2d Session. No. 3273. AMERICAN MERCHANT MARINE IN THE FOREIGN TRADE. DECEMBER 13, 1890.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed. Mr. FARQUHAR, from the Committee on Merchant Marine and Fisheries, submitted the following REPORT: [To accompany S. 3738.] The Committee on Merchant Marine and Fisheries, having had under consideration a substitute for Senate bill 3738, entitled "An act to place the American merchant marine, engaged in the foreign trade, upon an equality with that of other natious," and having concluded to submit the same to the consideration of the House, present the following report, together with letters of the Commissioner of Navigation bearing on the subject. In offering this bill or substitute it is properly assumed that a marine of our own, built, manned, and used by our own people, is a national requirement essential to a fair participation in the trade of the world, indispensable to wise industrial economy of state, and vital to the importance and defense of our country. The patriots who formed our Government deemed a marine of our own as important as the Union itself; and even in 1828, when governmental care was finally given up and discriminating dues and duties were suspended, it was asserted that the free working of shipping reciprocity would not affect our footing on the ocean; but, whatever the supposition was, our equal footing from various causes has been lost, and mainly so from the unfairness of our rivals, whose Governments, since their acceptance of our free shipping policy, have suppressed its spirit, and by subsidies, bounties, subventions, and other agencies have actively aided their people to withstand our competition, to gain advantages, and finally to work the ruin of our ocean traffic. Following, as we do, the statesmanship of the fathers and of the chief European powers, whose care for shipping is increasing year by year, we propose by this bill to restore the lost footing in a practical and speedy way. In the first section the bill provides for navigation bounties for nineteen years, in two periods: First, for ten years at an equal ratio, and second, for nine years at a diminishing rate. The second section confines the payments to vessels in the direct carriage of exports and imports. The third section makes provision for American seamen and looks to increasing their numbers. Section 4 limits the bounty to vessels of the first class, A1 and A14, according to an American standard of inspection approved by the Gov ernment. H. Rep. 1-8 Section 5 provides inducements for building only the best vessels for foreign trade and keeping up their characters by proper repairs. Section 6 makes provision for increasing our defensive power at sea, through the possession of powerful steamers structurally adapted to conversion into auxiliary cruisers or transports for the naval service. In time of peace this class of ships will perform our postal duty. In time of war they will strengthen our naval arm. At all times they will do national service. Section 7 provides for free postal service to foreign countries, without setting up monopolies in that service or discriminating in favor of one port and against another for the departure of ocean mails. The swiftest American steamers out of every port will be at the service of the people in each of the seaboard States. Section 8 makes provision, through the Secretary of the Treasury, for the administration of the law. We would call attention particularly to certain details of the bil. First, as to the distinction made in favor of vessels performing voyages of 1,000 miles and less. These will be mainly to ports in the West Indies, Mexico, and Central America. Over 70 and under 500 miles the bounty will be 10 cents regardless of exact distance sailed. Also, over 500 and under 1,000 miles it will be 20 cents without regard to precise measurement. This adjustment has been carefully tramed, not only to equalize the advantages and facilities of northern and southern ports, but to make sure that the neighboring countries of our continent and its fertile islands may have increased trade with the United States, and especially to secure the gateway of the Gulf ports to the shipping that should hail from them. Second, as to the distinction in favor of steam vessels above 11-knot speed, and the proportioning of payments to speed above that rate, it is intended thereby to induce the building of larger and swifter steamers han now compose our steam marine. And, in fact, without this inducement we could not probably much improve the spe d of cargo steamers, which shall also be mail and passenger ships; because above a rate of about 11 knots the enlargement of power, greater cousumption of fuel, and increase of crew augments rapidly. This may be understood when it is considered that this augmentation is in the ratio of the cube root of the speed. While we have not provided for payments in proportion to this rule, it is believed such approximation has been made as will, with other things affecting the problem, practically secure our object. Third, as to the limit of 7,000 miles, it was deemed the minimum proper to be paid in the original bill, and it may not be sufficient to encourage the building of large sail ships for our Pacific coast grain trade, but the committee have thought it might do to begin with. If insufficient to regain our share of that trade the amount may be increased at a future time. AMOUNT OF BOUNTY UNDER THE SUBSTITUTE BILL. TREASURY DEPARTMENT, BUREAU OF NAVIGATION, SIR: Your request for an estimate of the abatement of bounties that would result from certain changes proposed in your [substitute] bill as it was reported to the House, has had due consideration. SAIL VESSELS. If sailing vessels shall receive but 20 cents a ton, in place of 30 cents as formerly calculated, the abatement would be one-third, or $380,784. Against this amount there is an increase from extending the former limit of 500 tons downward. This increase admits 181 vessels of an aggregate measurement of 63,350 tons. At 20 cents a ton, this increase would sum up to $164,710, leaving a net abatement of $216,074 for sail vessels. STEAMERS. If steamers below 11-knot speed receive but 20 cents a ton, instead of 30 cents, then, as it is unknown how many of them there are and how much tonnage they would aggregate, I will assume this class constitutes 20 per cent. of the whole steam fleet in foreign trade. The abatement would be one-third on this proportion, or on 63 per cent. of the whole amount formerly estimated, which would be $110,483. The extension of limit from 500 tons downward only includes four vessels of 1,842 tons aggregate; these would increase the payment by $12,894, leaving an abatement so far of $97,594. Then, taking the steamers above 11-knot speed, it may be assumed that their rate would be fairly averaged at 13 knots. Indeed, this may be too high, but at this rate, paying 21 cents for 12 knots, 22 cents for 13 knots, and so on up to 30 cents per knot, the average of present fleet at 13 knots and 22 cents therefor would abate the portion of the former estimate, which would remain subject to this reduction 26.66 per cent.; in other words, this part of the abatement would amount to $392,050. Adding the net abatement above of $97,594, we find a total of $489,644 for steam vessels. THE TOTAL ABATEMENT. Adding together the abatements for sail and steam, we find a total of $608, 124. THE TOTAL OF BOUNTIES. As the former estimate was $2,718,004 for both sail and steam the first year, deducting the above abatement we have a total payment of $2,109,880. This shows an average abatement of 22.37 per cent. THE PAYMENTS OF FOLLOWING YEARS. From the foregoing calculations I think a general conclusion may be made that the modifications proposed would abate the payments that I had estimated for the tonnage bill (as reported by your committee and passed by the Senate), during the lifetime of the measure, over 20 per cent., and perhaps 25 per cent., because it is donbtful if so great an abatement will leave encouragement enough to induce the measure of enlargement of the marine that was expected under a bounty of 30 cents a ton per 1,000 miles sailed. RATIO OF BOUNTY TO WHOLE COST OF TRANSPORTATION. As for the ratio of bounty to whole cost of transportation, my former estimate will have to be revised in the light of the modifications proposed. The whole cost of ship transportation includes the interest, insurance, and depreciation of the ship, besides the running expenses while loading, sailing, and discharging. Taking an average of voyages to Europe and to ports around the capes, I found the average ratio of bounty under the reported bill to whole cost of transportation was 12.38 per cent. for sailing ships. Under the modifications proposed this ratio will shrink to 8.25 per cent. In the case of steamers running to ports in the West Indies and Mexico, I found the average ratio of bounty to whole cost of transportation was 10.93 per cent. Under the changes proposed, there being twice as much sail as steam, this ratio would fall to about 3.16 per cent. For the entire marine under bounty and during the term of the bill when steam will be gaining on sail, an average ratio of 8 per cent. may be estimated as a fair approximation. In this connection it may be instructive to examine in a practical way how far the proposed bounty of 20 cents a ton (in place of 30) would go towards equalizing the footing of our sailing ships with those of foreign flags. There is now (or was on the 3d instant), in the harbor of San Francisco, "under charter" and loading grain for Europe, 27 ships of large tonnage. Of these 24 are foreign, 20 being Britishi, 3 Germau, and 1 Norwegian. Ouly three are American, so that foreign flags prevail in the ratio of 9 to 1. The average foreign ship has been thirty-five days in port, the average American ship forty-eight days, or 37 per cent. longer time in waiting. The average rate of freight to the foreign ship is £2 08. 5d., but the average rate to the American ship is only £1 168. 3d., a difference in favor of the foreign ship of 11.51 per cent. The German and Norwegian vessels have full as much advantage as the British. The American ships average a size of 1,878 tons, and will carry 2,689.22 tons gross of grain. As their rate of freight is $8.82 per ton, the average earning of each for the carnage of a cargo will be $23,719. Foreign ships of same size getting 11.51 per cent. more freight-money for the same load, would receive $2,730 in excess of our ships. But there is one of our ships chartered by a British firm, getting only £1 128 6d in contrast with British ships chartered by the same firm getting £2, a dif ference in favor of the British flag amounting to 24.6 per cent. The discrimination against our ships has often been much greater. (See my Report, pages 99 to 104.) In view of this discrimination, existing to-day as for many years past, let us see how much bounty, as an offset, would be paid under the 20-cent provision of the bill now proposed, on ships of 1,878 tons. The bounty would amount to $2,629, as against a discrimination of $2,730, so there would be a shortage of $101 on freight discrimination alone, and nothing for the longer time of waiting for charters, and greater expense of running American vessels. This is exactly the situation with the fleet loading grain at San Francisco to-day. Nine ships foreign to one American chartered and loading, and freights to American ships so discriminative as to drive them out of the trade, which is in the possession of foreign merchants, foreign underwriters, and foreign shipping. It must be evident that our country is gaining nothing by having foreigners to transact our commerce and transport our products; but, rather, every interest of the country is being laid under contribution for the aliment of foreign nations. This condition of our foreign trade has not improved in years past, and never will improve until American ships shall be sustained by American spirit and American law. Very respectfully, yours, Hon. JOHN M. FARQUHAR, Chairman of Committee on Merchant Marine and Fisheries. THE COST ACCOUNT AND RUNNING EXPENSES OF AMERICAN SHIPS. Hon. JOHN M. FARQUHAR, Chairman of Committee on Merchant Marine and Fisheries: SIR: I regret there is not at my command the time and all the figures needed for a full and perfect answer to your inquiries on the economy of shipping, particularly in regard to the proportionate expenses of manning and victualing our vessels in the foreign trade, and I desire to say the main thing lacking in building and running American ships is not cheapness and low wages, but the control of trade and regular employment. The time was when it was competition, but now it is preference-the preference of foreign merchants and alien underwriters-that controls the employment of our ships. Foreigners control our carrying because the operation of our commercial treaties has enabled them to grasp and hold our commerce, and to share among themselves the navigation that is rightfully American. What we may think is American commerce, and should yield employment to our ships in the foreign trade, belongs to merchants and owners of foreign nations, and is preferably insured and protected by foreign underwriters and foreign flags. Without home employment no marine can last. An American marine can not exist on foreign sustenance; and hence dies. If Congress needs to be convinced of the futility of competition for employment of American ships in foreign trade, let it look into history. Take six months of the year 1885, at San Francisco, in the grain trade. During the month of August 12 British but not one Amercian ship was chartered; and for three months, while 27 British and one German ship sailed, not a single American in the trade left the port. For the six months named, on the average for each month of the British fleet awaiting charters, in proportion to vessels disengaged, 45 per cent. got cargoes and 40 per cent. sailed For the same period, of the American fleet awaiting charters, 7.8 per cent. of vessels obtained cargoes and sailed. Of the German vessels, 50 per cent. received charters and 28.1 per cent. sailed. Thus the British flag had a preference over our own in our own port of 5 to 1. Our ships were offering for charters at rates much below the British all the time. In the last week of October British iron ships were asking and receiving 20 per cent. and British wooden ships 5 per cent. more than American vessels could obtain when they did secure engagements. ONE MORE ILLUSTRATION. On the 26th of March, 1886, a fleet of 50 sail lay in San Francisco Harbor for cargoes to Europe. Of 30 American, 14 were chartered and 16 disengaged. Of 19 British, 15 were chartered and only 4 were disengaged. The average American ship had been 177 days in port, and the average British ship only 60 days. The average American ship under charter had been 190 days in port, and the average British ship under charter less than 74 days. The British excess of charter rate, unusually low, only 7.74 per cent., but look at the sacrifice of time. Thus the British ship, inferior in all respects to the American in the trade, but its flag preferred by British merchants, its risk minimized by British underwriters, sailing shorthanded, overloaded, and manned by underpaid sailors, has cast "competition" to the dogs. THE ACCOUNTS OF SHIPPING. The expenditures upon shipping may be considered under two general heads. First, the cost account, the second, the running expenses. To the cost account belong the building or purchase payments, the interest charges, insurance premiums, property taxes, and repairs of maintenance. To the running expenses belong the disbursements of every kind made necessary by using the vessel, the principal of these being grouped under the heads of wages of crew, provisions and stores, stevedore and labor bills, loading and discharging, wharfage, towing, and pilotage, customs and port charges, commissions and inspection fees, together with miscellaneous outlays and ordinary repairs. Whether idle or employed, a vessel is always under expense. Though she may have settled her cost account, it is never closed; for depreciation goes on while she lasts, and she is always under hazard. Of course, all expenditures must be reimbursed from the gross receipts of employment, and there can be no profits while a ship remains in debt. And, as ships are always incurring debts, constant employment at fair freights creates the only chance for profits from their ownership. It follows, then, that the management of shipping calls for an economic care in many things; first, but not most, in building and maintaining; second, but of prime consequence, in paying employment; third, but not subordinate, in swift and safe navigation. With regard to building, much has been said by theorists in favor of "cheap ships "-in other words, inferior ships-but nothing is better known by experienced owners than the false economy of carrying on trade with such vessels. The fault with "cheap ships" is this: They are not durable. Necessarily built of inferior or light materials, with poor workmanship, they last only a short time and frequently need repairs, if not prematurely lost. Durability is really the cheapest property paid for in purchasing vessels. If a ship costing $60 per ton will last thirty years, it would not be good economy to pay $40 per ton for a ship to last only twenty years, though an owner would really pay the same price, namely, $2 per year, for each of them; because if it takes five years for the "cheap" ship and seven and one-half for the best one to get out of debt on cost account, the best ship would have twenty-two and onehalf years, and the "cheap" one only fifteen years for profit earning. Thus the difference in time for profit earning would buy another superior ship. A further discussion of this point may be profitable. SHIPS BUILT ABROAD. The builders of British iron ships, wishing to monopolize the trade, have given it out that American-built ships cost too much, that "economy" requires that building vessels in the United States should cease, and all our shipping be built 3,000 miles away, where it could be cheapest done. This trade-cry has deluded some of our people fond of foreign trade. They think there is fortune in it. Let us see if there be. First. The proposition carries too much private selfishness and goes too far in uational abasement. Shipbuilding can not be given up, because it is a military art of vital consequence to national existence. We might as well be asked to sunder the |