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Shipping Subsidy Program Proposed A\sk for Prompt Action in ARCH 13 may become a date M of great significance in the development of the American merchant marine if the congress enacts shipping legislation to the ex- tent and in the spirit proposed by Secretary Roper in the recommenda- tions he transmitted on that day, with the authority of the President, to Congressman §S. O. Bland, chair- man of the committee on merchant marine, radio and fisheries. In his letter the secretary of commerce summarized as follows the recom- mendations made in a study on ship subsidy policies which had been pre- pared by Director Henry H. Heimann of the shipping board bureau under his supervision: Summary of Recommendations 1. The present system of linking subsidies with the carrying of mail should be abandoned, and in its place specific subsidies granted for the maintenance of essential services should be given. Such subsidies should not be extended to lines in the protected trade. 2. Subsidy contracts should be based on the differentials in building and operating costs, should be sufficiently flexible to permit of equitable readjusi- ments as changes in conditions occur, and should provide for necessary replacements. 3. Subsidies should be _ divided into four classifications: a. Construction differential subsidy. b. Operating differential sub- sidy. ec. Trade penetration subsidy. d. Other conditions bearing on the issue, such as for- eign subsidies, etc. 4. Money for subsidies should be appropriated from general trea- sury funds, and not as at pres- ent, provided indirectly through some other department of: the government. . Subsidies should not be granted to more than one line compet- ing in the same trade route without the business volume justifies it. We, of course would not wish to limit sound competition, but destructive competition should not be aid- ed through subsidies. 6. The preceding proposals con- template uniform cost informa- tion at all times available to the government, and regulatory power over subsidized lines or construction companies. 7. Administration of subsidies. on Subsidies to be recommended through a joint committee of experts, representing govern- ment departments having a di- rect interest in the develop- ment of the merchant marine. It is suggested that a represen- tative of the department of commerce, state, treasury and navy departments would effec- tively coordinate the govern- ment’s interest. The actual ad- ministration of each subsidy contract once entered _ into, however, should rest in the de- partment of commerce. In his letter the secretary also suggested that the new _ subsidy policy should be gradually intro- duced, replacing old subsidy con- tracts in fairness and equity, and if possible, through mutual agreement, to prevent demoralization of the in- dustry. He further recommended that there should be competitive bids on all subsidies; and he ex- pressed the hope that these needed changes may be effectuated through legislation at the present session of the congress. A copy of the secre- tary’s letter was also sent to Sena- tors Hugo il. Black, Duncan —U. Fletcher, and Hubert D. Stephens. The full report giving the details of the proposed ship subsidy policy as determined in the study made by Director Heimann of the shipping board bureau follows: Ship Subsidy Policy ECAUSE American shipbuilding and shipoperating costs are the highest in the world, due to superior standards of living in the United States, continued government aid is necessary in order to offset the com- petitive handicaps encountered by American ships operating in foreign trade. This aid, which should be placed on a more rational basis than the system now in effect, can be given either in the form of (1) preferen- tial treatment by means of tariff or tax exemptions, or (2) by direct subsidies. Preferential Treatment HIS form of aid, used by Great Britain in achieving her mari- time supremacy, and also by the Tinited States in the early days of the republic, is predicated on the contention that in the control of the eargo factor lies the only hove of building up a strong merchant ma- rine, and that direct subsidies do not necessarily mean cargoes. “Tnder the preferential tariff plan, goods imported into the United MARINE REvIEw—April, 1934 Congress States in a ship of alien flag, from a country other than that under whose flag the ship operates, would pay a higher tariff than similar goods imported in an American ship. In the case of the United States, a great importing country, this form of aid would doubtless prove highly ef- ficacious, The shipping act of 1920 earries a provision for preferential tariffs, coupled with a direction to the President to give notice of the abrogation of all reciprocal treaties in conflict therewith. While this is still the law, it has never been put into effect. “Objections offered to the prefer- ential tariff policy rest not so much on any doubt as to its efficacy as upon the fear that such a course would lead to reprisals by other countries, “Another suggestion for aiding American ships by means of prefer- ential treatment involves a gradu- ated tonnage tax which would favor liners operating on fixed schedules, and would thus tend to minimize tramp competition, “Tt is believed that any form of government aid which savors of dis- crimination, real or fancied, would (because of possible international repercussions) prove less desirable than a system of direct subsidies. At the moment such aid could scarcely be initiated nor expected to supplant subsidy payments, Direct Subsidies STUDY of the results of the country’s shipping policy dur- ing the post war period shows that its objectives have been only partial- ly attained. Growing obsolescence of the fleet; inadequate provisions for replacements; the prevalence of wasteful practices throughout the in- dustry; and, in recent’ years, an over-conservatism in the exercise of the government’s regulatory © func- tion are but a few of the causes which have impaired the competitive position of American vessels in the foreign trade. “The development of a more ef- fective subsidy policy must, there- fore, in fairness both to the countrv and the industry, be accompanied by a sound program of rationalization. Desirable amalgamations should be encouraged. A more effective use should be made of conference agree- ments. and of the other broad pow- ers of regulation delegated by con- gress, Better coordination between shipping and other forms of trans- portation, such as rail and inland water carriers, should be brought about, as well as the coordination of 9