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Since the Soviet Union wishes to buy Russia is in default on loans to the United wheat from us, it puts us in a favorable States including its lend-lease debt.
[From the New York (N.Y.) Times, bargaining position. By all means, we Attorney General Robert F. Kennedy has
Oct. 13, 1963) should go ahead with the deal, but our given the green light to the loans, calling
NEGOTIATIONS DUE TODAY approach should be very conscious of its them a short-term credit arranged by grain essentially political character. traders with private banks. Twice before
WASHINGTON, October 22.-A Soviet trade
delegation will meet with Government offithe Justice Department has made such a
cials tomorrow to discuss conditions for the ruling, Homer Cummings in 1934 and last [From the New York (N.Y.) Journal
sale of $250 million worth of American wheat year, holding such credits were only short American, Oct. 30, 1963)
and flour to the Soviet Union. term or a postponement of payment and thus
The four-man mission was on the way from UNITED STATES PRESSURES BANKS FOR CUT not strictly loans. RATE RUSSIAN WHEAT LOAN
New York by automobile. Meanwhile, SecreWHY NOT GOLD FOR WHEAT?
tary of Commerce Luther H. Hodges dismissed (By Leslie Gould)
The question of any wheat sale to the the idea that American shipping rates were American banks are being pressured by Communists is debatable, but the financing
a threat to the sale. Rates of U.S. cargo Washington to finance the controversial $250 of such a deal at interest rates cheaper than
ships run about $10 above those of foreign million sale of surplus wheat to Russia at those for prime borrowers at home is ridic
vessels. interest rates below those charged prime ulous.
Mr. Hodges told a news conference his Deborrowers in the United States.
Russia needs the wheat, as do most of the partment had received “a half-dozen appliThe wheat, which has cost American tax Communist countries. Poland, Hungary, and cations for export licenses, but none of them payers through the farm subsidy around Czechoslovakia are others seeking grain- have completely met all the specifications." $2.36 a bushel, is to be sold to the Commu about $60 million worth. Yugoslavia also
President Kennedy has stipulated that nists at the world price, which is approxi- wants grain. The President laid certain re wheat to Russia must be carried on U.S. mately $1.80 a bushel.
strictions as to the Russian deal-shipments ships as available, with foreign shipping in In dollars this subsidy is $56 to $84 mil to be in American vessels and delivery only a supplementary capacity. lion, depending on whether the Russians to eastern Communist nations-none to Red
"We don't think the Hungarians have take 100 or 150 milion bushels. China or Cuba.
pulled out completely," Mr. Hodges said. The Export-Import Bank, backed by the Russia has gold and the United States,
"They're taking a second look." U.S. State and the Agriculture Departments, through its generosity, has been losing it. Mr. Hodges also mentioned Czechoslovakia wants a 5-percent interest rate on the financ- So, if the Russians want the wheat let them in regard to export licenses. Bulgaria has ing, with five-eighths of 1 percent going to pay for it in gold.
also expressed an interest in purchasing the Export-Import Bank as a fee for guaran
American wheat. The three Soviet satellite teeing the loan.
nations had approached Secretary of State [From the New York (N.Y.) Times,
Dean Rusk in New York.
Oct. 23, 1963]
Mr. Hodges said he believed there were This leave 436 percent as the interest to be WHEAT DEAL MAY RAISE PRICE OF FLOUR enough American ships to handle the shipreceived by the American banks extending
(By Philip Shabecoff)
ment sought by the Russians. But he conthe credit. This is lower than the current
Because of Soviet operations in the inter
ceded it was possible that some foreign vesprime rate of 412 percent to commercial borrowers.
national wheat market, American housewives sels would be used. The prime rate actually is higher than 412
soon may be spending more on flour used in
[From the New York (N.Y.) Times, Oct. 18, percent, for banks normally require about There should be no immediate change in
1963] 20 percent of such loans to remain on dethe price of store-bought bread, however.
FIVE-PERCENT LOAN RATE SET ON SOVIET posit. This makes the interest cost 5.6 per
Several major flour millers, including Gen
WHEAT-EXPORT BANK TO GUARANTEE DEAL cent for the 80 percent of the amount boreral Mills, Pillsbury, and the International
FOR FIVE-EIGHTHS OF 1 PERCENT CHARGE rowed that is used.
Milling Co., said last week they were raising The Export-Import Bank originally pro- the price of family flour by 40 cents a hun
(By Philip Shabecoff) posed the banks get 444 percent with the dredweight. Yesterday a group of Texas flour
The Export-Import Bank of Washington Export-Import Bank charging three-fourths
has fixed the terms on which it will guaranmills announced a similar increase. of 1 percent as its fee. Its latest proposal
tee loans to the Soviet Union for the pur
This probably means that the price of a reduced its fee to five-eighths of 1 percent. 5-pound bag of flour on supermarket shelves
chase of U.S. wheat, according to a leading A more realistic charge would be one-half of
bank in Chicago. now costing 59 cents will go up 2 cents when 1 percent. the new milling rates take effect.
A spokesman for the Chicago bank, which
declined to be identified, said the ExportRUSSIANS PAY CASH, GOLD In addition the price of bulk flour sold to
Import Bank would charge five-eighths of The Canadians, who have long dealt with bread producers has risen by as much as
1 percent to guarantee loans made to the the Communist nations, selling wheat to Red 60 cents a hundredweight since the end of
Russians by commercial banks in this August. China and trading with Castro's Cuba, were
FUTURES GO UP to charge the Russians 512 percent for the
Commercial banks would be expected to financing of a just completed $500 million Millers agreed that Soviet wheat operations charge an interest rate of a maximum of 438 wheat purchase. The American order, which were chiefly responsible for the rising price percent, the spokesman said. Thus, the efis still under negotiation, is for half the of flour. Wheat futures prices began rising fective rate to the Soviet Union would be Canadian sale.
when the Soviet Union purchased $500 mil 5 percent. The Russians felt the 51/2-percent interest lion worth of wheat from Canada in Sep
The guarantee by the Export-Import Bank too high, so they are paying the Canadians tember.
would be made to the commercial banks, in cash and gold.
The price increase accelerated when it was
and the banks would make the loan to the When the American deal was announced, learned that the Russians would seek about grain traders rather than to the Russians. it was indicated that payment would be for 4 million tons of wheat in the United States.
COST TO BE PASSED ON cash and gold plus some short-term financ On the key Hard wheat futures market in
However, the traders would then pass on ing. The Export-Import Bank, which gets Kansas City, Mo., for example, the price of
the full cost of the loan to the Soviet buyits money from the American taxpayers, via a bushel of Hard wheat for December delivery
ers. the U.s. Treasury, apparently is pulling for stood at $1.9714 August 30. On Monday it Therefore, the Russians will, in effect, the extension of credit to the Russians. was $2.13.
be paying the 438 percent to the commercial The millers, who operate on extremely thin banks and the five-eighths of a percent to SKIRTS U.S. STATUTES margins, were forced to reflect the rise in
the Government agency. This, if not directly violating the American wheat futures in their own prices, an official The terms envisioned by the U.S. export policy and law, skirts it. There are two ques- of a large mill said.
financing agency reportedly call for a 25tions, aside from political and moral ones. In the case of family flour sold for home percent cash downpayment with the reThese are:
baking, some of the increase may be passed mainder paid in three equal installments The 1961 Agriculture Act in which Con- on to the customer.
over an 18-month period. gress spelled out as policy that subsidized Bread prices are not sensitive to changes L. M. Matveev, president of Exportkhleb, commodities be sold only to "friendly” na- in flour prices.
the Soviet state grain trading agency, has tions. Communist Russia is a declared If wheat futures continue to rise, a miller declared that the Soviet Union would not enemy.
said, there will be a further increase in the pay more than 5 percent interest in its proThe Johnson Act of 1934 which bars loans price of flour. This is unlikely, he added, posed purchase of 4 million bushels of U.S. to a country in default on its loans to the because the Government has said it will sell wheat. United States. The law, sponsored by the wheat stored in bins of the Federal com. Harold F. Linder, president and chairman late Senator Hiram Johnson, of California, modity Credit Corporation to dealers at the of the Export-Import Bank, would not conforbids any person in the United States “to statutory minimum price 105 percent of firm or deny the reports when reached by make any loan to such foreign government.” the support price.
telephone last night. He said such data
on its operations were a confidential matter ship owners' to move wheat to the Soviet It's well to remember, too, that if and as between the Government agency and the Union. The tramp ship operators, whose U.S. grain eventually begins to move to commercial banks and were never made unscheduled vessels ply between any ports Russia, any deals made will be subject to public.
where cargo is available, recently reduced various provisos. It's not clear what all of NORMAL GUARANTEE their rate by $5 from $26 a ton.
them will be. For example, the Presidential Mr. Linder added, however, that "it would
Presumably, the remainder of the wheat declaration left the key question of credit be perfectly normal for us to guarantee all purchase, 70 to 80 percent, would be car very murky. Sales were to be for cash, but or part of a credit for an export transaction ried by foreign vessels at the world charter they were also to be on normal commercial of this nature. We would do the same for rate of about $12.50 a ton. This amount of terms; and the latter phrase means 18 France and Switzerland, for example." wheat would be paid for through normal months credit. No one has yet explained
where the credit is coming from. He explained that the agency normally commercial credits of about 18 months. worked out reasonable risks, and consulted The $18-a-ton figure was said to have been
PROBLEM IN SHIPPING with the banks on money-market conditions worked out with American tramp ship own
Another Presidential proviso applies to before settling on a rate for its guarantee. ers, whose vessels are regarded as most suit
shipping. Mr. Kennedy has laid it down that Mr. Linder reiterated that an agency guar
able by wheat shippers, at an unannounced antee on the Soviet wheat sale would fall
meeting earlier this week in New York. It half of any wheat sold to the Soviets in into the "normal" commercial channels spec was understood that ship representatives the grain trade will have to travel in Amerified by President Kennedy in his announceand officials of the Commerce Department ican-flag ships. But, as exporters know well,
there's a practical difficulty over shipping as ment 2 weeks ago. had agreed that ships or tankers of larger
well as over credit. American-flag ships are The Export-Import Bank has never before capacities--16,000
tons—could to 20,000
high-cost carriers, certainly higher cost than guaranteed a commercial credit to the Soviet handle nearly 720,000 tons of the wheat.
Soviet-flag ships, whose crews are paid in Union, Mr. Linder said.
Later, it was said, one other shipping line
rubles or zlotys. Besides, much Soviet shipGrain trade circles were aware of the rehad offered to handle 200,000 more tons. This
ping was acquired for no cash cost, but by ported proposal to guarantee the credit to would put the amount of wheat to go in
bartering oil with Greek shipowners and with the Soviet Union by yesterday evening. American vessels at 920,000 tons, or about 23
Scandinavian, Italian, German, and Japanese Most traders expressed surprise that the percent of the projected total shipments.
shipbuilders. Government would pave the way for the ex
A survey by shipowners and Government
On the face of it, this Kennedy formula to tension of credit in the sale of wheat to
officials indicated that the 23 percent was Russia. about all that could be carried by the U.S.- protect U.S. shipping and maritime jobs is
popular “If the Russians can't get credit they will flag ships now available.
(So, for that matter, is the decision to let pay for the wheat in cash,” one grain mer
A division of the shipment
private business handle any deals made.) chant said. "We would be quite happy to U.S. and foreign-flag vessels has been re
The conflict arises from the fact that private settle for cash,” he added. garded as the most likely solution. If ac
business, of whatever nationality, prefers According to the Chicago bank, other naceptable to the Russians, the Maritime Ad
not to ship in American bottoms because ministration will set tions in the Communist bloc of Eastern
they cost more than foreign-flag shipping. Europe would be granted the same terms as U.S. shippers. In effect, the guideline would
There's only one basis on which we could those extended to the Soviet Union. be a ceiling rate of $18 a ton.
hope to stick Russia for the high cost of The Soviet Union is ineligible for long
COMMERCE GRANTS LICENSE
American freight-if Russia were too desterm loans from the United States under If the rate quoted by a shipowner to a perate to bargain. But the Financial Post the terms of the Johnson Act, which pro- private grain trader who negotiates a sale of Toronto has already confirmed the aphibits such loans to nations with debts in to the Russians falls within the $18-a-ton prehension expressed in this column on default.
schedule, the Maritime Administration would September 30 that Russia was buying more Meanwhile, the grain trade is still await certify the ship as available. The Depart in Canada than she really needs: first, to ing the arrival of the Soviet trade delegation ment of Commerce then could issue an ex
corner the market there and freeze China to negotiate the sale. On Wednesday it port license for the sale.
out; and second, in order to resell Canawas reported the delegation would arrive
There was speculation in trading circles dian grain to Cuba, to the European satelyesterday. Their arrival, however, apparently on what concessions would be made to ship- lites, and to our own friends and allies in has been postponed.
owners for meeting the $18 rate. It is known free Europe. The delegation already has been granted that in the first meeting here of shipowners
SATELLITES PULL BACK visas to enter the United States. with the Maritime Administration last week
Obviously, this isn't a desperate move; it's the shippers sought a 10-percent increase
a smart one and part and parcel of the smart [From the New York (N.Y.) Times, Nov. 3, in rates for shipments of surplus agricultural
move Russia has made in Canada is the 1963] products under foreign aid programs.
right she has reserved to move her purchases UNITED STATES GIVES SOVIET COMPROMISE PLAN
Under Federal law, 50 percent of foreign in ships of her own choice. She can charter for WHEAT RATES_SUGGESTS PROVIDING VESaid shipments must be made in U.S. ships.
all that she wants in the world market well SELS FOR 20 TO 30 PERCENT OF GRAIN AT A This requirement would not apply to the
under the cost of American-flag freighters. COST OF $18 A TON-RUSSIANS WEIGH OFproposed sale of wheat to the Soviet Union
Now the satellites, who've really been bidding FER--APPROVAL WILL END DEADLOCK-BULbecause it would be made by commercial
for our grain, are pulling back because AmerGARIA MAY PURCHASE 8 MILLION IN TOBACCO companies.
ican-flag shipping costs too much.
In the world as it exists today, a great been no adjustment of foreign aid shipWASHINGTON, November 2.—The United ment rates since 1957, and that since then
power without a competitive merchant marStates has moved to break the impasse on
ine-or without a policy for getting one their costs, including labor, had risen.
is economically disarmed. For whatever its shipping rates that has blocked sales of The division of the wheat shipments would other values or volume may stagnate or dewheat to the Soviet Union. also placate foreign maritime nations. Sev
cline, traffic on the high seas is going to A new proposal, which the Russians are eral countries have informally protested increase. understood to be considering over the week that the American-bottoms condition laid end, would involve concessions by both sides. down by President Kennedy was discrim: competitive
thrust of European and Japanese
Partly, this will be due to the sharper It includes a lowered U.S. cargo rate and a inatory and contrary to U.S. endorsement industry, which must export to prosper and, division of some $250 million worth of wheat of free trade principles.
indeed, to live. But partly it is due to the between American and foreign-flag vessels.
expansive drive of the Soviet economy to The sale of up to 4 million tons of wheat [From the Chicago Tribune, Oct. 29, 1963)
penetrate the markets of the world and inhas been blocked because U.S. cargo sched
SOVIET WHEAT SALE DETAILS GROW MURKY fluence the economies of our allies and ules have been $10 to $13 or more higher
(By Eliot Janeway)
friends. One of the ways the Soviets have than foreign charter charges for shipments to Black Sea and Baltic ports.
NEW YORK, October 27.-American achieve
made themselves competitive internationments in the field of foreign affairs have an President Kennedy stipulated that wheat
ally has been by building up their merchant sold to the Soviet Union and its satellites odd way of beginning solid and defined, marine. should be carried in American vessels, as and then growing mistier and mistier. Now
ONLY BY GOVERNMENT available, supplemented by foreign ships.
our sale of grain to the Soviets seems to be There's nothing any private person or
turning from an accomplished fact to a more group can do to make American shipping A $21 RATE WAS OFFERED
tentative accommodation, almost as if it competitive with the fleets which sail under It is understood that the United States is dealt with technicians who were to be the flags of more benevolently realistic govwilling to provide a cargo rate of $18 a ton shipped out of Cuba, not wheat to be shipped ernments. It can only be done by governif 20 to 30 percent of the wheat is carried out of Great Lakes and gulf ports. President ment. in American vessels. Payments for this Kennedy, indeed, has already thought it wise of this point, John F. Kennedy could do amount would be in dollars or gold.
to drop a hint, in his speech at the Univer worse than look back on the most successful The $18-a-ton rate compares with the $21 sity of Maine, about the possibility of Russia single tour of duty in the governmental a ton recently offered by a group of tramp spurning our offer to sell grain.
career of his father, Joseph P. Kennedy. In
the fateful period of transition between (From the New York (N.Y.) Times, Oct. One noted this week that foreign ship rates the New Deal and crisis years, Joe Kennedy
began to rise when they bought $500 million recognized the need for a Government ship- WHEAT SHIP RATES VEX WHITE HOUSE-RUS- in wheat from Canada last month and rose ping operation and he became Roosevelt's
SIANS BALK, DECLARING FEES ARE DISCRIMI- further when the American-Soviet negotiamaritime administrator. Today, we need a
tions became known. This could mean, he shipping policy and a tough-minded admin
(By William M. Blair)
said, "that the gap will be narrowed to the istrator just as much as we did in 1937.
point where the whole thing becomes WASHINGTON, October 26.-President Ken
academic." [From the Washington (D.C.) Evening Star, nedy is caught in a political dilemma be
NEXT STEP UP TO SOVIET
cause the Soviet Union sought and got as
surances that American ships would be avail He said the next step was for a Soviet SHIPPING BIG OBSTACLE TO SOVIET WHEAT DEAL able to carry wheat to Russia.
grain team, due here from Canada, to begin (By Eliot Janeway)
Now the Russians are balking, at what negotiations with private American grain NEW YORK.-American achievements in they regard as discriminatory American merchants. The shipping rates, however, the field of foreign affairs have an odd way shipping rates, which are higher than the appear to make necessary further meetings of beginning as solid and defined, and then rates of foreign-flag vessels.
by the Russians and Government officials. growing mistier and mistier. Now our sale A breakdown in the wheat deal would serve
The administration is fully aware that the of grain to the Soviets seems to be turning to harden Republican criticism and that of Russians could buy wheat elsewhere. One from an accomplished fact to a more tenta anti-Communists of both parties, and would report current here is that the Russians are tive accommodation, almost as if it dealt bring on more criticism for trading with the seeking more wheat from Canada. It is also with "technicians” who were to be shipped enemy.
known that they have been watching the out of Cuba, not wheat to be shipped out of It could make the deal a major issue in Argentine wheat crop, which will be harGreat Lakes and gulf ports. President Ken the 1964 elections and could be particularly vested later this year. nedy, indeed, has already thought it wise to damaging if Soviet-American relations took The President, however, is understood to drop a hint, in his speech at the University a sudden turn for the worse, making it ap
be firm for a large wheat deal. Anything less of Maine, about the possibility of Russia pear that Mr. Kennedy had been taken in by would be embarrassing after his strong apspurning our offer to sell grain. the Russians.
proval of the sale. It's well to remember too that if and as Authoritative sources say that the Rus The sale conditions stipulated that the U.S. grain eventually begins to move to sians first broached the use of U.S. ships for
wheat should be carried in American vessels Russia, any deals made will be sub the $250 million worth of wheat they want if they are available. The maritime adminject to various provisos. It's not clear what to buy. They asked for assurances that U.S. istrator said that the meeting with the ship all of them will be. For example, the Presi vessels would be available and that ship- companies produced the information that dential declaration left the key question of ments would not be jeopardized by domestic
enough American ships were physically availcredit very murky. Sales were to be for cash, problems, such as port facilities or strikes. able to move the wheat, "but if the rates but they were also to be on normal com The administration gave the assurances
are not satisfactory, the ships will not be mercial terms; and the latter phrase means in the informal diplomatic talks held 242 available." 18 months credit. No one has yet explained weeks ago, when it got its first direct word
In such a situation, the Maritime Adminwhere the credit is coming from.
that the Russians wanted to buy wheat and istration could certify that American shipAnother Presidential proviso applies to other commodities.
ping was not available and foreign bottoms shipping. Mr. Kennedy has laid it down that
The talks led to an agreement that the could be used at lower rates. half of any wheat sold to the Soviets in the Russians would obtain the use of American
He also said that the “Government isn't grain trade will have to travel in American- ships.
going to ask ship owners to ship below cost.” flag ships. But, as exporters know well,
CRITICIZED BY REPUBLICANS
But to permit the use of foreign-flag vessels there's a practical difficulty over shipping as
Some officials conjectured that the Rus
to move the bulk of the wheat could have well as over credit. American-flag ships are
far-reaching political effects. Wheat is politsians did not realize at the time that the high-cost carriers. rates of American-flag vessels then were
ically sensitive as a symbol of American On the face of it, the Kennedy formula some $12 a ton higher than charges by for
agriculture's ability to produce and as a to protect U.S. shipping and U.S. maritime
food to feed the world's hungry. eign-flag ships for cargo to Baltic and Black jobs is popular. So, for that matter, is the
Sea ports. decision to let private business handle any
other officials, however, doubted that the
[From the Baltimore (Md.) Sun, Oct. 28, deals made. The conflict arises from the fact Russians had been unaware of the higher
1963) that private business, of whatever nation
American charges. They stated that the WHEAT SALE TO RUSSIANS IS SNARLEDality, prefers not to ship in American bot
Russians had long been exporting and that KHRUSHCHEV'S THREAT ON SHIPPING IS No toms because they cost more than foreign- they would likely have been informed of the SURPRISE TO UNITED STATES flag shipping. rates for all kinds of shipping.
WASHINGTON, October 27.-Soviet Premier The Financial Post of Toronto has already
The situation poses a real problem for Khrushchev's public threat to bypass the confirmed the apprehension that Russia was Mr. Kennedy, who is still under fire from United States in his wheat purchases came buying more in Canada than she really
some Republicans for approving the sale of needs: first, to corner the market there and
as no surprise to the administration. surplus farm products to the Soviet Union. freeze China out; and second, in order to re
One official familiar with the negotiations Further, shipping unions have demanded sell Canadian grain to Cuba, to the European that
at least 50 percent of any wheat sold to
so far conceded that "the issue is snarled up satellites, and to our own friends and allies
more than anticipated." the Soviet Union be carried in American botin free Europe.
He spoke in the wake of Khrushchev's toms. Obviously, this isn't a desperate move, it's
statement yesterday that any "discrimina
The 50-percent requirement is in effect on a smart one. And part and parcel of the
tory conditions" would block Soviet purchase shipments of wheat and other commodities of U.S. wheat. smart move Russia has made in Canada is
under Government aid and food-for-peace the right she has reserved to move her pur
AMERICAN SHIPS NEEDED programs. Under these programs, the Marichases in ships of her own choice. She
time Administration puts a ceiling on rates The Premier did not specify what he meant can charter all that she wants in the world
to be charged for Government shipments. by “discriminatory conditions" but it was market well under the cost of American-flag
The Maritime Administration made clear assumed here that he referred to President freighters. Now the satellites, who've really been bidding for our grain, are pulling back yesterday that it was prepared to recommend Kennedy's October 9 stipulation that ex
à ceiling for any Russian shipments when a ports to the Soviet Union would have to be because American-flag shipping costs too
sale was made by private grain traders. The handled in American ships, if available. much.
statement was made at a meeting of the Gov This presumably would have the effect of There's nothing any private person or
ernment shipping officials with representa, adding about $10 a ton to the cost of the group can do to make American shipping tives of American-flag companies.
100 million to 200 million bushels of wheat. competitive with the fleets which sail under the flags of more benevolently realistic goy
TALKS CALLED INCONCLUSIVE
The White House, State Department and ernments. It can only be done by Govern
The meeting was described by some ship- in the preliminary negotiations had no
other agencies that have been participating ment.
ping representatives as highly inconclusive Of this point, Mr. Kennedy could do worse and unsatisfactory. Donald W. Alexander, formal comment on Khrushchevis remarks
as they appeared in the Moscow newspaper than look back on the most successful sin- Maritime Administrator, said after the meet
Izvestia. gle tour of duty in the governmental career ing that the ship officials had indicated they planned to "operate in a way that their costs
However, officials said that the Premier's of his father, Joseph P. Kennedy. In the fateful period of transition between the are covered and that they make a reasonable objection really was only a public statement New Deal and crisis years, Joe Kennedy rec profit."
of the position that the Soviet negotiaognized the need for a Government shipping The shipping interests also pointed out to tors have been taking all along in the prioperation and he became President Roose- the Government officials that there had been
vate discussions. velt's maritime administrator. Today, we no "adjustment” in rates for Government aid
CUT IN RATES RESISTED need a shipping policy and a tough-minded shipments since 1957.
American shipping lines, are reported to administrator just as much as we did in Some officials hope that the problem will have declined the Maritime Administration's 1937.
be solved without any Government action. invitation to reconsider their rates.
Administration officials explain their re- sickle flying on them and we don't intend to Donald G. Alexander, Maritime Adminisluctance to comment at this stage on Khru- do it now.”
trator, after a meeting Friday with represhchev's remarks by hinting that the Gov The ILA did not take any action on the sentatives of shipowners, said they stressed ernment still hopes to come to terms with handling of other Russian exports and im- there had been no “adjustment" in rates the shipping industry by reminding it that ports at the east, gulf, and Great Lakes under the law since 1957. Mr. Kennedy's qualifiying phrase of avail- ports which it embraces.
The law requires that 50 percent of aid ability and the question of rates are closely A boycott against all Russian goods was cargoes be carried on U.S. ships. The Mariconnected.
instituted by the ILA last October at the time Commission sets "fair and reasonable" THREE CHOICES GIVEN
height of the Cuban crisis and has not been rates under the law. In effect it establishes This may mean, some officials privately lifted, despite pressure from numerous quar a rate ceiling for the merchant marine. explained, that should the shipowners reject ters that this ban be removed.
The Cabinet is expected to be briefed on the administration's overtures, the Govern The other Russian goods were not voted the situation when it meets with President ment will have three choices:
upon today, it was learned, for fear the long- Kennedy in the White House tomorrow. 1. It could consider the deal as having shore leaders would reject the wheat deal The briefing will cover the protests from fallen through.
as well. When it will be discussed has not Allies who believe their shipping is being 2. It could announce that the high ship- been announced yet.
discriminated against by the President's ping rates mean nonavailability of American
MOVE THROUGH CANADA
ruling vessels, permitting the Soviet to find its own
Mr. Alexander said the Maritime Commismeans of transportation.
Many of the cargoes that normally would 3. It could seek some kind of accommoda- ing Baltimore--are still moving between this move through U.S. east coast ports—includ
sion was prepared to set up rates as "guide
lines” for the merchant marine. However, tion with the Russians, wih part of the wheat
he added, he will first report to the Governto be delivered in American ships.
country and Russia, but through Canadian
ment officials who have dealt with a Russian Beyond stressing that the discussion between the Maritime Administration and the that the people who have lost the most
trade delegation headed by Sergei A. Borisov, shipowners is far from being closed, officials through the boycott are the longshoremen First Deputy Minister for Trade. of the United States.
Mr. Alexander and other officials of the make it clear in private conversations that the issue is predominantly a domestic polit- long to the same ILA, they have not abided
Although the Canadian dockworkers be Commerce Department, of which the mari
time agency is a part, are expected to meet ical problem that boils down to this: Mr. Kennedy, who alone decided earlier by the executive council edict not to handle again soon with representative of the ship
owners. this month to sell wheat to the Soviet, now
Soviet bloc trade.
Many port interests are concerned that has to decide about the next step. industry may find substitutes for some of the
From the Baltimore (Md.) Sun, DOCKERS SAY THEY'LL LOAD RUSS GRAIN-BUT automobile industry-and they will be a items such as cotton linters used by the
Oct. 26, 1963] LONGSHORE WORKERS WILL NOT PUT WHEAT permanent loss in trade to this country.
SUFFICIENT U.S. SHIPS SEEN FOR RUSSIAN ON SOVIET SHIPS
WHEAT DEAL (By Helen Delich Bentley)
(SUPERIOR, Wis., October 25.-The first NEW YORK, October 15.-The International [From the New York (N.Y.) Times, Oct. 29, sign of retaliatory measures to be taken Longshoremen's Association (AFL-CIO) to
against Canadian ships because of a Governday reluctantly agreed to load U.S. wheat SHIP MEN BARGAIN OVER WHEAT DEAL-SEEK ment-trusteeship placed over Canadian marifor Russia—but not aboard Russian-flag 10-PERCENT AID RATE RISE_IMPASSE STILL time unions was seen here today when ships.
American seamen picketed a Canadian vessel. Affirmative action was taken by the ex
WASHINGTON, October 28-American ship
The picketing is expected to spread to all ecutive council after wrestling with the
The a 10in aid
other Canadian ships in U.S. ports. problem for nearly 6 hours. One hour and Shipment rates in their meeting with Fed- pickets are members of the Seafarers Interfifteen minutes of that time was consumed
eral officials on carrying wheat to the Soviet by James J. Reynolds, Assistant Secretary of Union.
counterpart in Canada has been seized by the Labor, who requested permission to appear
While the owners made no demands, a before the council in an effort to sell the reliable source said today, they indicated
(By Helen Delich Bentley) program of President Kennedy.
they might agree to rates stipulated by the WASHINGTON, October 25.-Sufficient numGREAT EFFECT ON VOTE
Maritime Administration for the Russian bers of American-flag ships now in active Thomas W. Gleason, ILA president, cred- wheat cargoes if an "adjustment” was made service are available to carry the proposed ited Reynold's appearance with having a in the foreign aid schedules.
2,500,000 tons of American wheat to Russia, great effect on the council's favorable vote, Steeper American ship rates, which run Donald W. Alexander, Maritime Administrato which five conditions were attached. $10 to $12 more than those of foreign flag tor, reported today.
Strong internal opposition came from war vessels, have been the major obstacle to pri The only hitch as to whether they will be veteran dockworkers who belong to the vate sales of wheat to the Soviet Union. used by the Soviet, if they buy the wheat, is Longshoremen's Post of the Veterans of For Hard-bargaining Russians met formally the freight rate that will be demanded by eign Wars. They flatly opposed any move for the first time today with equally hard the American shipowners. to permit dockworkers to load grain on ships bargaining American grain merchants. The Alexander pointed this out at a press conbound for Communist nations.
session resulted in an impasse because of the ference following a 2-hour session with the Refusal to load the Russian-flag ships was rate question. The Russians said they heads of the four principal maritime associaone of the conditions included in the quali- wanted to purchase wheat, but balked at tions representing every American-flag shipfied approval.
what they considered "extra charges” for owner. A top Government official tonight said the shipping.
PURPOSE LIMITED Russian ship restriction could create a defi The rate snag arose because President Ken
The meeting was called to discuss the nite problem in the sale of wheat to the nedy, in approving the sale of surplus farm Soviet bloc.
commodities to Russia October 9, specified availability of ships and rates, Alexander exThe other qualifications were: that cargoes would be carried in American plained, only for the movement of wheat to
Russia, not to any other of the Soviet bloc PREFERENCE TO U.S. SHIPS ships, as available.
nations or for any other commodity. 1. Preference should be given to American- sales were to be made by private traders He set up the specification, although the
Because rates on American-flag ships for flag vessels whenever they are available to
the movement of U.S. Government-aid cargo rather than the Government. carry the wheat.
to other countries range from $7 to $10 a ton
It was understood that some of his ad2. Any work performed on the wheat must
higher, there has been some suggestion durvisers had opposed the stipulation on the be done under the terms of the ILA contracts
ing the past week that the Iron Curtain ground that it was a free-enterprise deal and working agreements.
countries were reluctant to make their purand should be carried through from sale to 3. There shall be no transshipment of any
chases from America if they had to ship them ships on that basis. grain to Cuba and Red China.
on American ships.
The impasse also brought protests from 4. A four-man committee from the ILA will several major maritime countries. Norway
Alexander referred to President Kennedy's act as liaison with the Government agencies
initial announcement October 9 when he was the first, acting through diplomatic involved in the grain movement.
said the movement of wheat and wheat flour channels. All the conditions of the sale announced
to Russia would be aboard American vessels
Other protests have been received from by President Kennedy shall be observed, the Britain, Denmark, and Sweden. They see a
if they were available.
QUESTIONED ON REPORT
The increase sought involves shipments by The Maritime Administrator was asked to Regarding the Russian ships, Gleason the Government under Public Law 480. This confirm a report circulating that the Soviets stated that:
is the Surplus Disposal Act, which allows had initially suggested that American-flag “No ILA worker shall be asked to load sales of farm commodities in exchange for ships be used for these shipments. cargo onto Russian ships. We have never in foreign currencies and strategic materials He replied he had heard of it only as a. our history loaded ships with a hammer and or donations for welfare purposes.
rumor and could not make the confirmation. CIX-1321
American seamen's unions and the Inter- ated under the American flag and manned a wholly coordinated national transportation national Longshoremen's Association have by American seamen cannot compete against basis, that Under Secretary Roosevelt and both pressed for preference treatment to be the foreign vessels because the Jones Act ex- his associates may find the real solution.” given American vessels. If this is not given, cluded them from the domestic trade.
Most-if not all of the remaining segthe National Maritime Union has said it will Yet these are the only American ships— ments of the domestic shipping industry have picket vessels loading for the bloc. The ILA primarily bulk type carriers—which could filed for rate increases to compensate for has indicated it will not load any grain if approach the low freight rates of the foreign increased costs. Some of these cases have foreign ships are favored over American. ships, which are built abroad, registered been pending before the Federal Maritime
Alexander explained that until an actual abroad, and manned by foreign seamen. Commission for a year-some even longer. fixture-contract-for a cargo of grain to be Once the lumber industry breaks com The length of time it takes the Commission moved to Russia is made, it is difficult to say pletely through the Jones Act with the "free to act on a rate petition has been disturbing how the rates will run. Shipowners are free movement” doctrine, then the orange, steel, to the shipping industry for some time beto negotiate their own, he explained, al chemical, and oil companies are going to cause of the mounting losses in the interim. though the Department of Commerce intends fight for their rights. Who can say that Some lines have collapsed altogether while to establish a guideline-a ceiling—as the lumber industry should have any more waiting what rate it will consider as being "fair and preference than the others?
Some shipping people have suggested subreasonable.”
Shipping circles feel strongly that the sidizing the domestic industry. Subsidy If the rate cited is higher on the export administration is selling the American do- payments would support both the construclicense application, Mr. Alexander said, "We mestic service short-or cannibalizing it in tion of new vessels and their operation. will consider it as no American ship being behalf of the lumber industry because of the Matson Navigation Co., the biggest domestic available because it won't be available at power in Congress of the Pacific Northwest nonsubsidized line, has taken a neutral stand what we consider a fair and reasonable rate.” congressional delegation.
on the issue of subsidy for its Hawaii freight In this instance, the buyer or seller could
The same shipping groups point out that trade. In a memorandum issued some time designate a foreign-flag ship as he is now
many of the lumbermen who are screaming ago on this subject, the company said: able to do under the Cargo Preference Act
that they cannot compete against Canadian “As the principal carrier in the trade, it which requires that at least 50 percent of all lumber which moves in foreign bottoms are is Matson's fundamental responsibility to aid cargoes must move on American bottoms
stockholders and part owners of many of the keep the total cost of moving Hawaii's comwhen available at reasonable rates.
same Canadian lumber concerns. In other merce at the lowest possible level consistent
words they are competing against themselves with the maintenance of adequate service GAP BEING CLOSED
and the domestic fleet is being sacrificed and a fair return to the stockholders on Alexander also pointed out that since the that is the feeling in the maritime world. their investment in Matson. This respongigantic purchase of wheat by Russia from Although the railroads seemingly would sibility does not include the determination Canada and Australia, the freight rates for support any attack against the domestic
of who is to pay this cost. foreign ships have been rising, placing the shipping lines, they may well beware of some “Under the present system, the users of world market closer to the price of American of the far-reaching implications. Competi the service pay directly for it through freight ships. The steamship representatives told tion against American-flag water transporta charges. This is the normal way of doing him, he said, that the gap could be closed tion has been stiff and the railroads have business. Under a subsidy arrangement, almost completely if the demand for ships complained. But what will it be if lower part of the cost would be shifted, either to continues rising.
cost foreign ships are given a wide-open field the taxpayers of the State or the Nation. The steamship men also pointed out, he in which to operate?
Whether or not the cost burden should be said, that historically when American ships Great concern has been expressed by many shifted is a matter of public policy, to be were not available, foreign shipowners sky- responsible sources about the decline-from decided by the public and those appointed rocket their rates far in excess of what they 700 ships before World War II to less than or elected to serve the public interest.” were when the demand began. Sometimes 100 today—of the domestic fleet, but thus far More recently, Matson has said that if it they even exceed the American rate, he con- only negative action has taken place. could get its requested freight rate, the rate mented.
When he was running for the Presidency, of return would put it on solid operating The Department of Commerce will not ask the then-Senator Kennedy wrote: “The de grounds now-without any subsidy of any any shipowner to handle any wheat or wheat pressed condition of our country's once kind. flour for Russia at a rate below cost or less flourishing domestic shipping industry Alcoa Steamship Co. has requested a than compensatory, Alexander stated. Wages should be a matter of deepest concern to freight rate boost to Puerto Rico and the aboard American ships are about four times everyone interested in our country's eco Virgin Islands and emphasized that it was higher than foreign ships, while other costs nomic progress and national security. Un urgent. That was nearly 18 months ago. also are comparably higher.
less strong measures are taken, promptly, to The plea is still pending.
now operating coastwise and intercoastal, Neuberger proposal and now before Congress [From the Baltimore (Md.) Sun, Oct. 14, one of the great bulwarks of our Nation's would permit foreign-built ships to be used 1963)
defense may soon be a thing of the past." generally on the domestic routes. Mr. Butler FROM BAD TO WORSE?—DARK DAYS FOR THE
Since that letter was written in 1960, at referred to this as obtaining ships from MERCHANT FLEET
least eight domestic-intercoastal, coastwise, "bargain basement shipyards in foreign
and offshore-steamship lines have sus countries. This is another artifice of inert (By Helen Delich Bentley) pended. Only seven are left.
expediency, unworthy of those who resort The future of the remnants of the do Summarizing in his letter, Mr. Kennedy to it." mestic shipping fleet literally hangs by a wrote: "If the domestic merchant fleet, so If the argument is that lower-cost foreign thread. A bill now pending in Congress strategic to the Nation's economy and to its procurement should replace domestic shipcould wipe it out, although the bill's sup- defense, is to be kept alive--and it must be ping, he said, "you might as well suggest porters would deny this.
Government must lend a hand. Steps must that we import lower salaried legislators Introduced by Senator NEUBERGER, Demo- be taken to insure fair treatment of domestic from West Germany, Japan, France or crat, of Oregon, the bill would permit on a shipping vis-a-vis other forms of transporta wherever, to sit in the Congress of the permanent basis the free movement of lum- tion. Beyond that Government has real and United States and enact laws to bring about ber from the United States to Puerto Rico long neglected responsibility to assist in the the complete demise of all of U.S. industry.” aboard foreign-flag ships. If that is enacted, formulation of a rational over-all transpor “This type of attitude, if not nipped in the maritime industry feels it is useless even tation policy in which intercoastal transport the bud, could pollinate or be catchingto try to apply the Jones Act any longer. has a vital position."
and might even lead to the demise of our The Jones Act was passed in 1920 to protect Among the problems cited by the “de merchant marine completely or to the demise domestic shipping by permitting only Amer ceased" lines as they went out of business of the domestic, legal profession-or what ican-flag ships to carry cargoes between was that of rates—that they were unable have you. Where then would we be with American ports and from the States to ter to get rate increases approved fast enough the balance-of-payments problems? Where ritories such as Puerto Rico and the Virgin by the Federal agencies.
would they find (the shipping quota] of the Islands.
At the Propeller Club Convention held in 35 million new jobs which the Department The effect of the Jones Act was weakened Baltimore last week, former Senator John of Labor has warned our economy must last year when Senator NEUBERGER squeezed Marshall Butler, who was considered out create in the next decade?” through a provision that lumber could move standing in his contributions to maritime The Senator blamed both Republican and to Puerto Rico on foreign-flag ships for a legislation while serving in the Senate Com Democratic administrations for the sad 1-year period if American ships could not merce Committee, spoke on "Domestic Water plight of the domestic merchant marine meet the low freight rate of the foreign Transportation and the National Interest.” today. Many agree that the weakness of vessels. The pending legislation has no pro He said among other things, “Unless some the domestic merchant marine doesn't trace viso which would give American ships an op- thing is done about the ratemaking situa to the Jones Act, but to longcontinued deportunity even to express a desire for the tion, a rejuvenation of domestic water ship fault of suitable action, leadership and lumber.
ping would be impossible, according to the coordination within the responsible-the Ironically, American ships which have been experts, even if the cost of the ships were executive-agencies of the National Governconverted abroad, but which are still oper- zero. It is in the area of ratemaking, on ment. No administration has made a real