Foreign Relations of the United States Diplomatic Papers, 1934, General, the British Commonwealth, Volume I

588.C1/16

The Chairman of the American Steamship Owners’ Association (McAuliffe) to the Secretary of State

New York, November 14, 1934.
[Received November 15.]

Sir: The American Steamship Owners’ Association respectfully submits the following considerations bearing upon the suggestion that an international conference of shipowners be convened in London to undertake the negotiation and formulation of an agreement providing for a reduction in world tonnage in international trades, a process popularly termed “rationalization of tonnage,” namely:

1. Inasmuch as American ships in their international operations are almost exclusively confined to American foreign trades, the Association’s comments herein have reference only to such trades.

2. Conditions prevailing in world shipping are economically unsatisfactory owing to the world-wide depression and excessive competition; freight rates are unremunerative and there is an excess of ship tonnage over present transportation requirements, in many trades. The result is that the earnings of shipowners throughout the world are inadequate properly to support shipping on a self-sustaining basis.

3. In addition to suffering from low rates and insufficient cargo, American ships have within the past year had their expenses materially increased through increases in costs of fuel, repairs, supplies, labor, etc., in the United States, as substantially eighty-five per cent of the total earnings of American ships are expended in American ports. At the same time there has been no material increase in freight rates.

4. Most of the services in which American ships are operated were established by the Government as essential foreign trade services and were operated for many years by the Shipping Board and Emergency Fleet Corporation at large public expense. American shipowners have been able to take over the services and the ships and to operate them only through the Government aid partly provided by the Merchant Marine Act, 1928.⁶⁶ Without Government aid these services cannot be continued or developed. Unless, therefore, the aid provided by the Merchant Marine Act, 1928, or substituted aid, is continued by the Government, American ships cannot continue to operate in American export and import trades, with possibly a few exceptions, and in no case can there be a replacement of the existing ships.

5. The continued attacks upon American shipowners and Government aid, which have not always correctly stated the facts, have necessarily created a feeling of great distrust and uncertainty in American shipowners as to whether Government aid is to be continued; whether the privately-owned American Merchant Marine is to live and develop, or is to be destroyed, or return is to be made to the more costly experiment of Government ownership and operation.

6. Foreign shipping interests are fully informed as to the present situation of American shipping. There is a strong hope and even expectation on the part of some that the critical attitude towards the American Merchant Marine signals its approaching end in foreign trade. While others recognize the right and necessity of America having a merchant marine adequate to her needs, and are prepared to cooperate with American shipowners in an effort to stabilize competitive conditions, nevertheless the uncertainty which exists as to the future policy of the Government places American shipowners in a position where they can make no definite plans for the future, and hence cannot intelligently enter upon any international negotiations for a correction of existing conditions with any certainty of feeling that any plans made could be carried out or be made effective.

7. Obviously there can be no sound development in American shipping until confidence as to the future is restored by some definite action taken by the Administration, which will make certain that a privately-owned American Merchant Marine is to have the continued and effective support of the Government. This includes a reorganization of the Shipping Board Bureau, or the creation of a new shipping administrative department, on a permanent basis which will enable it to function efficiently. It requires a clear definition of the character of aid to be accorded in the future, which will make clear that American ships are to have such backing of the Government as will assure their successful operation if efficiently and economically managed, and as will provide for adequate replacements. No such result has yet come from the investigations and numerous questionnaires with which American shipowners have been concerned. There is, however, opportunity for this to be accomplished from the present hearings before the Post Office Department and by the Special Interdepartmental Committee now at work, if Government officials concerned with the shipping problem will constructively cooperate with the shipowners to find a basis of sound future operations.

8. It has been suggested that the shipowners of all nations meet in conference and endeavor to find a basis upon which, or a formula by which, there can be arranged by international agreement a proportionate reduction of all ship tonnage in all world trades, thus automatically providing larger cargoes and for increasing the revenues of the ships that continue to operate. The suggestion of certain foreign interests is that compensation be made to laid-up ships from a fund to be collected by the governments of the nations interested, the payments therefrom to be determined and supervised by an international committee of shipowners. Whether this would be effective in attaining desired results it is impossible to say until it has been further developed as to its method of operation. It would require special legislation by Congress to put it in operation here, and, of course, no one can prophesy the attitude of Congress on the proposal. Nevertheless it may be worthy of further preliminary examination with a view to sounding its practical possibilities.

9. To the end that nothing may be left undone which might prove helpful in extricating American and foreign shipping from its present unsatisfactory state, and in order that we may be as helpful as possible to the government in solving the problem which confronts all shipping, our Association is prepared to send representatives to a preliminary conference of a small committee of the International Shipping Conference for the purpose of determining whether an agenda for a full meeting of the International Shipping Conference can be worked out, which will give reasonable promise of rationalizing shipping in world trades and prove acceptable to the governments of the nations concerned. Our Association would make two conditions to such a meeting: (1) that the policy of granting subsidies shall not be considered; and, (2) that the protected trades of the United States shall not be a subject for discussion, for we regard these as matters of national concern alone. If an agenda could be agreed upon, then a later full meeting of the Conference should be planned.

10. It is quite clear, however, that while steps may be taken by American shipping interests to join in the preparation of an agenda, nevertheless agreement to participate in a further conference, to consider the agenda and with a view to accomplishing definite action by the parties to the Conference, cannot be made until American shipowners are advised as to whether they are to have the continued support of the Government in the operation, maintenance and up-building of the American Merchant Marine, and, if so, as to the definite form which such aid is to take, so that uncertainty in this phase of the shipping problem may be removed.

11. Without the firm and certain support of the Government, and without a clear understanding of the character of international arrangement which would be approved by the Government, it would be futile for American shipowners to enter into a general international conference. Nor would it be fair to encourage the shipowners of other nations to take their time for and incur the expense of such a conference unless American shipowners were in position to make a definite commitment if terms satisfactory to them and to the Government could be agreed upon with the foreign interests.

12. For American shipowners to enter into a general international conference on any other basis would place them in an undignified position which would make it impossible to exercise an influence among world shipowners commensurate with the position which America holds among the nations and in world trade.

The American Steamship Owners’ Association views with highest appreciation the splendid efforts which the Secretary of State and his associate officials are making in the negotiation of international trade agreements, and it is confident that if, in the course of such negotiations, opportunity presents for the furtherance of the interests of American shipping advantage thereof will be taken.

We have [etc.]

John McAuliffe

66. 45 Stat. 689.