in the following table I have shown data from the immediate postwar years to the present.

With respect to the question concerning the percentage of operating cost represented by subsidy, figures for the year 1956, the latest available, show that the subsidy payable amounted to 19.3 percent of the total operating expenses of all subsidized steamship lines.

As I interpret the request of the chairman for information concerning these various subsidies, as to what type of vessels to which they are given, I feel that the following information, in addition to the above, with respect to the construction-differential payments which go to the shipyard, will be helpful:

Section 501 (a), Merchant Marine Act, 1936, in part, reads as follows: "Any citizen of the United States may make application to the Commission for a construction-differential subsidy to aid in the construction of a new vessel to be used in the foreign commerce of the United States. No such application shall be approved by the Commission unless it determines that (1) the plans and specifications call for a new vessel which will meet the requirements of the foreign commerce of the United States, will aid in the promotion and development of such commerce, and be suitable for use by the United States for national-defense or military purposes in time of war or national emergency;" Section 501 (b) and (c), in part, reads as follows:

"(b) The Commission shall submit the plans and specifications for the proposed vessel to the Navy Department for examination thereof and suggestions for such changes therein as may be deemed necessary or proper in order that such vessel shall be suitable for economical and speedy conversion into a naval or military auxiliary, or otherwise suitable for the use of the United States Govern

27629-58-pt. 1-30

ment in time of war or national emergency. If the Secretary of the Navy approves such plans and specifications as submitted, or as modified, in accordance with the provisions of this subsection, he shall certify such approval to the Commission.

"(c) Any citizen of the United States may make application to the Commission for a construction-differential subsidy to aid in reconstructing or reconditioning any vessel that is to be used in the foreign commerce of the United States."

Section 502 (b) states that the Commission may approve an allowance not to exceed 50 percent of such cost. Thus, Congress has provided that the construction-differential subsidy payable to the shipyard may not exceed 50 percent of the cost of the vessel, less the cost of defense features.

I was also asked to indicate the source of employment statistics contained in my statement.

1. The source of these data is the staff papers presented to the Commission on Foreign Economic Policy, commonly referred to as the Randall Commission (pp. 373 through 384). The figures were developed by the Department of Agriculture and the Department of Labor in 1954, and the breakdown at that time showed :

Using the same formula, in 1958, this total figure increased to 41⁄2 million employees.

2. The reference to the job security of 200,000 employees is an estimate of the number of United States employees producing goods equivalent to the estimated increase in imports which would take place in the event of a temporary suspension of tariffs. I understand that the Bureau of Labor Statistics, Department of Labor, agrees with this estimate.

Again I want to thank the committee for the courtesy extended to me in the presentation of our testimony supporting an extension of the Trade Agreements

Act.

Very truly yours,

Senator JENNER. Where do they travel?

RALPH B. DEWEY, President.

Mr. DEWEY. They operate from the Pacific coast to all ports of the world.

Senator JENNER. All right. Will you tell this committee what percentage of the total national productivity of this Nation is going in the export trade of this country?

Mr. DEWEY. The total national productivity?

Senator JENNER. Yes; what percentage of our total economy goes into export trade?

Mr. DEWEY. I am informed from the Department of Commerce figures that about 10 percent of the movable production of the United States enters into export.

Senator JENNER. About 10 percent. That is the total productivity of this United States?

Mr. DEWEY. Senator, I am not completely familiar with that figure, but I guess it is over $400 billion a year.

Senator JENNER. What would 10 percent of 400 billion be?

Mr. DEWEY. Forty billion.

Senator JENNER. Forty billion dollars. Do you know what percent of that is in trade with Canada?

Mr. DEWEY. I am not familiar with that figure.

T

Senator JENNER. Do you know what percent of it is in trade with South America?

Mr. DEWEY. No, sir.

Senator JENNER. You must be acquainted with what percentage of it is in trade in the Pacific.

Mr. DEWEY. I am not acquainted with it.

Senator JENNER. How do you expect the committee to intelligently act without information?

Mr. DEWEY. I had not prepared my testimony in the direction in which you have been interrogating.

Senator JENNER. Mr. Chairman, I do not care to go on and bother this witness but I just think we are going to have some information here before we can act.

The CHAIRMAN. I will say if the Senator prepares a list of questions we will submit them to the State Department and ask them to furnish the information.

Senator JENNER. The State Department?

Well, they are the ones putting out this stuff. I would just get the same answer back.

Senator LONG. Mr. Chairman, may I just ask 1 or 2 questions? The CHAIRMAN. Senator Long.

Senator LONG. If you people were permitted to buy your ships wherever you could buy them most cheaply you would not be asking for a construction subsidy; would you?

Mr. DEWEY. No.

Senator LONG. If you were permitted to hire your labor where you could hire it most cheaply you would not be asking for subsidies on labor; would you?

Mr. DEWEY. We would not, and to answer the question further, it is on record that among monopolized American shipowners who cannot pay the American wages are using foreign flags and those ships have now left our merchant marine.

Senator LONG. If you were permitted to repair your ships wherever you can repair them as at the lowest costs you would not be asking for a subsidy?

Mr. DEWEY. No, sir.

Senator LONG. Actually, you want subsidies whenever Congress passes laws that you must pay for a high-cost product?

Mr. DEWEY. Yes; indeed.

Senator LONG. You say you cannot compete if forced by law to buy a high-cost product?

Mr. DEWEY. That is it exactly.

Senator LONG. That involves buying ships made in American yards, hiring American labor, repairing ships in American yards and buying the insurance Congress tells you to buy.

You are being subsidized in those areas?

Mr. DEWEY. That is correct. Those elements where we are being forestalled from going into other than American markets.

Senator LONG. Congress was willing to protect 20 percent of the American market for your industry, and foreigners control the other 80 percent.

Mr. DEWEY. That is the way it works out.

Senator LONG. Congress did this by means of subsidy rather than by tariffs?

Mr. DEWEY. Yes; well the tariff was-the subsidy was in an attempt to compensate for the tariff, Senator. I suppose it had a choice of reducing the tariff or going into the subsidy program.

Senator LONG. The same situation existed in the sugar industry; did it not?

Mr. DEWEY. There could be a parallel drawn there.

Senator LONG. A similar situation, that is, with regard to subsidizing, because it involves both tariff and subsidy.

Mr. DEWEY. There are elements that are common.
Senator LONG. Tariffs, subsidies, and quotas.

Mr. DEWEY. I am not sufficiently familiar with that situation. Senator LONG. As far as your industry is concerned the situation involves a determination by Congress and the executive that this Nation must have ships under American control, American shipyards and trained American seamen for our defense. Therefore, the level of American maritime traffic is based on those defense considerations; is it not?

Mr. DEWEY. They are to a large extent, but of course the Merchant Marine Act is designed to serve the commerce of the Nation with ships operating in those routes that are essential to the commerce of the Nation.

So that everything you say is precisely true and you have said it just right, Senator. But I must add that the whole philosophy behind it is that in addition to providing a nucleus in the event of an emergency (and we can cite chapter and verse where this has paid handsomely) in addition to that it is designed to guarantee the export-import business of the country some measure of stability and continuity. Senator LONG. Someone they can count on?

Mr. DEWEY. Yes, sir.

Senator LONG. Thank you very much.

Mr. DEWEY. Thank you, Senator.

Senator MALONE. Mr. Chairman, concerning that 50-percent tariff on a ship: When you build a ship in Japan or Germany or some place you pay that 50 percent when you bring it back to the United States, and go under the flag; is that it?

Mr. DEWEY. And you would not pay it of course-you could notSenator MALONE. When they passed that act that was for the purpose of equalizing the costs?

Mr. DEWEY. When they pasesd the Merchant Marine Act, Senator?
Senator MALONE. No, when they passed this 50-percent tariff?
Mr. DEWEY. For the purpose of equalizing-

Senator MALONE. The cost of construction.

Mr. DEWEY. I am not sure what the differentials were at the time. I can only assume it was inherent in the thing.

Senator MALONE. Of course. It seems to me that what Congress did was to build you a glass house and you just never took a look at it before you came back here complaining about everything else and I want to join the Senator from Indiana in every word he said.

In the first place, we have gotten so far away from the Constitution of the United States that we utterly disregard it. Everyone assumes when they come here this act is going to be extended, so their attitude

is: How can I get some kind of special consideration for my business? Everybody wants to come in and get a little piece of it assuming this is going to go on.

Now my personal opinion is that if the people of the United States ever break this sound barrier on the Potomac through which no public sentiment ever penetrates, if they ever fully realize what Congress has done to them in the last 24 years, they will move on this place. They won't even wait for an election, and they will take everybody out of the play who testifies as you have.

We think, I believe, that we should have a merchant marine.

Mr. DEWEY. I know you do because you have supported it on many occasions.

Senator MALONE. But I don't believe you should complain about protection for the American workingman and investor to the extent of difference in wages here and abroad but that is exactly what you are doing.

Mr. DEWEY. Well, it may be what we are getting but to suggest that I complained that others might get it, Senator, is distorting my testimony.

Senator MALONE. Well, you are complaining. You are trying to extend an act that destroys business. We have got 6 million men on the counter now who are on social security or State help who are getting hungry out there, and you are talking about 200,000.

Mr. Chairman, this witness just happened to get caught in the vise here, but I just hope there are more Senators who begin to think of this thing as a violation of the Constitution of the United States. That is what it is, and there can be no doubt about it. It has never been before the Supreme Court. Attempts have been made to get there and it may finally reach there, like the NRA did. But there is no doubt that it is unconstitutional when a President of the United States, as Mr. Dulles, Secretary of State, admitted, can trade a part or all of any industry to foreign nations if he believes that it will further his foreign policy, and the 36 foreign competitive nations that make up the GATT it has been established by Mr. Dulles do not have to keep their share of the agreements as long as they can show they are short of dollar balances.

Senator JENNER. I have been short all my life.

Haven't you?

Senator MALONE. That is right.

I am going to complete this statement and it is not going to take very long.

I was not here when they voted unanimously

The CHAIRMAN. If the Senator will yield the Chair wants to recess the hearing until 2: 30, if that suits the Senator.

Senator MALONE. You can recess.

Senator DOUGLAS. Mr. Chairman, I will not be here this afternon, so I would like to make this statement on behalf of Mr. Masaoka.

He was a member of the famous 42d Combat Team of Americans of Japanese descent which served with such great credit in World War II.

These men indeed served under something of a popular cloud, and they made a record which I think has been unsurpassed in the history of the American military forces.