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Since the Soviet Union wishes to buy wheat from us, it puts us in a favorable bargaining position. By all means, we should go ahead with the deal, but our approach should be very conscious of its essentially political character.

[From the New York (N.Y.) JournalAmerican, Oct. 30, 1963]

UNITED STATES PRESSURES BANKS FOR CUTRATE RUSSIAN WHEAT LOAN

(By Leslie Gould)

American banks are being pressured by Washington to finance the controversial $250 million sale of surplus wheat to Russia at interest rates below those charged prime borrowers in the United States.

The wheat, which has cost American taxpayers through the farm subsidy around $2.36 a bushel, is to be sold to the Communists at the world price, which is approximately $1.80 a bushel.

In dollars this subsidy is $56 to $84 million, depending on whether the Russians take 100 or 150 milion bushels.

The Export-Import Bank, backed by the U.S. State and the Agriculture Departments, wants a 5-percent interest rate on the financing, with five-eighths of 1 percent going to the Export-Import Bank as a fee for guaranteeing the loan.

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The prime rate actually is higher than 42 percent, for banks normally require about 20 percent of such loans to remain on deposit. This makes the interest cost 5.6 percent for the 80 percent of the amount borrowed that is used.

The Export-Import Bank originally proposed the banks get 44 percent with the Export-Import Bank charging three-fourths of 1 percent as its fee. Its latest proposal reduced its fee to five-eighths of 1 percent. A more realistic charge would be one-half of 1 percent.

RUSSIANS PAY CASH, GOLD

The Canadians, who have long dealt with the Communist nations, selling wheat to Red

China and trading with Castro's Cuba, were to charge the Russians 52 percent for the financing of a just completed $500 million wheat purchase. The American order, which is still under negotiation, is for half the Canadian sale.

The Russians felt the 52-percent interest too high, so they are paying the Canadians in cash and gold.

When the American deal was announced, it was indicated that payment would be for cash and gold plus some short-term financing. The Export-Import Bank, which gets its money from the American taxpayers, via the U.S. Treasury, apparently is pulling for the extension of credit to the Russians.

SKIRTS U.S. STATUTES

This, if not directly violating the American policy and law, skirts it. There are two questions, aside from political and moral ones. These are:

The 1961 Agriculture Act in which Congress spelled out as policy that subsidized commodities be sold only to "friendly" na tions. Communist Russia is a declared enemy.

The Johnson Act of 1934 which bars loans to a country in default on its loans to the United States. The law, sponsored by the late Senator Hiram Johnson, of California, forbids any person in the United States "to make any loan to such foreign government."

Russia is in default on loans to the United States including its lend-lease debt.

Attorney General Robert F. Kennedy has given the green light to the loans, calling them a short-term credit arranged by grain traders with private banks. Twice before the Justice Department has made such a ruling, Homer Cummings in 1934 and last year, holding such credits were only short term or a postponement of payment and thus not strictly loans.

WHY NOT GOLD FOR WHEAT?

The question of any wheat sale to the Communists is debatable, but the financing of such a deal at interest rates cheaper than those for prime borrowers at home is ridiculous.

Russia needs the wheat, as do most of the Communist countries. Poland, Hungary, and Czechoslovakia are others seeking grainabout $60 million worth. Yugoslavia also wants grain. The President laid certain restrictions as to the Russian deal-shipments to be in American vessels and delivery only to eastern Communist nations-none to Red China or Cuba.

Russia has gold and the United States, through its generosity, has been losing it. So, if the Russians want the wheat let them pay for it in gold.

[From the New York (N.Y.) Times,
Oct. 23, 1963]

WHEAT DEAL MAY RAISE PRICE OF FLOUR
(By Philip Shabecoff)

Because of Soviet operations in the inter

national wheat market, American housewives soon may be spending more on flour used in baking.

There should be no immediate change in the price of store-bought bread, however.

Several major flour millers, including General Mills, Pillsbury, and the International Milling Co., said last week they were raising the price of family flour by 40 cents a hundredweight. Yesterday a group of Texas flour mills announced a similar increase.

This probably means that the price of a 5-pound bag of flour on supermarket shelves now costing 59 cents will go up 2 cents when the new milling rates take effect.

In addition the price of bulk flour sold to bread producers has risen by as much as 60 cents a hundredweight since the end of

August.

FUTURES GO UP

Millers agreed that Soviet wheat operations were chiefly responsible for the rising price of flour. Wheat futures prices began rising when the Soviet Union purchased $500 million worth of wheat from Canada in September.

The price increase accelerated when it was learned that the Russians would seek about 4 million tons of wheat in the United States.

On the key Hard wheat futures market in Kansas City, Mo., for example, the price of a bushel of Hard wheat for December delivery stood at $1.974 August 30. On Monday it was $2.13.

The millers, who operate on extremely thin margins, were forced to reflect the rise in wheat futures in their own prices, an official of a large mill said.

In the case of family flour sold for home baking, some of the increase may be passed on to the customer.

Bread prices are not sensitive to changes in flour prices.

If wheat futures continue to rise, a miller said, there will be a further increase in the price of flour. This is unlikely, he added, because the Government has said it will sell wheat stored in bins of the Federal Commodity Credit Corporation to dealers at the statutory minimum price-105 percent of the support price.

[From the New York (N.Y.) Times,
Oct. 13, 1963]

NEGOTIATIONS DUE TODAY WASHINGTON, October 22-A Soviet trade

delegation will meet with Government officials tomorrow to discuss conditions for the sale of $250 million worth of American wheat

and flour to the Soviet Union.

The four-man mission was on the way from New York by automobile. Meanwhile, Secretary of Commerce Luther H. Hodges dismissed the idea that American shipping rates were a threat to the sale. Rates of U.S. cargo ships run about $10 above those of foreign vessels.

Mr. Hodges told a news conference his Department had received "a half-dozen applications for export licenses, but none of them have completely met all the specifications."

President Kennedy has stipulated that wheat to Russia must be carried on U.S. ships as available, with foreign shipping in a supplementary capacity.

"We don't think the Hungarians have pulled out completely," Mr. Hodges said. "They're taking a second look."

Mr. Hodges also mentioned Czechoslovakia in regard to export licenses. Bulgaria has also expressed an interest in purchasing American wheat. The three Soviet satellite nations had approached Secretary of State Dean Rusk in New York.

Mr. Hodges said he believed there were enough American ships to handle the shipment sought by the Russians. But he conceded it was possible that some foreign vessels would be used.

[From the New York (N.Y.) Times, Oct. 18, 1963] FIVE-PERCENT LOAN RATE SET ON SOVIET WHEAT-EXPORT BANK TO GUARANTEE DEAL FOR FIVE-EIGHTHS OF 1 PERCENT CHARGE (By Philip Shabecoff)

The Export-Import Bank of Washington has fixed the terms on which it will guarantee loans to the Soviet Union for the purbank in Chicago. chase of U.S. wheat, according to a leading

A spokesman for the Chicago bank, which Import Bank would charge five-eighths of declined to be identified, said the Export1 percent to guarantee loans made to the Russians by commercial banks in this

country.

Commercial banks would be expected to charge an interest rate of a maximum of 4% percent, the spokesman said. Thus, the effective rate to the Soviet Union would be 5 percent.

The guarantee by the Export-Import Bank would be made to the commercial banks, and the banks would make the loan to the grain traders rather than to the Russians.

COST TO BE PASSED ON

However, the traders would then pass on the full cost of the loan to the Soviet buyers. Therefore, the Russians will, in effect, be paying the 4% percent to the commercial banks and the five-eighths of a percent to the Government agency.

The terms envisioned by the U.S. export financing agency reportedly call for a 25percent cash downpayment with the remainder paid in three equal installments over an 18-month period.

L. M. Matveev, president of Exportkhleb, the Soviet state grain trading agency, has declared that the Soviet Union would not pay more than 5 percent interest in its proposed purchase of 4 million bushels of U.S. wheat.

Harold F. Linder, president and chairman of the Export-Import Bank, would not confirm or deny the reports when reached by telephone last night. He said such data

on its operations were a confidential matter between the Government agency and the commercial banks and were never made public.

NORMAL GUARANTEE

Mr. Linder added, however, that "it would be perfectly normal for us to guarantee all or part of a credit for an export transaction of this nature. We would do the same for France and Switzerland, for example."

He explained that the agency normally worked out reasonable risks, and consulted with the banks on money-market conditions before settling on a rate for its guarantee.

Mr. Linder reiterated that an agency guarantee on the Soviet wheat sale would fall into the "normal" commercial channels specified by President Kennedy in his announcement 2 weeks ago.

The Export-Import Bank has never before guaranteed a commercial credit to the Soviet Union, Mr. Linder said.

Grain trade circles were aware of the reported proposal to guarantee the credit to the Soviet Union by yesterday evening. Most traders expressed surprise that the Government would pave the way for the extension of credit in the sale of wheat to Russia.

"If the Russians can't get credit they will pay for the wheat in cash," one grain merchant said. "We would be quite happy to settle for cash," he added.

According to the Chicago bank, other nations in the Communist bloc of Eastern Europe would be granted the same terms as those extended to the Soviet Union.

The Soviet Union is ineligible for longterm loans from the United States under the terms of the Johnson Act, which prohibits such loans to nations with debts in default.

Meanwhile, the grain trade is still awaiting the arrival of the Soviet trade delegation to negotiate the sale. On Wednesday it was reported the delegation would arrive yesterday. Their arrival, however, apparently has been postponed.

The delegation already has been granted visas to enter the United States.

[From the New York (N.Y.) Times, Nov. 3, 1963]

UNITED STATES GIVES SOVIET COMPROMISE PLAN for WHEAT RATES-SUGGESTS PROVIDING VESSELS FOR 20 TO 30 PERCENT OF GRAIN AT A COST OF $18 A TON-RUSSIANS WEIGH OFFER-APPROVAL WILL END DEADLOCK-BULGARIA MAY PURCHASE 8 MILLION IN TOBACCO (By William M. Blair) WASHINGTON, November 2.-The United States has moved to break the impasse on its shipping rates that has blocked sales of wheat to the Soviet Union.

A new proposal, which the Russians are understood to be considering over the weekend, would involve concessions by both sides. It includes a lowered U.S. cargo rate and a division of some $250 million worth of wheat between American and foreign-flag vessels.

The sale of up to 4 million tons of wheat has been blocked because U.S. cargo schedules have been $10 to $13 or more higher than foreign charter charges for shipments to Black Sea and Baltic ports.

President Kennedy stipulated that wheat sold to the Soviet Union and its satellites should be carried in American vessels, as available, supplemented by foreign ships.

A $21 RATE WAS OFFERED

It is understood that the United States is willing to provide a cargo rate of $18 a ton if 20 to 30 percent of the wheat is carried in American vessels. Payments for this amount would be in dollars or gold.

The $18-a-ton rate compares with the $21 a ton recently offered by a group of tramp

ship owners to move wheat to the Soviet Union. The tramp ship operators, whose unscheduled vessels ply between any ports where cargo is available, recently reduced their rate by $5 from $26 a ton.

Presumably, the remainder of the wheat purchase, 70 to 80 percent, would be carried by foreign vessels at the world charter rate of about $12.50 a ton. This amount of wheat would be paid for through normal commercial credits of about 18 months.

The $18-a-ton figure was said to have been worked out with American tramp ship owners, whose vessels are regarded as most suitable by wheat shippers, at an unannounced meeting earlier this week in New York. It was understood that ship representatives and officials of the Commerce Department had agreed that ships or tankers of larger capacities-16,000 to 20,000 tons-could handle nearly 720,000 tons of the wheat.

Later, it was said, one other shipping line had offered to handle 200,000 more tons. This would put the amount of wheat to go in American vessels at 920,000 tons, or about 23 percent of the projected total shipments. A survey by shipowners and Government officials indicated that the 23 percent was about all that could be carried by the U.S.flag ships now available.

A division of the shipment between U.S. and foreign-flag vessels has been regarded as the most likely solution. If acceptable to the Russians, the Maritime Administration will set a guideline for U.S. shippers. In effect, the guideline would be a ceiling rate of $18 a ton.

COMMERCE GRANTS LICENSE

If the rate quoted by a shipowner to a private grain trader who negotiates a sale to the Russians falls within the $18-a-ton schedule, the Maritime Administration would certify the ship as available. The Department of Commerce then could issue an export license for the sale.

There was speculation in trading circles on what concessions would be made to shipowners for meeting the $18 rate. It is known that in the first meeting here of shipowners with the Maritime Administration last week the shippers sought a 10-percent increase in rates for shipments of surplus agricultural products under foreign aid programs.

Under Federal law, 50 percent of foreign aid shipments must be made in U.S. ships. This requirement would not apply to the proposed sale of wheat to the Soviet Union because it would be made by commercial companies.

The shipowners argued that there had been no adjustment of foreign aid shipment rates since 1957, and that since then their costs, including labor, had risen.

The division of the wheat shipments would also placate foreign maritime nations. Several countries have informally protested that the American-bottoms condition laid down by President Kennedy was discriminatory and contrary to U.S. endorsement of free trade principles.

[From the Chicago Tribune, Oct. 29, 1963] SOVIET WHEAT SALE DETAILS GROW MURKY

(By Eliot Janeway)

NEW YORK, October 27.-American achievements in the field of foreign affairs have an odd way of beginning solid and defined, and then growing mistier and mistier. Now our sale of grain to the Soviets seems to be turning from an accomplished fact to a more tentative accommodation, almost as if it dealt with technicians who were to be shipped out of Cuba, not wheat to be shipped out of Great Lakes and gulf ports. President Kennedy, indeed, has already thought it wise to drop a hint, in his speech at the University of Maine, about the possibility of Russia spurning our offer to sell grain.

It's well to remember, too, that if and as U.S. grain eventually begins to move to Russia, any deals made will be subject to various provisos. It's not clear what all of them will be. For example, the Presidential declaration left the key question of credit very murky. Sales were to be for cash, but they were also to be on normal commercial terms; and the latter phrase means 18 months credit. No one has yet explained where the credit is coming from.

PROBLEM IN SHIPPING

Another Presidential proviso applies to shipping. Mr. Kennedy has laid it down that half of any wheat sold to the Soviets in the grain trade will have to travel in American-flag ships. But, as exporters know well, there's a practical difficulty over shipping as well as over credit. American-flag ships are high-cost carriers, certainly higher cost than Soviet-flag ships, whose crews are paid in rubles or zlotys. Besides, much Soviet shipping was acquired for no cash cost, but by bartering oil with Greek shipowners and with Scandinavian, Italian, German, and Japanese shipbuilders.

On the face of it, this Kennedy formula to protect U.S. shipping and maritime jobs is popular.

(So, for that matter, is the decision to let private business handle any deals made.) The conflict arises from the fact that private business, of whatever nationality, prefers not to ship in American bottoms because they cost more than foreign-flag shipping.

There's only one basis on which we could hope to stick Russia for the high cost of American freight-if Russia were too desperate to bargain. But the Financial Post of Toronto has already confirmed the apprehension expressed in this column on September 30 that Russia was buying more in Canada than she really needs: first, to corner the market there and freeze China out; and second, in order to resell Canadian grain to Cuba, to the European satellites, and to our own friends and allies in free Europe.

SATELLITES PULL BACK

Obviously, this isn't a desperate move; it's a smart one and part and parcel of the smart move Russia has made in Canada is the right she has reserved to move her purchases in ships of her own choice. She can charter all that she wants in the world market well under the cost of American-flag freighters. Now the satellites, who've really been bidding for our grain, are pulling back because American-flag shipping costs too much.

In the world as it exists today, a great power without a competitive merchant marine or without a policy for getting oneis economically disarmed. For whatever other values or volume may stagnate or decline, traffic on the high seas is going to increase.

Partly, this will be due to the sharper competitive thrust of European and Japanese industry, which must export to prosper and, indeed, to live. But partly it is due to the expansive drive of the Soviet economy to penetrate the markets of the world and influence the economies of our allies and friends. One of the ways the Soviets have made themselves competitive internationally has been by building up their merchant marine.

ONLY BY GOVERNMENT

There's nothing any private person or group can do to make American shipping competitive with the fleets which sail under the flags of more benevolently realistic governments. It can only be done by government.

Of this point, John F. Kennedy could do worse than look back on the most successful single tour of duty in the governmental career of his father, Joseph P. Kennedy. In

the fateful period of transition between the New Deal and crisis years, Joe Kennedy recognized the need for a Government shipping operation and he became Roosevelt's maritime administrator. Today, we need a shipping policy and a tough-minded administrator just as much as we did in 1937.

[From the Washington (D.C.) Evening Star, Oct. 28, 1963]

SHIPPING BIG OBSTACLE TO SOVIET WHEAT DEAL (By Eliot Janeway)

NEW YORK.-American achievements in the field of foreign affairs have an odd way of beginning as solid and defined, and then growing mistier and mistier. Now our sale of grain to the Soviets seems to be turning from an accomplished fact to a more tentative accommodation, almost as if it dealt with "technicians" who were to be shipped out of Cuba, not wheat to be shipped out of Great Lakes and gulf ports. President Kennedy, indeed, has already thought it wise to drop a hint, in his speech at the University of Maine, about the possibility of Russia spurning our offer to sell grain.

It's well to remember too that if and as U.S. grain eventually begins to move to Russia, any deals made will be subject to various provisos. It's not clear what all of them will be. For example, the Presidential declaration left the key question of credit very murky. Sales were to be for cash, but they were also to be on normal commercial terms; and the latter phrase means 18 months credit. No one has yet explained where the credit is coming from.

Another Presidential proviso applies to shipping. Mr. Kennedy has laid it down that half of any wheat sold to the Soviets in the grain trade will have to travel in Americanflag ships. But, as exporters know well, there's a practical difficulty over shipping as well as over credit. American-flag ships are high-cost carriers.

On the face of it, the Kennedy formula to protect U.S. shipping and U.S. maritime jobs is popular. So, for that matter, is the decision to let private business handle any deals made. The conflict arises from the fact that private business, of whatever nationality, prefers not to ship in American bottoms because they cost more than foreignflag shipping.

The Financial Post of Toronto has already confirmed the apprehension that Russia was buying more in Canada than she really needs: first, to corner the market there and freeze China out; and second, in order to resell Canadian grain to Cuba, to the European satellites, and to our own friends and allies in free Europe.

Obviously, this isn't a desperate move, it's a smart one. And part and parcel of the smart move Russia has made in Canada is the right she has reserved to move her purchases in ships of her own choice. She can charter all that she wants in the world market well under the cost of American-flag

freighters. Now the satellites, who've really been bidding for our grain, are pulling back because American-flag shipping costs too much.

There's nothing any private person or group can do to make American shipping competitive with the fleets which sail under the flags of more benevolently realistic governments. It can only be done by Government.

Of this point, Mr. Kennedy could do worse than look back on the most successful single tour of duty in the governmental career of his father, Joseph P. Kennedy. In the fateful period of transition between the New Deal and crisis years, Joe Kennedy recognized the need for a Government shipping operation and he became President Roosevelt's maritime administrator. Today, we need a shipping policy and a tough-minded administrator just as much as we did in

1937.

[From the New York (N.Y.) Times, Oct. 27, 1963]

WHEAT SHIP RATES VEX WHITE HOUSE-RUSSIANS BALK, DECLARING FEES ARE DISCRIMI

NATORY

(By William M. Blair) WASHINGTON, October 26.-President Kennedy is caught in a political dilemma because the Soviet Union sought and got assurances that American ships would be available to carry wheat to Russia.

Now the Russians are balking, at what they regard as discriminatory American shipping rates, which are higher than the rates of foreign-flag vessels.

A breakdown in the wheat deal would serve to harden Republican criticism and that of anti-Communists of both parties, and would bring on more criticism for trading with the enemy.

It could make the deal a major issue in the 1964 elections and could be particularly damaging if Soviet-American relations took a sudden turn for the worse, making it appear that Mr. Kennedy had been taken in by

the Russians.

Authoritative sources say that the Russians first broached the use of U.S. ships for the $250 million worth of wheat they want to buy. They asked for assurances that U.S. vessels would be available and that shipments would not be jeopardized by domestic problems. such as port facilities or strikes.

The administration gave the assurances in the informal diplomatic talks held 22 weeks ago, when it got its first direct word that the Russians wanted to buy wheat and other commodities.

The talks led to an agreement that the Russians would obtain the use of American ships.

CRITICIZED BY REPUBLICANS

Some officials conjectured that the Russians did not realize at the time that the rates of American-flag vessels then were some $12 a ton higher than charges by foreign-flag ships for cargo to Baltic and Black Sea ports.

Other officials, however, doubted that the Russians had been unaware of the higher American charges. They stated that the Russians had long been exporting and that they would likely have been informed of the rates for all kinds of shipping.

The situation poses a real problem for Mr. Kennedy, who is still under fire from some Republicans for approving the sale of surplus farm products to the Soviet Union. Further, shipping unions have demanded that at least 50 percent of any wheat sold to the Soviet Union be carried in American bottoms.

The 50-percent requirement is in effect on shipments of wheat and other commodities under Government aid and food-for-peace programs. Under these programs, the Maritime Administration puts a ceiling on rates to be charged for Government shipments.

The Maritime Administration made clear

yesterday that it was prepared to recommend a ceiling for any Russian shipments when a sale was made by private grain traders. The statement was made at a meeting of the Government shipping officials with representatives of American-flag companies.

TALKS CALLED INCONCLUSIVE

The meeting was described by some shipping representatives as highly inconclusive and unsatisfactory. Donald W. Alexander, Maritime Administrator, said after the meeting that the ship officials had indicated they planned to "operate in a way that their costs are covered and that they make a reasonable profit."

The shipping interests also pointed out to the Government officials that there had been no "adjustment" in rates for Government aid shipments since 1957.

Some officials hope that the problem will be solved without any Government action.

One noted this week that foreign ship rates began to rise when they bought $500 million in wheat from Canada last month and rose further when the American-Soviet negotiations became known. This could mean, he said, "that the gap will be narrowed to the point where the whole thing becomes academic."

NEXT STEP UP TO SOVIET

He said the next step was for a Soviet grain team, due here from Canada, to begin negotiations with private American grain merchants. The shipping rates, however, appear to make necessary further meetings by the Russians and Government officials.

The administration is fully aware that the Russians could buy wheat elsewhere. One report current here is that the Russians are seeking more wheat from Canada. It is also known that they have been watching the Argentine wheat crop, which will be harvested later this year.

The President, however, is understood to be firm for a large wheat deal. Anything less would be embarrassing after his strong approval of the sale.

The sale conditions stipulated that the wheat should be carried in American vessels if they are available. The maritime administrator said that the meeting with the ship companies produced the information that enough American ships were physically available to move the wheat, "but if the rates are not satisfactory, the ships will not be available."

In such a situation, the Maritime Administration could certify that American shipping was not available and foreign bottoms could be used at lower rates.

He also said that the "Government isn't going to ask ship owners to ship below cost." But to permit the use of foreign-flag vessels to move the bulk of the wheat could have far-reaching political effects. Wheat is polit-. ically sensitive as a symbol of American agriculture's ability to produce and as a food to feed the world's hungry.

[From the Baltimore (Md.) Sun, Oct. 28, 1963]

WHEAT SALE TO RUSSIANS IS SNARLEDKHRUSHCHEV'S THREAT ON SHIPPING IS NO SURPRISE TO UNITED STATES

WASHINGTON, October 27.-Soviet Premier Khrushchev's public threat to bypass the United States in his wheat purchases came as no surprise to the administration.

One official familiar with the negotiations so far conceded that "the issue is snarled up more than anticipated."

He spoke in the wake of Khrushchev's statement yesterday that any "discriminatory conditions" would block Soviet purchase of U.S. wheat.

AMERICAN SHIPS NEEDED

The Premier did not specify what he meant by "discriminatory conditions" but it was assumed here that he referred to President

Kennedy's October 9 stipulation that exports to the Soviet Union would have to be handled in American ships, if available.

This presumably would have the effect of adding about $10 a ton to the cost of the 100 million to 200 million bushels of wheat. The White House, State Department and in the preliminary negotiations had no other agencies that have been participating

formal comment on Khrushchev's remarks as they appeared in the Moscow newspaper Izvestia.

However, officials said that the Premier's objection really was only a public statement of the position that the Soviet negotiators have been taking all along in the private discussions.

CUT IN RATES RESISTED

American shipping lines, are reported to have declined the Maritime Administration's invitation to reconsider their rates.

Administration officials explain their reluctance to comment at this stage on Khrushchev's remarks by hinting that the Government still hopes to come to terms with the shipping industry by reminding it that Mr. Kennedy's qualifiying phrase of availability and the question of rates are closely connected.

THREE CHOICES GIVEN

This may mean, some officials privately explained, that should the shipowners reject the administration's overtures, the Government will have three choices:

1. It could consider the deal as having fallen through.

2. It could announce that the high shipping rates mean nonavailability of American vessels, permitting the Soviet to find its own means of transportation.

3. It could seek some kind of accommoda

tion with the Russians, wih part of the wheat to be delivered in American ships.

Beyond stressing that the discussion be

sickle flying on them and we don't intend to do it now."

The ILA did not take any action on the handling of other Russian exports and imports at the east, gulf, and Great Lakes ports which it embraces.

A boycott against all Russian goods was instituted by the ILA last October at the height of the Cuban crisis and has not been lifted, despite pressure from numerous quarters that this ban be removed.

The other Russian goods were not voted upon today, it was learned, for fear the longshore leaders would reject the wheat deal as well. When it will be discussed has not been announced yet.

MOVE THROUGH CANADA

Many of the cargoes that normally would move through U.S. east coast ports-including Baltimore-are still moving between this country and Russia, but through Canadian ports. In other words, the general feeling is that the people who have lost the most

Donald G. Alexander, Maritime Administrator, after a meeting Friday with representatives of shipowners, said they stressed there had been no "adjustment" in rates under the law since 1957.

The law requires that 50 percent of aid cargoes be carried on U.S. ships. The Maritime Commission sets "fair and reasonable" rates under the law. In effect it establishes a rate ceiling for the merchant marine.

The Cabinet is expected to be briefed on the situation when it meets with President Kennedy in the White House tomorrow.

The briefing will cover the protests from Allies who believe their shipping is being discriminated against by the President's ruling.

Mr. Alexander said the Maritime Commission was prepared to set up rates as "guidelines" for the merchant marine. However, he added, he will first report to the Government officials who have dealt with a Russian trade delegation headed by Sergei A. Borisov,

tween the Maritime Administration and the through the boycott are the longshoremen First Deputy Minister for Trade.

shipowners is far from being closed, officials make it clear in private conversations that

the issue is predominantly a domestic political problem that boils down to this:

Mr. Kennedy, who alone decided earlier this month to sell wheat to the Soviet, now has to decide about the next step. DOCKERS SAY THEY'LL LOAD RUSS GRAIN-BUT LONGSHORE WORKERS WILL NOT PUT WHEAT

ON SOVIET SHIPS

(By Helen Delich Bentley) NEW YORK, October 15.-The International Longshoremen's Association (AFL-CIO) today reluctantly agreed to load U.S. wheat for Russia-but not aboard Russian-flag ships.

Affirmative action was taken by the executive council after wrestling with the

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[From the New York (N.Y.) Times, Oct. 29, 1963]

SHIP MEN BARGAIN OVER WHEAT DEAL-SEEK 10-PERCENT AID RATE RISE-IMPASSE STILL HOLDS

WASHINGTON, October 28-American shipowners sought a 10-percent increase in aid

Mr. Alexander and other officials of the Commerce Department, of which the maritime agency is a part, are expected to meet again soon with representative of the ship

owners.

[From the Baltimore (Md.) Sun,
Oct. 26, 1963]

SUFFICIENT U.S. SHIPS SEEN FOR RUSSIAN
WHEAT DEAL

(SUPERIOR, WIS., October 25.-The first sign of retaliatory measures to be taken against Canadian ships because of a Government-trusteeship placed over Canadian maritime unions was seen here today when American seamen picketed a Canadian vessel. The picketing is expected to spread to all other Canadian ships in U.S. ports. The

problem for nearly 6 hours. One hour and shipment rates in their meeting with Fed-pickets are members of the Seafarers Inter

fifteen minutes of that time was consumed by James J. Reynolds, Assistant Secretary of Labor, who requested permission to appear before the council in an effort to sell the program of President Kennedy.

GREAT EFFECT ON VOTE

Thomas W. Gleason, ILA president, credited Reynold's appearance with having a great effect on the council's favorable vote, to which five conditions were attached.

Strong internal opposition came from war veteran dockworkers who belong to the Longshoremen's Post of the Veterans of Foreign Wars. They flatly opposed any move to permit dockworkers to load grain on ships bound for Communist nations.

Refusal to load the Russian-flag ships was one of the conditions included in the qualified approval.

A top Government official tonight said the Russian ship restriction could create a definite problem in the sale of wheat to the

Soviet bloc.

The other qualifications were:

PREFERENCE TO U.S. SHIPS

1. Preference should be given to Americanflag vessels whenever they are available to carry the wheat.

2. Any work performed on the wheat must be done under the terms of the ILA contracts and working agreements.

3. There shall be no transshipment of any grain to Cuba and Red China.

4. A four-man committee from the ILA will act as liaison with the Government agencies involved in the grain movement.

All the conditions of the sale announced by President Kennedy shall be observed, the

ILA added.

REGARDING RUSS SHIPS

Regarding the Russian ships, Gleason stated that:

"No ILA worker shall be asked to load cargo onto Russian ships. We have never in our history loaded ships with a hammer and

CIX-1321

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While the owners made no demands, a reliable source said today, they indicated they might agree to rates stipulated by the Maritime Administration for the Russian wheat cargoes if an "adjustment" was made in the foreign aid schedules.

Steeper American ship rates, which run $10 to $12 more than those of foreign flag vessels, have been the major obstacle to private sales of wheat to the Soviet Union.

Hard-bargaining Russians met formally for the first time today with equally hardbargaining American grain merchants. The session resulted in an impasse because of the rate question. The Russians said they wanted to purchase wheat, but balked at what they considered "extra charges" for shipping.

The rate snag arose because President Kennedy, in approving the sale of surplus farm commodities to Russia October 9, specified that cargoes would be carried in American ships, as available.

He set up the specification, although the sales were to be made by private traders rather than the Government.

It was understood that some of his advisers had opposed the stipulation on the ground that it was a free-enterprise deal and should be carried through from sale to ships on that basis.

The impasse also brought protests from several major maritime countries. Norway was the first, acting through diplomatic channels.

Other protests have been received from Britain, Denmark, and Sweden. They see a possible loss of business for their ships.

The increase sought involves shipments by the Government under Public Law 480. This is the Surplus Disposal Act, which allows sales of farm commodities in exchange for foreign currencies and strategic materials or donations for welfare purposes.

national Union of North America. Their SIU

counterpart in Canada has been seized by the trusteeship.)

(By Helen Delich Bentley) WASHINGTON, October 25.-Sufficient numbers of American-flag ships now in active service are available to carry the proposed 2,500,000 tons of American wheat to Russia, Donald W. Alexander, Maritime Administrator, reported today.

The only hitch as to whether they will be used by the Soviet, if they buy the wheat, is the freight rate that will be demanded by the American shipowners.

Alexander pointed this out at a press conference following a 2-hour session with the heads of the four principal maritime associations representing every American-flag shipowner.

PURPOSE LIMITED

The meeting was called to discuss the availability of ships and rates, Alexander explained, only for the movement of wheat to Russia, not to any other of the Soviet bloc nations or for any other commodity.

Because rates on American-flag ships for the movement of U.S. Government-aid cargo to other countries range from $7 to $10 a ton higher, there has been some suggestion during the past week that the Iron Curtain countries were reluctant to make their purchases from America if they had to ship them on American ships.

Alexander referred to President Kennedy's initial announcement October 9 when he said the movement of wheat and wheat flour to Russia would be aboard American vessels if they were available.

QUESTIONED ON REPORT

The Maritime Administrator was asked to confirm a report circulating that the Soviets had initially suggested that American-flag ships be used for these shipments.

He replied he had heard of it only as a rumor and could not make the confirmation.

American seamen's unions and the International Longshoremen's Association have both pressed for preference treatment to be given American vessels. If this is not given, the National Maritime Union has said it will picket vessels loading for the bloc. The ILA has indicated it will not load any grain if foreign ships are favored over American.

Alexander explained that until an actual fixture-contract-for a cargo of grain to be moved to Russia is made, it is difficult to say how the rates will run. Shipowners are free to negotiate their own, he explained, although the Department of Commerce intends to establish a guideline-a ceiling-as to what rate it will consider as being "fair and reasonable."

If the rate cited is higher on the export license application, Mr. Alexander said, "We will consider it as no American ship being available because it won't be available at what we consider a fair and reasonable rate.”

In this instance, the buyer or seller could designate a foreign-flag ship as he is now able to do under the Cargo Preference Act which requires that at least 50 percent of all aid cargoes must move on American bottoms when available at reasonable rates.

GAP BEING CLOSED

Alexander also pointed out that since the gigantic purchase of wheat by Russia from Canada and Australia, the freight rates for foreign ships have been rising, placing the world market closer to the price of American ships. The steamship representatives told him, he said, that the gap could be closed almost completely if the demand for ships continues rising.

The steamship men also pointed out, he said, that historically when American ships were not available, foreign shipowners skyrocket their rates far in excess of what they were when the demand began. Sometimes they even exceed the American rate, he conmented.

The Department of Commerce will not ask any shipowner to handle any wheat or wheat flour for Russia at a rate below cost or less than compensatory, Alexander stated. Wages aboard American ships are about four times higher than foreign ships, while other costs also are comparably higher.

ated under the American flag and manned by American seamen cannot compete against the foreign vessels because the Jones Act excluded them from the domestic trade.

Yet these are the only American shipsprimarily bulk type carriers-which could approach the low freight rates of the foreign ships, which are built abroad, registered abroad, and manned by foreign seamen.

Once the lumber industry breaks completely through the Jones Act with the "free movement" doctrine, then the orange, steel, chemical, and oil companies are going to fight for their rights. Who can say that the lumber industry should have any more preference than the others?

Shipping circles feel strongly that the administration is selling the American domestic service short-or cannibalizing it-in behalf of the lumber industry because of the power in Congress of the Pacific Northwest congressional delegation.

The same shipping groups point out that many of the lumbermen who are screaming that they cannot compete against Canadian lumber which moves in foreign bottoms are stockholders and part owners of many of the same Canadian lumber concerns. In other words they are competing against themselves and the domestic fleet is being sacrificedthat is the feeling in the maritime world. Although the railroads seemingly would support any attack against the domestic shipping lines, they may well beware of some of the far-reaching implications. Competition against American-flag water transportation has been stiff and the railroads have complained. But what will it be if lowercost foreign ships are given a wide-open field in which to operate?

Great concern has been expressed by many responsible sources about the decline-from 700 ships before World War II to less than 100 today-of the domestic fleet, but thus far only negative action has taken place.

When he was running for the Presidency, the then-Senator Kennedy wrote: "The depressed condition of our country's onceflourishing domestic shipping industry should be a matter of deepest concern to everyone interested in our country's economic progress and national security. Unless strong measures are taken, promptly, to preserve and strengthen the dry cargo fleet now operating coastwise and intercoastal,

[From the Baltimore (Md.) Sun, Oct. 14, one of the great bulwarks of our Nation's 1963]

FROM BAD TO WORSE?-DARK DAYS FOR THE MERCHANT FLEET

(By Helen Delich Bentley)

The future of the remnants of the domestic shipping fleet literally hangs by a thread. A bill now pending in Congress could wipe it out, although the bill's supporters would deny this.

Introduced by Senator NEUBERGER, Democrat, of Oregon, the bill would permit on a permanent basis the free movement of lumber from the United States to Puerto Rico aboard foreign-flag ships. If that is enacted, the maritime industry feels it is useless even to try to apply the Jones Act any longer. The Jones Act was passed in 1920 to protect domestic shipping by permitting only American-flag ships to carry cargoes between American ports and from the States to territories such as Puerto Rico and the Virgin Islands.

The effect of the Jones Act was weakened last year when Senator NEUBERGER squeezed through a provision that lumber could move to Puerto Rico on foreign-flag ships for a 1-year period if American ships could not meet the low freight rate of the foreign vessels. The pending legislation has no proviso which would give American ships an opportunity even to express a desire for the lumber.

Ironically, American ships which have been converted abroad, but which are still oper

defense may soon be a thing of the past.”

Since that letter was written in 1960, at least eight domestic-intercoastal, coastwise, and offshore-steamship lines have suspended. Only seven are left.

Summarizing in his letter, Mr. Kennedy wrote: "If the domestic merchant fleet, so strategic to the Nation's economy and to its defense, is to be kept alive-and it must beGovernment must lend a hand. Steps must be taken to insure fair treatment of domestic shipping vis-a-vis other forms of transportation. Beyond that Government has real and long neglected responsibility to assist in the formulation of a rational over-all transportation policy in which intercoastal transport has a vital position."

Among the problems cited by the "deceased" lines as they went out of business was that of rates-that they were unable to get rate increases approved fast enough by the Federal agencies.

At the Propeller Club Convention held in Baltimore last week, former Senator John Marshall Butler, who was considered outstanding in his contributions to maritime legislation while serving in the Senate Commerce Committee, spoke on "Domestic Water Transportation and the National Interest."

He said among other things, "Unless something is done about the ratemaking situation, a rejuvenation of domestic water shipping would be impossible, according to the experts, even if the cost of the ships were zero. It is in the area of ratemaking, on

a wholly coordinated national transportation basis, that Under Secretary Roosevelt and his associates may find the real solution."

Most-if not all of the remaining segments of the domestic shipping industry have filed for rate increases to compensate for increased costs. Some of these cases have been pending before the Federal Maritime Commission for a year-some even longer. The length of time it takes the Commission to act on a rate petition has been disturbing to the shipping industry for some time because of the mounting losses in the interim. Some lines have collapsed altogether while waiting.

Some shipping people have suggested subsidizing the domestic industry. Subsidy payments would support both the construction of new vessels and their operation. Matson Navigation Co., the biggest domestic nonsubsidized line, has taken a neutral stand on the issue of subsidy for its Hawaii freight trade. In a memorandum issued some time ago on this subject, the company said:

"As the principal carrier in the trade, it is Matson's fundamental responsibility to keep the total cost of moving Hawaii's commerce at the lowest possible level consistent with the maintenance of adequate service and a fair return to the stockholders on their investment in Matson. This responsibility does not include the determination of who is to pay this cost.

"Under the present system, the users of the service pay directly for it through freight charges. This is the normal way of doing business. Under a subsidy arrangement, part of the cost would be shifted, either to the taxpayers of the State or the Nation. Whether or not the cost burden should be shifted is a matter of public policy, to be decided by the public and those appointed or elected to serve the public interest."

More recently, Matson has said that if it could get its requested freight rate, the rate of return would put it on solid operating grounds now-without any subsidy of any kind.

Alcoa Steamship Co. has requested a freight rate boost to Puerto Rico and the Virgin Islands and emphasized that it was urgent. That was nearly 18 months ago. The plea is still pending.

Another bill even bolder than the Neuberger proposal and now before Congress would permit foreign-built ships to be used generally on the domestic routes. Mr. Butler referred to this as obtaining ships from "bargain basement shipyards in foreign countries. This is another artifice of inert expediency, unworthy of those who resort to it."

If the argument is that lower-cost foreign procurement should replace domestic shipping, he said, "you might as well suggest that we import lower salaried legislators from West Germany, Japan, France or wherever, to sit in the Congress of the United States and enact laws to bring about the complete demise of all of U.S. industry."

"This type of attitude, if not nipped in the bud, could pollinate or be catchingand might even lead to the demise of our merchant marine completely or to the demise of the domestic, legal profession-or what have you. Where then would we be with the balance-of-payments problems? Where would they find [the shipping quota] of the 35 million new jobs which the Department of Labor has warned our economy must create in the next decade?"

The Senator blamed both Republican and Democratic administrations for the sad plight of the domestic merchant marine today. Many agree that the weakness of the domestic merchant marine doesn't trace to the Jones Act, but to longcontinued default of suitable action, leadership and coordination within the responsible-the executive-agencies of the National Government. No administration has made a real

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